Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-01208/USCOURTS-casd-3_18-cv-01208-2/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:0078j(b)ss Stockholder Suit

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

Carey Camp, Individually and on Behalf 

of All Others Similarly Situated,

Plaintiff,

v.

Qualcomm Inc., Steven K. Mollenkopf, 

and George S. Davis, 

Defendants.

Case No.: 18-cv-1208-AJB-BLM

ORDER:

GRANTING IN PART AND 

DENYING IN PART DEFENDANTS’ 

MOTION TO DISMISS THE 

CONSOLIDATED AMENDED CLASS 

ACTION COMPLAINT 

(Doc. No. 57)

Pending before the Court is Defendants’ motion to dismiss the consolidated 

amended class action complaint. (Doc. No. 57.) Plaintiff opposes the motion. (Doc. No. 

63.) For the reasons set forth more fully below, the Court GRANTS in part and DENIES 

in part Defendants’ motion to dismiss.

I. BACKGROUND

Plaintiff represents a class of those who purchased Qualcomm stock between 

January 31, 2018, and March 12, 2018 and who are suing under the Securities Exchange 

Act of 1934. (Doc. No. 50 at 4.) Qualcomm is a United States wireless technology company 

that manufactures chips and other technologies for mobile devices. (Id. ¶¶ 34, 41.) In early 

November 2017, Singapore chipmaker Broadcom offered to acquire Qualcomm for $105 

billion, or $70 per share. (Id. ¶¶ 51, 58, 64.) 

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Plaintiffs allege that on January 29, 2018, Qualcomm “secretly filed a voluntary 

request” for The Committee on Foreign Investment in the United States (“CFIUS”) to 

investigate Broadcom Limited. (Id. ¶ 24.) CFIUS is a federal interagency committee that 

reviews certain investments in United States business to determine whether such 

transactions threaten to impair national security. (Id. ¶ 99.) It makes recommendations 

regarding such transactions for the President’s ultimate determination. (Id.) “Typically a 

CFIUS review of a transaction begins when the parties to a transaction jointly file a 

‘voluntary notice’ notifying CFIUS of the transaction, and usually after the parties have 

come to an agreement on the terms.” (Id. ¶ 101.) Once a CFIUS review is initiated, the 

panel has 30 days to clear a transaction or open an investigation, which extends the deadline 

by 45 days. (Id. ¶¶ 102–04.) If CFIUS makes a recommendation to block the transaction, 

the President has 15 days to act. (Id. ¶ 106.)

On November 12, 2017, Qualcomm rejected Broadcom’s unsolicited initial bid. (Id.

¶ 63.) Broadcom responded by mounting a hostile takeover. (Id. ¶¶ 71–72.) On December 

4, 2017, Broadcom launched a proxy fight. (Id. ¶ 71.) On December 6, 2017, Broadcom 

announced that it had initiated a process to redomicile in the United States. (Id. ¶ 75.) On 

January 29, 2018, Defendants filed a unilateral voluntary notice requesting that CFIUS 

review Broadcom’s offer. (Id. ¶ 92.) 

As alleged, Defendants emphasized value and antitrust concerns as reasons that 

investors should vote against Broadcom’s directors. (Id. ¶¶ 196, 199, 200, 202, 210.) 

Defendants maintained that they were engaged in meaningful negotiations with Broadcom. 

(Id. ¶¶ 200, 208, 225, 227.)

On February 26, 2018, Reuters confirmed that CFIUS was looking at the deal and 

had been in touch with at least one of the companies and that lawmakers were pressuring 

the White House to review the transaction before the stockholder vote on March 6, 2018. 

(Id. ¶ 163.) On March 4, 2018, two days before Qualcomm’s shareholder meeting, CFIUS 

ordered Qualcomm to postpone its director elections by 30 days so CFIUS could conduct 

a full investigation. (Id. ¶ 169.) Following this announcement, Qualcomm’s stock price 

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declined 4.02%. (Id. ¶ 178.) On March 12, 2018, CFIUS released a letter explaining that 

its initial determination was based on “the information submitted by Qualcomm in its 

unilateral voluntary notice on January 29, 2018,” responses to questions and information 

provided by both Qualcomm and Broadcom and further investigation could include referral 

to the President for decision. (Id. ¶ 253.) In an executive order dated March 12, 2018, the 

President blocked Broadcom’s attempted takeover. (Id. ¶ 181.) Following the news, 

Qualcomm’s stock price dropped 4.95%. (Id. ¶ 256.)

The instant action was filed on June 8, 2018. On March 8, 2019, Plaintiffs filed the 

Amended Complaint that names Qualcomm and Defendants Mollenkopf, Rosenberg, 

Jacobs, and Horton, and asserts claims under Sections 10(b) and 20(a) of the Securities 

Exchange Act of 1934 and SEC Rule 10b-5. (See generally Doc. No. 50.)

II. LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s 

complaint and allows a court to dismiss a complaint upon a finding that the plaintiff has 

failed to state a claim upon which relief may be granted. See Navarro v. Block, 250 F.3d 

729, 732 (9th Cir. 2001). “[A] court may dismiss a complaint as a matter of law for (1) lack 

of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim.” 

SmileCare Dental Grp. v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) 

(citation and internal quotation marks omitted). However, a complaint will survive a 

motion to dismiss if it contains “enough facts to state a claim to relief that is plausible on 

its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In making this 

determination, a court reviews the contents of the complaint, accepting all factual 

allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. 

Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 

2007). 

Notwithstanding this deference, the reviewing court need not accept “legal 

conclusions” as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). It is also improper for a 

court to assume “the [plaintiff] can prove facts that [he or she] has not alleged.” Associated 

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Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 

(1983).

III. DISCUSSION

A. Defendants’ Request for Judicial Notice

Federal Rule of Evidence 201 states that a “court may judicially notice a fact that is 

not subject to reasonable dispute because it: (1) is generally known within the trial court’s 

territorial jurisdiction; or (2) can be accurately and readily determined from sources whose 

accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).

Defendants’ seek judicial notice of the following documents: (A) Excerpt from 

Qualcomm’s Definitive Proxy Statement filed on Schedule 14A with the SEC on January 

5, 2018; (B) Qualcomm’s Additional Definitive Proxy Soliciting Materials filed on 

Schedule 14A with the SEC on January 16, 2018; (C) Qualcomm’s Press Release filed on 

Schedule 14A with the SEC on January 23, 2018; (D) Interim Order dated March 4, 2018 

from the Committee on Foreign Investment in the United States filed by Qualcomm with 

the SEC on March 5, 2018; (E) Letter dated March 5, 2018 from the Committee on Foreign 

Investment in the United States filed by Qualcomm with the SEC on March 5, 2018; (F) 

Letter dated March 11, 2018 from the U.S. Department of Treasury filed by Qualcomm 

with the SEC on March 12, 2018; (G) Order of President of the United States of America 

regarding the Proposed Takeover of Qualcomm Incorporated by Broadcom Limited dated 

March 12, 2018 filed by Qualcomm with the SEC on March 13, 2018; (H) Article by the 

New York Times dated November 4, 2017 titled “Chip Maker Broadcom Said to Mull a 

Bid for Qualcomm”; (I) Article by the New York Times dated November 6, 2017 titled 

“Broadcom Targets Qualcomm in Largest-Ever Tech Deal”; (J) Article by Reuters dated 

February 26, 2018 titled “Exclusive: Secretive U.S. Security Panel Discussing Broadcom’s 

Qualcomm Bid-Sources”; (K) historical stock price data for Qualcomm from January 29, 

2018 through March 13, 2018 published by Yahoo! Finance at https://finance.yahoo.com; 

and (L) historical stock price data for Qualcomm from April 1, 2019 through May 9, 2019 

published by Yahoo! Finance at https://finance.yahoo.com. (See generally Doc. No. 57-

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15.)

Exhibits A-J are each paraphrased or quoted in the Complaint and/or forms the basis 

for Plaintiffs’ claims. A defendant may seek to incorporate a document into a complaint 

“if the plaintiff refers extensively to the document or the document forms the basis of the 

plaintiff’s claims.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 

Accordingly, Exhibits A-J are incorporated by reference.

Further, Exhibits A-L also may be judicially noticed. Courts may take judicial notice 

of SEC filings and news articles. See, e.g., Metzler Inv. GMBH v. Corinthian Colls., Inc., 

540 F.3d 1049, 1064 n.7 (9th Cir. 2008); Wilson v. Edison Int’l, Inc., No. LA CV15-09139 

JAK (PJWx), 2016 WL 7469601, at *6 (C. D. Cal. July 6, 2016); In re Century Aluminum 

Co. Sec. Litig., 749 F. Supp. 2d 964, 979–80 (N.D. Cal. 2010). Further, Courts may also 

take judicial notice of official government documents and historic stock prices of publicly 

traded companies as the information is subject to accurate and ready determination from 

sources whose accuracy cannot reasonably be questioned. See Metzler, 540 F.3d at 1064 

& n.7; Hague v. Wells Fargo Bank, N.A., No. C11-02366 TEH, 2011 WL 3360026, at *1 

(N.D. Cal. Aug. 2, 2011). 

Based on the foregoing, the Court GRANTS Defendants’ request for judicial notice.

B. Defendants’ Motion to Dismiss

Defendants assert that Plaintiffs fail to state a claim under Section 10(b) since 

Plaintiffs fail to identify any actionable misstatement or omission, fail to adequately plead 

scienter, and fail to adequately plead loss causation. (See generally Doc. No. 57-1.) Further, 

Defendants argue that Plaintiffs have failed to state a claim under Section 20(a). (See 

generally id.)

Section 10(b) of the Exchange Act forbids: (1) the use or employment of any 

deceptive device, (2) in connection with the purchase or sale of any security, and (3) in 

contravention of Securities and Exchange Commission rules and regulations. 15 U.S.C. § 

78j(b); see Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341 (2005). Additionally, 

Rule 10b–5, promulgated by the SEC under Section 10(b), forbids the making of any 

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“untrue statement of a material fact” or the omission of any material fact “necessary in 

order to make the statements made not misleading.” 17 C.F.R. § 240.10b–5; see Dura, 544 

U.S. at 341. To succeed in a private civil action under Section 10(b) and Rule 10b–5, a 

plaintiff must establish “(1) a material misrepresentation (or omission); (2) scienter, i.e., a 

wrongful state of mind; (3) a connection with the purchase or sale of a security; (4) reliance 

...; (5) economic loss; and (6) loss causation, i.e., a causal connection between the material 

misrepresentation and the loss.” Dura, 544 U.S. at 341–42.

i. Manner of Pleading

Plaintiffs’ complaint contains a designated section entitled “Defendants’ Materially 

False and Misleading Statements and Omissions of Material Fact.” (Doc. No. 50 at 64.) 

While the Court notes that Plaintiffs’ complaint does contain large block quotes, Plaintiffs’ 

complaint does single out the actual statements that are the basis of Plaintiffs’ securities 

fraud claim. See Primo v. Pac. Biosciences of Cal., Inc., 940 F. Supp. 2d 1105, 1112 (N.D. 

Cal. 2013); Lifschitz v. NextWave Wireless Inc., No. 08CV1697-LAB (WMC), 2010 WL 

11512356, at *3 (S. D. Cal. Mar. 5, 2010); In re Pixar Sec. Litig., 450 F. Supp. 2d 1096, 

1100 (N.D. Cal. 2006). 

ii. Not Actionable Statements

Defendants assert that the alleged misstatements on February 16, 20, 22, 26, and 

March 1 may be disregarded as they are after Plaintiffs last acquired stock. (Doc. No. 57-

1 at 20.) “A cause of action under section 10(b) applies only to misrepresentations or 

omissions made ‘in connection with the purchase or sale of any security.’” Binder v. 

Gillespie, 184 F.3d 1059, 1066 (9th Cir. 1999) (quoting 15 U.S.C. § 78k(b)). “Statements 

issued after a plaintiff’s purchase of stock cannot form the basis of a Section 10(b) or Rule 

10b-5 claim because the statements could not have affected the plaintiff’s decision to 

purchase stock.” Kelly v. Electronic Arts, Inc., 71 F. Supp. 3d 1061, 1069 (N.D. Cal. 2014) 

(citing Hanon v. Dataproducts Corp., 976 F.2d 497, 501 (9th Cir. 1992)). 

Plaintiffs contend that at the pleading stage, a class period in securities class actions 

“is not confined to that period preceding [plaintiff’s] final purchase of [company] stock; 

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carving out such a period would be arbitrary.” Alfus v. Pyramid Tech. Corp., 764 F. Supp. 

598, 606 (N.D. Cal. 1991); see also Nicholas v. Poughkeepsie Sav. Bank/FSB, No. 90 CIV 

1607 (RWS), 90 CIV 1607 (RWS), 1990 WL 145154, at *5 (S.D.N.Y. Sept. 27, 1990) 

(“Post-purchase statements are relevant to the course of wrongful conduct alleged by a 

plaintiff in a securities action and [plaintiff] has sued on behalf of the Class of persons who 

purchased stock during the entire Class Period.”) “[O]nce the general standing requirement 

is satisfied, any additional questions related to particular injuries are relevant only in the 

context of class certification under Federal Rule of Civil Procedure 23.” In re Connectics 

Corp. Sec. Litig., 542 F. Supp. 2d 996, 1004 (N.D. Cal. 2008); see also In re VeriSign, Inc., 

No. C 02-02270 JW (PVT), 2005 WL 88969, at *4 (N.D. Cal. Jan. 13, 2005) (“Simply 

because certain class members were injured by misrepresentations that came after the Lead 

Plaintiffs had already acquired VeriSign stock does not mean that the Lead Plaintiffs cannot 

represent the class.”)

The Court agrees with Defendants that these statements are not actionable. The cases 

cited by Plaintiffs address challenges to investors’ standing under Article III, whereas here 

Defendants are asserting that these statements as pled are not actionable. The Ninth Circuit 

has held that actionable statements are limited to those made before the plaintiff purchased 

the relevant stock. See Hannon, 976 F.2d at 501. Accordingly, the statements made on 

February 16, 20, 22, 26, and March 1 are disregarded as they are after Plaintiffs last 

acquired stock. 

Thus, the Court GRANTS Defendants’ motion to dismiss regarding Defendants’ not 

actionable statements. 

iii. Materially False or Misleading Statements

Defendants argue that the alleged misstatements are not misleading as Qualcomm 

did not misrepresent the regulatory impediments of a deal. (Doc. No. 57-1 at 21.) To allege 

an actionable false or misleading statement, a plaintiff must “specify each statement alleged 

to have been misleading, the reason or reasons why the statement is misleading, and, if an 

allegation regarding the statement or omission is made on information and belief, ... state 

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with particularity all facts on which that belief is formed.” In re Rigel Pharms., Inc. Sec. 

Litig., 697 F.3d 869, 877 (9th Cir. 2012) (quoting 15 U.S.C. § 78u-4(b)(1)). This is a 

demanding standard, requiring a plaintiff to allege with specificity “contemporaneous 

statements or conditions,” Ronconi v. Larkin, 253 F.3d 423, 432 (9th Cir. 2001), that 

demonstrate both “how and why the statements were false” when made, Metzler, 540 F.3d 

1049, 1071–72 (9th Cir. 2008).

a. Disclosure of the Voluntary Notice to CFIUS

Plaintiffs assert that the market was misled when Qualcomm repeatedly stated that 

it was ready to meet with Broadcom in an attempt to reach a negotiated deal, meanwhile 

Qualcomm was engaged in discussions with CIFUS. (Doc. No. 63 at 20.) “Rule 10b-5 and 

Section 14(e) in terms prohibit only misleading and untrue statements, not statements that 

are incomplete ... Often, a statement will not mislead even if it is incomplete or does not 

include all relevant facts.” Brody v. Transitional Hospitals Corp., 280 F.3d 997, 1006 (9th 

Cir. 2002) (emphasis in original). “To be actionable under the securities laws, an omission 

must be misleading; in other words it must affirmatively create an impression of a state of 

affairs that differs in a material way from the one that actually exists.” Id. (citing 

McCormick v. The Fund American Cos., 26 F.3d 869, 880 (9th Cir. 1994)). Here, it is not 

in dispute that Qualcomm did not disclose to investors that it was working with CFIUS. 

Plaintiffs assert that by not disclosing this fact Plaintiffs could not evaluate the appropriate 

risk of this transaction being blocked by CFIUS as it was concealed. (Doc. No. 63 at 21.) 

Defendants contend that the possibility was always present, and Qualcomm warned of the 

risk before the class period. (Doc. No. 57-1 at 23.) Therefore, Qualcomm argues that the 

statements were not misleading because they were entirely consistent with Qualcomm 

having asked CFIUS to investigate the national security implications. (Id.) 

Defendants disclosed that this transaction “may well result in significant national 

security concerns that could potentially block the transaction. Therefore, we believe 

approval by CFIUS is far from assured.” (Doc. No. 57-1 at 14.) However, at this stage of 

the litigation, Plaintiffs have alleged that Qualcomm’s statements may have been 

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misleading as they failed to disclose that they were actively engaged in discussions with 

CFIUS. This plausibly could have resulted in the market evaluating a greater risk of CFIUS 

blocking this transaction rather than the normal low risk that CFIUS would block a 

transaction. 

b. Openness Comments Regarding Negotiations 

Plaintiffs argue that Defendants engaged in a scheme to mislead by creating the 

impression that Qualcomm was genuinely open to the merger negotiation and publicly 

focusing on price and antitrust risks, while Qualcomm had initiated a CFIUS review. (Doc. 

No. 63 at 23.) Again, at this stage, Plaintiffs have sufficiently alleged that Qualcomm 

engaged in a fraudulent scheme. Here, Qualcomm filed a CFIUS notice unilaterally. While 

a CFIUS review itself does not mean a deal will be halted, it is unusual for a company to 

unilaterally file a CFIUS notice. Further, by the filing the notice unilaterally and failing to 

disclose this action to investors, Plaintiffs have adequately pled a theory of a scheme to 

mislead. 

Defendants state that they were seeking to gain insight as to whether CFIUS 

clearance would be a problem before getting too far down the road. However, this is a 

factual dispute. At this stage, the Court must accept Plaintiffs’ allegations as true and 

viewed in the light most favorable to Plaintiffs. Gompper v. VISX, Inc., 298 F.3d 893, 895

(9th Cir. 2002). A factual dispute is appropriate at summary judgment or trial. See id.

Further, Defendants assert that Plaintiffs cannot establish scheme liability because it 

is based off the same alleged misstatements as described above. However, Plaintiffs have 

adequately pled a different theory. The fact that Defendants could not have been engaging 

in genuine negotiation talks with Broadcom as it had initiated CFIUS review is a different 

theory than releasing misleading statements to investors. Accordingly, it is not just a simply 

repackaging of the alleged misstatements. 

Accordingly, the Court DENIES Defendants’ motion to dismiss based failure to 

plead on misleading statements.

/ / /

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iv. Scienter

“Scienter is [the] essential element of a § 10(b) claim.” Lipton v. Pathogenesis Corp., 

284 F.3d 1027, 1032 (9th Cir. 2002). The Supreme Court has explained that scienter for 

purposes of Section 10(b) and Rule 10b–5 is “the defendant's intention to deceive, 

manipulate or defraud.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 308

(2007). The complaint must “state with particularity facts giving rise to a strong inference 

that the defendant acted with the required state of mind.” Id. (quoting 15 U.S.C. § 78u–

4(b)(2)). This means a plaintiff “must provide, in great detail, all the relevant facts forming 

the basis of her belief” that the defendant has acted with “deliberate recklessness or intent.” 

In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 985 (9th Cir. 1999), abrogated on 

other grounds by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776 (9th Cir. 2008). A “strong 

inference” is one that a reasonable person would deem “cogent and at least as compelling 

as any opposing inference one could draw from the facts alleged.” Tellabs, 551 U.S. at 324. 

When analyzing the sufficiency of a plaintiff's scienter pleadings, the Court must 

“determine whether any of the allegations, standing alone, are sufficient to create a strong 

inference of scienter.” N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d 1089, 1095 

(9th Cir. 2011). “[I]f no individual allegation is sufficient, we conduct a ‘holistic’ review 

of the same allegations to determine whether the insufficient allegations combine to create 

a strong inference of intentional conduct or deliberate recklessness.” Id.

Here, Plaintiffs contend that Defendants Mollenkopf, Jacobs, Rosenberg and Horton 

knew about the effort to get CFIUS to preemptively block the deal and therefore, made 

their statements with intent to deceive. However, Plaintiffs’ arguments regarding scienter 

misstate the law and whether Defendants knew of the CFIUS filing is not an issue. Rather, 

the issue is whether Defendants knew their statements were false or misleading. See In re 

Rigel Pharm., Inc. Sec. Litig., 697 F.3d at 883 (knowledge of a fact is insufficient to 

establish scienter without allegations that defendants “believed that they made false or 

misleading statements”). There are no allegations in the complaint supporting the 

suggestion that Defendants believed their statements were false or misleading. 

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Defendant Rosenberg made the following statement: “The Broadcom-proposed 

acquisition will be subjected to very, very close scrutiny by well over a dozen potential 

agencies. We believe that this is probably going to take something in the range of 18 

months or more even ...” (Doc. No. 50 ¶ 195.) Defendant Mollenkopf mentioned that 

“there are some questions about deal certainty and regulatory approval.” (Id. ¶ 121.) 

Defendant Rosenberg discussed possible review by regulatory agencies that could take 

time to resolve “because of the complexity of the two companies’ businesses, because of 

the enormous overlap in the two companies’ technologies and businesses, and because of 

the global nature of our business.” (Id.) Here, there is an opposing inference that 

Defendants did not think that disclosure was required. This inference is shown by the fact 

that Qualcomm did disclose several warnings regarding the CFIUS risk. The allegations in 

the complaint simply do not adequately allege an inference of scienter. 

Finally, Plaintiffs claim that these allegations of motive are extremely important. 

However, “motive and opportunity” is simply inadequate to establish scienter. Rubke v. 

Capitola Bancorp Ltd., 551 F.3d 1156, 1166 (9th Cir. 2009). 

Accordingly, the Court GRANTS Defendants’ motion to dismiss regarding the 

element of scienter.

v. Loss Causation

Even when deceptive conduct is properly pled, a securities fraud complaint must 

also adequately plead “loss causation.” Erica P. John Fund, Inc. v. Halliburton Co., 563 

U.S. 804, 807 (2011). Loss causation is shorthand for the requirement that “investors must

demonstrate that the defendant’s deceptive conduct caused their claimed economic loss.” 

Id. Thus, like a plaintiff claiming deceit at common law, the plaintiff in a securities fraud 

action must demonstrate that an economic loss was caused by the defendant’s 

misrepresentations, rather than some intervening event. Dura, 544 U.S. at 343–44. The 

burden of pleading loss causation is typically satisfied by allegations that the defendant 

revealed the truth through “corrective disclosures” which “caused the company’s stock 

price to drop and investors to lose money.” Halliburton, 573 U.S. at 264.

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 Plaintiffs contend that on March 5, 2018, the market learned that Qualcomm had 

been working with CFIUS to preemptively block the deal. (Doc. No. 50 ¶ 233.) Plaintiffs 

assert that on March 6, 2018, Qualcomm disclosed CFIUS’ March 5, 2018 letter that stated 

Qualcomm had provided unilateral voluntary notice on January 29, 2018 as well as followup responses to questions and information provided by both Qualcomm and Broadcom. 

(Id. ¶ 236.) Then on March 12, 2018, the market learned that the President blocked the 

deal. (Id. ¶ 181.) On March 5, 2018, Qualcomm’s stock dropped by 1.13% and on March 

6, 2018, the stock fell by 2.92%. (Id. ¶ 239.) On March 13, 2018, the stock dropped by 

4.95%. (Id. ¶ 184.) 

Plaintiffs allege that loss causation is adequately pled where the stock price fell over 

two days following corrective disclosure. In re Montage Tech. Grp. Ltd. Sec. Litig., 78 F. 

Supp. 3d 1215, 1227 (N.D. Cal. 2015). However, the stocks at issue in Montage fell over 

25% in two days. Id. Here, Qualcomm’s stocks dropped 4.02% in two days. To plausibly 

plead loss causation, a complaint must allege that a company’s “share price fell 

significantly after the truth became known.” Dura, 544 U.S. at 347; Metzler, 540 F.3d at 

1062–63. Further, securities complaints tend to be predicated on double digit declines. Eng 

v. Edison Int’l, No. 15-CV-1478-BEN-KSC, 2017 WL 1857243, at *4 (S.D. Cal. May 5, 

2017) (collecting cases). Here, the stock drops on March 5 and 6, 2018 were minimal. 

Furthermore, there is a more plausible explanation that the market reacted to CFIUS’ action 

and not that Qualcomm had provided notice to CFIUS. See Metzler, 540 F.3d at 1064–65 

(rejecting loss causation theory in favor of “far more plausible” explanation; noting that 

“while the court assumes that the facts in a complaint are true, it is not required to indulge 

unwarranted inferences in order to save a complaint from dismissal”). 

On March 12, 2018, the President blocked this deal. Loss causation requires a 

plaintiff to “demonstrate that an economic loss was caused by the defendant’s 

misrepresentations, rather than some intervening event.” Lloyd v. CVB Fin. Corp., 811 F.3d 

1200, 1209 (9th Cir. 2016). It is quite evident that the stock drop on March 13, 2018 was 

connected to the President’s order rather than a misrepresentation by Qualcomm. 

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Accordingly, Plaintiffs cannot establish loss causation based on an intervening event. 

Thus, the Court GRANTS Defendants’ motion to dismiss regarding loss causation. 

vi. Section 20(a)

Section 20(a) imposes liability on control persons. 15 U.S.C. § 78t(a). “To establish 

liability under Section 20(a), a plaintiff must first prove a primary violation of Section 

10(b) or Rule 10b-5.” Kelly, 71 F. Supp. 3d at 1068. Since Plaintiffs have not pled a 

violation of Section 10(b), their Section 20(a) claim has also not been adequately

established. Accordingly, the Court GRANTS Defendants’ motion to dismiss regarding 

Section 20(a). 

V. CONCLUSION

Based on the foregoing, the Court GRANTS in part and DENIES in part

Defendants’ motion to dismiss. Plaintiffs must file a Second Amended Complaint by April 

6, 2020. 

IT IS SO ORDERED.

Dated: March 10, 2020

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