Randall

MEMORANDUM *

Tom Randall and other investors who purchased stock in Rational Software Corporation (Rational) appeal the district court’s dismissal with prejudice of their insider trading class action brought under §§ 10(b) and 20A of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, et. seq. We have jurisdiction under 28 U.S.C. § 1291 , and, after de novo review, we affirm.

The district court did not err in dismissing Randall’s second amended complaint for failure to plead facts sufficient to meet the two-part test for tippee liability set forth in Dirks v. SEC, 463 U.S. 646 , 103 S.Ct. 3255 , 77 L.Ed.2d 911 (1983). Randall’s complaint alleged that Paul Levy, Rational’s CEO, “tipped” material negative nonpublic information to Dain Rauscher Wessels (Wessels), a professional market analyst. Wessels then passed this information to its clients, who sold Rational stock.

Randall’s complaint did not allege facts which showed any special relationship between Levy and Wessels. The complaint also did not allege facts showing that Levy received a personal benefit from tipping Wessels or that Wessels knew or should have known that Levy’s disclosure was in breach of his fiduciary duty.…