People who had purchased stock of Time Warner Inc. (TW) during a certain time period (plaintiffs) filed a class-action lawsuit against TW and four of TW’s officers (defendants) for violation of Securities and Exchange Commission (SEC) Rule 10b-5. Specifically, TW had stated publicly that it was attempting to reduce its debt by securing strategic partnerships. However, when this strategy did not go as planned, TW decided to raise money a different way by issuing a new stock offering that significantly diluted the rights of TW stockholders. TW did not publicly mention the stock offering as a potential option for reducing the company’s debt. The plaintiffs thus purchased TW stock without this knowledge. The plaintiffs claimed that TW misled the public through various misrepresentations and omissions. The suit identified (1) TW statements that identified the speaker and were properly attributed to TW, such as TW press releases, and (2) statements that did not identify the speaker, such as anonymous statements to reporters and analysts. TW filed a motion to dismiss based on Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. The United States District Court for the Southern District of New York granted TW’s motion, finding that the plaintiffs failed to properly identify a false statement or material omission and failed to show that the defendants acted with scienter. The plaintiffs appealed.