Please use this case to answer all $5$ true$/$false questions and give a small $2$ sentence explanation why for each.

Case $8$: Lululemon Securities Litigation, $14$ F$.$ Supp. $3$d $553($S$.$D$.$N$.$Y$.2014)($Prenkert$,18$th

Ed$.,$ p$.45-49).$

Lululemon Athletic Inc. is a manufacturer of athletic apparel. Among its most popular products

are fitness pants made from a proprietary material known as luon, an amalgamation of $86$ percent

nylon and $14$ percent Lycra. The black luon pants were recalled in March $2013$ after customers

complained that they were transparent. The recall amounted to $17$ percent of the company's

sales. After the recall, customers reported additional problems, including pilling, flawed seams,

and continuing sheerness. The Louisiana Sheriffs' Pension & Relief Fund purchased common

shares of Lululemon during the time Lululemon made representations that its apparel's quality

level was the "highest in the industry," it was the "leader in technical fabrics and quality

construction," and that "quality" was the company's "key differentiating factor" from its peers.

After the recall, Lululemon's sales and the market price of its shares plummeted. The pension

fund sued Lululemon under Securities Exchange Act Section $10($b$)$ and Rule $10$b$-5,$ claiming that

Lululemon's statements were irreconcilable with Lululemon's actual, undisclosed quality control

practices. Was the pension fund's claim successful?

Lululemon's statements are insulated from liability by the Private Securities

Litigation Reform Act of $1995.$

Under the Securities Litigation Uniform Standards Act of $1998,$ the Louisiana

Sheriffs' Pension & Relief Fund's allegations of fraud must allege facts that give

rise to a requisite "strong inference" of scienter and the inference of scienter

must be cogent and compelling.

The statement that the quality level was the highest in the industry cannot

reasonable be interpreted as a guarantee there were no product defects.

The statement Lululemon was a leader in technical fabrics and quality

construction qualifies as a false statement of fact in violation of Rule $10$b$-5.$

The reference to quality as a key differentiating factor, taken in its proper context,

is not a guarantee of absolute quality at all times; rather, it is statements of goals

or beliefs.