## Facts

- pcOrder.com conducted an IPO (Feb. 26, 1999) and a secondary public offering (Dec. 7, 1999), filing registration statements for each.
- Investors sued pcOrder.com, its directors, its controlling shareholder (Trilogy Software), and its investment bankers under Securities Act §§ 11 and 15, alleging the registration statements contained material misstatements about business viability, financial reporting capability, and competition with Trilogy.
- The district court consolidated related suits, appointed lead plaintiffs, and considered a proposed class of pcOrder stock purchasers.
- The lead plaintiffs purchased shares in the aftermarket rather than directly in the offerings.
- By the time the lead plaintiffs purchased, registered offering shares and non-registered shares traded together in a fungible pool, making it difficult to identify whether any particular purchased share was issued under the challenged registration statements.
- The district court denied class certification, later dismissed most claims for lack of subject-matter jurisdiction based on lack of § 11 standing (failure to trace), found the remaining plaintiff’s claim moot, dismissed the action, and denied a motion by another investor to intervene.

## Issues

1. Whether Securities Act § 11 requires an aftermarket purchaser to trace the specific shares purchased to the allegedly defective registration statement to have standing as a “person acquiring such security.”
2. Whether expert statistical evidence showing a high probability that at least one share in an investor’s holdings originated in the registered offerings satisfies § 11’s traceability requirement.
3. Whether dismissal for lack of subject-matter jurisdiction was proper once the plaintiffs lacked § 11 standing and the only arguably traceable claim became moot.
4. Whether the district court properly denied a post-dismissal motion to intervene to continue the case.

## Decision

- The Fifth Circuit affirmed the dismissal.
- It held that § 11 standing requires traceability of the plaintiff’s shares to the challenged registration statement; probabilistic proof that “at least one share” likely came from the offering is insufficient.
- Because most plaintiffs could not trace their shares and the remaining plaintiff’s claim was moot, dismissal for lack of jurisdiction was affirmed.
- The denial of intervention was affirmed because intervention could not cure the absence of a live case or controversy after the action became jurisdictionally defective.

## Legal Principles

- Securities Act § 11 authorizes suit only by a person who acquired “such security,” meaning a security issued pursuant to the registration statement alleged to be materially false or misleading.
- Aftermarket purchasers may sue under § 11 only if their shares are traceable to the challenged registration statement; purchasing in a secondary market alone does not confer § 11 standing.
- When registered and unregistered shares are commingled in a fungible trading market, statistical likelihood that a portfolio includes at least one registered share does not satisfy § 11’s traceability requirement.
- When no plaintiff with a live claim has § 11 standing, federal jurisdiction is lacking and dismissal is proper; a new plaintiff generally cannot intervene to revive a case after it becomes jurisdictionally defective.

## Conclusion

The Fifth Circuit required strict share traceability for § 11 standing and rejected probabilistic tracing in a commingled market, affirming dismissal once no plaintiff with a live controversy could show acquisition of securities issued under the challenged registration statements and affirming denial of intervention.


Krim v. pcOrder.com, Inc., 402 F.3d 489 (5th Cir. 2005)