Sparling

Plaintiffs, a class of former Daou Systems, Inc. (“Daou”) investors who purchased Daou common stock between February 13, 1997 and October 28, 1998, allege that defendants Daou, Chief Executive Officer and Chairman of the Board Georges Daou (“G.Daou”), President and Director Daniel Daou (“D.Daou”), Chief Financial Officer and Senior Vice President Fred McGee, Chief Operating Officer and Executive Vice President Robert McNeill, and Director John Moragne systematically and fraudulently violated the Generally Accepted Accounting Principles (“GAAP”) in order to artificially inflate the price of Daou’s stock. Plaintiffs also allege that they incurred substantial personal losses due to their respective purchases of Daou stock at fraudulently inflated prices. The district court, on several occasions, determined that plaintiffs had failed to state sufficiently particularized claims under the 1933 Securities Act and the 1934 Exchange Act and thrice granted plaintiffs leave to amend. Plaintiffs now appeal the district court’s dismissal of them Third Amended Complaint (“TAC”) with prejudice. Defendants also cross-appeal the district court’s failure to consider, sua sponte, whether to impose…