Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_23-cv-01816/USCOURTS-caed-2_23-cv-01816-15/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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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

In re ORIGIN MATERIALS, INC. 

SECURITIES LITIGATION

No. 2:23-cv-01816 WBS JDP 

ALL ACTIONS CONSOLIDATED FROM:

ANTONIO F. SOTO, individually 

and on behalf of all others 

similarly situated,

Plaintiff,

v.

ORIGIN MATERIALS, INC., RICHARD 

J. RILEY, and JOHN BISSELL,

Defendants.

MEMORANDUM AND ORDER RE: 

MOTION TO DISMISS CORRECTED 

AMENDED COMPLAINT

----oo0oo----

Lead plaintiff Todd Frega brings this putative class 

action against defendants Origin Materials Inc., Richard Riley, 

and John Bissell, alleging violations of Sections 10(b) and 20(a) 

of the Securities Exchange Act, 15 U.S.C. §§ 78j(b), 78t(a). 

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Defendants now move to dismiss. (Docket No. 69.)

I. Factual and Procedural Background1

Defendant Origin Materials (“Origin” or “the company”) 

is a publicly traded company that purports to produce 

“sustainable materials” by converting plant-based matter such as 

wood residues into materials that can replace the petroleum-based 

plastics typically used in consumer products. (Corrected Am. 

Compl. (“CAC”) (Docket No. 61) ¶ 5.) Defendants Bissell and 

Riley are the co-CEOs of Origin. (Id. ¶ 14.)

Origin produces chloromethylfurfural (“CMF”), a 

“building block” chemical that can be converted into other 

products. (Id. ¶ 6.) As relevant here, CMF can be converted 

into (1) paraxylene (“PX”), a chemical used to produce a type of 

plastic called polyethylene terephthalate (“PET”); and (2) 

furandicarboxylic acid (“FDCA”), a chemical used to produce a 

different type of plastic called polyethylene furanoate (“PEF”). 

(Id.) (The complaint frequently refers to PX and PET 

interchangeably or as one unit. As such, the court will refer to 

the first product line as “PX/PET.” The court will refer to the 

second product line as “FDCA/PEF.”)

In February 2021, Origin announced plans to build 

Origin 2, a manufacturing plant intended to focus on, inter alia,

production of PX/PET, with construction to be completed by mid2025. (See id. ¶¶ 41-43, 60, 71-75.)

In November 2021, Origin retained an outside 

engineering firm to conduct the “front-end loading” process, a 

1 All facts recited in this Order are as alleged in the 

Corrected Amended Complaint unless otherwise noted.

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multiphase development process involving “progressively refining 

the project scope, definition, and feasibility, ultimately paving 

the way for detailed engineering and construction.” (Id. ¶¶ 51, 

59.)

Origin subsequently encountered chemical engineering 

issues related to scaling up the production of PX/PET. (See id.

¶¶ 86-88.) As a result, the plans for Origin 2 changed, with the 

plant to instead focus on the production of FDCA/PEF and

construction to be delayed by several years. (See id. ¶¶ 89, 

110-12.) On August 9, 2023, defendants publicly announced these 

changes. (See id. ¶¶ 150, 153.) The company’s share price 

subsequently fell. (See id. ¶ 160, 165.)

II. Section 10(b)

Section 10(b) of the Securities Exchange Act of 1934 

makes it unlawful for any person to “‘use or employ, in 

connection with the purchase or sale of any security registered 

on a national securities exchange . . . any manipulative or 

deceptive device or contrivance in contravention of such rules 

and regulations as the [Securities and Exchange] Commission may 

prescribe as necessary or appropriate in the public interest or 

for the protection of investors.’” In re Rigel Pharms., Inc. 

Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012) (quoting 15 U.S.C. 

§ 78j(b)). “One of those rules promulgated under the Act is 

Securities and Exchange Commission Rule 10b–5,” id., which makes 

it unlawful to, inter alia, (a) “employ any device, scheme, or 

artifice to defraud,” (b) “make any untrue statement of a 

material fact or to omit to state a material fact necessary in 

order to make the statements made, in the light of the 

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circumstances under which they were made, not misleading,” or (c) 

“engage in any act, practice, or course of business which 

operates or would operate as a fraud or deceit upon any person, 

in connection with the purchase or sale of any security.” 17 

C.F.R. § 240.10b-5.

“To survive a motion to dismiss under this regime, [the 

plaintiff] must plead: (1) a material misrepresentation or 

omission by the defendant (‘falsity’); (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.” Espy v. J2 Glob., Inc., 99 F.4th 527, 535 (9th Cir. 

2024) (quotation marks omitted).

“At the pleading stage, a complaint alleging claims 

under section 10(b) and Rule 10b–5 must . . . satisfy the 

heightened pleading requirements of both Federal Rule of Civil 

Procedure 9(b) and the Private Securities Litigation Reform Act”

(“PSLRA”). Rigel Pharms., 697 F.3d at 876. 

Rule 9(b) provides: “In alleging fraud or mistake, a 

party must state with particularity the circumstances 

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “Thus, 

Rule 9(b) requires particularized allegations of the 

circumstances constituting fraud, including identifying the 

statements at issue and setting forth what is false or misleading 

about the statement and why the statements were false or 

misleading at the time they were made.” Rigel Pharms., 697 F.3d 

at 876.

“Under the PSLRA, ‘the complaint shall [1] specify each 

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statement alleged to have been misleading [and] the reason or 

reasons why the statement is misleading, and [2], if an 

allegation 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.” In re 

Genius Brands Int’l, Inc. Sec. Litig., 97 F.4th 1171, 1180 (9th 

Cir. 2024) (quoting 15 U.S.C. § 78u-4(b)(1)(B)); see also

Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 321 

(2007) (same). The PSLRA also requires that the complaint 

“‘state with particularity facts giving rise to a strong 

inference that the defendant acted with the required state of 

mind.’” Rigel Pharms., 697 F.3d at 882 (quoting 15 U.S.C. § 78u–

4(b)(2)). 

III. Confidential Witness Allegations

In pleading the alleged violations, the complaint 

relies primarily upon statements attributed to a former Origin 

employee referred to as Confidential Witness 1 (“CW1”).

To comply with the PSLRA, “[a] complaint relying on 

confidential witness statements must describe the confidential 

witnesses ‘with sufficient particularity to establish their 

reliability and personal knowledge.’” Glazer Cap. Mgmt., L.P. v. 

Forescout Techs., Inc., 63 F.4th 747, 766-67 (9th Cir. 2023) 

(quoting Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 995 

(9th Cir. 2009)). In determining whether the complaint has 

established the reliability and personal knowledge of a 

confidential witness, courts consider “the level of detail 

provided by the confidential witnesses, the plausibility of the 

allegations, the number of sources, the reliability of the 

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sources, corroborating facts, and similar indicia of 

reliability.” Id. at 767.

According to the complaint, CW1 was a “technical 

development engineer who was employed at Origin prior to and 

throughout the Class Period” and “worked on developing the 

technology for . . . converting CMF to PX for Origin 2.” (CAC ¶ 

85.) CW1 was part of an engineering group that compiled 

chemistry data and sent it to the Origin 1 plant for further 

testing. (Id.) If the tests were successful, CW1 and his team 

would send the data to the outside engineering firm working on 

the “front-end loading” development process for Origin 2. (Id.)

The allegations attributed to CW1 are summarized as 

follows. In “late 2022” and “early 2023,” CW1 “learned from 

attending biweekly meetings with Origin’s R&D group” that there 

were “unexpected chemical issues” (referred to as “fouling”

occurring “at every step” of the PX/PET production process), 

leading to delays in the development process for Origin 2. (Id.

¶¶ 86, 88.) In December 2022, CW1 attended a meeting at which 

defendants Riley and Bissell provided updates on Origin 2, 

including that the company was “considering” changing the plans 

and construction schedule for Origin 2. (See id. ¶ 87.)

“CW1 further reported that in March 2023, based on 

emails with his direct manager and his attendance at weekly 

meetings held by Defendants Riley and Bissell, CW1 learned that 

Origin 2 was being broken up into two phases, was shifting to new 

products, and would no longer produce [PX/PET].” (Id. ¶ 89.) 

“CW1 also learned from these weekly Friday meetings with 

Defendants Riley and Bissell in March 2023, that [front-end 

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loading] was being delayed for Origin 2.” (Id. ¶ 90.)

The allegations concerning what CW1 “learned” at the 

March 2023 “weekly meetings held by” Riley and Bissell are 

crucial to establishing both that the plans for Origin 2 had 

definitively changed months in advance of the August 2023 

corrective disclosure, and that Riley and Bissell knew of those 

changes. In other words, the confidential witness statements are 

crucial to the complaint’s pleading of both falsity and scienter. 

However, the allegations concerning what CW1 “learned” 

at meetings attended by defendants are fatally vague, as they do 

not indicate “when this information was conveyed to [defendants], 

who conveyed it, or the substance of what was allegedly 

conveyed.” See In re Ditech Commc’ns Corp. Sec. Litig., No. 05-

cv-02406 JSW, 2007 WL 2990532, at *8 (N.D. Cal. Oct. 11, 2007)

(allegations concerning what confidential witness “learned” 

during meetings were insufficient to support inference of 

scienter). The complaint also fails to allege with specificity

what defendants’ role was during these meetings and whether 

defendants had access to the same information that was 

communicated to CW1. When questioned several times at oral 

argument, counsel was unable to provide any further detail 

concerning what CW1 “learned” and how he learned it.

It is possible for example that CW1 believes he 

“learned” of the changed plans, merely through his own deductions 

based on such things as the body language of the meeting 

attendees. In that circumstance, CW1’s belief that the plans had 

changed would not bear sufficient “indicia of reliability.” See

Glazer, 63 F.4th at 767; see also In re Downey Sec. Litig., No. 

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08-cv-3261 JFW RZX, 2009 WL 2767670, at *10 (C.D. Cal. Aug. 21, 

2009) (a confidential witness statement is insufficient where it 

“lack[s] specificity” and is “based on hearsay, rumor, or 

speculation”).

The lack of detail provided concerning the March 2023 

meetings is particularly glaring given that the complaint 

provides greater detail concerning other meetings. For instance, 

the complaint states the following concerning a meeting that 

occurred in December of 2022:

During this meeting, Defendants Riley and Bissell discussed 

the state of the Company, the research and development 

process at Origin 2, and provided an update on the plant --

such as how the plant would look. According to CW1, 

Defendants Riley and Bissell revealed that the Company was 

already considering scaling down the size of Origin 2, 

splitting the building of the plant into two phases, and 

shifting the focus of Origin 2 from PX to another product. 

Defendants Riley and Bissell further stated that the Company 

would either have to make less PX at the plant or pivot the 

production to another product due to the economics of PX.

At the meeting, CW1 was instructed that the Company was far 

off from completing FEL 2 for Origin 2.

(CAC ¶ 87.) These detailed allegations concerning what 

defendants Riley and Bissell themselves said and what CW1 was

“instructed” of at the December 2022 meeting stand in stark 

contrast to the threadbare assertion that “based on emails with 

his direct manager and his attendance at weekly meetings held by 

Defendants Riley and Bissell [in March 2023], CW1 learned that 

Origin 2” was changing course. (See id. ¶ 89.)

In evaluating the statements of a confidential witness, 

sufficient detail is all the more important, as both the court 

and the defendants lack a crucial piece of information -- the 

witness’s identity -- traditionally used in weighing the 

credibility of the allegations. And under the PSLRA, it is not 

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sufficient for plaintiff to merely “set forth a belief that 

certain unspecified sources will reveal, after appropriate 

discovery, facts that will validate h[is] claim.” In re Daou 

Sys., Inc., 411 F.3d 1006, 1015 (9th Cir. 2005) (cleaned up).

For the foregoing reasons, the court concludes that the 

statements attributed to CW1 -- which are foundational to 

plaintiff’s allegations that defendants committed securities 

violations – fail to satisfy the PSLRA’s particularity 

requirements. 

IT IS THEREFORE ORDERED that defendants’ motion to 

dismiss (Docket No. 69) be, and the same hereby is, GRANTED. 

Plaintiff has twenty days from the date of this Order to file an 

amended complaint, if he can do so consistent with this Order.

Dated: October 29, 2024

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