Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

After Uber’s founding in 2009, its valuation soared, with some investors assigning a valuation as high as $68 billion by mid-2016. Between June 2014 and May 2016, Kalanick, Uber’s founder, and Uber completed four preferred stock offerings, raising more than $10 billion in additional capital through limited partnerships and other entities. Irving Firemen’s Relief & Retirement Fund acquired Uber securities on February 16, 2016. In 2017, several alleged corporate scandals surfaced. By early 2018, investors estimated a nearly 30% decline in Uber’s valuation. Irving filed a putative class action against Uber and Kalanick alleging securities fraud under California Corporations Code sections 25400(d) and 25500. The Ninth Circuit affirmed the dismissal of the complaint, upholding the use of the federal standard for loss causation rather than the “less-rigid state law standard.” Irving did not state a claim because it did not adequately allege that Uber and Kalanick’s alleged fraudulent misstatements and omissions caused its alleged losses. Even assuming actionable misstatements by Uber and Kalanick and that news articles, a lawsuit, and government investigations revealed the truth to the market, Irving did not adequately and with particularity allege that these revelations caused the resulting drop in Uber’s valuation. View "Irving Firemen’s Relief & Retirement Fund v. Uber Technologies, Inc." on Justia Law

The Ninth Circuit affirmed the district court's dismissal based on failure to state a claim of a putative securities class-action alleging violations of section 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 14a-9.The panel clarified that the standards for actionability explained in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 575 U.S. 175 (2015), with respect to falsity under section 11 of the Securities Act of 1933, also govern whether a plaintiff has sufficiently alleged the falsity of a statement of opinion under SEC Rule 14a-9 through either a misrepresentation-of-material-fact theory or an omission-of-material-fact theory. Omnicare identified three ways in which a statement of opinion may nonetheless involve a representation of material fact that, if that representation is false or misleading, could be actionable. First, every statement of opinion explicitly affirms that the speaker actually holds the stated belief. Second, some sentences that begin with opinion words like "I believe" contain embedded statements of fact. Third, a reasonable investor may, depending on the circumstances, understand an opinion statement to convey facts about how the speaker has formed the opinion. In this case, the panel applied the Omnicare standards in an accompanying memorandum disposition. View "Golub v. Gigamon Inc." on Justia Law

The Ninth Circuit affirmed the district court's dismissal of a securities fraud action against an investment bank, holding that the complaint failed sufficiently to allege scienter. Plaintiff's complaint stemmed from the bank's handling of MannKind's stock price. After an investment bank analyst published a report setting a target price of $7 per share for the company's stock, the stock surged 26 percent that day. Later that evening, the bank announced that it would act as the placing agent for a dilutive offering that priced that same stock at $6 per share. The stock price declined the next day.The panel explained that the complaint did not offer a plausible motive for the bank’s actions or provide compelling and particularized allegations about scienter, and thus it did not support the required strong inference that the defendant intentionally made false or misleading statements or acted with deliberate recklessness. In this case, the panel reasoned that the most plausible inferences are that someone failed to put MannKind on the watch list, failed to properly check the watch list, or failed to realize that a conflict existed when approving the report. View "Panthera Investment Fund, L.P. v. H.C. Wainwright & Co., LLC" on Justia Law

The Ninth Circuit reversed the district court's dismissal of a class action brought by investors with a financial services firm. Plaintiffs alleged that Edward Jones breached its fiduciary duties under Missouri and California law, but the district court concluded that it did not have subject matter jurisdiction because the Securities Litigation Uniform Standards Act (SLUSA) prevents plaintiffs from bringing their claims as a class action consisting of fifty or more persons.The panel concluded that SLUSA does not bar plaintiffs' state law fiduciary duty claims because Edward Jones's alleged misrepresentation or omission that forms the basis for plaintiffs' fiduciary duty claims is not "in connection with the purchase or sale of a covered security." In this case, plaintiffs claim that Edward Jones breached its fiduciary duties under Missouri and California law by failing to conduct a suitability analysis, and they allege that this lack of suitability analysis caused them to move their assets from commission-based accounts to fee-based accounts, which was not in their best financial interest as low-volume traders. The panel explained that the alleged failure to conduct a suitability analysis was not material to the decision to buy or sell any covered securities. Accordingly, the panel remanded for further proceedings. View "Anderson v. Edward D. Jones & Co., LP" on Justia Law

The Ninth Circuit affirmed the district court's dismissal with prejudice of a putative securities fraud class action under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint alleged that Tesla, Inc., and two of its officers, misled the investing public during 2017 about Tesla's progress in building production capacity for the Model 3, its first mass-market electric vehicle.The panel concluded that, to the limited extent that the specific statements challenged in plaintiffs' operative Second Amended Complaint are not protected by the "safe harbor" for forward-looking statements in the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5(c), plaintiffs have failed adequately to plead falsity. The panel also held that plaintiffs' proposal to amend the complaint further, to challenge an additional statement, fails for lack of the requisite loss causation. View "Friedman v. Tesla, Inc." on Justia Law

Plaintiffs, who represent a putative shareholder class, filed suit alleging that BofI and its senior executives violated sections 10(b) and 20(a) of the Securities Exchange Act by denying that BofI was the subject of a money laundering investigation. The complaint also alleged that BofI falsely stated that a whistleblower's separate allegations that BofI made undisclosed loans to criminals were "disconnected from the reality of BofI's highly compliant and top-performing business."The panel held that plaintiffs may rely on a corrective disclosure derived from a Freedom of Information Act (FOIA) response by plausibly alleging that the FOIA information had not been previously disclosed. If a plaintiff relies on information obtained via a FOIA request, the pleading burden to allege loss causation is no different from the pleading burden for other types of corrective disclosures. Therefore, the panel reversed the district court's loss causation ruling to the extent it deemed information obtained via a FOIA request to be publicly available prior to its disclosure. The panel also held that the district court correctly ruled that the Seeking Alpha article at issue did not constitute a corrective disclosure, in part because it was written by an anonymous short-seller with no expertise beyond that of a typical market participant who based the article solely on information found in public sources. Accordingly, the panel affirmed in part, reversed in part, and remanded. View "Grigsby v. BofI Holding, Inc." on Justia Law

The Ninth Circuit reversed the district court's judgment dismissing a securities fraud class action, holding that the shareholders have adequately pleaded a viable claim under Section 10(b) of the Securities Exchange Act and Rule 10b-5 for the two categories of misstatements the district court found actionable, with the whistleblower lawsuit serving as a potential corrective disclosure.The panel held that one way to prove loss causation is to show that the defendant's fraud was revealed to the market through one or more "corrective disclosures" and that the company's stock price declined as a result. In this case, plaintiff alleged loss causation by relying on two corrective disclosures: a whistleblower lawsuit filed by a former company insider and a series of blog posts offering negative reports about the company's operations. The panel agreed with the district court that the Seeking Alpha blog posts could not qualify as corrective disclosures and, even if the posts disclosed information that the market was not previously aware of, it is not plausible that the market reasonably perceived these posts as revealing the falsity of BofI's prior misstatements, thereby causing the drops in BofI's stock price on the days the posts appeared. However, the panel held that the whistleblower lawsuit filed by a former company insider was a potential corrective disclosure. The panel joined the Sixth Circuit in rejecting any categorical rule that allegations in a lawsuit, standing alone, can never qualify as a corrective disclosure. Finally, the panel rejected the shareholders' allegations regarding a new category of misstatements concerning government and regulatory investigations. View "Houston Municipal Employees Pension System v. BofI Holding, Inc." on Justia Law

The Ninth Circuit affirmed the district court's dismissal of a putative securities class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. Plaintiff alleged that a medical device company misled the investing public about whether the FDA would approve the company's new aneurysm sealing product.The panel held that allegations that are implausible do not create a strong inference of scienter under the Private Securities Litigation Reform Act. In this case, plaintiff failed sufficiently to plead facts giving rise to a strong inference that defendants made false or misleading statements either intentionally or with deliberate recklessness. The panel explained that, under the facts alleged, plaintiff's core theory—that the company invested in a U.S. clinical trial and made promising statements about FDA approval, yet knew from its experience in Europe that the FDA would eventually reject the product—has no basis in logic or common experience. Rather, the more plausible inference is that the company made optimistic statements about its prospects for FDA approval. View "Nguyen v. Endologix, Inc." on Justia Law

The Ninth Circuit affirmed the district court's dismissal of a securities fraud action because it was barred by the act of state doctrine. Plaintiffs alleged that defendants knowingly failed to disclose legal deficiencies under Mexican tax law in the 2012 APA Ruling and sold shares knowing these legal deficiencies existed.The panel held that plaintiffs' claims under the Securities Exchange Act of 1934 would require a United States court to pass judgment on the validity of a 2012 ruling by Mexico's tax authority. In this case, the mandatory elements of applying the act of state doctrine were satisfied and the policies underlying the doctrine weighed in favor of applying it to bar plaintiffs' claims. Agreeing with its sister circuits, the panel held that the district court was not required to consider the Sabbatino factors. The panel declined to reconsider whether a tax ruling by the Mexican government, that remains valid in Mexico, complied with Mexico's tax laws. View "Royal Wulff Ventures LLC v. Primero Mining Corp." on Justia Law

The Ninth Circuit affirmed the district court's grant of summary judgment for the SEC in a civil complaint filed against defendant and his law firm, alleging securities fraud claims. The panel held that the EB-5 visa program investments in connection to defendant and his law firm constitute securities in the form of investment contracts. In this case, the private placement memoranda's (PPMs) identification of the investments as securities, the form of the investment entity as a limited partnership, and the promise of a fixed rate of return all indicate that the EB-5 transactions were securities. The panel rejected defendant's contention that the promised return was effectively nullified by the administrative fees, and his assertion that his clients nonetheless lacked an expectation of profit.The panel agreed with the district court that the uncontroverted evidence established that defendant was acting as a broker and was required to register with the SEC as a broker; defendant engaged in securities fraud in violation of section 17(a) of the Securities Act of 1933 and section 10(b) of the Securities Exchange Act of 1934; and the district court did not abuse its discretion in entering the disgorgement order. View "SEC v. Feng" on Justia Law