McGann

Plaintiff securities investors appeal the grant of judgment on the pleadings for defendant Ernst & Young (“E&Y’), an independent accounting firm. Plaintiffs alleged that E&Y incurred primary liability under § 10(b) of the Securities Exchange Act of 1934 (the “Act”) by preparing a fraudulent audit report that it knew would be included by its chent in a Form 10-K. This case requires us to decide whether the Supreme Court’s recent decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A, 511 U.S. 164 , 114 S.Ct. 1439 , 128 L.Ed.2d 119 (1994), overturned the traditional interpretation of § 10(b) first set forth in SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2nd Cir.1968) (en banc), cert. denied sub nom. Coates v. SEC, 394 U.S. 976 , 89 S.Ct. 1454 , 22 L.Ed.2d 756 (1969). We have jurisdiction, 28 U.S.C. § 1291 , and we reverse.

I. FACTS AND PRIOR PROCEEDINGS

At all relevant times, E&Y was the outside auditor for the Community Psychiatric Centers (“CPC”), a publicly traded corporation. Plaintiffs alleged the following facts: E&Y issued a false and misleading audit opinion regarding CPC’s financial statements for the fiscal year ending in November 1990.…