Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_11-cv-01252/USCOURTS-cand-5_11-cv-01252-8/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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Case No.: 5:11-CV-01252-EJD

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED 

COMPLAINT

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION

IN RE:FINISAR CORPORATION 

SECURITIES LITIGATION

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Case No.: 5:11-CV-01252-EJD

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS FIRST 

AMENDED COMPLAINT

[Re: Docket No. 70]

Presently before the court in this securities fraud class action is Defendants Finisar 

Corporation, Eitan Gertel, Jerry Rawls, and Kurt Adzema’s (collectively, “Defendants”) Motion to 

Dismiss Lead Plaintiff Oklahoma Firefighters Pension and Retirement System’s (“Plaintiff”) First

Amended Complaint (“FAC”). Dkt. No. 70. The court found this matter suitable for decision 

without oral argument pursuant to Civil Local Rule 7-1(b) and vacated the hearing on June 25, 

2013. Dkt. No. 76. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. 

Having fully reviewed the parties’ briefing, and for the following reasons, the court GRANTS 

Defendants’ Motion.

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I. BACKGROUND

a. Factual Background

The following factual background is taken from Plaintiff’s FAC and is presumed to be true 

for purposes of this motion. See FAC, Dkt. No. 69. Plaintiff brings this federal securities fraud 

action on behalf of itself and a class of all persons and entities who purchased or otherwise 

acquired the common stock of Finisar between September 8, 2010 and March 8, 2011 (the “Class 

Period”). Defendant is a technology company that develops and sells fiber optic subsystems and 

components that enable high-speed voice, video and data communications for telecommunications, 

networking, storage, wireless and cable television applications. The individual defendants each 

served as directors of Finisar during the Class Period: Mr. Gertel was the Chief Executive Officer, 

Mr. Rawls was the Chairman of the Board, and Mr. Adzema was the Chief Financial Officer. 

Prior to the Class Period, Finisar experienced six consecutive fiscal quarters of revenue 

growth, purportedly driven by sales of its key wavelength selective switches (“WSS”) and 

reconfigurable optical add/drop multiplexers (“ROADM”) linecard telecom products. Plaintiff 

alleges that Defendants misled investors as to the nature of that growth by denying that Finisar’s 

revenue increase was the result of a short-term, unsustainable inventory build-up by customers 

rather than the result of increased demand for Finisar products. Moreover, Plaintiff contends that

Defendants knew at some point during the Class Period that customers’ fears of over-supply 

constraints had not materialized but failed to disclose that information, and also failed to disclose 

that customers would be reducing their orders from Finisar as a result. 

Plaintiff points to the following allegedly misleading statements Defendants made about 

Finisar’s performance:

• On September 8, 2010 PiperJaffray analyst Troy Jensen issued a report on Finisar 

titled “Takeaways from Recent Management Meeting” which purportedly repeated 

statements made by Mr. Gertel at an investor dinner. Particularly, Mr. Jensen 

reported that “[t]he negative concerns with respect to Finisar and the optical 

component sector is a belief that customers have been double ordering over the past 

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several quarters and, if true, this could dramatically slow demand if customers return 

to normal patterns. While it is hard to quantify the amount of optical components 

sitting in OEM’s inventories, Finisar (and JDS Uniphase and Oclaro) have been 

adamant that inventory levels have not increased materially.” Moreover, the report 

stated that “We [the PiperJaffray analysts] believe concerns regarding double 

ordering and inventory levels being [sic] overblown and have created a compelling 

valuation for FNSR shares.” FAC ¶ 36.

• On December 2, 2010 during a Credit Suisse Technology Conference Call, a Credit 

Suisse analyst highlighted that Finisar had “significantly outgrown [its] end markets 

for the last six quarters” and raised the fear that that “this is going to revert.” Mr. 

Gertel responded saying:

So if you look at the market, you see the fundamentals for growth are 

there. People need more higher bit rate products, more sophisticated 

products to address the cost reduction that the network needs and the 

demand continues.

As far as we know we haven’t seen any inventory issues with our product 

with our customers. Our product—our business is 60/40, basically 40% is 

LAN/SAN business, 60% is telecom. On the LAN/SAN side, by far the 

majority of our sales is a vendor-managed inventory. So we have 

visibility to what people have. There is no reason for them to have 

inventory because we own the inventory. So we’re pretty safe with that.

And on the telecom side, look, there can be one or two guys who try to 

build their own inventory, but by far the majority of the customers 

expediting products and doesn’t look to us, not visible to us at all, all these 

quarters if they are building any inventory.

 Id. at ¶ 38.

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• On January 11, 2011 Mr. Rawls stated during a call with analysts, investors, and 

media representatives that:

This [the ROADMs, the wavelength selective switch or the WSS] is the fastest

growing product on the planet for optic. It is the drug that phone companies don’t 

seem to be able to get enough off [sic], it is—gives them the ability to switch light 

instead of electrons and gives them operational efficiency, that is they can spend 

CapEx and save OpEx.

So it is—the demand has been incredibly strong and we have been at capacity and 

on allocation now for—oh, I don’t know, the last five quarters, maybe six quarters 

in this product. It’s a very exciting space.

[F]or most—some of our customers, we get very specific rolling production 

forecasts that go out as far as 12 months as to what—that are updated biweekly. 

So we understand their business, at least what they expect for their business. And 

others, we get forecasts that say, this is what we need for capacity, this is what we 

expect to sell. Because we are such an important supplier and all of our 

customers depend on us so heavily, they have to share with us what it is that they 

expect to happen in their business to make sure that we are ready for it. I mean, 

we are not only the number one supplier for Cisco, Alcatel, Huawei, but also 

IBM, EMC, you name it. And all of these guys in their business need us to be 

able to respond or they’re going to be revenue-limited. 

 Id. at ¶¶ 42-43.

• On February 10, 2011, during another call with analysts, investors, and media 

representatives, Mr. Rawls stated that Finisar, “today,” was in a “very strong demand 

environment.” Id. at ¶ 46.

Plaintiff alleges that, despite the statements listed above, Finisar learned through the course of 

annual negotiations with customers that Finisar was experiencing a serious slowdown in business, 

particularly from customers in China. According to Plaintiff, these negotiations were substantially

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completed by December 2010. Defendants also knew after its customer negotiations were 

completed that Finisar was experiencing increased pricing pressures due to intense competition and 

that Finisar was forced to steeply discount pricing in order to retain certain customers. 

Despite learning of these conditions as early as November 2010, Finisar did not share this 

information with its investors or the public until March 8, 2011. On that date, Finisar issued a press 

release indicating that, during the fourth quarter of fiscal year 2011 (February 1, 2011, through 

April 30, 2011), Finisar revenues would be impacted by certain developments, including: (1) the 

annual price negotiations, (2) a shutdown at certain customers for Chinese New Year, (3) an 

inventory adjustment by some customers who had been double ordering and building inventory,

particularly for products that had been on allocation such as WSS and ROADM line cards, and (4) 

a slowdown in business in China overall. Id. at ¶ 48.

Mr. Rawls gave a conference call that same day to discuss Finisar’s expected results. 

During the call, Mr. Rawls explained the inventory adjustment saying: 

[M]any, many of the people that follow our company have speculated for several quarters 

about double ordering inventory builds on the part of our customers and we continually 

responded that we asked our customers and they say, “No. We’re buying for production

and we’re not buying for inventory.” Well we have clearly learned here in the last month or 

so from several of them that all of a sudden surprise, surprise they have some pretty good 

size inventories of wavelength selective switches. And the question is we don’t really have 

great visibility into their inventory levels other than what they tell us and I, you know, 

they’re not—we’re not getting complete information I don’t think.

Id. at ¶ 49. Mr. Rawls also stated that Finisar had seen “reduced order rates” for “a couple of 

months.” Id. at ¶ 52. Mr. Gertel admitted that Finisar had seen the slowdown in a more 

pronounced way since the beginning of February. Id. at ¶ 53.

On this news, Finisar’s stock price, which had nearly tripled during the Class Period, 

erased nearly all of those gains in one day, falling from its previous close of $40.04 to $24.61 at

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the close of March 9, 2011. Id. at ¶¶ 7, 79, 86. The financial news media reported on Finisar’s 

March disclosure and the fallen stock price. 

Plaintiff further alleges that during the more than three months in which Defendants knew 

of the inventory build-up and slowdown in the Chinese market prior to disclosing the same on 

March 8, 2011, they capitalized on the rapidly rising stock price. Finisar conducted a substantial 

stock offering garnering over $118 million in gross proceeds. Id. at ¶ 72. At the same time,

individual defendants Mr. Rawls, Mr. Gertel and Mr. Adzema sold over 264,000 shares of their 

personally held Finisar stock for proceeds of over $6.8 million. Id. at ¶ 73.

b. Procedural History

On March 15, 2011, Plaintiff Martin Derchi-Russo filed a class action complaint in this 

court against Defendants for violation of Sections 10(b) and 20(a) of the Securities Exchange Act 

of 1934 (“Exchange Act”). Dkt. No. 1; 15 U.S.C. § 78j(b). Two additional plaintiffs filed separate 

but similar actions in the ensuing weeks. See Dkt. No. 12. On May 4, 2011, this court ordered that 

the three cases be related. Dkt. No. 17. Several months later, on October 27, 2011, this court 

issued an order consolidating all related actions, appointing Oklahoma Firefighters Pension and 

Retirement System as Lead Plaintiff, and approving the same’s legal counsel as Lead Counsel. 

Dkt. No. 48. Lead Plaintiff filed the Amended Consolidated Class Action Complaint on January 

20, 2012. Dkt. No. 53. Defendants filed a motion to dismiss (Dkt. No. 56), which the court 

granted on January 16, 2013 (Dkt. No. 68). The FAC followed (Dkt. No. 69), and Defendants 

moved to dismiss it on February 20, 2013 (Dkt. No. 70). The court now turns to the substance of 

that motion. 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim in the 

complaint with sufficient specificity to “give the defendant fair notice of what the ... claim is and 

the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) 

(internal quotations omitted). A complaint which falls short of the Rule 8(a) standard may be 

dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). 

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Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim is “proper only 

where there is no cognizable legal theory or an absence of sufficient facts alleged to support a 

cognizable legal theory.” Shroyer v. New Cingular Wireless Servs., Inc., 606 F.3d 658, 664 (9th 

Cir. 2010) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). In considering whether 

the complaint is sufficient to state a claim, the court must accept as true all of the factual 

allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While a 

complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, 

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 

U.S. at 570).

Because Plaintiff’s FAC exclusively raises federal securities laws causes of action, it is 

also subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) 

and the pleading standards articulated in the Private Securities Litigation Reform Act of 1995 

(“PSLRA”). See 15 U.S.C. § 78u-4(b)(1) (applying the PSLRA provisions to “any private 

action arising under this chapter [the Exchange Act]” alleging false or misleading statements). 

Under these rules, a securities fraud plaintiff must “state with particularity” the elements of its 

claim. See Fed. R. Civ. Proc. 9(b) (requiring the plaintiff to “state with particularity the 

circumstances constituting fraud or mistake”); Zucco Partners, LLC v. Digimarc Corp., 552 

F.3d 981, 990 (9th Cir. 2009) (finding the PSLRA requires the plaintiff to plead falsity and 

scienter with particularity). 

With respect to falsity, the plaintiff must “specify each statement alleged to have been 

misleading, [and] the reason or reasons why the statement is misleading.” 15 U.S.C. § 78u4(b)(1). To the extent an allegation is based 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). In 

doing so, the plaintiff shall “reveal ‘the sources of [his] information.’” In re Daou Sys., Inc. 

Sec. Litig., 411 F.3d 1006, 1015 (9th Cir. 2005) (quoting In re Silicon Graphics Inc. Sec. 

Litig., 183 F.3d 970, 975 (9th Cir. 1999)). With respect to scienter, the plaintiff must “state 

with particularity facts giving rise to a strong inference that the defendant acted with the 

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required state of mind.” 15 U.S.C. § 78u-4(b)(2). That is, the plaintiff must plead with 

particularity the facts evidencing “the defendant’s intention ‘to deceive, manipulate, or 

defraud.’” Tellabs Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007) (quoting 

Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194 & n. 12 (1976)). To satisfy the rigorous 

pleading standards of the PSLRA, the complaint’s scienter allegations must give rise not 

simply to a plausible inference of scienter, but rather to an inference of scienter that is “cogent 

and at least as compelling as any opposing inference of nonfraudulent intent.” Id. at 314.

III. DISCUSSION

To state a claim under Section 10(b) of the Exchange Act and its accompanying rule 

promulgated by the Securities and Exchange Commission (“SEC”), Rule 10b-5, 17 C.F.R. § 

240.10b-5, a plaintiff must allege (1) a material misrepresentation or omission made by the 

defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the 

purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic 

loss; and (6) loss causation. Janus Capital Grp. v. First Derivate Traders, --- U.S. ---; 131 S. Ct. 

2296, 2301 n.3 (2011). Defendants argue that Plaintiff has failed to adequately alleged the first 

(false or misleading statement), second (scienter), and sixth (loss causation) prongs of its 10(b) 

claim.

a. False or Misleading Statement by Defendants

i. Mr. Gertel’s Statement as Reported by the September 8, 2010 Analyst 

Report

Plaintiff alleges that on September 7, 2010, ACI Research issued a report and 

recommendation on Finisar that relayed, in pertinent part, that analysts “are now detecting 

inventory buildup in Finisar’s ROADM business, particularly in their merchant market WSS 

[wavelength selective switches] business.” FAC ¶ 35. The very next day, which marks the start of 

the Class Period, an analyst from PiperJaffray issued a report based largely on information he had 

gathered during a dinner he hosted with Mr. Gertel. Id. at ¶ 36. According to the report, “Finisar 

(and JDS Uniphase and Oclaro),” as of that date, “have been adamant that inventory levels have 

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not increased materially.” Id. Plaintiff argues that, because Mr. Gertel hosted this dinner and 

because Finisar is mentioned in this statement in the report, the court should attribute the 

“adamant” denial of inventory build-up to Mr. Gertel. The court disagrees.

Plaintiff’s argument appears to be in direct conflict with the Supreme Court’s recent 

decision in Janus Capital. In that case, the Court considered whether certain allegedly misleading 

statements contained in several fund prospectuses could be attributed to the funds’ creator and 

investment adviser. See 131 S. Ct. 2296. The Court first articulated a rule for determining if a 

speaker is a “maker” of a statement, holding that “[f]or purposes of Rule 10b-5, the maker of a 

statement is the person or entity with ultimate authority over the statement, including its content 

and whether and how to communicate it.” 131 S. Ct. at 2302. It then went on to note that, despite 

the close relationship between the funds and their adviser, they were maintained as legally separate 

entities. Thus, the Court found that statements made by the funds could not be attributed to the 

adviser, even if the adviser assisted in preparing the prospectuses. 131 S. Ct. at 2304-05. 

The statement at issue in this case is even further removed from its alleged maker than the 

ones at issue in Janus Capital. There, the alleged “maker” was a corporate entity closely related to 

the true speaker and had been heavily involved in preparing the statement. Here, the “adamant” 

denial statement is contained in an independent analyst’s report. While that report appears to be 

based at least in part on statements made by Mr. Gertel at a recent dinner, Plaintiff supplies no 

allegations suggesting that Mr. Gertel or anyone else at Finisar had editorial control over the 

author’s use of it or the preparation of the ultimate report. Moreover, the statement is clearly 

attributed to at least three separate speakers: Finisar, JDS Uniphase, and Oclaro. See FAC ¶ 36. 

The collective nature of this statement makes it impossible for the court to determine whether the 

author was reporting on each individual company’s specific “adamant” denial, or rather the 

cumulative impression he received from the three companies throughout the evening. Accordingly, 

the court finds that the September 8, 2010 statement cannot be attributed to Mr. Gertel or Finisar.

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ii. Mr. Gertel’s Statements During the December 2, 2010 Investor Call

Plaintiff next alleges that Mr. Gertel’s December 2, 2010 statements that the “fundamentals 

for growth” were present in the market, that Finisar had not seen inventory issues with its 

customers, and that it did not have visibility into inventory issues with its telecom customers were

false and misleading. The court previously found that these statements, when read in full, were

insufficient to show falsity because the only visibility Mr. Gertel appeared to admit to was that of 

the inventory of Finisar’s LAN/SAN products, which are not at issue in this case. Dkt. No. 68 7-8. 

Plaintiff now alleges that Finisar’s annual price negotiations with its telecom customers typically 

cover topics such as production needs and capacity and that during these negotiations in 2010 

customers “disclosed—and had every incentive to disclose—their inventory levels and decreased 

demand for Finisar products as they burned-off excess inventory.” FAC ¶¶ 8, 41, 62, 66-67. 

Moreover, according to Plaintiff, these negotiations occurred “at the end of 2010” and were 

substantially completed by the time of Mr. Gertel’s statement. Id. at ¶¶ 8, 9, 41, 61. 

These allegations plausibly suggest that Finisar at least discussed inventory levels with its 

telecom customers prior to December 2, 2010. However, they do not go so far as to suggest that 

Finisar had any true visibility into its customers’ inventory levels as of that time. Most notably, 

these allegations do not support an inference that Finisar’s customers had actually revealed an 

excess of inventory during these discussions, and thus that Mr. Gertel’s statement suggesting that 

Finisar’s growth was in-line with end market sales and that Finisar had “visibility” into telecom 

inventory can be inferred to be false or misleading. 

Elsewhere in the FAC, Plaintiff includes curative statements issued by Finisar regarding its 

fiscal fourth quarter 2011 revenues that directly contradict the inference it asks the court to make

here. In a March 8, 2011 press release, Finisar listed both the annual price negotiations and “the 

adjustment of inventory levels at some telecom customers” among the factors influencing its 

revised revenue estimates. Finisar’s setting forth the negotiations and the inventory adjustment as 

separate causes of the decrease in its revenue contradicts Plaintiff’s argument that Defendants had 

accurate visibility into its customers’ inventories during the annual negotiations. Id. at ¶ 48. Even 

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more strongly detracting from this argument is Plaintiff’s inclusion of Mr. Rawls’ March 8, 2011 

statement to investors that “we don’t really have great visibility into [customers’] inventory levels 

other than what they tell us and I, you know, they’re not—we’re not getting complete information I 

don’t think.” Id. at ¶ 49. Without more to support an inference that customers revealed an 

inventory build-up to Defendants by December, the court finds that Plaintiff has not alleged that 

Mr. Gertel’s December 2, 2010 statement was false or misleading when made to the satisfaction of 

Rule 9(b) and the PLSRA.

iii. Mr. Rawls’ Statements During the January 11, 2011 and February 10, 

2011 Investor Calls

Finally, Plaintiff contends that Mr. Rawls’ January 11, 2011 statement that WSS is “the 

fastest growing product on the planet for optic” and “the drug that phone companies don’t seem to 

be able to get enough of,” along with his statement that demand had been “incredibly strong,” and 

on February 10, 2011 that “today” Finisar finds itself “in a very strong demand environment” for 

ROADM and WSS products misled investors to believe that demand for WSS and other telecom 

products remained strong at the time of the respective calls. FAC ¶¶ 42, 46. Plaintiff makes clear 

that it only alleges these cited portions of the January and February 2011 statements to be false or 

misleading. Dkt. No. 73 at 9. The court previously found that Plaintiff did not adequately allege 

falsity as to these statements because Plaintiff had not included allegations suggesting that 

customers were actually building inventory at the time of the call or, even if customers were 

building inventory, Plaintiff did not allege that the statements about demand were false, only that 

the source of the demand was omitted. Dkt. No. 68 at 8-9. 

Plaintiff maintains that it has changed its theory as to these statements from that of 

omission to that of an affirmative misstatement, now arguing that the statements were false when 

made because, at the time Mr. Rawls was trumpeting the “incredibly strong” demand environment 

for WSS and ROADM to investors, demand for the telecom products was actually falling as a 

result of customers’ inventory build-up. In arguing that its allegations are sufficient to state falsity, 

Plaintiff points to Finisar’s own later statements suggesting that Defendants had already seen 

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reduced order rates by the time the January and February statements were made. Particularly, 

during the March 8, 2011 call on Finisar’s revised revenue estimates, Mr. Rawls stated that he had 

seen the impact of reduced order rates for “a couple of months” due to “an industry-wide 

phenomenon” that was “not limited to just one customer in China.” FAC ¶ 45. This statement 

plausibly suggests that Finisar’s orders had been reduced since at least January. Also on March 8, 

2011, Mr. Gertel explained that Defendants had seen this “more pronounced” slowdown in China 

“starting at the beginning of February in a more serious way.” This statement appears to directly 

contradict Mr. Rawls’ February 10 statement that “today” Finisar is in a “strong demand 

environment.”

Despite Plaintiff’s plausible allegations that demand had started to curtail by January 2011, 

the court does not find that Plaintiff has plausibly alleged that Mr. Rawls’ January statements were 

false. Taking these statements in context, Mr. Rawls appears to have been discussing Finisar’s past 

performance:

This [the ROADMs, the wavelength selective switch or the WSS] is the fastest growing 

product on the planet for optic. It is the drug that phone companies don’t seem to be able 

to get enough off [sic], it is—gives them the ability to switch light instead of electrons 

and gives them operational efficiency, that is they can spend CapEx and save OpEx.

So it is—the demand has been incredibly strong and we have been at capacity and on 

allocation now for—oh, I don’t know, the last five quarters, maybe six quarters in this 

product. It’s a very exciting space.

Id. at ¶ 42. On its face, Mr. Rawls’ statement pertains to the prior “five quarters, maybe six 

quarters.” The present tense in the introductory portion of these statements appears only to be 

used for the purpose of setting up an analogy to describe what the demand “has been” like over 

these past quarters.

Similarly, Mr. Rawls’ February statement also appears, in context, to be referring to prior 

quarters:

Case 5:11-cv-01252-EJD Document 77 Filed 09/30/13 Page 12 of 14
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Case No.: 5:11-CV-01252-EJD

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED 

COMPLAINT

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For the Northern District of California

And if you think about the headlines for the company, most of it what you’ve seen I think 

over the last few quarters has been wavelength selective switches, switching light, not 

electrons, the ROADM capabilities and telecom equipment, and it has been very exciting as 

that business has grown 20%, 30% per quarter, quarter after quarter...so anyway, today we 

find ourselves in a very strong demand environment. Revenues have been growing fast. 

Id. at ¶ 46. Given Plaintiff’s own admissions that Defendants’ “double-digit, sequential growth” in 

the six consecutive quarters leading into the Class Period was “driven primarily” by WSS and 

ROADM sales, the court cannot find that these statements describing demand in those recent 

quarters as “strong” were false. Id. at ¶ 33.

Even isolating the narrow portion of Mr. Rawls’ February statement that Plaintiff asserts as 

the misrepresentation, i.e. the statement that “today” Finisar finds itself “in a very strong demand 

environment,” the court still cannot find that Plaintiff has adequately alleged falsity. This 

statement, taken alone, does suggest at least a pivot in the conversation towards present day 

conditions. However, without more, the word “strong” used to describe a company’s demand is 

insufficient to serve as the basis of a securities fraud cause of action. See In re Splash Tech. 

Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059, 1076-77 (N.D. Cal. 2001) (noting that courts have 

held that phrases such as “strong,” “robust,” and “well-positioned,” when used to describe demand, 

results, or strategy are not actionable as material misrepresentations); see also In re Calpine Corp., 

288 F. Supp. 2d 1054, 1088 (N.D. Cal. 2003) (holding that words such as “strong” and “solid” 

could not form a basis for Section 10(b) claims). Accordingly, the court finds that Plaintiff has 

failed to adequately allege falsity of the January and February statements.

Because Plaintiff has for the second time failed to adequately allege any material 

misrepresentation on the part of Defendants, the court DISMISSES its Section 10(b) claim

WITHOUT LEAVE TO AMEND. For the same reasons, the court DISMISSES Plaintiff’s Section 

20(a) claim WITHOUT LEAVE TO AMEND. See Zucco Partners, 552 F.3d at 990 (“Section 

20(a) claims may be dismissed summarily...if a plaintiff fails to adequately plead a primary 

violation of section 10(b).”).

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