Baxter International Inc. (Baxter) (defendant), a manufacturer of medical products, released second-quarter financial results for 2002 on July 18, 2002, that were lower than expected, causing shares to drop from $43 to $32. On November 5, 2001, Baxter had made a projection that business revenue would grow in the low teens. Between the projection on November 5 and the actual financial results on July 18, Baxter had acquired Fusion Medical Technologies (Fusion) in a stock-for-stock transaction. Brian Asher (plaintiff) brought suit to represent all of the investors who had bought stock or exchanged shares of Fusion during that time. The complaint contended that Baxter’s November 5 projections were materially false because: (1) Baxter’s renal division had not met its internal budgets in years, (2) Baxter had closed multiple plants that had been the principal source of its low-cost products, and (3) Baxter’s bio-science division had experienced a sterility failure that resulted in over $10,000,000 in losses. Baxter had not changed its forecasts and cautions after the sterility failure and the closing of multiple plants. The district court dismissed the complaint on the grounds that Baxter’s forecasts were within the safe-harbor provision of the Private Securities Litigation Reform Act of 1995 (the Act), 15 U.S.C. §§ 77z-2(c), 78u-5(c). Asher appealed.