Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02674/USCOURTS-azd-2_06-cv-02674-2/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Teamsters Local 617 Pension )

and Welfare Funds, on behalf )

of itself and all others ) No. CIV 06-2674-PHX-RCB

similarly situated, )

)

Plaintiff, ) O R D E R

)

vs. )

)

Apollo Group, Inc., et al., )

)

Defendants. )

 In Teamsters Local 617 Pension & Welfare Funds v. Apollo

Group, Inc., 623 F.Supp.2d 763 (D.Ariz. 2009) (“Apollo I”), the

court issued a host of rulings pertaining to defendants’ motions to

dismiss the First Amended Complaint (“FAC”) in this securities

fraud action. In the pending reconsideration motion (doc. 107),

lead plaintiff, Pension Trust Fund for Operating Engineers

(“plaintiff”), challenges several aspects of Apollo I. First, it

asserts that dismissal was improper as to the control person

liability claims under section 20(a) of the Securities and Exchange

Act of 1934 (“the Exchange Act”) as against the following 

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defendants: Daniel E. Bachus; Dino J. DeConcini, Hedy Govenar;

Brian E. Mueller; Laura Palmer Noone (“Noone”) (collectively “the

group one defendants”); John G. Sperling; and Peter Sperling

(collectively “the Sperlings”). Relatedly, plaintiff contends that

because the FAC sufficiently alleges that each of the group one

defendants and the Sperlings had the requisite control over a

primary violator, the section 20(a) claims should stand as against

each of them. Necessarily then, plaintiff further asserts that the

court must vacate the judgments entered in favor of each of the

group one defendants. Lastly, if the court finds that the FAC

inadequately alleges a section 20(a) control person claim as to any

of the group one defendants, still, according to plaintiff,

reconsideration is “appropriate[.]” Reply (doc. 111) at 11:3

(emphasis omitted). Plaintiff reasons that because the court

dismissed with prejudice the section 20(a) claim against the group

one defendants, it must reconsider and grant plaintiff leave to

amend in that regard. 

Basically, defendants counter that the court should deny

plaintiff’s motion “in its entirety” because the FAC does not

adequately allege “that any of these defendants controlled any

purported primary violator of the federal securities laws in

connection with Apollo[’s] . . . alleged stock option backdating

practices.” Resp. (doc. 110) at 1. Moreover, defendants assert

that plaintiff’s “promise to cure” the deficient section 20(a)

claim is not a proper basis for reconsideration. Id. at 10:16. 

Discussion

I. Reconsideration Standards

Evidently because the court entered judgment against some but

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1 Defendants construe plaintiff’s motion to reconsider pursuant to LRCiv

7.2(g) as directed solely against the Sperling defendants. See Resp. (doc. 110)

at 3 n. 3. In seeking relief under that Rule, however, plaintiff lists each of the

seven dismissed defendants. See Mot. (doc. 107) at 2:25-27. Thus, the court does

not read plaintiff’s motion as narrowly as do the defendants. 

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not all of the moving defendants, plaintiff is relying upon two

different rules as the procedural bases for its motion. Pursuant

to LRCiv 7.2(g),1 plaintiff is moving for reconsideration as to all

of the moving defendants. As to the group one defendants, in

accordance with Fed. R. Civ. P. 59(e), plaintiff also is seeking to

have “the Court vacate the judgment[s]” entered against them. Mot.

(doc. 107) at 2:1-2. LRCiv 7.2(g) is entitled “Motions for

Reconsideration[,]” whereas Fed. R. Civ. P. 59(e) is entitled

“Motion[s] to Alter or Amend a Judgment.” So on the face of it,

plaintiff’s distinction between the group one defendants and the

Sperlings, based upon entry of judgment, is understandable. 

Regardless of the procedural vehicle, the legal standards governing

plaintiff’s motion are the same however. 

There is no express provision in the Federal Rules of Civil

Procedure for a motion for reconsideration. See United States v.

Comprehensive Drug Testing, Inc., 473 F.3d 915, 955 (9th Cir. 2006)

(Thomas, J., dissenting). “Rather, such motions are creatures of

local rule or practice.” Id. In this action, as just noted,

plaintiff is relying upon LRCiv 7.2(g) as the procedural vehicle

for this reconsideration motion. “Absent good cause shown,” that

Rule requires the filing of such motions “no later than ten (10)

days after the filing of the order that is the subject of the

motion.” LRCiv 7.2(g)(2). Where, as here, a timely

reconsideration motion is brought pursuant to the Local Rules, it

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“is construed as a motion to alter or amend a judgment under Rule

59(e).” See Shapiro v. Paradise Valley Unified, 374 F.3d 857, 863

(9th Cir. 2004) (citations omitted); see also Carroll v. Nakatani,

342 F.3d 934, 945 (9th Cir. 2003) (Although Rule 59(e) is entitled

“Motion to Alter or Amend Judgment,” the Ninth Circuit “permits a

district court to reconsider and amend a previous order” pursuant

to that Rule.) 

“The history of Rule 59(e) shows that ‘alter or amend’ means a

substantive change of mind by the court.” Miller v. Transamerican

Press, Inc., 709 F.2d 524, 527 (9th Cir. 1983). “Under Rule 59(e),

it is appropriate to alter or amend a judgment if (1) the district

court is presented with newly discovered evidence, (2) the district

court committed clear error or made an initial decision that was

manifestly unjust, or (3) there is an intervening change in

controlling law.” United Nat. Ins. Co. v. Spectrum Worldwide,

Inc., 555 F.3d 772, 780 (9th Cir. 2009) (citation and internal

quotation marks omitted). Local Rule 7.2(g) in part mirrors that

standard. That Rule provides that “[t]he Court will ordinarily

deny a motion for reconsideration . . . absent a showing of

manifest error or a showing of new facts or legal authority that

could not have been brought to its attention earlier with

reasonable diligence.” LRCiv 7.2(g)(1). Irrespective of the

grounds, in the end, “[w]hether or not to grant reconsideration is

committed to the sound discretion of the court.” In re Fowler, 394

F.3d 1208, 1214 (9th Cir. 2005) (citation and internal quotation

marks omitted). 

 There is a basis for reconsidering Apollo I to the extent the

court required, as a predicate to stating a section 20(a) claim,

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that plaintiff plead a primary securities law violation as to each

of the defendants. As explained below, however, Rule 12(b)(6)

provides the legal framework for the remainder of plaintiff’s

arguments - not the reconsideration standards which defendants

repeatedly invoke. 

II. Section 20(a) - Control Person Claim

This court in Apollo I reiterated that “to ‘prove a prima

facie case under Section 20(a), a plaintiff must prove: (1) a

primary violation of federal securities law and (2) that the

defendant exercised actual power or control over the primary

violator.’” Apollo I, 633 F.Supp.2d at 827 (quoting, inter alia,

No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W.

Holding Corp., 320 F.3d 920, 945 (9th Cir. 2003) (“America West”)). 

In Apollo I, this court, inter alia, granted the motion to dismiss

the section 20(a) claims as against the group one defendants and

the Sperlings. The sole basis for that dismissal was failure to

“adequately” plead the first element of a section 20(a) claim – “a

primary violation of section 10(b)[.]” See id. at 828. Given that

holding, the court did not address the second prong of control

person liability as to those particular defendants. 

A. Primary Violation

Plaintiff asserts that “the court’s dismissal of plaintiff’s

§ 20(a) claim was clear error justifying Rule 59(e) relief.” 

Mot. (doc. 107) at 2:10-11 (emphasis omitted). First, plaintiff

challenges the court’s finding that as a prerequisite to

stating a section 20(a) claim, it had to plead a primary securities

law violation as to each of the group one defendants and as to each

of the Sperlings. Second, plaintiff contends that the FAC

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2 That section provides:

Every person who, directly or indirectly, controls any person 

liable under any provision of this chapter or of any rule or 

regulation thereunder shall also be liable jointly and severally 

with and to the same extent as such controlled person to any 

person to whom such controlled person is liable, unless the 

controlling person acted in good faith and did not directly 

or indirectly induce the act or acts constituting the violation 

or cause of action.

15 U.S.C. § 78t(a) (emphasis added).

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adequately alleges that each of those seven defendants had the

“requisite control” so as to state a section 20(a) claim against

them. Id. at 3:14. Defendants vigorously dispute whether the FAC

contains sufficient allegations of control. Tellingly, however,

their response is silent as to the first prong for section 20(a)

liability. By their silence, the court assumes that defendants

concede the validity of plaintiff’s position.

Even absent such a concession, the court recognizes that in

Apollo I it erroneously required, as a precursor to control person

liability, allegations that each of the defendants individually

violated section 10(b). After reciting section 20(a) of the

Exchange Act,2

 the Ninth Circuit reiterated that “a defendant

employee of a corporation who has violated the securities law will

be jointly and severally liable to the plaintiff, as long as the

plaintiff demonstrates ‘a primary violation of federal securities

law’ and that ‘the defendant exercised actual power or control over

the primary violator.” Zucco Partners, LLC v. Digimarc Corp., 552

F.3d 981, 990 (9th Cir. 2009) (citing America West, 320 F.3d at 945

(quoting Howard v. Everex Sys., Inc., 228 F.3d 1057, 1065 (9th Cir.

2000) (quotation marks omitted)) (other citations omitted)

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3 At this juncture, the court is reminded of Justice Frankfurter’s astute

observation that “[w]isdom too often never comes, and so one ought not to reject

it merely because it comes late.” Henslee v. Union Planters Nat. Bank & Trust Co.,

335 U.S. 595, 600, 69 S.Ct. 290, 93 L.Ed. 259 (1949) (Frankfurter, J., dissenting).

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(emphasis added). Consistent with the plain language of section

20(a) and the Ninth Circuit case law construing it, it stands to

reason that although control person liability under that statute 

cannot exist without a primary violation, section 20(a) does not

require that the alleged controlling person be primarily liable

under section 10(b). See Paracor Finance, Inc. v. General Electric

Capital Corp., 96 F.3d 1151, 1161 (9th Cir. 1996) (“The plaintiff

need not show the controlling person’s scienter or that they

culpably participated in the alleged wrongdoing.”)(internal

quotation marks omitted); Howard, 228 F.3d at 1065 (To prove a

prima facie violation under section 20(a), a “[p]laintiff need not

show that the defendant was a culpable participant in the

violation, but defendant may assert a ‘good faith’ defense.”)

(citations omitted). That is so because section 20(a) “premises

liability solely on the control relationship, subject to the good

faith defense.” Hollinger v. Titan Capital Corp., 914 F.2d 1564,

1575 (9th Cir. 1990) (emphasis added). Recognizing that a

plaintiff need only plead and prove the commission of “a primary

violation of federal securities law” generally, and not a “primary

violation” by a given defendant, (citations and internal quotation

marks omitted), plaintiff is entitled to reconsideration of that

issue.3

 

Before proceeding, the court notes that in In re Amgen Sec.

Litig., 544 F.Supp.2d 1009 (C.D.Cal. 2008), the court did dismiss

the section 20(a) control person claims as to certain outside

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director and non-speaking defendants, “since [it] ha[d] dismissed

the § 10(b) claims against them.” Id. at 1037-1038. The Amgen

court did not cite any support for its holding, however; and, as

the preceding discussion makes clear, Amgen is an aberration. 

Notwithstanding the foregoing, defendants contend that

reconsideration is not warranted because it will not change the

outcome. The outcome will not change, defendants argue, because

the FAC does not sufficiently allege that any of them exercised

actual power or control over a primary violator - the second

element of a section 20(a) claim. Hence, they reason that the

Apollo I order granting dismissal of the section 20(a) claims and

entry of judgment as to the group one defendants should still

stand, albeit for a different reason than articulated in Apollo I. 

Plaintiff strenuously disagrees. Plaintiff’s position is

that the FAC sufficiently alleges the exercise of actual power or

control by each of the group one defendants, and by the Sperlings. 

Therefore, the court must reinstate the section 20(a) claims. 

The Sperlings are in a different procedural posture than the

group one defendants. Thus, as to the Sperlings, presently there

is no need to address the issue of whether the FAC adequately

alleges control for section 20(a) purposes - a fact which

plaintiff and the Sperlings did not take into account. In Apollo

I, inter alia, this court granted with prejudice the group one

defendants’ motion for dismissal of the section 20(a) claims. 

Apollo I, 633 F.Supp.2d at 834. Pursuant to Fed. R. Civ. P.

54(b), the court also ordered that judgment be entered in favor of

that group of defendants. Id. at 832-834. In contrast, this

court granted the Sperlings’ motion to dismiss the section 20(a)

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claims without prejudice. Id. at 834, ¶ (10). Moreover, the

court also expressly granted plaintiff leave to file a second

amended complaint (“SAC”) as to the Sperlings, among other

defendants. Id. at 834, ¶ (14). 

Plaintiff timely filed a SAC wherein, inter alia, it added

allegations as to the Sperling defendants purported control. See,

e.g., SAC (doc. 112) at 70-71, ¶ 161. In light of the foregoing,

the court denies as moot the plaintiff’s motion for

reconsideration as to the Sperlings. See Struggs v. Evans, 2008

WL 5068522, at *1 (N.D.Cal. 2008) (denying as moot motion for

reconsideration, even as to claims dismissed with prejudice, where

plaintiff, in his original motion, also was granted leave to

amend); see also Valentine v. First Advantage Saferent, Inc., 2008

WL 4367353, at *1 (C.D.Cal. 2008) (reconsideration motion filed

simultaneously with motion to amend motion rendered moot by

granting leave to amend). Indeed, because the SAC superseded the

FAC, at this point it would be improper for the court to consider

the sufficiency of the FAC’s allegations of control person

liability against the Sperlings. See Loux v. Rhay, 375 F.2d 55,

57 (9th Cir. 1967) (“The amended complaint supersedes the original,

the latter being treated thereafter as non-existent.”); Bullen v.

De Bretteville, 239 F.2d 824 (9th Cir. 1956) (“It is hornbook law

that an amended pleading supersedes the original, the latter being

treated thereafter as non-existent.”) 

In contrast to the Sperling defendants, the claims against

the group one defendants were dismissed with prejudice, including

the section 20(a) claim, and judgment entered in their favor. 

Pursuant to Fed. R. Civ. P. 59(e) and LRCiv 7.2, plaintiff had ten

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days in which to move for reconsideration. In Apollo I, however,

the court granted plaintiff 30 days in which to file a second

amended complaint (“SAC”). Anticipating that it would prevail on

this reconsideration motion in its entirety, plaintiff’s SAC

includes allegations even as to the group one defendants against

whom judgment was previously entered. See SAC (doc. 112) at 70,

n. 9. Plaintiff’s anticipatory amendment does not preclude their

reconsideration motion. Accordingly, as to the group one

defendants the court must determine whether the FAC alleges

control so as to state a section 20(a) claim against each of them. 

B. Exercise of Actual Power or Control

Before examining the sufficiency of the FAC’s section 20(a)

claims against each of the group one defendants and the Sperlings,

the court must address three preliminary but significant issues. 

First, it must determine the applicable pleading standards for a

section 20(a) control person claim. Second, the court must decide

whether, as defendants repeatedly assert, a control person claim

must include allegations of “actual participation.” Third, the

court must consider the impact, if any, of the signing of

allegedly false financial statements upon the control person

liability analysis. The court will address these issues seriatim. 

1. Pleading Standards

In Apollo I this court was confronted with the issue of

whether Rule 8 or Rule 9 supplies the governing pleading standards

for loss causation. See Apollo I, 633 F.Supp.2d at 813-814. Once

again, the issue of the applicable pleading standards has arisen,

but in a different context than Apollo I. The parties have a

fundamental disagreement as to the applicable pleading standards

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for a section 20(a) claim. Plaintiff contends that Rule 8(a)’s

notice pleading standards govern. Subsection (2) of that Rule

merely requires “a short and plain statement of the claim showing

that the pleader is entitled to relief[.]” Fed. R. Civ. P.

8(a)(2). On the other hand, defendants contend that the

“‘heightened pleading standard’” of the Private Securities

Litigation Reform Act of 1995 (“PSLRA”) governs. Resp. (doc. 110)

at 5:2-3. Among other things, the PSLRA “requir[es] that a

complaint plead with particularity both falsity and scienter.” In

re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1084 (9th Cir. 2002)

(citation omitted) (emphasis added). 

Defendants frame their pleading standards’ argument strictly

in terms of the PSLRA. Close scrutiny of the cases to which

defendants cite reveals, however, that in some the courts applied

the pleading dictates of Rule 9(b) rather than those of the PSLRA. 

For example, in Howard v. Hui, 2001 WL 1195780 (N.D.Cal. Sept. 24,

2001), characterizing a section 20(a) claim as “an allegation of

fraud[,]” the court held that “a plaintiff must plead the

circumstances of the control relationship with sufficient

particularity to satisfy rule 9(b).” Id. at *4 (citations

omitted) (emphasis added). Rule 9(b), in turn, requires that when

“alleging fraud . . . , a party must state with particularity the

circumstances constituting fraud[.]” Fed. R. Civ. P. 9(b)

(emphasis added). In other cases to which the defendants cite,

the court jointly invoked Rule 9(b) and the PSLRA. See, e.g., In

re Splash Tech. Holdings, Inc. Sec. Litig., 2000 WL 1727377, at

*25 (N.D.Cal. Sept. 29, 2000) (citation omitted) (“[T]he complaint

must plead the circumstances of the control relationship with

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4 Hereinafter these claims will be referred to collectively as “section

10(b)” claims.

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particularity[]” as “required by 9(b) and [the] PSLRA.”). Based

upon the cases to which defendants cite, the court interprets

their response as asserting that plaintiff’s section 20(a) claims

must satisfy the more stringent pleading standard of Rule 9(b) and

the PSLRA. 

Regardless of whether based upon the PSLRA or Rule 9(b), as

discussed below, none of the cases upon which defendants rely

convince the court to apply a “heightened pleading standard” to

the section 20(a) claims at issue herein. See Resp. (doc. 110) at

5:2 (internal quotation marks omitted). The court finds

defendants’ authority unavailing because those cases overlook a

fundamental distinction between section 20(a) control person

claims and section 10(b) and Rule 10b-5 securities fraud claims.4

Fraud and scienter -- essential elements of a section 10(b) claim

-- are not elements of a section 20(a) control person claim. That

distinction easily justifies applying a heightened pleading

standard to a section 10(b) claim, but not to a section 20(a)

claim. 

The Ninth Circuit has yet to address the issue of whether a

section 20(a) claim should be plead in conformity with Rule 9(b),

as reinforced by the PSLRA, or in conformity with the notice

pleading requirements of Rule 8(a)(2). Additionally, there is a

split of authority within the district courts of this Circuit on

that issue. The requirement that a plaintiff allege “the

circumstances of control with particularity[]” for purposes of

stating a section 20(a) claim, “is set forth in several district

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5 In Chan v. Orthologic Corp., 1998 WL 1018624, at *8 (D.Ariz. Feb. 5,

1998), this court, too, indicated that in pleading a section 20(a) claim a

plaintiff must satisfy Rule 9(b). This court further noted that PSLRA “has

strengthened the requirement of Rule 9(b).” Id. (citing Oak Tech., 1997 WL 448168,

at *3). Those statements were dicta, however, in that the court went on to discuss

the merits of plaintiffs’ section 10(b) claims, but not their section 20(a) claims.

Moreover, as fully explicated above, in the more than a decade since Chan the case

law pertaining to pleading a section 20(a) claim has evolved and changed to the

point where now the court is firmly convinced that Rule 8 provides the applicable

pleading standard. 

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court decisions.” Hayley v. Parker, 2002 WL 925322, at *9

(C.D.Cal. March 15, 2002) (citing, inter alia, Howard v. Hui, 2001

WL 1159780, at *4 (N.D.Cal. Sep. 24, 2001); In re Splash Tech.

Holdings, Inc. Sec. Litig., 2000 WL 1727405, at *16 (N.D.Cal.

Sept. 29, 2000); In re Oak Tech. Sec. Litig., 1997 WL 448168, at

*14-15 (N.D.Cal. Aug. 1, 1997)); see also In re Atmel Corp. Deriv.

Litig., 2008 WL 2561957, at *11 (N.D.Cal. June 25, 2008) (same).5

In more recent years, however, the weight of district court

authority within this Circuit is to the contrary. Siemers v.

Wells Fargo & Co., 2006 WL 2355411 (N.D.Cal. Aug. 14, 2006), upon

which the plaintiff herein relies, is representative. There, the

defendants argued that because “the complaint sound[ed] in

fraud[,]” Rule 9(b) require[d] the allegations of control to be

stated with particularity.” Id. at *14 (citation omitted). 

Stressing that Rule 9(b) “requires only that ‘the circumstances

constituting fraud . . . shall be stated with particularity[,]’”

the Siemers court rejected that defense argument. Id. The court

soundly reasoned:

The control exerted by [defendant] is not 

a circumstance that constitutes fraud. 

Plaintiff is only required to assert fraud 

with particularity as to primary violations.

At the control-person level, liability exists

irrespective of the control person’s scienter.

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Id. (citing Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1575

(9th Cir. 1990) (“[W]e hold that a plaintiff is not required to

show ‘culpable participation’ to establish that a broker-dealer

was a controlling person . . . . The statute does not place such

a burden on the plaintiff .”)) Thus, the Siemers court expressly

declined to adopt the contrary view of cases such as Hui, to which

the defendants herein cite. Id. (“To the extent [Hui] held that 

. . . , control must be alleged with particularity, this order

respectfully disagrees.”) 

Siemers is the basis for several other decisions within this

Circuit, concluding that “[b]ecause claims based on control person

liability do not directly touch on circumstances that constitute

fraud, Rule 9(b) does not apply to Plaintiff’s claims of control

person liability[.]” In re Wash. Mutual, Inc., 259 F.R.D. 490, 504

(W.D.Wash. 2009) (citing Siemers, 2006 WL 235411, at *14); Fouad

v. Isilon Systems, Inc., 2008 WL 5412397, at *12 (W.D.Wash. Dec.

29, 2008) (expressly applying “Rule 8[’s] notice pleading

standard” to plaintiffs’ control person liability claims based

upon the reasoning in Siemers); In re LDK Solar Sec. Litig., 2008

WL 4369987, at *12 (N.D.Cal. Sept. 24, 2008) (same); see also In

re Countrywide Fin. Corp. Sec. Litig., 588 F.Supp.2d 1132, 1201

(C.D.Cal. 2008) (quoting LDK Solar, 2008 436997, at *12)

(“‘Although the circumstances of the primary violators’ fraud must

be pled with particularity under Rule 9(b) [and the PSLRA], the

control element is not a circumstance that constitutes fraud and

therefore need not be pled with particularity.’”) 

Although it did not mention Siemers, in Batwin v. OCCAM

Networks, Inc., 2008 WL 2676364 (C.D.Cal. July 1, 2008), the court

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similarly reasoned “that a § 20(a) claim need not be pled in

accordance with Rule 9(b) or the PSLRA because scienter and fraud

are not elements of such a claim.” Id. at *24 n. 17 (citing,

inter alia, In re Initial Pub. Offering, 241 F.Supp.2d 281, 396

(S.D.N.Y. 2003)). Instead, the Batwin court expressly held that

control person liability claims “must be pleaded in accordance

with Fed. R. Civ. P. 8(a)(2), requiring that the plaintiff provide

“a ‘short and plain statement of the claim showing that the

pleader is entitled to relief.’” Id. at *24 (citing, inter alia,

Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am.

Sec., LLC, 446 F.Supp.2d 163, 190 (S.D.N.Y. 2006)). 

Of the two lines of cases just discussed, in this court’s

view, the Siemers line is the more soundly reasoned because they

recognize that scienter and fraud are not elements of a section

20(a) claim. The cases upon which the defendants rely fail to

make that crucial distinction, as will soon be readily apparent. 

Further, as will also be seen, applying a heightened pleading

standard to a section 10(b) claim but not to a section 20(a) claim

fully comports with the PSLRA’s plain language and its underlying

purpose.

 Quoting at length from In re Tyco Int’l, Ltd., 2007 WL

1687775 (D.N.H. 2007), defendants assert that a plaintiff “must

plead specific facts demonstrating that Defendants exercised

actual power or control over the primary violation in relevant

respects.” Resp. (doc. 110) at 5:23-25 (emphasis in original). 

Significantly, however, the Tyco court did not directly confront 

the issue of which pleading standards apply to section 20(a)

control person claims. In fact, in discussing whether plaintiffs

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6 The court is well aware that Federal Rule of Appellate Procedure

32.1(a), effective January 1, 2007, states in relevant part, “[A] court may not

prohibit or restrict the citation of federal judicial opinions, . . . that have

been: . . . designated as . . . , ‘not for publication,’ . . . , or the like[.]”

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sufficiently alleged that a defendant director and major

shareholder was a control person, Tyco does not mention the

pleadings standards of Rules 8 or 9(b), or the PSLRA. Rather,

without citing to any legal authority, the Tyco court held that

plaintiffs’ “bare assertions and generalized allegations [we]re

simply insufficient to establish that [a former director

defendant] exercised control over the company [so as] to sustain

plaintiff’s control person claims against him.” Tyco, 2007 WL

1687775, at *8. 

In addition to the shortcomings just identified, two other

factors undermine the precedential value of Tyco. The first is

that Tyco, a district court within the First Circuit, is not

binding on this district court which sits within the Ninth

Circuit. See Dabbas v. Moffitt & Associates, 2008 WL 686687, at

*2 n. 2 (S.D.Cal. 2008) (federal cases from outside the Ninth

Circuit are “not binding authority” on district courts within the

Ninth Circuit). Second, Tyco expressly states that it is “NOT

FOR PUBLICATION[.]” Tyco, 2007 WL 1687775 (emphasis in original). 

That unequivocal declaration, although not determinative of Tyco’s

precedential value,6 strongly suggests that such value is rather

limited. For all of these reasons, although the defendants in the

present action place great credence on Tyco, this court does not. 

Defendants’ reliance upon Hui also is misplaced, but for

different reasons. Initially, as already explained, the court

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disagrees with the basic premise of Hui, which is that a “section

20(a) claim is an allegation of fraud[,]” and thus is governed by

Rule 9(b)’s particularity requirement. See Hui, 2001 WL 1159780,

at *4 (citation omitted). Furthermore, the two cases to which the

Hui court cites – Oak Tech., 1997 WL 446168, and In re Glenfed,

Inc. Sec. Litig., 60 F.3d 591 (9th Cir. 1995) – do not persuade

this court that Rule 9(b)’s particularity requirement applies to

the section 20(a) claims at issue herein. Despite mandating that

the “‘control relationship’ be pled with particularity, in

accordance with Rule 9(b)[,]” critically, as the Batwin court

astutely noted, the court in Oak Tech. “did not explain the basis

for th[a]t requirement.” Batwin, 2008 WL 2676364, at *24 n. 17.

The Hui court’s reliance upon GlenFed is equally tenuous. 

Despite what Hui implies, the Ninth Circuit in GlenFed “did not

require that all allegations of control be set forth with

particularity.” See Siemers, 2006 WL 2355411, at *14. “Instead,”

the GlenFed Court “held that plaintiffs could not rely on a theory

of group-published information to hold outside directors liable for

misleading statements issued by the corporation unless the

plaintiffs pleaded the outside directors' involvement in the

day-to-day operations of the corporation with particularity.” Id.

In GlenFed, “whether or not the directors were involved in

day-to-day operations was a circumstance determinative of whether

or not they committed fraud in the issuance of the statements.” 

Id. (citation omitted). Thus, as the court persuasively reasoned

in Siemers, the “holding of GlenFed does not apply to the situation

. . . , where,” as here, “liability is not dependent upon showing

that the control person engaged in fraud.” See id. In sum, unlike

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the Hui court, this court does not find either Oak Tech. or GlenFed

persuasive on the issue of the pleading standards for a section

20(a) claim.

Likewise, Splash Technology Holdings, 2000 WL 1727405, another

case to which defendants cite, does not advance their argument that

a section 20(a) claim must be pled with particularity. In

requiring “the circumstances of the control relationship [to be

pled] with particularity[,]” the Splash Technology Holding court

simply cited to Oak Tech. Id. at *25 (citation omitted). The Oak

Tech. court offered no rationale whatsoever for its holding though,

as mentioned earlier. What is more, the court’s pronouncement in

Splash Technology Holding was merely dicta in that it was

unnecessary to that court’s holding. Because the plaintiffs in

Splash Technology Holding did not plead a primary violation of the

federal securities law, the court found “any discussion of control

person liability . . . moot.” Id. at *26. Therefore, Splash

Technology Holding, like the other cases to which defendants cite,

is not persuasive in terms of the governing pleading standards for

a section 20(a) claim. 

The final case to which defendants cite is In re Digital

Island Sec. Litig., 223 F.Supp.2d 546 (D.Del. 2002), aff’d on other

grounds, 357 F.3d 322 (3rd Cir. 2004). As with Tyco, Digital Island

is a district court decision outside the Ninth Circuit; hence it is

not binding upon this district court. See Dabbas, 2008 WL 686687,

at *2 n.2. Moreover, Splash Technology Holding was the primary

basis for the court’s holding in Digital Island, but, as just

explained, the Splash Technology Holding court’s rationale was

weak, to say the least. 

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7 The PSLRA requires that for “securities fraud actions” alleging

“[m]isleading statements and omissions[,]” a complaint must “specify each statement

alleged to have been misleading, the reason or reasons why the statement is

misleading, and, if an allegations regarding the statement or omission is made on

information and belief, the complaint shall state with particularity all facts on

which that belief is formed.” 15 U.S.C. § 78u-4(b)(1) (West 2009)

8 “Under the PSLRA, a complaint must “‘state with particularity facts

giving rise to a strong inference that the defendant acted with the required state

of mind.’” Glenbrook Capital, 2009 WL 839289, at *5 (quoting 15 U.S.C. 

§ 78u-4(b)(2)). 

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To summarize, each of the cases to which defendants cite

requires a section 20(a) claim to be pled with particularity. Yet,

none of those cases are convincing on the issue of pleading such a

claim because they are: (1) not soundly reasoned; (2) outside this

Circuit; or (3) both. Consequently, despite defendants’ repeated

urging, the court will not require a section 20(a) claim to be pled

in accordance with either the PSLRA or Rule 9(b). 

Indeed, adopting a heightened pleading standard for section

20(a) claims would run afoul of the PSLRA. In enacting the PSLRA,

Congress sought to provide “protections to discourage frivolous

[securities] litigation.” H.R. Conf. Rep. No. 104-369, 104th Cong.,

1st Sess. at 32 (Nov. 28, 1995). One of those “protections” was to

“strengthen[] the already-heightened pleading requirements of Rule

9(b).” Glenbrook Capital Ltd. Partnership v. Kuo, 2009 WL 839289,

at *5 (March 30 2009). Significantly, the PSLRA did not uniformly

heighten the pleading standards for all Exchange Act causes of

action. The PSLRA explicitly adopted stringent pleading standards

for allegations of material misstatements or omissions brought

pursuant to 15 U.S.C. § 78u-4(b)(1).7 The PSLRA also

“[s]pecifically . . . imposed strict requirements for pleading

scienter[,]”8 id., which “is an essential element of a § 10(b) or

Rule 10b-5 claim.” Lipton v. Pathogenesis Corp., 284 F.3d 1027,

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1035 n. 15 (9th Cir. 2002) (citation omitted). 

In sharp contrast, the PSLRA is silent as to the pleading

standards for section 20(a) control person claims. Unlike section

10(b) claims, however, “‘to establish the liability of a controlling

person, the plaintiff does not have the burden of establishing that

person’s scienter distinct from the controlled corporation’s

scienter.’” Batwin, 2008 WL 2676364, at *24 (quoting Arthur

Children’s Trust v. Keim, 994 F.2d 1390, 1398 (9th Cir. 1993)). 

Therefore, it is logical and wholly consistent with the PSLRA to

find, as did the Batwin court, that for a section 20(a) cause of

action, where scienter is not an element, the PSLRA’s heightened

pleading standards do not apply. See id., 2008 WL 2676364, at *24

n. 17 (citations omitted). 

Lastly, “the legislative history of the PSLRA, . . . specifies

that its heightened pleading standards only apply to ‘securities

fraud’ claims.” Initial Pub. Offering, 241 F.Supp.2d at 397 n. 185

(quoting S.Rep. No. 104-98, at 7) (emphasis added). Having found,

as this court has, that section 20(a) claims do not sound in fraud,

requiring such claims to be alleged in accordance with the PSLRA’s

heightened pleading standards would conflict with the legislative

history of that Act.

For all of these reasons, agreeing with plaintiff, the court

holds that section 20(a) control person claims are subject to the

more general notice pleading requirements of Fed. R. Civ. P.

8(a)(2). Not only is there case law outlined herein to support this

holding, but, from the court’s perspective, that line of cases is

more soundly reasoned, and hence more persuasive, than defendants’

contrary authority. Accordingly, the court will examine the FAC’s

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allegations of section 20(a) control person liability to determine

whether they satisfy the less stringent notice pleading standards of

Rule 8(a).

The court’s holding that Rule 8 provides the governing pleading

standards here seriously erodes defendants’ Response, which is cast

in terms of the more exacting standards of Rule 9(b) and the PSLRA. 

Further undermining defendants’ response is that it borrows heavily

from Apollo I. That reliance is misplaced, though, because the

pleading deficiencies which defendants stress from Apollo I were in

the context of scienter. And, as should be abundantly clear by now,

from this court’s standpoint, scienter is not an element of a

section 20(a) claim. Hence, the section 20(a) claims which the FAC

alleges are not subject to the more exacting pleading standards of

Rule 9(b) and the PSLRA.

2. Actual Participation

Defendants fare no better with their argument that plaintiff

must plead “actual participation” to satisfy the second element of a

section 20(a) control person claim. Quoting from Burgess v. Premier

Corp., 727 F.3d 826 (9th Cir. 1984), defendants repeatedly state

that “[t]here must be some showing of actual participation in the

corporation’s operation or some influence before the consequences of

control may be imposed[]” under section 20(a). Resp. (doc. 110) at

2:5-7; 4:20-22; 12:23-25; 13:21-23; 14:5-7; and at 15:22 - 16:1-3

(emphasis added). Primarily due to an intervening change in the law

since Burgess, that statement evinces a basic misconception as to

control person liability - at least at the pleading stage. See

Howard, 228 F.3d at 1065 (showing of an “effective lack of

participation” and lack of scienter entitles defendant to good faith

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9 As to the Sperling defendants, plaintiff also argues that because the

FAC alleges that they “control over 99% of Apollo’s voting stock[,]” they are

control persons. Mot. (doc. 107) at 3:14-15 (citation omitted). Defendants retort

that “stock ownership does not establish control[.]” Resp. (doc. 110) at 10:27

(emphasis omitted). The court will leave this argument for another day given its

finding that this reconsideration motion is moot as to the Sperlings.

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defense to control person liability claim). 

Burgess was decided prior to Hollinger. Id. at 1066. “Prior

to Hollinger, it was clear that a plaintiff needed to show actual

participation to make out a prima facie § 20(a) case in this

circuit.” Id. (citation omitted). Hollinger “shifted the burden to

the defendant[,]” however, “to show that she acted in good faith and

did not directly or indirectly induce the violations.” Id.

(citation and internal quotation marks omitted). Consequently,

despite defendants’ contrary assertions, “it is not necessary to

show actual participation or the exercise of power[]” to make out a

prima facie § 20(a) claim in the Ninth Circuit. Id. (emphasis

added). So, rather than focusing on defendants’ alleged actual

participation, this court must look to allegations of their

“participation in the day-to-day affairs of the corporation and the

defendant's power to control corporate actions.” See Apollo I, 633

F.Supp.2d at 827 (quoting America West, 320 F.3d at 945). 

3. Signing Allegedly False Financial Statements

Plaintiff’s sole basis for moving for reconsideration as

to defendants other than the Sperlings9 is that they “were all

officers and directors who ‘signed’ false financial statements[.]’" 

Mot. (doc. 107) at 3:18-19. According to plaintiff, the foregoing

“qualif[ies] [defendants] as control persons under" Apollo I. Id.

at 3:19-20 (citations omitted). There are factual and legal flaws

with this proposition.

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First, plaintiff reads Apollo I too broadly. In Apollo I, this

court did not, as plaintiff strongly implies, hold that signing

false financial statements, absent any other allegations, suffices

to allege control under section 20(a). This court simply reiterated

that “there is ‘persuasive authority indicat[ing] that an officer or

director who has signed false financial statements containing

materially false and misleading statements qualifies as a control

person.’” Apollo I, 633 F.Supp.2d at 828 (quoting Amgen, 544

F.Supp.2d at 1037 (in turn, collecting cases)). The court in Apollo

I did not further discuss that proposition because it was

unnecessary to the holdings therein. 

Second, there is no factual basis for plaintiff’s argument. 

Plaintiff cites to paragraphs 156-182 of the FAC as the factual

underpinning for this argument. See Mot. (doc. 107) at 3:18. On

the face of it, none of those paragraphs pertain to the section

20(a) control person claims; rather, they allege section 10(B) and

Rule 10b-5 violations. Moreover, close examination of paragraphs

156-182 reveals that they do not include allegations that any of the

defendants signed any documents – financial statements or otherwise. 

Nor does the FAC contain allegations elsewhere that any of the

defendants signed any documents. So, even assuming arguendo that

the signing of a false financial statement by an officer or director

suffices to plead a section 20(a) claim, the FAC does not include

such allegations as to any of the defendants. Plainly then,

defendants’ purported signing of false financial statements is not a

basis for reinstating the section 20(a) claims as against them. 

Although it disagrees with plaintiff’s proffered basis for 

finding that the FAC sufficiently alleges control within the meaning

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10 The parties’ original control person liability arguments were cursory,

to say the least. Three of the seven dismissed defendants did not even mention the

sufficiency of the control person allegations against them, making this additional

briefing all the more necessary. 

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of section 20(a), the court will sua sponte examine the sufficiency

of the FAC’s allegations in that regard as to each of the

defendants. The court is proceeding in this way because in Apollo I

it did not reach the issue of whether the FAC sufficiently alleges

the exercise of actual power or control over a primary violator by

each of these defendants. 

Proceeding in this way does not prejudice defendants. Upon the

filing of plaintiff’s reconsideration motion, pursuant to LRCiv

7.2(g)(2), the court ordered that in responding, defendants were to

“address the issue of whether the [FAC] sufficiently alleges that

each of them exercised actual power or control over the primary

violation for purposes of asserting control person liability under

[s]ection 20(a) of the . . . Exchange Act[.]”10 Doc. 108 at 2:4-8. 

Defendants thus were notified of the possibility that upon

reconsideration the court would examine the control element of a

section 20(a) claim, and they tailored their response accordingly.

To summarize, in scrutinizing the FAC’s allegations of control

as to each of the defendants, Rule 8's notice pleading requirements

will apply. The court will not require allegations of actual

participation, however. Lastly, the signing of allegedly false

financial statements will not factor into the court’s analysis of

the FAC’s control allegations. Against that backdrop, the court

will examine the FAC to ascertain whether it sufficiently alleges

control so as to state a section 20(a) claim against each of the

defendants. 

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11 “In Twombly, . . . , the Supreme Court ‘retired’ the familiar language

derived from Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80

(1957), which provided ‘the accepted rule that a complaint should not be dismissed

for failure to state a claim unless it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle him to relief.’”

Rick-Mik Enterprises v. Equilon Enterprises, 532 F.3d 963, 970-971 (9th Cir. 2008)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, ___, 127 S.Ct. 1955, 1968, 167

L.Ed.2d 929 (2007) (quoting Conley)). 

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4. Rule 12(b)(6) Standards

As acknowledged earlier, in Apollo I the court improperly

dismissed the section 20(a) claims against defendants because the

FAC did not allege a primary securities law violation against them

individually. Plainly then, in Apollo I this court never reached

the issue of whether the FAC sufficiently alleges that each of the

defendants had the requisite control so as to state a section 20(a)

claim against them. Now, for the first time, the court is

considering that issue. Therefore, as to this particular control

issue, Rule 12(b)(6)’s dismissal motion standards apply, not the

more demanding reconsideration standards which defendants invoke. 

Apollo I includes a recitation of the basic standards governing

a Rule 12(b)(6) motion in the post-Twombly11 era. See Apollo I, 633

F.Supp.2d at 779. Since Apollo I, the Supreme Court decided

Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 173 L.Ed.2d 868

(2009), which discussed Rule 8(a)(2)’s standards in conjunction with

Rule 12(b)(6)’s dismissal standards. Significantly, in Iqbal the

Supreme Court removed any doubt as to Twombly’s applicability

outside the anti-trust realm. The Iqbal Court held that the Twombly

standards apply to “all civil actions” pled under Fed. R. Civ. P. 8,

not just to antitrust cases. Iqbal, 556 U.S. at ___, 129 S.Ct. at

1953 (citations and internal quotation marks omitted). Because

Iqbal reaffirms the Supreme Court’s decision in Twombly, Iqbal does

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not alter the standards which this court employed in Apollo I. 

Certain aspects of Twombly bear emphasizing though.

As before, “to survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to ‘state a

claim to relief that is plausible on its face.’” Iqbal, 129 S.Ct. at

1949 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “A claim

has facial plausibility when the plaintiff pleads factual content

that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Id. (citing

Twombly, at 556, 127 S.Ct. 1955). Although “the pleading standard

Rule 8 announces does not require ‘detailed factual allegations,’ 

. . . it demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation.” Id. (citing, inter alia, Twombly, 550 U.S.

at 555, 127 S.Ct. 1955). 

The Supreme Court in Iqbal stressed that Twombly’s plausibility

standard “is not akin to a ‘probability requirement,’ but it asks

for more than a sheer possibility that a defendant has acted

unlawfully.” Iqbal, 556 U.S. at ___, 129 S.Ct. at 1949 (quoting

Twombly, 550 U.S. at 556, 127 S.Ct. 1955). After Twombly,

“[f]actual allegations must be enough to raise a right to relief

above the speculative level, . . . , on the assumption that all the

allegations in the complaint are true (even if doubtful in 

fact)[.]” Twombly, 550 U.S. at ___, 127 S.Ct. at 1965 (citations and

footnote omitted). Thus, “[p]ost-Twombly, plaintiffs face a higher

burden of pleading facts, and courts face greater uncertainty in

evaluating complaints.” al-Kidd v. Ashcroft, 580 F.3d 949, 977 (9th

Cir. 2009). Engaging in the “context-specific task” of determining

whether the FAC states a plausible section 20(a) claim as to any of

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the remaining defendants, the court is particularly mindful that it

must “draw on its judicial experience and common sense.” See Iqbal,

556 U.S. at ___, 129 S.Ct. at 1950 (citation omitted). 

With that clarification, the court will consider the FAC’s

broad allegations of control, as well as the control allegations

specific to each of the defendants. In so doing, the general

principles of control person liability outlined in Apollo I will

continue to inform the court. See Apollo I, 633 F.Supp.2d at 827-

828. 

a. Control Allegations Generally

Section IV of the FAC, entitled “Defendants’ Duties,” alleges

in relevant part as follows:

Because of their positions of control and authority

as directors or officers of Apollo, each of the 

defendants was able to and did, directly and 

indirectly, control the wrongful acts complained 

of herein. These acts include: (i) agreement to 

and/or acquiescence in the improper stock practices; 

and (ii) causing Apollo to file false SEC filings in

violation of the U.S. securities laws. Because of 

their positions with Apollo, each of the defendants 

had access to adverse non-public information and was

required to disclose these facts promptly and 

accurately to Apollo shareholders and the financial

markets but failed to do so. 

FAC (doc. 71) at 10, ¶ 32:16-23. Additionally, the FAC alleges that

“[e]ach of the defendants participated in the issuance and/or review

of the false and/or misleading statements, including the false SEC

filings and reports issued to Apollo shareholders.” Id. at 12, 

¶ 34:4-6. 

In another section of the FAC pertaining to “defendants’

duties” as “to granting and approving stock option grants,” it

alleges:

The individual defendants, because of their positions

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with [Apollo], possessed the power and authority to

control the contents of Apollo’s quarterly reports, 

press releases, SEC filings, and presentations to

securities analysts, money and portfolio managers and

institutional investors, i.e., the market. They

were provided with copies of [Apollo’s] reports, SEC

filings, registration statements and press releases

alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to

prevent their issuance or cause them to be corrected.

Id. at 14:10-18 (emphasis omitted). 

 b. Daniel Bachus

As to Daniel Bachus, the FAC alleges that he was Apollo’s Chief

Accounting Officer (“CAO”) and Controller throughout the Class

Period. FAC (doc. 71) at ¶ 21. The FAC also alleges that Bachus

had “knowledge of material non-public information regarding” Apollo. 

Id. That knowledge allegedly formed the basis for Bachus’ sale of

Apollo stock for $1.7 million in proceeds during the Class Period. 

Id. Additionally, the FAC states that Bachus “sign[ed] the

allegedly false and misleading Forms 10-K and 10-Q[,]” which were

filed with the SEC thereby “conceal[ing] Apollo’s true financial

conditions[.]” Id. at 95, ¶ 199. 

Instead of analyzing those allegations in terms of a section

20(a) claim, Bachus relies solely upon the court’s analysis in

Apollo I. From Bachus’ perspective, that prior analysis “doom[s]

the Section 20(a) claim as against him.” Resp. (doc. 110) at 16:21. 

Then, characterizing the preceding allegations as “conclusory[,]”

Bachus maintains that the FAC “do[es] not establish [him] as a

control person.” Id. at 16-17 (citation and internal quotation

marks omitted). The FAC is deficient in that regard, Bachus

contends, because it “does not allege that his employment position

permitted him to maintain any control over Apollo, much less its

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stock option granting process or its public disclosures.” Id.

Bachus thus argues that the court should adhere to its ruling in

Apollo I, and continue to hold that the FAC does not adequately

allege a section 20(a) claim against him.

Addressing these contentions in order, there is no merit to

defendants’ recurring argument that because the court in Apollo I

found many of these same allegations inadequate, it should make the

same finding now. In taking this stance, defendants, including

Bachus, are conveniently overlooking the context of Apollo I. The

focus there was scienter – a critical element of a section 10(b)

violation - which must be pled in conformity with the heightened

pleading standards of Rule 9(b) and the PSLRA. As discussed

earlier, those more stringent standards do not apply to section

20(a) claims. Consequently, the court disagrees with defendants

that the Apollo I rationale applies with equal force to the section

20(a) claims now under scrutiny.

As to Bachus’ assertion that the FAC’s allegations of control

are inadequate because they are “conclusory,” he relies solely upon

Tyco, supra. Id. at 16. The court has already found that Tyco is

not controlling on several grounds, however. Therefore, obviously 

Tyco cannot provide a basis for finding the FAC’s allegations as to

Bachus “conclusory.” 

More significantly, the FAC’s factual allegations and the

reasonable inferences therefrom “plausibly suggest” that defendant

Bachus had the requisite control so as to state a section 20(a)

claim against him. See al-Kidd, 580 F.3d at 975 (citation and

internal quotation marks omitted). The allegation that Bachus

signed false and misleading financial statements arguably takes on

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even more significance given that he was Apollo’s CAO and

controller. The allegations that he was among the defendants who

“had the ability and opportunity to prevent the[] issuance” of such

statements, among other items, and that he along with others “had

the ability and opportunity to . . . cause” the allegedly misleading

statements “to be corrected[,]” also take on greater significance

given Bachus’ role as Apollo’s CAO and controller. See FAC (doc.

71) at 14, ¶ 37. Id. Those allegations, in conjunction with the

FAC’s broader control allegations, such as that each of the

defendants’ asserted “participat[ion] in the issuance and/or review

of the false and/or misleading statements, including the false SEC

filings and reports issued to Apollo shareholders[,]” id. at 12, 

¶ 34:4-6, along with Bachus’ position as Apollo’s CAO and

controller, are sufficient to withstand dismissal at this pleading

stage. See Hayley, 2002 WL 925322, at *10 (plaintiffs stated a

valid section 20(a) claim against outside director defendants

despite lack of “allegations of day-to-day oversight,” where those

defendants, inter alia, allegedly “signed the 10-K form that

allegedly reflects fraudulent accounting practices[;]” and they had

“access to non-public information . . . essential to th[e] case[]”).

In fact, the allegations as to defendant Bachus are strikingly 

similar to those in Amgen which that court found were “sufficient to

satisfy the second element of a § 20(a) claim” against four

corporate executives. See Amgen, 544 F.Supp.2d at 1038. The Amgen

complaint, like the FAC, alleged that certain executives “signed SEC

financial statements during the Class Period.” Id. (citation

omitted). Also much like the FAC, the Amgen complaint alleged as

follows:

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Defendants held positions of control, and they 

participated in drafting, preparing, and/or 

approving public reports and other statements

and communications complained of . . . , were 

. . . able to and did control the content of 

various SEC filings, press releases, and other 

public statements pertaining to the Company 

during the Class Period[.] 

Id. (citations and internal quotation marks omitted). 

Amgen thus provides additional support for the view that, when

read together, the FAC’s allegations as to defendant Bachus are

sufficient to “nudge” plaintiff’s section 20(a) claim “across the

line from conceivable to plausible.” See Twombly 550 U.S. at 570,

127 S.Ct. 1955. Twombly requires nothing more. “The intensely

factual questions surrounding [Bachus’] actual participation in the

day-to-day affairs of [Apollo] relate to any good faith defense that

[he] may choose to assert in response to Plaintiff[’s] allegations.” 

See In re UTStarcom, In. Sec. Litig., 617 F.Supp.2d 964, 979-980

(N.D.Cal. 2009) (citing Howard, 228 F.3d. at 1065). Development of

those issues must await another day. Hence, the court finds that at

this juncture the section 20(a) claim against defendant Bachus

should be allowed to stand.

c. Dino DeConcini

Defendant DeConcini has been an Apollo director since 1981. 

See FAC (doc. 71) at 9, ¶ 26:11-12. DeConcini maintains that

because he “was an outside director uninvolved with the day-to-day

affairs of [Apollo], and because the Court has already found that

[he] was not involved in the stock option backdating process or

accounting for stock options, the [FAC] does not sufficiently allege

that he is a ‘control person.’” Resp. (doc. 110) at 14, ¶ 10-14

(citation and footnote omitted). DeConcini adds that “[g]iven the

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court’s finding” as to the purported stock option backdating, the

FAC’s allegations of his Audit Committee membership cannot “rescue”

plaintiff’s control person claim against him. Id. at 14 n.9:23-24

(citation omitted). Defendant DeConcini also stresses the absence

of “any” allegations showing his “‘actual participation in the

corporation’s operation or some influence’” by him so that the

“‘consequences of control may be imposed.’” Id. at 145-6 (quoting

Burgess, 727 F.2d at 832) (other citation omitted). 

None of these arguments are compelling. Defendant DeConcini

characterizes the FAC as alleging his “mere[]” status as “an outside

director during the relevant time period.” Resp. (doc. 110) at

14:3-4 (citing FAC at ¶ 26). To be sure, “being an officer or

director does not create any presumption of control[.]” Paracor, 96

F.3d at 1163 (citations and internal quotation marks omitted)

(emphasis in original). On the other hand, “director status ‘is a

sort of red light’ indicating the potential for day-to-day

involvement in a company.” Fouad, 2008 WL 5412397, at *12 (quoting

Arthur Children’s Trust v. Keim, 994 F.2d 1390, 1397 (9th Cir.

1993)). Moreover, the FAC alleges more than simply DeConcini’s

position as an outside director. The FAC also alleges that

DeConcini was “a member of the Audit Committee[.]” FAC (doc. 71) at

9, ¶ 26:12. As a member of that Committee, allegedly, DeConcini had

the following “responsib[ilities][:]” 

(i) reviewing and discussing the audited financial

statements of [Apollo] with management; (ii) 

discussing with [Apollo's] independent accountants 

the matters required to be discussed by the Statement 

of Accounting Standards . . . ; (iii) receiving and

reviewing the written disclosures and letters from 

its independent accountants . . . ; (iv) discussing 

with its independent accountants, the independent

accountants' independence; and (v) recommending to 

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the Board . . . that the audited financial statements 

be incorporated by reference into [Apollo's] Annual 

Reports.

Id. at ¶ 40. As an Audit Committee member, the FAC also alleges

that “DeConcini caused or allowed the dissemination of the improper

public statements described [t]herein.” Id. at 9, ¶ 26:12-13. 

Lastly, the FAC alleges that “[b]ased on his knowledge of material

non-public information regarding [Apollo],” during the Class Period

DeConcini sold over 100,000 shares of Apollo stock for proceeds of

$5.7 million. Id. at 9, ¶ 26:13-16.

Defendant DeConcini’s attempt to downplay the significance of

these allegations is not convincing. The FAC alleges “traditional

indicia” of control by him, such as stock ownership and having a

seat on Apollo’s Board of Directors. See America West, 320 F.3d at 

945 (citation and internal quotation marks omitted). The FAC also

alleges DeConcini’s responsibilities, as detailed above, as a member

of Apollo’s Audit Committee. The issuance of false and misleading

financial statements, and improprieties surrounding Apollo’s

accounting procedures, is part of the alleged primary violation of

stock option backdating. See Apollo I, 633 F.Supp.2d at 769-770. 

Financial statements and Apollo’s accounting clearly fall within the

purview of the Audit Committee, as the FAC alleges. 

What is more, the FAC explicitly alleges that as an Audit

Committee member DeConcini “review[ed] and discuss[ed] the audited

financial statements of [Apollo] with management[.]” FAC (doc. 71)

at 15, ¶ 40:15-16 (emphasis added). The allegations of DeConcini’s

Audit Committee responsibilities, in conjunction with the broader

control allegations, sufficiently allege control person status at

this motion to dismiss stage. See, e.g., In re Wash. Mutual, Inc.,

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259 F.R.D. at 509 (denying motion to dismiss control person claims

against outside director defendants who served on Audit Committee,

Finance Committee, or both, where their committee-related

responsibilities were related to the alleged primary violations)

(citing Fouad, 2008 WL 5412397, at *10 (same)). 

The court is well aware that in Apollo I it found that

“defendant DeConcini's alleged Audit Committee responsibilities

d[id] not create a strong inference of scienter[.]” Apollo I, 633

F.Supp.2d at 813. Of course, scienter is an element of a section

10(b) primary violation - not of a section 20(a) control person

claim. So although the FAC did not sufficiently allege scienter as

to DeConcini, that does not preclude a finding that those same

allegations are sufficient for purposes of alleging control under

section 20(a). 

Likewise, the court’s observation in Apollo I that “[t]here is

nothing linking [Mr. DeConcini] to any aspect of stock option

granting or the associated accounting[]” does not justify dismissal

of the section 20(a) claim against him. See id. In responding to

plaintiff’s motion, Mr. DeConcini places far too much credence in

that statement. First, it was made while discussing the sufficiency

of the section 10(b) scienter allegations against him. As should be

abundantly clear by now, the pleading standards for scienter are far

more strict that they are for pleading a section 20(a) claim. 

Further, because the inquiry at this juncture “revolve[s] around the

management and policies” of Apollo, “not around discrete

transactions[,]” the court’s prior comment is not germane in this

context. See Paracor, 96 F.3d at 1162 (internal quotation marks

omitted). 

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 Finally, as earlier discussed, the lack of allegations of

“actual participation” by DeConcini is not a basis for dismissing

the section 20(a) claim against him. See Reese, 2009 WL 506820, at

*9 (plaintiffs were “not required to demonstrate actual

participation by Defendants or the exercise of power . . . to

establish derivative liability under § 20(a)) (citation omitted). 

The FAC’s allegations as to DeConcini, and the reasonable inferences

therefrom, signal a level of involvement and control beyond being

merely a titular member of the Audit Committee. The allegations

concerning DeConcini’s “title and responsibilities are sufficient at

the pleading stage[]” to allege the requisite control for section

20(a) purposes. See id. (citations omitted). Thus, as with Bachus,

the court finds that the FAC’s allegations “nudge” plaintiff’s

section 20(a) claim against DeConcini “across the line from

conceivable to plausible.” See Twombly, 550 U.S. at 570, 127 S.Ct.

1955. By the same token though, also as with defendant Bachus, the

court “recogniz[es] that [DeConcini] will be permitted to develop

the nature of Plaintiff[’s] proof through discovery and interpose

defenses of good faith or lack of participation at a later date.” 

See Reese, 2009 WL 506280, at *10. 

d. Hedy Govenar

The FAC’s allegations specifically pertaining to Ms. Govenar

are scant. The FAC alleges that she was an Apollo director during

the Class Period. FAC (doc. 71) at 8, ¶ 24. It also alleges that

Ms. Govenar was a director of the University of Phoenix, an Apollo

subsidiary for five years well before the Class Period. Id. at 8-9,

¶ 24. Allegedly, “[b]ased on her knowledge of non-public material

information regarding [Apollo],” during the Class Period Ms. Govenar

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sold nearly 80,000 shares of Apollo stock “for proceeds of $3.4

million[.]” Id. at 9, ¶ 24:2-4. 

Additionally, the FAC alleges that Ms. Govenar was one of two

Apollo directors whom the Sperlings appointed to serve on a Special

Committee (“SC”). Id. at 58, ¶ 93:10-11. That Committee was

charged with “oversee[ing] a review of [Apollo’s] practices related

to stock option grants.” Id. at 58, ¶ 93:11-13. The FAC vaguely

alleges, as discussed in Apollo I, that Ms. Govenar was “removed

from the SC due to [an] [unspecified] conflict[] of interest[.]” Id.

at 58, ¶ 13-14. “[U]ltimately [Ms. Govenar] resigned from the

Apollo Board.” Id. at 58, ¶ 93:14. 

Essentially, Ms. Govenar’s argument is the same as Mr.

DeConcini’s. The FAC’s allegations of control are inadequate

because it “merely alleges that [she] was a[n] . . . outside

director of Apollo.” Resp. (doc. 110) at 13 (citations omitted). 

Likewise, Ms. Govenar points to the lack of allegations that she

“had any control, much less actual control over the day-to-day

management of Apollo or was otherwise involved in options granting

or reporting processes.” Id. (footnote omitted). Relying upon

Burgess, supra, Ms. Govenar also emphasizes her lack of “actual

participation” in Apollo’s operations. Id. at 12. 

Again, the court disagrees with the proposition that in this

Circuit “actual participation” is a necessary predicate to stating a

claim under section 20(a). Nonetheless, the court agrees that the

FAC does not sufficiently allege a section 20(a) claim against Ms.

Govenar. Admittedly, as outlined above, the FAC does include

specific allegations regarding Ms. Govenar beyond its broad

allegations of control pertaining to all of the defendants. Those

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specific allegations are not sufficient, even when read with the

broad control allegations, to allow plaintiff to proceed on a theory

of control person liability against Ms. Govenar. 

The allegations as to Ms. Govenar are much like those in Reese,

supra, 2009 WL 506820, wherein the court granted a defendant’s

motion to dismiss the section 20(a) control person claim because it

was not adequately pled. The Reese court held that the complaint

did not sufficiently allege a section 20(a) claim because it

“stat[ed] only that he was a non-executive member of the [corporate

defendant] board of directors . . . and served on the Ethics and

Environment Assurance Committee.” Id. at *9 (citation and internal

quotation marks omitted). The court reasoned that those

“allegations d[id] not speak to any degree of control over the

operations of the corporation and certainly no involvement in its

day-to-day activities.” Id.

Here, the FAC suffers from the same deficiencies with respect

to Ms. Govenar. The FAC “do[es] not speak to any degree of control”

over Apollo’s “operations” by Ms. Govenar, and “certainly no

involvement [by her] in [Apollo’s] day-to-day activities.” See id. 

Aside from her appointment on the SC, in sharp contrast to defendant

DeConcini, the FAC does not include any allegations as to Ms.

Govenar’s responsibilities as an outside Apollo director. The

absence of such allegations make it impossible to discern whether

Ms. Govenar was responsible for controlling any aspect of Apollo’s

management or policies.

Further, primarily because of the time frame, Ms. Governar’s 

SC assignment does not save this otherwise deficient section 20(a)

claim. As the FAC alleges, that Committee was charged with the

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discrete task of “oversee[ing] a review of [Apollo’s] practices

related to stock option grants.” FAC (doc. 71) at 58, ¶ 93:11-12. 

That Committee was formed in late June 2006, in the aftermath of the

alleged backdating. This is not a situation, for example, where Ms.

Govenar was appointed to a corporate committee charged with

promulgating Apollo’s policy for granting stock options. Nor are

there any allegations that this SC assignment put Ms. Govenar in a

position of controlling any aspect Apollo’s management or policies.

Instead, the SC was charged with reviewing and “investigating”

alleged “options misconduct” which had already occurred. See id. at

5, ¶ 11:21. As the foregoing shows, the meager allegations in the

FAC specific to Ms. Govenar do not “plausibly suggest” that she had

the requisite control so as to state a section 20(a) claim against

her. See al-Kidd, 580 F.3d at 975 (citation and internal quotation

marks omitted). Consequently, the court stands by its prior holding

that the FAC does not state a section 20(a) claim against Ms.

Govenar, albeit for a different reason than in Apollo I. 

e. Brian Mueller

The court has little difficulty finding that the FAC does not

adequately allege control person status as to defendant Mueller.

After joining Apollo in 1987, the FAC twice alleges that Mueller

“serv[ed] in a variety of positions, including a variety of

executive positions since 1993.” FAC (doc. 71) at 9, ¶ 25:7-8; and

at 77, ¶ 128:22-24. “Most recently,” prior to his January 2006

appointment as Apollo’s President, “Mueller held the title of Chief

Operating Officer (“COO”)[.]” Id. at 9, ¶ 25:8-9. As discussed in

Apollo I, the FAC includes two allegations of “knowingly false

statements” by Mr. Mueller as well. Apollo I, 633 F.Supp.2d at 812. 

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Arguing that the court should “confirm” the dismissal of the

section 20(a) claim against him, Mueller notes the paucity of

allegations as to his “knowledge of stock options[.]” Resp. (doc.

110) at 15:1. Mueller asserts that the foregoing, along with the

timing of his Apollo presidency, which began roughly nine months

before the end of the Class Period, “cannot be reconciled with

Plaintiff’s proposition that [he] is a ‘control person’ for the

entire class period.” Id. at 15:3-4 (emphasis added).

There are several glaring deficiencies in the FAC’s pleading of

section 20(a) control person status as to Mr. Mueller. First, the

court agrees with Mueller’s assertion that “officers and directors”

cannot be found “liable as control persons under Section 20(a) for

alleged violations that took place before they assumed their

positions.” Resp. (doc. 110) at 14-15, n. 10 (citing, inter alia,

Roberts v. Heim, 670 F.Supp. 1466, 1487 (N.D.Cal. 1987), aff’d in

part on other grounds, rev’d in part on other grounds, 857 F.2d 646

(9th Cir. 1988)). That reasoning is not entirely dispositive of the

section 20(a) claim against Mueller though because the FAC alleges

that he became Apollo’s president during the Class Period, albeit

not until near the end of that Period. Nevertheless, due to the

lack of factual allegations of control specific to Mr. Mueller,

plaintiff has not met its burden of pleading a plausible section

20(a) claim against him.

The lack of specific time frames regarding Mueller’s other

positions with Apollo further weakens plaintiff’s section 20(a)

claim as against this particular defendant. Aside from his January

2006 appointment as Apollo’s President, the FAC is silent as to

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whether Mueller held any of those “executive positions” during the

Class Period. Further, the FAC does not elaborate as to the nature

of those “executive positions,” Mueller’s responsibilities while he

served in those positions, or any specific time frames for that

service. Similarly, there is no time frame as to when Mueller was

COO and what responsibilities he had as such. The FAC also is

silent as to Mueller’s responsibilities as Apollo’s president. 

Perhaps he was simply a titular President, or perhaps he was more. 

There is no way to know from the FAC. The lack of allegations as to

Mueller’s responsibilities as Apollo’s president becomes even more

problematic given his relatively short tenure during the Class

Period as Apollo’s president. 

Compounding the pleading deficiencies just identified are the

lack of allegations of “traditional indicia” of control by Mr.

Mueller. For example, the FAC does not specifically allege stock

ownership by Mr. Mueller; nor does it allege that he held a seat on

Apollo’s Board of Directors. To be sure, “Twombly and Iqbal do not

require that the complaint include all facts necessary to carry

plaintiff’s burden.” See al-Kidd, 580 F.3d at 977 (emphasis added). 

But here, insofar as Mr. Mueller is concerned, the FAC does not

allege “plausible grounds to infer the existence of a claim for

relief” pursuant to section 20(a). See id. (citation and internal

quotation marks omitted). 

In short, the court adheres to its prior ruling that dismissal

of the section 20(a) claim against Mueller is proper, albeit for a

different reason than articulated in Apollo I. Now, the court finds

that the FAC does not adequately allege the control elements of a

section 20(a) claim against defendant Mueller. 

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f. Laura Palmer Noone

As already explained, plaintiff’s argument that defendants

“were all officers and directors who ‘signed’ false financial

statements,” thus qualifying them as control persons is tenuous at

best. See Mot. (doc. 107) at 3:18-19 (citation omitted). That

argument is even more tenuous as to Ms. Noone, though, because the

FAC does not allege that she was an officer or director of Apollo. 

Rather, the FAC alleges that since September 2000, Ms. Noone has

been president of the University of Phoenix -- an Apollo subsidiary.

FAC (doc. 71) at 9, ¶ 28. Thus, assuming arguendo that an officer

or director who allegedly signs a false financial statement is a

control person for § 20(a) purposes, Ms. Noone does not qualify as

such because the FAC does not allege that she was an officer or

director of Apollo. 

What is more, as Ms. Noone persuasively argues, because she was

neither an Apollo director nor officer, she “could not have

‘controlled’ Apollo, including its disclosures, in any way.” Resp.

(doc. 110) at 12:15-16. The lack of any allegation as to her

director or officer status with Apollo, as distinguished from an

Apollo subsidiary, is “dispositive” of the § 20(a) claim against

her, Ms. Noone argues. Id. (citations omitted). 

Her position is well-taken. To illustrate, in Copland v.

Grumet, 88 F.Supp.2d 326 (D.N.J. 1999), plaintiffs sought to amend

their complaint to add section 20(a) claims against two officers of

a subsidiary on the theory that they were control persons of the

subsidiary’s parent. Id. at 335-336. The Copland court reasoned

that “at best” plaintiffs’ allegations could only show that the

officers of the subsidiary controlled the subsidiary, not that they

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controlled the parent defendant. Id. at 335; see also Brown v.

Enstar Group, Inc., 84 F.3d 393, 397 (11th Cir. 1996) (affirming

summary judgment on section 20(a) claim in favor of chairman of

subsidiary due to lack of record evidence that he had the power to

control the parent when the allegedly fraudulent and misleading

prospectus was issued). Unlike Copland, the FAC’s allegations do

not even minimally show that Ms. Noone exercised any measure of

control over an Apollo subsidiary, much less over Apollo itself. 

The few other allegations as to Ms. Noone described in Apollo

I, even when taken together with the FAC’s general control

allegations, provide nothing “more than a sheer possibility” that

she is a control person for section 20(a) purposes. See Iqbal, 

U.S. ___, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127

S.Ct. 1955). A “sheer possibility” does not satisfy Twombly’s

plausibility standard. See id. Thus, as with defendants Govenar

and Mueller, the court finds that the FAC does not adequately plead

a section 20(a) claim for control person liability against Ms.

Noone. 

III. Leave to Amend

In its motion, plaintiff sought limited relief in the form of

having this court “reconsider [Apollo I] and deny defendants Bachus,

DeConcini, Govenar, Mueller, Noone and the Sperlings’ motion to

dismiss the § 20(a) claims against them.” Mot. (doc. 107) at 4:27-

5:1. The sole basis for that motion is the fact that the court

erroneously required plaintiff to allege a section 10(b) primary

violation as against each individual defendant as a predicate to a

section 20(a) control person claim. In any event, plaintiff also

sought “withdraw[al] [of] the Judgment entered in favor of Bachus,

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DeConcini, Govenar, Mueller and Noone [(“the group one

defendants”)][.]” Id. at 5:1-2 (citation omitted). 

Plaintiff’s reconsideration motion does not explicitly mention

amending the FAC as to the section 20(a) claims. Plaintiff does

indicate that it is “[m]indful that [Apollo I] required [it] to

amend [its] Complaint to more particularly alleged the falsity of

the alleged misstatements[.]” Mot. (doc. 107) at 3 (citation

omitted). Plaintiff then assures that its “forthcoming [SAC] will

particularly allege each false and misleading statement ‘signed’ by

defendants that are the subject of this motion.” Id. But of

course the amendments just referenced, and which the court addressed

in some length in Apollo I, do not pertain to the second control

element of a section 20(a) claim. The amendments to which plaintiff

is referring are directed strictly at the primary section 10(b)

violations. Thus, there is nothing on the face of plaintiff’s

reconsideration motion suggesting to either the court or the group

one defendants that plaintiff intended to amend the FAC regarding

control person liability as to any of them.

Plaintiff first made the suggestion of such an amendment in its

reply to this reconsideration motion. Plaintiff raised the

possibility of amendment by seeking to have the court “reconsider

the dismissal of . . . plaintiff’s § 20(a) claims with prejudice” as

to the group one defendants. Reply (doc. 111) at 11:6-8 (emphasis

added). In urging amendment, plaintiff simply stated that “there

has been no showing that any such defects could not be cured by

amendment.” Id. at 11:9. Further, plaintiff notes that “defendants

have not contended that any amendment would be futile.” Id. at

11:16-17. Of course, there would have been no reason for defendants

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to address those contentions in their response because, as detailed

above, plaintiff did not even hint at amendment until it filed its

reply. Thus, defendants were not on notice that as part of this

motion plaintiff also was seeking leave to amend. 

Further complicating plaintiff’s belated request for leave to

amend is that during the pendency of this motion, plaintiff filed a

SAC which includes a section 20(a) claim against the group one

defendants. As the SAC candidly notes, plaintiff included those

allegations despite being fully aware that in Apollo I this court,

inter alia, had previously dismissed those claims with prejudice and

directed entry of judgment thereon. See SAC (112) at 70, n. 9. The

group one defendants, as well as the other remaining individual

defendants and Apollo Group, Inc. then promptly moved for dismissal

of the SAC. That motion has been fully briefed and submitted. 

This procedural quagmire, which put the court in a somewhat

tenuous position, easily could have been avoided. Despite the 30

day deadline for filing the SAC which the court imposed in Apollo I,

plaintiffs could have sought an extension of that deadline. That

would have delayed the filing of the SAC until after resolution of

this reconsideration motion. Even after the SAC was filed, the

group one defendants also could have sought an extension of time in

which to answer or otherwise respond to the SAC, but they did not. 

Instead, all defendants forged ahead with motions to dismiss the

SAC. 

Given the unique procedural posture of this case, the court

rules as follows. Despite finding that the FAC does not

sufficiently allege section 20(a) control person liability against

defendants Hedy Govenar; Brian E. Mueller; and Laura Palmer Noone,

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the court grants plaintiff’s reconsideration motion. The court now

deems the section 20(a) claims against the three defendants just

listed to be dismissed without prejudice and with leave to amend. 

Necessarily, the Rule 54(b) judgment previously entered in favor of

these defendants shall be vacated. 

By the same token though, because a SAC has already been filed,

that SAC is the operating complaint for purposes of the pending

defense motions to dismiss. No other amendment shall be allowed,

nor shall any further briefing regarding the SAC be filed unless

sought by the court. In other words, whether plaintiff has

adequately alleged a section 20(a) claim against defendants Govenar;

Mueller and/or Noone is now entirely dependent upon the sufficiency

of the allegations in the SAC.

Next, having considered for the first time the sufficiency of

the control element of a section 20(a) claim as against defendants

Daniel E. Bachus and Dino J. DeConcini, and having found that the

FAC does adequately allege such a claim against these two

defendants, the court must vacate the judgment previously entered in

favor of those defendants. As with the three defendants discussed

in the preceding paragraph, because a SAC has already been filed,

that SAC is the operative complaint for purposes of the pending

motions to dismiss. No other amendment shall be allowed, nor shall

further briefing regarding the SAC be filed unless sought by the

court. 

Conclusion

For the reasons set forth herein, Lead Plaintiff’s Motion to

Reconsider Dismissal of Plaintiff’s § 20(a) Claim (doc. 107) is

DENIED in part and GRANTED in part, as enumerated below: 

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The court hereby ORDERS that:

(1) Lead Plaintiff’s Motion For Reconsideration is DENIED as

moot as to defendants John Sperling and Peter Sperling;

(2) Lead Plaintiff’s Motion For Reconsideration is GRANTED as

to defendants Daniel Bachus; Dino DeConcini; Hedy Govenar; Brian E.

Mueller; and Laura Palmer Noone;

(3) The Clerk of the Court is directed to vacate the judgment

(doc. 106) previously entered as to the five defendants enumerated

in paragraph (2) above; and 

(4) Apollo I, doc. 105 at 127:10 is sua sponte amended to

insert defendant Norton for defendant Nelson. 

DATED this 19th day of February, 2010.

Copies to counsel of record

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