Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02674/USCOURTS-azd-2_06-cv-02674-4/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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1 Apollo “adopts and incorporates the individual’s arguments “to the

extent applicable to Apollo[.]” Apollo Resp. (Doc. 149) at 6:25-26, n.1. 

Similarly, the individuals are relying upon Apollo’s reasons, as well as their own,

in arguing that plaintiff’s motion should be denied. See Defs.’ Resp. (Doc. 148)

at 22:19-20. Thus, unless necessary to distinguish among them, Apollo and the

individuals will be collectively referred to throughout as “the defendants.”

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Teamsters Local 617 Pension )

and Welfare Funds, et al. )

)

Plaintiffs, ) No. CIV 06-02674 PHX RCB

)

vs. ) O R D E R

)

Apollo Group, Inc., et al., )

)

Defendants. ) )

Background

In this securities fraud action, lead plaintiff, Pension Trust

Fund for Operating Engineers (“plaintiff”), commenced this action

against Apollo Group, Inc. (“Apollo”), and various Apollo officers

and directors (“the individuals”).1

 In an effort to satisfy the

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28 2 That estimation takes into account the voluminous exhibits incorporated

in each of the complaints.

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rigorous pleading standards of the Private Securities Litigation

and Reform Act (“PSLRA”) and Fed.R.Civ.P. 9(b), plaintiff has made

literally hundreds of pages of allegations in two separate

complaints.2

 After scrutinizing plaintiff’s “cut and paste, . . .

puzzle like pleading” in Teamsters Local 617 Pension and Welfare

Funds v. Apollo Group, Inc., 633 F.Supp.2d 763 (D.Ariz. 2009)

(“Apollo I”), vacated in part on reconsideration, 690 F.Supp.2d 959

(D.Ariz. 2010), this court found, inter alia, that the first

amended complaint (“FAC”) did not “satisfy the heightened pleading

standards for fraud under either Rule 9(b) or the PSLRA.” Id. at

786. The court allowed plaintiff to amend the FAC and it did. 

That second amended complaint (“SAC”) was the subject of

another round of dismissal motions by defendants. Finding that the

SAC did not plead falsity with the requisite degree of

particularity, the court dismissed the SAC “with prejudice and

without leave to amend.” See Teamsters Local 617 Pension and

Welfare Funds v. Apollo Group, Inc., 2011 WL 1253250, at *37

(D.Ariz. March 31, 2011) (“Apollo III”). Accordingly judgment was

entered in favor of defendants and against plaintiff. 

Currently pending is “Lead Plaintiff’s Fed.R.Civ.P. 59(e)

Motion to Alter or Amend Judgment[.]” (Doc. 146) at 1. Plaintiff

is seeking to have the court reopen and modify the Apollo III

judgment on the following grounds: (1) two Ninth Circuit cases

decided subsequent to Apollo III purportedly represent an

intervening change in controlling law; (2) dismissal of certain

false and misleading statements was “manifestly erroneous;” and 

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3 Given the court's intimate familiarity with this action and because

the issues have been fully briefed, in its discretion the court denies plaintiff’s

request for oral argument as it would not aid the decisional process. See

Fed.R.Civ.P. 78; Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998); Lake at Las

Vegas Investors Group, Inc. v. Pac. Dev. Malibu Corp., 933 F.2d 724, 729 (9th Cir.

1991).

4 For ease of reference, all citations to page numbers of docketed items

are to the page assigned by the court's case management and electronic case filing

(CM/ECF) system.

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(3) it was “clear error to dismiss the SAC with prejudice and

without leave to amend.” Defendants respond that plaintiff has not

satisfied the exceedingly stringent standards to warrant the

“extraordinary remedy” of amending a judgment after its entry. See

Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir. 2011)

(citation and internal quotation marks omitted). 

Discussion3

I. Fed.R.Civ.P. 59(e)

A. Timeliness

Plaintiff specifically styles its motion as one to “alter or

amend judgment” pursuant to Fed.R.Civ.P. 59(e). See Pl.’s Mot.

(Doc. 146) at 1.4

 That Rule mandates that such motions “must be

filed no later than 28 days after entry of the judgment[.]” 

Fed.R.Civ.P. 59(e) (emphasis added). Calculating the relevant time

frame in accordance with Fed.R.Civ.P. 6(a), the court “exclude[s]”

April 1, 2011, the entry date of the judgment, as that is “the day

of the event that triggers” Rule 59(e)’s 28 day time “period[.]” 

See Fed.R.Civ.P. 6(a)(1)(A). Then, “count[ing] every day,

including intermediate Saturdays, Sundays, and legal holidays[,]”

means that plaintiff had until April 29, 2011, in which to file its

Rule 59(e) motion. See Fed.R.Civ.P. 6(a)(1)(B). Plaintiff’s

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5 In so doing, this court is following well-settled Ninth Circuit

precedent denominating Rule 59(e) motions to alter or amend a judgment as motions

to reconsider. See, e.g., S.E.C. v. Platforms Wireless Int’l Corp., 617 F.3d 1072,

1100 (9th Cir. 2010) (citing United Nat’l Ins. Co. v. Spectrum Worldwide, Inc., 555

F.3d 772, 780 (9th Cir. 2009) (enumerating the circumstances under which

“[r]econsideration under Rule 59(e) is appropriate[]”); Kona Enterprises Inc. v.

Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (recognizing that “Rule 59(e)

permits a district court to reconsider and amend a previous order[]”). 

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motion was filed on April 28, 2011, 27 days after the entry of the

judgment. Undoubtedly, that motion was timely under Rule 59(e).

Nonetheless, defendants urge the striking of plaintiff’s

motion as “untimely[.]” Apollo Resp. (Doc. 149), at 8 n. 5. 

Defendants posit that because this Court “treats” Rule 59(e)

motions “as motions for reconsideration[,]”5

 id., and because

plaintiff is seeking to have this court “reconsider its

judgment[,]” Pl.’s Mot. (Doc. 146) at 6:7, LRCiv 7.2(g)(2) provides

the relevant time frame, not Rule 59(e). In accordance with that

former Rule, “[a]bsent good cause shown, any motion for

reconsideration shall be filed no later than fourteen (14) days

after the date of the filing of the Order that is the subject of

the motion.” LRCiv 7.2(g)(2) (emphasis added). Defendants proceed

to argue that because plaintiff’s motion “was filed 28 days after

the entry of the Order (Dkt. No. 145)[,]” it was not timely under

that Local Rule. See Apollo Resp. (Doc. 149) at 8, n. 5 (emphasis

added). 

There are two primary flaws with this statement. For

starters, it is ambiguous because although Apollo specifically

refers to “the Order[,]” it cites to the judgment. Apollo Resp.

(Doc. 149) at 8 n. 5. An order and a judgment are not necessarily

synonymous. Second, the just quoted statement is internally

inconsistent given defendants’ proverbial comparison of apples to

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oranges. The defendants indicate that “entry of the Order” is the

relevant event under LRCiv 7.2(g)(2), see id. (emphasis added),

however, pursuant to that Local Rule it is the “filing of the

Order[,]” not its “entry” which is the triggering event. See LRCiv

7.2(g)(2) (emphasis added). On the other hand, “entry of the

judgment, as opposed to the order, is the triggering event under

Fed.R.Civ.P. 59(e), which plaintiff argues applies here. 

Taking defendants’ statement at face value, i.e., looking to

the date of entry of the Order, they also inaccurately calculate

the time frame. As with the judgment, the order was filed on March

31, 2011, but it was not entered until April 1, 2011. See Doc.

144. Thus, as discussed above with respect to the entry of the

judgment, plaintiff’s motion was filed 27, not “28 days after . . .

entry of the Order[,]” as defendants assert. See Apollo Resp.

(Doc. 149) at 8, n. 5 (citation omitted) (emphasis added). 

With this clarification, the issue remains whether LRCiv

7.2(g)(2), as defendants urge, or Fed.R.Civ.P.Rule 59(e), as

plaintiff assumes, governs the timeliness of the pending motion.

Defendants are mistaken that “constru[ing] plaintiff’s Rule 59(e)

motion as one for reconsideration means that it “should be

stricken” as untimely based upon LRCiv 7.2(g)’s 14 day filing

deadline. See id. That Local Rule does not apply in this

situation because that Rule expressly pertains only to motions to

reconsider “orders,” as opposed to judgments. See LRCiv 7.2(g). 

Federal Rule 59(e), on the other hand, and the explicit basis for

plaintiff’s motion herein “clearly contemplates entry of judgment

as a predicate to any motion[]” thereunder. See Balla v. Idaho

State Board of Corrections, 869 F.2d 461, 466 (9th Cir. 1989)

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(internal quotation marks and citations omitted). And here, a

judgment within the meaning of Rule 54, was separately entered in

accordance with Fed.R.Civ.P. 58. Thus, in keeping with its

“obligation to construe local rules so that they do not conflict

with the federal rules,” Marshall v. Gates, 44 F.3d 722, 725 (9th

Cir. 1995) (citation omitted); Fed.R.Civ.P. 83(a)(1), the court

readily finds that LRCiv 7.2(g), directed to reconsideration of

orders, does not foreclose a Fed.R.Civ.P. 59(e) motion such as this

to alter or amend a judgment. See Gaut v. Carter, 2012 WL 94479,

at *2 (E.D.Cal. 2012) (emphasis added) (local rule governing

reconsideration of rulings, decisions or orders did not foreclose

Rule 59(e) motion “based on the Court’s error in entering judgment

on the . . . claim[]”). Further because, as discussed above, Rule

59(e) has its own 28 day time frame, despite defendants’ contrary

suggestion, deeming a Rule 59(e) motion to be one for

reconsideration does not mean that LRCiv 7.2(g)(2)’s shorter filing

time frame applies. 

B. Governing Legal Standards

Rule 59(e) does not list “specific grounds for a motion to

amend or alter[;]” hence, “the district court enjoys considerable

discretion in granting or denying the motion.” Herron, 634 F.3d at

1111 (internal quotation marks and citation omitted). “In general,

there are four basic grounds upon which a Rule 59(e) motion may be

granted: (1) if such motion is necessary to correct manifest errors

of law or fact upon which the judgment rests; (2) if such motion is

necessary to present newly discovered or previously unavailable

evidence; (3) if such motion is necessary to prevent manifest

injustice; or (4) if the amendment is justified by an intervening

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change in controlling law.” Id. (citation omitted). “[O]ther,

highly unusual circumstances,” also may “warrant[]

reconsideration.” Sch. Dist. No. 11, Multnomah County, Or. v.

ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

At the same time, however, “[a] motion for reconsideration may

not be used to raise arguments or present evidence for the first

time when they could reasonably have been raised earlier in the

litigation.” Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH &

Co., 571 F.3d 873, 880 (9th Cir. 2009) (case citation and internal

quotation marks omitted) (emphasis in original). Therefore, a

party “rais[ing] arguments or present[ing] evidence for the first

time when they could reasonably have been raised earlier in the

litigation[] . . . raise[s] the concern that [it] has abused Rule

59(e)[.]” Herron, 634 F.3d at 1112 (citation and internal

quotation marks omitted). “Ultimately, a party seeking

reconsideration must show more than a disagreement with the Court’s

decision, and recapitulation of the cases and arguments considered

by the court before rendering its original decision fails to carry

the moving party’s burden.” Cachill Dehe Band of Wintun Indians v.

California, 649 F.Supp.2d 1063, 1070 (E.D.Cal. 2009) (citation and

internal quotation marks omitted). 

As is abundantly clear, “amending a judgment after its entry

remains an extraordinary remedy[.]” Herron, 634 F.3d at 1111

(internal quotation marks and citation omitted). The Ninth

Circuit thus has repeatedly cautioned that such an amendment

“should be used sparingly.” Id. (internal quotation marks and

citation omitted). Amendment of judgment is sparingly used to

serve the dual “interests of finality and conservation of judicial

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6 Judgment was entered in this case on April 1, 2011 (Doc. 145). The

Ninth Circuit filed Ernst, 641 F.3d 1089, on April 14, 2011, and Finisar III, 429

Fed.Appx. 641, on April 26, 2011. Consequently, there is no dispute that both

decisions were “intervening.” Here, the only contested issue is whether either or

both of those decisions resulted in a change in controlling law. Hence, for

brevity’s sake, hereinafter, the court will omit “intervening.”

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resources.” See Kona Enterprises, 229 F.3d at 890. It stands to

reason then that plaintiff, as the moving party here, has a “high

hurdle.” See Weeks v. Bayer, 246 F.3d 1231, 1236 (9th Cir. 2001). 

Moreover, denial of a motion for reconsideration under Rule 59(e)

will not be reversed absent a showing of abuse of discretion. See

Herron, 634 F.3d at 1111. 

1. “Intervening Change in Controlling Law”

Here, the first basis for plaintiff’s Rule 59(e) motion is a

claimed intervening change in controlling law. Shortly after entry

of judgment in this case, the Ninth Circuit issued Lynch v. Rawls,

429 Fed.Appx. 641 (9th Cir. 2011) (“Finisar III”); and New Mexico

State Invest. Council v. Ernst & Young LLP, 641 F.3d 1089 (9th Cir.

2011) (“Ernst”). Plaintiff strongly implies that each of those

decisions constitutes “an intervening change in controlling law[,]”

thus entitling it to relief under Fed.R.Civ.P. 59(e). See Pl.’s

Mot. (Doc. 146) at 5:28-6:1 (internal quotation marks, citation and

footnote omitted). Defendants disagree.

 There is a dearth of case law, especially in the context of

securities litigation, defining precisely what constitutes “an

intervening change in controlling law”6 for Rule 59(e) purposes. 

See In re Intelligroup Sec. Litig., 527 F.Supp.2d 262 (D.N.J. 2007) 

(“few federal courts [have] addressed plaintiffs’ Rule 59(e)

motions within the context of securities litigation for the purpose

of establishing whether the precedent entered during the pendency

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of the case constituted an intervening change in the controlling

law[]”). Perhaps that explains, but it does not excuse, the

relative short shrift which the parties gave this issue. 

Neither the plaintiff nor Apollo discussed this issue at all. 

The individuals did, but their treatment was cursory and

uninstructive. They claim that:

[I]n contexts analogous to Rule 59(e), courts 

have held that a[] . . . change in controlling 

law only occurs where ‘the reasoning or theory of 

. . . prior authority is clearly irreconcilable 

with the reasoning or theory of intervening higher 

authority.’

Defs.’ Resp. (Doc. 148) at 8:8-10 (quoting Miller v. Gammie, 335

F.3d 889, 893 (9th Cir. 2003) (en banc)).

The individuals’ reliance on Miller, where the Ninth Circuit

was “examin[ing] the effect of an intervening Supreme Court

decision on a three-judge panel of th[at] [Circuit] Court[,]” is

misplaced. See United States v. Lindsey, 634 F.3d 541, 548 (9th

Cir.), cert. denied, 131 S.Ct. 2475 (2011). First, even accepting

the premise that Miller is analogous to the present case, Miller’s

holding is not as broad as the individuals imply. The Miller Court

carefully limited its holding to “circumstances like those

presented [t]here[in][.]” See Miller, 335 F.3d at 893 (emphasis

added). In particular, its holding governs “circumstances . . . ,

where the reasoning or theory of [a] prior circuit authority is

clearly irreconcilable with the reasoning or theory of intervening

higher authority[.]” Id. (emphasis added). The Miller court

reiterated that “[i]n future cases of such clear irreconcilability,

a three-judge panel of this court and district courts should

consider themselves bound by the intervening higher authority and

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reject the prior opinion of [the Ninth Circuit] as having been

effectively overruled.” Id. at 900. The individuals’ selective

quote fails to take into account the context of Miller. 

Second, as discussed next, changes in controlling law for Rule

59(e) purposes can occur short of cases of clear irreconcilability,

such as Miller. Third, nothing in Miller, or, as will be seen,

elsewhere, indicates, as the individuals declare, that a change in

controlling law “only occurs” under the scenario in Miller. See

Defs.’ Resp. (Doc. 148) at 8:9 (emphasis added). In sum, the court

disagrees with the individuals that Miller provides the governing

legal standard here. Consequently, before examining whether

Finisar III or Ernst, or both, resulted in a change in controlling

law as Rule 59(e) conceives it, the court is compelled to look for

guidance to the analyses of other courts which have confronted that

issue. From that, two basic principles emerge.

The first is that confirmation or clarification of existing

law is not tantamount to a change in controlling law. Schiller v.

Physicians Resources Group Inc., 342 F.3d 563 (5th Cir. 2003),

another securities fraud action, is illustrative. Affirming the

denial of plaintiffs’ Rule 59(e) motion, the Schiller Court

rejected their argument that “Nathenson v. Zonagen, Inc., 267 F.3d

400 (5th Cir. 2001) represent[ed] a[ ] . . . change in the law[] 

. . . with respect to the pleading requirements in securities fraud

cases.” Id. at 568 n. 3. From the standpoint of the Schiller

Court, “Nathenson held that the enactment of the [PSLRA] did not

generally alter the substantive scienter pleading requirements for

§ 10(b) and Rule 10(b)(5) securities fraud claims.” Id. (bold

emphasis added). Rather, “Nathenson merely confirmed that scienter

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or severe recklessness remained a valid basis for liability under 

§ 10(b) and Rule 10(b)(5) in light of the plain language of the

PSLRA.” Id. (bold emphasis added). As Schiller demonstrates, a

change in controlling law requires more than “merely confirm[ing]”

the state of existing law. See id.; see also United States v.

Campbell, 168 F.3d 263, 269-270 (6th Cir. 1999) (emphasis added)

(defendant not entitled to re-open sentence based upon amendment to

Sentencing Guideline which “merely clarified or explained it[]” but

“did not substantively alter the guideline” and did not “change 

. . . any underlying principles[]” because that clarification

“constitute[d] no ‘change’ in the law at all[]”); In re

Intelligroup, 527 F.Supp.2d at 381-382 (footnote and citations

omitted) (applying the Schiller rationale, and holding that neither

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167

L.Ed.2d 929 (2007), nor Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007),

“provide[d] th[e] Court with grounds to grant Plaintiffs . . .

leave to amend, since both . . . decisions clarified-rather than

altered–the applicable pleading standards, which existed at the

time of Plaintiffs’ filing of all [their] complaints[]”).

To the contrary, the second emerging principle is that a

change in controlling law results where a subsequent decision

“creates a significant shift in [a court’s] analysis[.]” 

Beckstrand v. Electronic Arts Group Long Term Disability Ins. Plan,

2007 WL 177907, at *2 (E.D.Cal. Jan. 19, 2007) (emphasis added). 

The plaintiff in Beckstrand, for example, was seeking declaratory

relief under the Employee Retirement Income Security Act of 1974

(“ERISA”). Following a bench trial in which the court employed an

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7 In Duvall v. Reliance Standard Life Ins. Co., 646 F.Supp.2d 1188

(E.D.Cal. 2009), the court indicated that “Abatie’s holding . . . appears to have

been abrogated by the Supreme Court . . . in Metropolitan Life Insurance Company

v. Glenn, ___ U.S. ___, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008).” Id. at 198. That

possible abrogation has no bearing on the above discussion.

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abuse of discretion standard, it entered judgment in defendants’

favor. 

In the meantime, the Ninth Circuit in Abatie v. Alta Health &

Life Insurance Co., 458 F.3d 955 (9th Cir. 2006) (en banc),7

“changed how courts are to apply th[at] abuse of discretion

standard,” Beckstrand, 2007 WL 177907, at *2, explicitly

“overrul[ing]” its prior decision in Atwood v. Newmont Gold Co., 45

F.3d 1317 (9th Cir. 1995). Abatie, 458 F.3d at 966. Instead of

employing Atwood’s burden shifting approach in ERISA conflict

cases, the Ninth Circuit in Abatie held that the abuse of

discretion analysis must, inter alia, be “informed by the nature,

extent, and effect on the decision-making process of any conflict

of interest that may appear in the record.” Id. Because Abatie

“changed how the court is to review administrator decisions under”

ERISA, the district court in Beckstrand granted plaintiff’s motion

to amend the judgment based upon that change in controlling law. 

Beckstrand, 2007 WL 177907, at *2; see also Beckstrand v.

Electronic Arts Group Long Term Disability Ins. Plan, 2007 WL

1599769, at *3 (citation omitted); and at *5 (E.D.Cal. Jun. 4,

2007) (Abatie provides a “different analytical approach” or a “new

analytical method . . . for courts to employ when reviewing, for

abuse of discretion, ERISA cases . . . involv[ing] conflicted

administrators[]”). 

A significant change in a court’s analysis, and hence a change

in controlling law, can occur short of directly overruling a prior

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precedent, however, as Moretti v. Wyeth, Inc., 2011 WL 2580356

(D.Nev. Jun. 28, 2011), shows. The court in Moretti granted

summary judgment in favor of the defendant drug manufacturer on two

grounds. First, the court held that the warning label on a generic

drug “was adequate as a matter of law because it was approved by

the FDA [Food and Drug Administration] and complied with the

requirement to be the same as the brand name drug.” Id. at *2. 

Second, the Moretti court held that the plaintiff could not “prove

that any alleged deficiency in [the drug’s] labeling was the

proximate cause of any injury to [p]laintiff, because no genuine

issue exists as to the fact that she did not read the labeling or

other information provided for [the] drug.” Id. at *1. 

 After entry of final judgment, plaintiff Moretti sought

“reinstate[ment] in light of the Ninth Circuit’s [then] recent

ruling in Gaeta v. Perrigo Pharmaceuticals Company,” 630 F.3d 1225

(9th Cir. 2011) (“Gaeta I”). Id. After Gaeta I, with respect to

warnings, the Moretti court found “that despite the approval by the

FDA and the compliance with the “same as” requirement, it is “clear

that generic manufacturers, . . . , must take specific steps when

they learn of new risks associated with their products,” and “shall

revise their drug labeling to include a warning as soon as there is

reasonable evidence of an association of a serious hazard with a

drug.” Id. (quoting Gaeta, 630 F.3d 1231–1232; and citing 21

C.F.R. § 201.57(e) (2004)) (emphasis added by Moretti court)

(internal quotations omitted)). “In light of Geata [sic],”

contrary to its prior holding, the Moretti court thus held that

“the label’s mere compliance with the same as requirement and

approval by the FDA d[id] not bar recovery and d[id] not

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8 Since Moretti, the Supreme Court granted certiorari, vacated the

judgment, and remanded Gaeta “for further consideration in light of PLIVA, Inc. v.

Mensing, 564 U.S. ––––, 131 S.Ct. 2567, 180 L.Ed.2d 580 (2011)[,]” wherein the

Court held, contrary to Gaeta I, that federal law preempts state law claims for

failure to warn against generic drug manufacturers. See L. Perrigo Co. v. Gaeta,

___ U.S. ___, 132 S.Ct. 497, 181 L.Ed.2d 343 (Oct. 23, 2011) (“Gaeta II”). The

court in Moretti declined to “rul[e] that the claims were not preempted by federal

law, . . . and instead ruled on the merits of the motion for summary judgment with

regards to the issue of adequate warning[,]” as discussed above. See Moretti, 2011

WL 2580356, at *1. Thus, Gaeta II does not impact the Moretti court’s analysis of

whether, at that time, Gaeta I constituted an intervening change in the controlling

law. 

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necessarily deem the warnings adequate as a matter of law.” Id. at

*3 (internal quotation marks omitted). 

On the issue of proximate cause, the Moretti court also found

that Gaeta I amounted to a “change in controlling law in . . . that

there are means by which generic manufacturers can amend their

warnings once they learn of risks, i.e. adding an additional

warning on the bottle itself[.]” Id. (internal quotation marks

omitted). Given those changes in the controlling law, the court

granted plaintiff’s Rule 59(e) motion; vacated its prior order;

denied defendants’ summary judgment motion and ordered the case

reinstated. Id. at *3 - *4.8

Sequoia Forestkeeper v. U.S. Forest Service, 2011 WL 902120

(E.D.Cal. March 15, 2011), also illustrates a change in controlling

law absent an outright reversal. Justice Kennedy, in his

concurrence in Rapanos v. United States, 547 U.S. 715, 759, 126

S.Ct. 2208, 2236, 165 L.Ed.2d 159 (2006), adopted a “‘significant

nexus’ test” for determining what constitutes “navigable waters”

within the meaning of the Clean Water Act (“CWA”). After

considering two Ninth Circuit cases, “which recognized Justice

Kennedy’s opinion in Rapanos to be the ‘controlling rule of law,’”

the district court applied that standard, holding that the water at

issue was not a “navigable water” under the CWA’s definition. 

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9 The court is compelled to comment upon plaintiff’s view common to both

Finisar III and Ernst, i.e. that those cases are “new authority” or “new case

law[]” justifying relief from judgment under Rule 59(e). See Pl.’s Mot. (Doc. 146)

at 6:8; and at 11:18. Plaintiff is misapprehending the scope of that Rule,

however. If the court ultimately determines that one or both of those cases amount

to a change in controlling law, then plaintiff would prevail under Rule 59(e).

But, that Rule does not contemplate setting aside a judgment just because a case

is “new.” See In re Intelligroup, 527 F.Supp.2d at 381, n. 84 (citing, inter alia,

Foman, 371 U.S. at 182, 83 S.Ct. 227 (“discussing the filtering aspect of Rule

15(a)”) (“[G]ranting Plaintiff yet another leave to amend on the grounds of

issuance of new clarifying decisions would: (a) create an anomalous precedent

preventing any conclusive litigation by enabling securities plaintiffs to

perpetually seek leave to amend their insufficient complaints through a mere act

of citing those judicial decisions, which were issued after these plaintiff[s]

filed their complaints, and (b) therefore, frustrate the whole purpose of both Rule

15(a) and PSLRA.”) 

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Sequoia Forestkeeper, 2011 WL 902120, at *4. Shortly thereafter,

the Ninth Circuit “made clear that” courts “may also consider the

plurality opinion’s interpretation [in Rapanos] of the term

‘navigable water’[.]” Id. Thus, because in Sequoia Forestkeeper

the court had previously rejected the plurality definition as “not

controlling[,]” it granted plaintiff’s motion to reconsider the

“navigable waters” issue “under the Rapanos plurality standard.” 

Id. at *4 n. 3. 

In sum, the cases outlined above mark two ends of the change

in controlling law spectrum. At one end, are cases which generally

or substantively alter existing law, such as by overruling it, or

creating a significant shift in a court’s analysis. Those

circumstances warrant relief under Rule 59(e). On the other end of

the spectrum, cases which merely confirm, clarify or explain

existing case law do not provide a basis for relief under that

Rule. Guided by these principles, the court will separately

consider whether either Finisar III or Ernst, or both, amount to a

change in controlling law, as plaintiff strongly implies.9 

a. “Finisar III”

In Apollo III, to a certain extent, this court did rely upon

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In re Finisar Corp. Derivative Litig., 542 F.Supp.2d 980 (N.D.Cal.

2008) (“Finisar I”); and In re Finisar Corp. Derivative Litig.,

2009 WL 3072882 (N.D.Cal. 2009) (“Finisar II”), as more fully

discussed herein. And, after Apollo III, the Ninth Circuit in

Lynch v. Rawls, 429 Fed.Appx. 641 (9th Cir. 2011) (unpublished mem.)

(“Finisar III”) did reverse and remand Finisar II. Based upon

Finisar III, plaintiff is seeking, inter alia, “withdraw[al]” of

the Apollo III judgment pursuant to Rule 59(e), and to have this

court “revisit [Apollo III] to the extent it relied on Finisar I

and Finisar II[.]” Pl.’s Mot. (Doc. 146) at 8:13-14. Although not

couched strictly in terms of a controlling change in law, as will

be seen, evidently that is the import of plaintiff’s reliance upon

Finisar III as a basis for seeking relief under Rule 59(e). 

Defendants strenuously disagree that Finisar III warrants granting

plaintiff relief from judgment under Rule 59(e). 

i. Unpublished Memorandum

Citing to Fed.R.App.P. 32.1 and Ninth Circuit Rule 36-3,

preceding the Finisar III memorandum it notes, “Not for Publication

in West’s Federal Reporter[.]” Finisar III, 429 Fed.Appx. 641. 

Within the Finisar III memorandum itself the Ninth Circuit

unequivocally stated, “This disposition is not appropriate for

publication and is not precedent except as provided by 9th Cir. R.

36-3.” Id. at 642 n.** (emphasis added). 

Because arguably it is dispositive, the court will first

address defendants’ argument that Finisar III cannot be deemed a

controlling change in law because it is a “non-precedential,”

unpublished memorandum decision. Defs.’ Resp. (Doc. 148) at 6:18

(citation omitted); see also Apollo’s Resp. (Doc. 149) at 9:24

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(emphasis omitted) (“Finisar III is ‘Not Precedent’”). In making

this argument, defendants rely upon Ninth Circuit Rule 36-3(a),

significantly limiting the precedential value of its “[u]npublished

dispositions and orders[.]” Ninth Circuit Rule 36-3(a). Neither

are “precedent, except when relevant under the doctrine of law of

the case or rules of claim preclusion or issue preclusion.” Id.

(emphasis added). Because Finisar III is “not precedent[,]” except

for the narrow purposes which Rule 36-3(a) lists, defendants

contend that that memorandum “could not reflect a ‘change in

controlling law[.]’” Apollo’s Resp. (Doc. 149) at 10:2-3. 

 Relying in part upon Federal Rule of Appellate Procedure

32.1, and upon subsection (b) of Ninth Circuit Rule 36-3, plaintiff

counters that this court “can and should rely on Finisar III[.]”

Pl.’s Reply (Doc. 150) at 6:2-3 (emphasis omitted). Rule 32.1

dictates in relevant part that a court “may not prohibit or

restrict the citation of federal judicial opinions” that are

designated as “‘not for publication[.]’” Fed.R.App.P. 32.1(a)(i). 

Ninth Circuit Rule 36-3(b), allows “[u]npublished dispositions and

orders issued on or after January 1, 2007" to “be cited to the

courts of this circuit in accordance with FRAP 32.1.” Ninth

Circuit Rule 36-3(b). 

Plaintiff fails to take into account the distinction between

“‘consider[ing]’” or citing to an unpublished case, and whether

such a case is tantamount to a change in controlling law, as is

evident from the cases to which it cites. See Pl.’s Reply (Doc.

150) at 6:14 (quoting Christian Legal Society v. Eck, 625 F.Supp.2d

1026 (D.Mont. 2009) (“CLS”)). In both CLS and CGI Techns. &

Solutions, Inc. v. Rose, 2011 WL 197772 (W.D.Wash. Jan. 19, 2011),

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the courts did look to unpublished Ninth Circuit cases, but they

did so under entirely different circumstances than are present

here. Moreover, neither CLS nor Rose even remotely suggests or

implies that because a court may cite or look to such memoranda,

that somehow equates to a change in controlling law. 

The most significant distinction between CLS and Rose is that

those courts were not confronted with the issue here: whether an

unpublished memorandum can result in a change in controlling law. 

Moreover, the unpublished decision “freely consider[ed]” by the

Rose court “reasserted the reasoning” of a prior case which

“remain[ed] controlling authority in the Ninth Circuit.” Rose,

2011 WL 197772 at *3 (emphasis added). Additionally, even without

that “recent” unpublished decision, Ninth Circuit case law

supported the Rose court’s conclusion. Id. The foregoing

reinforces the view that the issue of a possible change in law did

not arise in any form in Rose.

CLS, too, involved a vastly different set of facts than the

present case. In CLS, previously the plaintiff had “brought a

strikingly similar, if not identical suit” against other

defendants. CLS, 625 F.Supp.2d at 1031. In that earlier lawsuit,

the district court granted summary judgment in defendants’ favor. 

The Ninth Circuit affirmed in an unpublished memorandum. 

Consistent with Ninth Circuit Rule 36-3, because “[m]any of the

Plaintiffs’ . . . arguments” in CLS “were also raised in” their

prior action, the CLS court “rel[ied] on [that action] for its

precedential guidance[.]” Id. at 1031, n. 8 (emphasis added). As

is readily apparent, CLS and Rose thus stand in sharp contrast to

the present case. Consequently, the cases upon which plaintiff is

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relying are inapposite and have no bearing on the issue of whether

an unpublished memorandum, such as Finisar III, can result in a

change in controlling law. 

Moreover, it strains logic to imply, as does the plaintiff,

that the Ninth Circuit would announce a change in controlling law

in an unpublished memorandum (with a dissent), having limited

precedential value under the Rules of that Court. Cf. Continental

Western Insurance Co. v. Costco Wholesale Corp., 2011 WL 3583226,

at *3 (W.D.Wash. Aug. 15, 2011) (“Whatever legal effect” federal

district court decisions designated as ‘Not for Publication’ . . .

might have, as a practical[] matter[,] they serve as a signal to

another court that the court issuing the decision did not intend to

contribute to the shaping of the law.”) Standing alone, the fact

that Finisar III is an unpublished memorandum convinces this court

that that memorandum did not result in a change in controlling law

as plaintiff suggests. 

For the sake of completeness, however, the court will assume

arguendo that Finisar III’s status as an unpublished memorandum

does not foreclose the possibility that it represents a change in

controlling law. Proceeding with that assumption, the court will

turn to the issue of whether plaintiff has met its burden of

showing that, substantively, Finisar III resulted in such a change.

ii. Merits

First, some clarification is necessary. Plaintiff gives the

inaccurate impression that the Ninth Circuit reversed Finisar I, as

well as Finisar II. See Pl.’s Mot. (Doc. 146) at 6:19-21 (emphasis

added) (“The Ninth Circuit’s reversal [in Finisar III] demonstrates

that th[is] Court’s reliance on Finisar I and Finisar II was

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misplaced.”); see also id. at 8:8-9 (emphasis added) (“Finisar III

demonstrates that two substantial decisions [Finisar I and Finisar

II] on which this Court relied were fundamentally flawed.”) Only

Finisar II was appealed though. What is more, Apollo III cited

Finisar II, the appealed district court decision, only twice; and,

neither time did it cite Finisar II for a proposition later

reversed by the Ninth Circuit. These are just two of the many

factors severely undercutting plaintiff’s theory that Finisar III

entitles it to relief from judgment pursuant to Rule 59(e).

Plaintiff claims that Finisar III impacts the Apollo III

analysis in a variety of ways. Tellingly, only one of those ways

is even suggestive of a change in controlling law. Plaintiff reads

Apollo III as “cit[ing] Finisar I in support of its finding that

the SAC’s allegations regarding the October 20, 2003 grant were not

sufficient to allege that the grant had been backdated.” Pl.’s

Mot. (Doc. 146) at 6:22-23 (citations omitted). Plaintiff then

baldly contends that “Finisar III fundamentally alters this

analysis[;]” but it has not shown, nor could it, how that is so. 

See id. at 7:4. 

To begin with, plaintiff mischaracterizes how Finisar I

factored into this court’s analysis of whether the SAC sufficiently

alleged backdating as to the October 20, 2003 grants. 

Significantly, in Apollo III this court first discussed Finisar I

because of plaintiff’s reliance thereon. In responding to

defendants’ argument that a reasonable inference of backdating

could not be drawn as to those grants because they “were publicly

disclosed by the timely filing of Form 4s with the SEC[,]”

plaintiff relied, inter alia, upon “selective quotes” from Finisar

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I. See Apollo III, 2011 WL 1253250, at *6. Distinguishing Finisar

I, and explaining how plaintiff’s reliance thereon was

“unavailing[,]” this court stressed that “of the 12 purportedly

backdated stock options [in that case], the Form 4s related to 9 of

them were filed late.” Id. at *3; and *7 (internal quotation marks

and citations omitted) (emphasis added by Apollo III court). In

contrast, in Apollo III, “where, undisputably, the Form 4s were

timely filed[,]” this court concluded that “Finisar I[’s] . . .

recognition that it is ‘theoretically possible to backdate where

Form 4s are late, has no bearing on the October 20, 2003 grants at

issue[.]” Id. at *7. 

Finisar III does not alter, much less “fundamentally alter”

the foregoing because “the related Forms 4 identifying the

challenged grants” in Finisar III “were filed months or even more

than a year late, allowing ample opportunity for mischief (e.g.

selecting more favorable retrospective grant dates).” See Finisar

III, 429 Fed.Appx. at 644. Given that obvious and important

factual distinction between Finisar III and Apollo III, Finisar III

does not evince a change in controlling law as to whether a

reasonable inference of backdating can be drawn when, inter alia,

as here, Form 4s are timely filed. 

The second way plaintiff claims that Finisar III

“fundamentally alters” the Apollo III analysis is with respect to

Apollo’s Restatement. Based upon the SAC’s allegations, which in

turn, “quot[ed] verbatim” from the Restatement, in Apollo III, this

court stressed that as to certain October 20, 2003 grants, the SAC

alleged “that the original stated grant date is the most likely

measurement date for . . . grants” post August 2002. Apollo III,

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2011 WL 1253250, at *5 (citations omitted) (emphasis added by

Apollo III court). This court found that such an allegation,

“especially when coupled with the timely filed Form 4s, severely

erode[d] a strong inference of scienter to engage in intentional

backdating as to the October 20, 2003 grants.” Id. Plaintiff

believes that Finisar III “fundamentally alters this analysis[]” as

well. Pl.’s Mot. (Doc. 146) at 7:4. 

Plaintiff accurately recites the Finisar III Court’s comment

that:

Plaintiffs may rely on the self-incriminatory 

portions of Finisar's 10–K without having to take 

the 10–K’s self-serving, self-exonerating 

conclusion of no malfeasance on behalf of the 

majority of Finisar's board as true. See Williamson

v. U.S., 512 U.S. 594, 600, 114 S.Ct. 2431, 129 

L.Ed.2d 476 (1994)[.]

Finisar III, 429 Fed.Appx. 643 n. 1 (other citation omitted). From

plaintiff’s viewpoint, that footnote “demonstrates that defendants’

self-serving conclusions regarding whether options were backdated

after 2002, or whether there was evidence of backdating, is

irrelevant and carries no probative value.” Pl.’s Mot. (Doc. 146)

at 7:25-8:1 (citation and footnote omitted). Additionally,

plaintiff construes that footnote as a “ruling, in almost identical

circumstances presented here, [which] calls into question this

Court’s holding that falsity cannot be plead if plaintiff’s

allegations contradict Apollo’s restatement.” Id. at 7:21-23

(citation omitted). 

Accepting arguendo plaintiff’s viewpoint, as the cite to

Williamson vividly shows, the quoted proposition had been

recognized well before Apollo III. Thus, Finisar III does not

change or expand the controlling law on that issue. Rather, that

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10 According to plaintiff, that finding “fundamentally rejects the

approach taken by the district court in Finisar I[,]” but as earlier noted, in

Finisar III, the Ninth Circuit reversed and remanded Finisar II – not Finisar I.

See Pl.’s Reply (Doc. 150) at 7:6-7 (bold emphasis added). 

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footnote merely confirmed the state of existing law as to selfexculpatory statements. Thus, it does not support a finding that

Finisar III represents a change in controlling law.

Broadly stated, plaintiff’s remaining claims fall into two

categories: (1) those which are more appropriately raised, if at

all, on appeal; and (2) those which are irrelevant because they beg

the dispositive issue of whether Finisar III constitutes a change

in controlling law.

Falling into that first category is plaintiff’s contention

that like the district court in Finisar III, this court

impermissibly “drew inferences in favor of Defendants rather than

Plaintiffs, resolved factual inconsistencies without discovery, and

analyzed Plaintiffs’ allegations individually rather than

collectively.” See Finisar III, 429 Fed.Appx. at 644.10 The sole

basis for this argument is, as discussed, the following statement

in Apollo III, quoting verbatim from the Restatement: “Apollo

generally determined the original stated grant date is the most

likely measurement date for Section 16 Officer grants after August

2001.” Apollo III, 2011 WL 1253250, at *5 (internal quotations and

citation omitted) (emphasis added by Apollo III court). By

focusing on this singular statement, plaintiff is doing precisely

what it faults this court for doing – viewing the SAC’s

allegations individually, rather than collectively. That quote

from the SAC, taken directly from the Restatement, was one of a

number of factors, in combination, which in the end compelled the

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11 Plaintiff’s remaining claims such as Finisar III is “inconsistent with”

this court’s analysis in Apollo III, or Finisar III “calls into question” an Apollo

III holding, likewise fall into the category of issues which are more appropriately

raised, if at all, on appeal. See Pl.’s Mot. (Doc. 146) at 6:3; 7:22. 

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court to find that plaintiff could not “rely upon the October 20,

2003 grants as a circumstance contributing to a strong inference of

scienter[.]” See Apollo III, 2011 WL 1253250, at *10 (internal

quotations marks, citation and footnote omitted). In any event, as

is readily apparent, the foregoing amount to nothing more than a

disagreement with this court’s decision in Apollo III; but that is

not a basis for the extraordinary remedy of reopening a judgment

under Rule 59(e). See Cachill Dehe Band of Wintun Indians, 649

F.Supp.2d at 1070.11

Plaintiff’s remaining contentions are irrelevant because, as

earlier noted, they beg the critical issue of whether Finisar III

constitutes a change in controlling law. First, plaintiff asserts

that because “defendants cited at least one of the Finisar

decisions in every single brief they submitted attacking ths SAC,

[they] cannot credibly claim that Finisar III does not represent a

fundamental rejection of their contentions in support of dismissal

of the SAC.” Id. at 8:3-6 (citations omitted). Even if Finisar

III “fundamental[ly] reject[ed]” defendants’ contentions, as

opposed to this court’s holdings, that is irrelevant to whether

Finisar III signaled a change in controlling law. See id. at 8:5. 

Plaintiff’s assertion that “[t]he Ninth Circuit’s reversal in

Finisar is critical because the Court and defendants relied on

[Finisar I and Finisar II] extensively[]” similarly has no bearing

on the change in controlling law issue. See id. at 5:6 (emphasis

added). A close look at defendants’ previously filed briefs, and

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12 See Apollo’s Resp. (Doc. 149) 12-19 (concluding after a nearly three

page analysis, “[i]n sum, Plaintiff’s assertion that the Court relied heavily on

the underlying district court Finisar decisions is simply false[]”). 

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the fact that in Apollo III this court cited to Finisar II, which

was subsequently reversed, only twice (and then not for a reversed

proposition), belies this assertion. Even if accurate, nothing

about defendants’ and the court’s alleged “extensive” reliance upon

Finisar I and Finisar II, could render Finisar III “critical” under

these circumstances. 

Picking up where plaintiff left off, Apollo devotes the bulk

of its Finisar III argument to disputing how “heavily” this court

relied upon the underlying Finisar decisions in Apollo III.12

Taking a slightly different tack, the individuals similarly dispute

that they “extensively” relied upon those decisions. See Defs.’

Resp. (Doc. 148) at 9:28-10:24-28, n. 2. This focus, by all

parties, misses the point. The number of times a case is cited, by

the court or the parties, whether one time or 100 times, is

immaterial to the issue of whether a change in controlling law has

occurred. As defendants aptly stated, “[t]he mere fact that this

Court and the parties cited Finisar I and II[,]” and Finisar II was

“later reversed does not undermine th[is] Court’s [Apollo III]

opinion[,]” absent a showing of an intervening change in

controlling law. See Defs.’ Resp. (Doc. 148) at 8:13-14 (emphasis

omitted). 

Also irrelevant is plaintiff’s blanket statement that “Finisar

III . . . credited plaintiffs’ use of a statistical analysis in

alleging backdating.” Pl.’s Mot. (Doc. 146) at 7:8-9 (citation

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13 There, plaintiffs “included a statistical ‘Merrill Lynch’ type

analysis[,]” which “calculates the annualized returns of options grants at twenty

days after the grant and compares it with the company’s overall annual return.”

Finisar III, 429 Fed.Appx. at 644 and at n. 2. The Finisar III plaintiffs used

that analysis “to demonstrate that the disputed options were granted at periodic

lows in stock price and/or before substantial increases in stock price, and

resulted in annualized returns for directors and officers ranging from 200% to more

than 3000%, compared to much smaller or even negative returns for average

investors.” Id. 

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omitted).13 Plaintiff does not endeavor to show that Finisar III

changed the controlling law with respect to the use of statistical

analyses in cases of alleged backdating. More than two years prior

to Finisar III, based upon then-extant case law, this court

recognized that such analyses can play a role in alleging

backdating. “Initially th[is] court found . . . somewhat

troubling” the FAC’s omission of a statistical analysis, especially

“given defendants’ position that such an analysis is a necessary

predicate to pleading backdating.” Apollo III, 633 F.Supp.2d at

793. After a review of relevant case law, however, this court

opined “that while a statistical analysis may be preferable, and

certainly would strengthen the backdating allegations herein, at

this point the lack of such an analysis is not fatal.” Id.

(emphasis added). The court hastened to add, “[t]hat is not to say

that at some point in this litigation plaintiff’s backdating

allegations cannot be defeated due to the lack of a sound financial

analysis, but not now.” Id. at 794. In Apollo III, this court

“continue[d] to adhere to the view that lack of a sound financial

analysis is not critical or necessarily dispositive at the pleading

stage when backdating is a part of an alleged section 10(b)

fraudulent scheme.” Apollo III, 2011 WL 1253250, at *17 (internal

quotation marks and citation omitted). 

Instead of explaining how Finisar III generally altered the

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14 Plaintiff does indicate that “in light of” Apollo III, they “are

undertaking the same kind of statistical analysis as was expressly sanctioned by

Finisar III.” Pl.’s Mot. (Doc. 146) at 7:15-16. And, the draft third amended

complaint (“DTAC”) which plaintiff attaches to its reply herein, “include[s] such

an analysis performed by an independent expert.” Pl.’s Reply (Doc. 150) at 15:5-6

(citation omitted). 

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substantive law regarding the use of statistical analyses in a case

such as this, plaintiff takes a somewhat unusual tack. Plaintiff

declares that “[b]ecause . . . th[is] Court expressly stated that

such an analysis was not required . . . , [they] did not include

one in the SAC.” Pl.’s Mot. (Doc. 146) at 7:13-14 (citation

omitted) (emphasis in original).14 Plaintiff’s strained reading of

Apollo I is problematic, although the court is willing to disregard

it. The court is unwilling, however, to countenance plaintiff’s

seeming failure to take responsibility for what appears to be a

calculated strategy on its part - to delay including a statistical

analysis until it was backed into a legal corner. Its two prior

complaints had been found wanting in a number of critical ways. 

But, literally at the eleventh hour, or so it appears, plaintiff

presents a DTAC which it believes can cure the numerous pleading

deficiencies identified by this court in two prior comprehensive

decisions. This is akin to “rais[ing] arguments or present[ing]

evidence for the first time when they could reasonably have been

raised earlier in the litigation[.]” See Herron, 634 F.3d at 1112

(citation and internal quotation marks omitted). That, in turn,

“raise[s] the concern” of “abuse[] of Rule 59(e)[.]” See id. 

Plaintiff’s timing notwithstanding, despite the many and varied

ways in which it undertook to establish that Finisar III

constitutes a change in controlling law, plaintiff has not met its

burden. Fundamentally, it defies logic to assert that a change in

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controlling law would be announced in an unpublished memorandum. 

Beyond that, plaintiff has wholly failed to show that Finisar III

“generally alter[ed]” or “create[]d a significant shift” in the

pertinent substantive law. See Schiller, 342 F.3d at 568 n. 3;

Beckstrand, 2007 WL 177907, at *2. At the very most, it is

possible to read Finisar III as “merely confirming,” or “merely

clarif[ying] or explain[ing]” the state of existing law. See

Schiller, 342 F.3d at 568 n. 3; Campbell, 168 F.3d at 269. Such

confirmation is not equivalent to a change in controlling law

sufficient as courts define it, however. Thus, the only way

plaintiff can prevail on its change in controlling law theory is if

it can show that Ernst constituted such a change.

b. “Ernst”

Not long after entry of the Apollo III judgment, the Ninth

Circuit in Ernst reversed and remanded the dismissal of a

securities fraud complaint for failure to adequately plead

scienter. That lawsuit had its genesis in an “improper stock

option backdating scheme” by Broadcom Corporation, a semiconductor

company. Ernst, 641 F.3d at 1093. As a result of that scheme,

Broadcom issued a Restatement of its financial statements, wherein

it “acknowledged that [i]t had improperly accounted for $2.2

billion in income, largely due to improper option backdating.” Id.

“Additionally, every financial statement, and quarterly and annual

report issued during the time period covered by the Restatement,

was false and misleading.” Id. Broadcom therefore “agreed to a

civil penalty of $12 million in connection with a SEC [Securities

Enforcement Commission] civil securities fraud investigation[.]”

Id. 

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Broadcom shareholders then brought a securities fraud action

against Ernst & Young (“EY”), Broadcom’s outside auditors, for

“fraudulent accounting practice, alleging they caused Broadcom’s

stock price to be artificially inflated.” Id. at 1092-1093. 

Plaintiff alleged that EY “knew of, or recklessly disregarded,

Broadcom's fraudulent backdating actions yet issued unqualified

audit opinions attesting to the validity of Broadcom's financial

statements.” Id. at 1092. The district court dismissed the

complaint for failure to adequately plead scienter against EY. 

 Reversing, the Ninth Circuit held that plaintiffs had

adequately plead scienter “based on three specific points when EY

was faced with circumstances that would compel a reasonable auditor

to further investigate and disclose Broadcom’s backdating of

options[.]” Id. at 1095. The Ernst Court found the following

“factual allegations were each sufficient to support an inference

of scienter by EY[:] 

(1) a large grant of options on May 26, 2000 

for which EY was given no documentation; 

(2) options granted in 2001 during a period 

when Broadcom's compensation committee did 

not have a quorum due to the death of one of 

its members; and (3) EY's direct involvement 

in 2003 with corrective reforms to Broadcom's 

prior options practices.”

Id. Thus, the Ernst Court found “a holistic review . . .

unnecessary[.]” Id. Nonetheless, the Court found that “these

primary allegations supported an inference of scienter when viewed

collectively with other claims that EY received no documentation

for many option grants, knew Broadcom's internal controls were

weak, and ignored other red flags.” Id.

Rather than explaining how Ernst constitutes a change in

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15 Actually, the issue in Ernst was the sufficiency of the scienter

allegations under Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127

S.Ct. 2499, 168 L.Ed.2d 179 (2007), which requires the weighing of competing

inferences. “[W]hile the scienter and falsity inquiries overlap significantly[,]”

Scott v. ZST Digital Networks, Inc., 2012 WL 538279, at *8 (C.D.Cal. Feb. 14,

2012), those terms are not completely interchangeable. 

16 Plaintiff actually stated that the “district court” upheld the

allegations in Ernst. Pl.’s Mot. (Doc. 146) at 9:6. Obviously plaintiff is

mistaken. It was the Ninth Circuit, in reversing the district court’s ruling

granting EY’s motions to dismiss, that “upheld” the sufficiency of those

allegations. 

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controlling law, plaintiff’s motion centers on what it believes are

the similarities between the Ernst allegations and the SAC’s

allegations examined in Apollo III. Plaintiff asserts, for

example, that “[t]he description of Broadcom’s restatement was

strikingly similar to Apollo’s restatement.” Pl.’s Mot. (Doc. 146)

at 9:14-15. Plaintiff likewise claims that “the allegations of

falsity15 contained in the complaint that the [Ninth Circuit]16

upheld . . . were substantially similar to the allegations

contained in the SAC at issue here.” Id. at 9:5-8 (citation and

footnote omitted) (footnote added). Given these claimed

similarities, and others, in its motion plaintiff argues that

“Ernst confirms that [it] ha[s] stated a claim arising from

Apollo’s practices of issuing non-management grants without having

actually set a grant date.” Id. at 10:17-18 (citations omitted)

(emphasis added). 

Deeming the foregoing as an argument that Ernst reflects a

change in controlling law, defendants’ response is three-fold. 

First, Ernst does not reflect a change in controlling law as that

Court was “restat[ing] long standing principles of law,” and

“appl[ying] precedents that this [c]ourt also applied in” Apollo

III. Apollo Resp. (Doc. 149) at 17:10-12 (citations omitted). 

Second, Ernst is irrelevant because the issue there was the

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sufficiency of scienter allegations against an outside auditor –

not, as here, the sufficiency of falsity allegations. Third, as

Apollo put it, Ernst involved “radically different facts” than

those which the SAC alleges. See id. at 16:10. 

In rejoinder, plaintiff claims that defendants are “wrong that

Ernst merely applied existing law and cannot be considered new

authority.” See Pl.’s Reply (Doc. 150) at 10:21 (citation

omitted). Plaintiff observes that “Apollo still cites Edward J.

Goodman Life Income Trust v. Jabil Circuit, Inc., 595 F. Supp. 2d

1253, 1277 (M.D. Fla. 2009) for the proposition that the accounting

issues in this action are highly technical.” Id. at 10:22-25

(citation omitted) (bold emphasis added). “Yet,” according to

plaintiff, Ernst “rejects such contentions with respect to

determining a measurement date in these circumstances under APB

25.” Id. at 10:25-26 (citation omitted). 

Standing alone, a party citing a case, as Apollo did Jabil, is

not, in the slightest, indicative of a change in controlling law. 

Such a change could be shown if, for example, Apollo III cited

Jabil for a proposition which Ernst later overruled. That is not

the situation here, however. Apollo III cited Jabil once, to

“bolster[]” its “conclusion” that the timely filing of Forms 4 by

defendants Nelson and Gonzales “negate[d]” an inference of

scienter. See Apollo III, 2011 WL 1253250, at *5. Hence, in

Apollo III, this court’s reliance upon Jabil had nothing to do with

APB 25. Plaintiff has, therefore, utterly failed to show how Ernst

resulted in a change in controlling law based upon the foregoing.

Further, even if, as plaintiff describes it, Ernst is “one of

the only decisions from the Ninth Circuit specifically addressing

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allegations of stock option backdating, and provid[ing] guidance

regarding such claims which at best had only been previously

discussed by district courts in this Circuit[,]” Pl.’s Reply (Doc.

150) at 10:27-12:2 (emphasis added), that is not equivalent to a

change in controlling law. “[P]roviding guidance” is far afield

from generally or substantively altering existing law, or creating

a significant analytical shift in the law. 

Plaintiff’s discussion of Ernst was a continual effort to draw

similarities between the allegations in that case and those in the

SAC. That discussion did nothing to advance plaintiff’s argument

that Ernst constitutes a controlling change in law. Trying to draw

factual similarities between two cases is a very different analysis

than explaining why a case amounts to a change in controlling law. 

That latter analysis is wholly missing here. As with Finisar III,

plaintiff thus has not met its burden of establishing that Ernst

amounts to a change in controlling law. This finding renders moot

defendants’ assertions that Ernst also is factually and legally

irrelevant. 

In short, plaintiff did not meet its burden of proof in

showing that either Finisar III or Ernst constituted a change in

controlling law so as to warrant setting aside the judgment in this

case.

2. “Manifestly Erroneous” and “Clear Error”

Here, the plaintiff also is seeking relief from the judgment

asserting: (1) it was “manifestly erroneous” to dismiss certain

false statements, Mot. (Doc. 146) at 11:21 (emphasis omitted); and

(2) the court “committed clear error” in denying amendment of the

SAC. Reply (Doc. 150) at 13:18. Manifest error is, effectively,

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clear error. See Ybarra v. McDaniel, 656 F.3d 984, 998 (9th Cir.

2011) (internal quotation marks and citation omitted)(“A rule 59(e)

motion may be granted if[,] [for example,] . . . the district court

committed clear error or made an initial decision that was

manifestly unjust[.]”). So the same standards govern these

remaining two aspects of plaintiff’s motion. 

The difficulty lies, however, in the lack of a definition of

clear error for Rule 59(e) purposes in the Ninth Circuit. Campion

v. Old Republic Home Protection Co., 2011 WL 1935967, at *1

(S.D.Cal. May 20, 2011). The Ninth Circuit is not alone; “[c]ourts

have generally not defined what constitutes ‘clear error’ under

[that] Rule[.]” Pet Food Express Limited v. Royal Canin USA, Inc.,

2011 WL 6140874, at *4 (N.D.Cal. Dec. 8, 2011) (internal quotation

marks and citation omitted). Given that lack of definition, as in

Campion and Pet Food Express, courts routinely look to the “clearly

erroneous” standard invoked in the context of the law of the case

doctrine. In that context, “‘clearly erroneous’ is a very exacting

standard[,]’” Campion, 2011 WL 1935967, at *1 (quoting Hopwood v.

Texas, 236 F.3d 256, 273 (5th Cir. 2000) (citation omitted)), such

that “a court should have a clear conviction of error.” Pet Food

Express, 2011 WL 6140874, at *4 (internal quotation marks and

citation omitted). Thus, “‘[m]ere doubts or disagreement about the

wisdom of a prior decision of this or a lower court will not

suffice[.]’” Campion, 2011 WL 1935967, at *1 (quoting Hopwood, 236

F.3d at 273 (citation omitted)). “‘To be clearly erroneous, a

decision must strike [a court] as more than just maybe or probably

wrong; it must be dead wrong.’” Id. 

Within the Ninth Circuit, courts also have looked to Black’s

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Law Dictionary, stating that “[a] manifest error of fact or law

must be one ‘that is plain and indisputable, and that amounts to a

complete disregard of the controlling law or the credible evidence

in the record.’” See, e.g. In re Wahlin, 2011 WL 1063196, at *2

(Bankr.D. Idaho March 21, 2011) (quoting In re Oak Park Calabasas

Condo. Ass’n, 302 B.R. 682, 683 (Bankr.C.D.Cal. 2003); quoting in

turn Black’s Law Dictionary 563 (7th ed. 1999)). This definition

comports with the Seventh Circuit’s “high standard for a party

filing a motion for reconsideration on the basis of error[.]”

Campion, 2011 WL 1935967, at *1. In that Circuit, “the movant must

demonstrate a wholesale disregard, misapplication, or failure to

recognize controlling precedent.” Id. (citation and internal

quotation marks omitted). By the same token, “manifest error of

law is not merely a party’s disagreement with how the trial court

applied the law.” In re Wahlin, 2011 WL 1063196, at *2. Nor is

“[m]anifest error . . . demonstrated by the disappointment of the

losing party.” Id. (Citations and internal quotation marks

omitted).

With these standards firmly in mind, the court will first

discuss whether, as plaintiff contends, it was “manifestly

erroneous” for this court to dismiss certain allegedly false and

misleading statements in Apollo I. 

a. APB 25, IRS Code § 162(m) & SOx Certifications

For a number of the SAC’s allegedly false and misleading

statements, including those pertaining to compliance with IRS Code

§ 162(m) and APB No. 25, and the SOx certifications (Nos. 36-48),

the Restatement was the sole basis for pleading falsity. See

Apollo III, 2011 WL 1253250, at *27. Dismissing the foregoing

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statements, among others, for failing to plead falsity with the

requisite particularity, this court concluded:

The SAC’s reliance on the Restatement does 

not provide the necessary particularity because 

it does not draw a specific nexus between the 

allegedly fraudulent statement and the facts upon 

which the allegation of fraud is dependent[,] 

i.e. the Restatement, or, at least, a clear 

statement of why and how the plaintiff has reached 

the conclusion that a particular statement is 

fraudulent. . . . Even if the SAC provided that 

missing link, it still could not withstand these 

dismissal motions because in relying upon the 

Restatement as a basis for falsity, the SAC does 

not always comport with the Restatement. 

Id. (internal quotation marks and citation omitted). Plaintiff

argues that dismissal of false statements 36-48 on that basis “was

manifestly erroneous[,]” but it does not identify any specific

error, let alone a manifest or clear error. See Pl.’s Mot. (Doc.

146) at 11:25-26 (citations omitted). Instead, plaintiff first

urges this court to reach a different result by examining three

paragraphs in the SAC, “coupled” with what it terms the “compelling

allegations of . . . scienter that the Court found sufficient in”

Apollo I. Id. at 12:3-4. 

Plaintiff’s suggested approach has two significant

shortcomings. First, this is a thinly veiled attempt “‘asking the

court to rethink what it ha[s] already thought through – rightly or

wrongly.’” See Occupy Fresno v. County of Fresno, 2011 WL 6066500,

at *1 (E.D.Cal. 2011) (quoting United States v. Rezzonico, 32

F.Supp.2d 1112, 1116 (D.Ariz. 1998) (other quotation marks and

citation omitted)). The court declines to do so. 

Second, the issue of the falsity of such statements was

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17 Plaintiff states that Apollo III dismissed the allegedly false and

misleading statements pertaining to APB 25, IRC § 162(m) and the false SOx

certifications "with one line, implying that because it found . . . plaintiff's

allegations of falsity insufficient with respect to Apollo's financial statements,

allegations with respect to APB 25, IRC § sec. 162(m) and false SOx certifications

must also necessarily fail." Reply (Doc. 150) at 11:20-23 (citation omitted).

That is an accurate statement, but to the extent it gives the impression that

Apollo III did not adequately consider those types of false statements, the court

disagrees. The “impl[ication]” was strong and patently obvious, given the analysis

preceding the dismissal line, as the following excerpt shows:

The SAC's broad, conclusory allegations that Apollo 

overstated its net income and understated its compensation 

expenses as a result of granting stock options below the 

fair market value of Apollo's common stock on the date of 

the grant do not satisfy the exacting pleading standards 

of the PSLRA and Rule 9(b). The SAC's reliance on the 

Restatement does not provide the necessary particularity 

because it does not ‘draw a specific nexus between the 

allegedly fraudulent statement and the facts upon which the 

allegation of fraud is dependent[,]’ i.e. the Restatement, 

‘or, at least, a clear statement of why and how the plaintiff 

has reached the conclusion that a particular statement is 

fraudulent.’ See Ferro, 2007 WL 1691358, at *19 (citation, 

internal quotation marks and emphasis omitted). Even 

if the SAC provided that missing link, it still 

could not withstand these dismissal motions because 

in relying upon the Restatement as a basis for falsity, 

the SAC does not always comport with the Restatement. 

Consequently, the court grants defendants' motions to dismiss 

insofar as it is predicated upon those false and misleading 

statements where the Restatement is the sole basis for pleading 

falsity . . . . That includes the allegations pertaining to 

compliance with IRS Code § 162(m) and APB No. 25, 

and the SOx certifications. . . .

Apollo III, 2011 WL 1253250, at *27 (citations omitted).

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briefed by the parties and examined in Apollo III.17 Plaintiff did

not like the outcome in Apollo III; now, it is seeking a different

one. However, manifest error is not “demonstrated by the

disappointment of the losing party." In re Wahlin, 2011 WL

1063196, at *2 Id. (citations and internal quotation marks

omitted). Further, as this court has previously stated, “a motion

for reconsideration is not designed merely to provide a

dissatisfied litigant with additional opportunity to sway the

Court.” Hassayampa Steering Committee v. Arizona, 1991 WL 71769,

at *1 (D.Ariz. March 26, 1991) (citation omitted), aff’d without

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pub’d opinion, 942 F.2d 791 (9th Cir. 1991). Additionally, simply

stating, as plaintiff does, that a given finding was “manifestly

erroneous,” does not make it so. 

Plaintiff devotes the remainder of its argument regarding the

dismissal of certain false and misleading statements to discussing

Glazer Capital, 594 F.3d 736. Plaintiff maintains that that case

“illustrates” that “defendants’ SOx certifications and their

statements regarding [Apollo’s] compliance with APB 25 and IRS 

§ 162(m)[] . . . were pled with the requisite particularity.” 

Pl.’s Mot. (Doc. 146) at 12:24. Plaintiff strenuously contends

that “[t]he allegations with respect to defendants’ compliance with

APB 25 and IRC § 162(m) are far stronger than plaintiff’s

allegations in Glazer.” Pl.’s Reply (Doc. 150) at 12:11-12

(emphasis in original). 

Notably, plaintiff cited to Glazer in its opposition to

defendants’ motion to dismiss the SAC, but for a different

proposition than it now does. At that time, plaintiff accused

defendants of “confusing falsity and scienter” – a “tactic[] . . .

rejected” in Glazer). Pl.’s Omnibus Opp’n to Defs.’ Motions to

Dismiss the SAC (Doc. 129) at 21:9-11 (citation omitted). Thus,

obviously plaintiff was aware of Glazer in opposing defendants’

motions to dismiss the SAC. And even though, as plaintiff now

contends, Glazer Capital “provides a clear example of how simple

[a] task [it] can be” to satisfy the PSLRA’s heightened pleading

standards as to falsity, Pl.’s Mot. (Doc. 146) at 12:24, plaintiff

did not make that argument until this motion to alter or amend the

judgment. 

“It is not the purpose of allowing motions for reconsideration

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to enable a party to complete presenting his case after the court

has ruled against him[,]” yet that is precisely what plaintiff is

attempting here by belatedly relying upon Glazer Capital to support

upholding certain false and misleading statements in the SAC. See

Frietsch v. Refco, Inc., 56 F.3d 825, 828 (7th Cir. 1995). Further,

plaintiff is improperly using this motion to “raise arguments or

present evidence for the first time when they could reasonably have

been raised earlier in the litigation.” See Marlyn Nutraceuticals,

571 F.3d at 877 (quoting Kona Enterprises, 229 F.3d at 890). Were

this court to countenance allowing amendment where, as here,

plaintiff has done nothing more than “request” leave to amend

without providing any factual or legal justification whatsoever,

compounded by not submitting a proposed amended complaint, “some

lawsuits might never end, rather than just seeming endless.” See

Frietsch, 56 F.3d at 828 (Posner, J.) (emphasis added). 

b. Leave to File Motion to Amend

In the last part of this motion plaintiff argues that this

court committed clear error by not giving it “an opportunity to

amend the [SAC] prior to dismiss[al] . . . with prejudice” in

Apollo III. Pl.’s Mot. (Doc. 146) at 13:16-17 (emphasis omitted). 

Hence, plaintiff is seeking to have the judgment reopened and

modified pursuant to Rule 59(e) to allow it to “file a motion to

amend the [SAC] to cure any defects still remaining[.]” Id. at

18:1-2. The defendants raise three procedural challenges to this

aspect of plaintiff’s motion -– all of which can be readily

disposed of before turning to the merits.

i. “Jurisdiction”

 Stressing that this “[m]otion is a motion for leave to amend,

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18 To a certain extent, the defendants’ misapprehension is understandable,

given plaintiff’s explicit “request that the Court modify the Order to provide

plaintiffs with an opportunity to replead their claims[.]” See Pl.’s Mot. (Doc.

146) at 13:18-19 (emphasis added). Immediately thereafter, however, plaintiff does

indicate that it will be prepared to file an amended complaint and a motion to

amend[]” after the resolution of this motion. Id. at 13:21-22 (emphasis added).

Plaintiff echoes that request in concluding its motion. See id. at 18:1-3.

Further, although the defendants could not have known it when they filed their

responses, plaintiff’s reply reiterates that it is “ask[ing] the Court to grant

this Rule 59(e) motion so they may file a motion to amend.” Reply (Doc. 150) at

15:18-19 (emphasis added).

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the defendants assert that the court “lacks jurisdiction to

entertain” such a motion “if it denies the Rule 59(e) motion[.]”

Defs.’ Resp. (Doc. 148) at 17:28 (emphasis in original); and 17:18. 

In Lindauer v. Rogers, 91 F.3d 1355 (9th Cir. 1996), the Ninth

Circuit “adopted the requirement that, once judgment has been

entered in a case, a motion to amend the complaint can only be

entertained if the judgment is first reopened under a motion

brought under Rule 59 or 60.” Id. at 1357. The defendants contend

that the Lindauer “requirement” effectively bars the amendment

aspect of plaintiff’s Rule 59(e) motion. 

The defendants misapprehend the nature and scope of the

current motion, however.18 Plaintiff is not arguing that it should

be granted leave to amend now. Rather, plaintiff is claiming that

it was clear error in the first instance in Apollo III to dismiss

the SAC with prejudice and without permitting amendment. On that

basis, among others, plaintiff is seeking to have the judgment reopened and modified pursuant to Rule 59(e) to “permit [it] to file

a motion to amend the [SAC] to cure any defects still remaining.” 

See Reply (Doc. 150) at 13:11-12 (internal quotation marks and

citation omitted)(emphasis added). Accordingly, because

plaintiff’s motion is not, as the defendants construe it, a motion

for leave to amend, Lindauer and its progeny are inapplicable here. 

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Thus, as plaintiff frames it, the amendment issue is properly

before this court as part of its motion for relief from judgment

under Rule 59(e). 

ii. Governing Legal Standards

The defendants’ second, related argument is that because final

judgment has been entered, “Rule 15(a)’s liberal principles do not

apply[.]” Defs.’ Resp. (Doc. 148) at 18:6-7 (emphasis omitted). 

Defendants contend that “Plaintiff must overcome Rule 59(e)’s ‘high

hurdles’ and show” it was “clear error” for this court to deny

plaintiff leave to amend in Apollo III. See id. at 19:1-3 (quoting

Weeks v. Bayer, 246 F.3d 1231, 1236 (9th Cir. 2001)). The

defendants’ position is well-taken. In analyzing whether it was

clear error to dismiss the SAC with prejudice and without leave to

amend, the case law discussed in section 2 above, albeit scant,

guides this court’s inquiry. Accord Fannon v. Guidant Corp., 583

F.3d 995, 1003-1004 (7th Cir. 2009) (where investors moved to set

aside the judgment and for leave to file an amended complaint, Rule

59(e) rather than Rule 15(a) standards applied). 

iii. LRCiv. 5.1

Again characterizing this aspect of plaintiff’s motion as one

“for leave to amend[,]” the defendants urge “outright” denial

“because the Plaintiff, yet again, has failed to comply with

[LRCiv] 15.1. Defs.’ Resp. (Doc. 148) at 19:7-9 (emphasis added). 

As this court highlighted in Apollo III when commenting upon

plaintiff’s failure to provide a proposed amended complaint:

 [T]hat [Local] Rule requires that if “[a] 

 party moves for leave to amend,” it “must

 attach a copy of the proposed amended 

 pleading[,]” and it “must indicate in what 

 respect it differs from the pleading which 

 it amends, by bracketing or striking through 

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19 Once again disregarding the standards for relief under Rule 59(e),

plaintiff claims that Apollo III’s amendment analysis was “inconsistent with Ninth

Circuit law[,]” and that “denial of leave to amend was inappropriate.” See Pl.’s

Mot. (Doc. 146) at 14:25; and at 15:21 (emphasis added). As earlier discussed,

however, to obtain the “extraordinary remedy” of amending a judgment under that

Rule, Herron, 634 F.3d at 111 (citation and internal quotation marks omitted),

requires a much more stringent showing, which, as indicated above, plaintiff did

recognize in its reply.

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 the text to be deleted and underlining the 

 text to be added.

Apollo III, 2011 WL 1253250, at *37 n. 28 (emphasis added in Apollo

III). At the risk of repetition, in the pending Rule 59(e) motion,

plaintiff is not moving to amend the SAC. That is the relief which

it desires in moving to reopen the judgment; it wants to be able to

file such a motion. Thus, because at this juncture plaintiff is

not moving to amend the SAC, the lack of a proposed amended

complaint is not fatal to its Rule 59(e) motion. 

iv. “Clear Error”

 Having found no procedural barriers to the amendment aspect

of plaintiff’s motion, the court is now free to address the merits.

In its reply,19 plaintiff asserts that this court “committed clear

error by failing to follow leading precedents on leave to amend[,]

i.e., Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052

(9th Cir. 2003), and Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 

9 L.Ed.2d 222 (1962). Reply (Doc. 150) at 13:18-19. More

specifically, plaintiff asserts that it was clear error to deny

amendment based upon “a finding that amendment would be futile[,]”

and this court’s prior warning that plaintiff’s claims “could be

dismissed if not properly pled on amendment[] . . . without

discussing Eminence or the Foman factors.” Mot. (Doc. 146) at

14:21-25. Plaintiff also argues that “[a]mendment would not be

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20 See Defs.’ Resp. (Doc. 148) at 16:19-22:5

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futile because [it] can . . . address the deficiencies identified

in [Apollo III][.]” Id. at 14:25-26 (bold emphasis omitted). 

Plaintiff advances that argument another step in its reply. Based

upon the DTAC, belatedly attached thereto, plaintiff claims that

now it can “demonstrate that leave to amend would not be futile[.]”

See Reply (Doc. 150) at 14:24, n. 2; 13:1-2 (emphasis added).

Defendants counter that plaintiff cannot show clear error

given a district court’s “particularly broad” discretion to deny

leave to amend where “the plaintiff has previously been granted

leave to amend and has subsequently failed to add the requisite

particularity to its claims[.]” See Zucco Partners, 552 F.3d at

1007 (internal quotation marks and citations omitted). 

Additionally, they argue that the court properly dismissed the SAC

with prejudice because plaintiff did not set forth any facts that

could cure the SAC’s deficiencies. Further, defendants dispute

plaintiff’s assertion that it can “correct any discrepancies and

inconsistencies between the [SAC]’s allegations and the accounting

errors admitted as part of Apollo’s restatement[.]” See Mot. (Doc.

146) at 16:11-13. Based upon certain findings in Apollo III,20

defendants contend that the inconsistencies which Apollo III

identified are “incurable[.]” Defs.’ Resp. (Doc. 148) at 22:1. 

Finally, plaintiff cannot show clear error, from defendants’

standpoint, because there is Ninth Circuit precedent affirming

denial of leave to amend a SAC after one amendment as a matter of

course, and one dismissal with prejudice. See Zucco Partners, 552

F.3d at 1007. 

Before delving into these arguments, a fairly close

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21 The court just as easily could have deemed plaintiff’s “request” to be

a motion and denied it for non-compliance with LRCiv 15.1, leaving plaintiff with

little recourse in terms of amendment. 

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examination of how the issue of amendment arose in Apollo III, and

this court’s reasoning is necessary. In opposing defendants’

motions to dismiss the SAC, in the last sentence of plaintiff’s

opposition, it merely stated: “Should the Court grant any portion

of defendants’ motions to dismiss, . . . plaintiff respectfully

requests leave to amend.” Pl.’s Resp. (Doc. 129) at 39:20-22

(emphasis added). That single sentence was the only mention of

amendment in plaintiff’s opposition. Plaintiff did not proffer any

reasons whatsoever as to why it should be allowed to amend its

complaint after having been given the opportunity to do so once as

a matter of right in Apollo I. Plaintiff claims that defendants

did not “oppose” that request, Mot. (Doc. 146) at 13:20, but

actually their replies were silent on the amendment issue. See

Apollo III, 2011 WL 1253250, at *36. 

In considering plaintiff’s “perfunctor[]y ‘request[]’” for

leave to amend, this court found that “‘request’ . . . a somewhat

telling, although not entirely dispositive, distinction.” Id. at

*37 n. 28. Giving plaintiff considerable leeway,21 this court also

found that “[b]ecause plaintiff sought leave to amend in the form

of a request arguably it was not required to attach a proposed

amended complaint or otherwise comply with the dictates of LRCiv

15.1.” Id. This court raised the possibility, however, that

“plaintiff made th[at]‘request’ as a means of circumventing that

Local Rule and because it does not have any additional facts.” Id.

“Otherwise, surely plaintiff would have brought them to the

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attention of the court and defendants[,]” this court reasoned. Id.

In Apollo III, this court reiterated that in previously

allowing amendment, it had “explained that ‘[t]he pleading

deficiencies in the FAC did not lie in the raw content of the FAC,

but in the absence of rigorously particularized allegations in

accordance with the PSLRA.’” Apollo III, 2011 WL 1253250, at *36

(quoting Apollo I, 633 F.Supp.2d at 832) (other citations and

internal quotation marks omitted). Further, this court commented

that earlier it had “expressly ‘advised’ plaintiff ‘that failure to

cure the pleading deficiencies identified therein, and failure to

comply with the relevant case law in that regard, may well lead to

dismissal of these claims in the future.” Id. (quoting Apollo I,

633 F.Supp.2d at 832) (emphasis added by Apollo III court). 

Moreover, well before Apollo III, in its motion to reconsider

Apollo I, filed on April 2, 2009, plaintiff had explicitly

“acknowledged that it [was] [m]indful that [Apollo I] required [it]

to amend [its] Complaint to more particularly allege[ ] . . . 

falsity[.]” Id. (citations and internal quotation marks omitted). 

“Nonetheless, even after amendment, as thoroughly discussed [in

Apollo III], the hallmark of the SAC [wa]s, still, the absence of

rigorously particularized allegations in accordance with the

PSLRA[] and Rule 9(b).” Id. (citation and internal quotation marks

omitted) (emphasis added). 

In light of that history, in Apollo III, the court started

with this settled proposition: “[W]here the plaintiff has

previously been granted leave to amend and has subsequently failed

to add the requisite particularity to its claims, [t]he district

court’s discretion to deny leave to amend is particularly broad.’”

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22 The Ninth Circuit did reverse Finisar II, but not on this basis. 

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Id. (quoting Zucco Partners, 552 F.3d at 1007 (citations and

internal quotation marks omitted)). This court further noted the

Ninth Circuit’s “repeated[] recogni[tion]” that a plaintiff’s

failure “to correct the deficiencies in its [FAC] is ‘a strong

indication that the plaintiffs have no additional facts to plead.’”

Id. (quoting In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1098

(9th Cir. 2002)). “Likewise,” this court explained, “[w]here the

plaintiff fails to set forth any additional facts that could save

the complaint, . . . , dismissal with prejudice is appropriate.” 

Id. (quoting Finisar II, 2009 WL 3072882, at *1522 (citing, inter

alia, In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 991

(9th Cir. 1999), abrogated on other grounds, Tellabs, 551 U.S. at

322–24, 127 S.Ct. 2499, 168 L.Ed.2d 179)) (footnote added).

Applying those principles, in Apollo III, this court

enumerated the following reasons for dismissing the SAC with

prejudice and without leave to renew. First, “[p]laintiff ha[d]

been given the opportunity to amend once, following a fairly

comprehensive analysis of the FAC’s deficiencies and overall

weaknesses.” Id. at *37. Second, “[t]he SAC did not correct those

deficiencies; nor [did] plaintiff offer[] any additional facts in

its response that could be alleged in a third amended complaint,

and that would save the SAC from dismissal with prejudice.” Id.

(footnote and citation omitted). Third, “in contrast to many

securities fraud cases, plaintiff’s allegations herein are not

based upon the statements of confidential witnesses and/or

employees and former employees[.]” Id. (citation and internal

quotation marks omitted). “Therefore, . . . it is difficult to

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imagine what additional facts Plaintiff could allege to satisfy the

strict pleading requirements of the PSLRA and Rule 9(b).” Id.

(citation and internal quotation marks omitted). Fourth, the court

observed that plaintiff was “represented by experienced counsel who

routinely practice in the area of securities class action

litigation, were given an adequate opportunity to file an amended

complaint addressing this court’s concerns in Apollo I, and

satisfying the governing pleading standards as developed in the

applicable case law.” Id. (footnote omitted). “Plaintiff did not

avail itself of that opportunity[,]” however. Id.

 Plaintiff has not satisfied the stringent standards for

establishing clear error on this record for a variety of reasons. 

 First, the Ninth Circuit grants courts “particularly broad

discretion,” to deny leave to amend “[w]here the plaintiff has

previously been granted leave to amend and has subsequently failed

to add the requisite particularity to the claims[.]” Zucco

Partners, 552 F.3d at 1007; quoting in turn In re Read-Rite Corp.,

335 F.3d 843, 845 (9th Cir. 2003); quoting in turn Vantive, 283 F.3d

at 1097-98). That was the situation in Apollo III. 

This court found In Apollo I that the FAC did “not satisfy the

heightened pleading standards for fraud under either Rule 9(b) or

the PSLRA[,]” due to a number of pleading irregularities outlined

therein. Apollo I, 633 F.Supp.2d at 786. Rather then “tak[ing]

the drastic step of dismissal based on . . . form[,]” the court 

“require[d] . . . plaintiff to streamline and reorganize the

complaint before allowing it to serve as the document controlling

discovery.” Id. (citation and internal quotation marks omitted). 

The court instructed plaintiff, to “be clear and concise in

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23 In Foman, the Supreme Court enumerated factors which may justify

dismissal without granting leave to amend: undue delay, bad faith, repeated failure

to cure deficiencies by previous amendments, undue prejudice and futility. Foman,

371 U.S. at 182, 83 S.Ct. 227.

24 See Apollo I, 633 F.Supp.2d at 831-832.

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identifying the false statements and articulating the factual

allegations supporting an inference that the statement is false or

misleading.” Id. at 786–787 (citation and internal quotation marks

omitted). Plaintiff attempted to do that, but as Apollo III

comprehensively discussed, “[t]he SAC’s changes in form only

highlight[ed] [its] substantive deficiencies . . . , revealing that

it does not plead falsity with the requisite degree of

particularity.” Apollo III, 2011 WL 1253250, at *18. 

Plaintiff disregards that “particularly broad discretion,” as

well as Apollo III’s rationale. Plaintiff focuses instead on the

fact that in Apollo III this court did not “discuss[] the Foman

factors[,]23” or Eminence Capital, as it did in Apollo I.24 Mot.

(Doc. 146) at 14:21. With respect to the Foman factors, plaintiff

implies that a court has no latitude at all and must always discuss

those factors when faced with the issue of amendment. In Eminence

Capital, the Ninth Circuit did reiterate, “[a] district court’s

failure to consider the relevant factors and articulate why

dismissal should be with prejudice instead of without prejudice may

constitute an abuse of discretion.” Eminence Capital, 316 F.3d at

1053 (citations omitted) (emphasis added). Given that permissive

language, the court does not read Ninth Circuit case law as

restrictively as plaintiff does. That is especially so where, as

here, experienced counsel, fully aware of the PSLRA’s rigorous

pleading standards, in effect, chose to “roll the dice.” They did

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that by off-handedly requesting leave to amend without providing

any legal or factual justification whatsoever. Cf. James Cape &

Sons Co. v. PCC Cost. Co., 453 F.3d 396, 401 (7th Cir. 2006) (no

abuse of discretion in dismissal with prejudice where, even

construing plaintiff’s “expressed . . . intention to ‘describe in

even greater detail the damages it suffered[]’ . . . in the

penultimate paragraph of its response to defendants’ motion to

dismiss[]” as a “proper[] mo[tion] to amend,” the district court

“had no way of knowing what the proposed amendment entailed[]”). 

Compounding those omissions was that plaintiff sought amendment in

the form of a “request,” seemingly, it now appears, to circumvent

LRCiv. 15.1's requirement of submitting a proposed amended

complaint, showing “in what respects it differs from the pleading

which it amends[.]” See LRCiv 15.1. 

While claiming that it was clear error not to discuss the

Foman factors in Apollo III, at the same time, plaintiff readily

concedes that one of the Foman factors – futility – was a basis for

denying leave to amend. Id. at 14:21-22 (citation omitted) (“[T]he

Court refused to grant leave to amend based on . . . a finding that

amendment would be futile[.]”) This concession weakens plaintiff’s

contention that Apollo III’s “‘failure to consider the relevant

factors’ (Eminence Capital, 316 F.3d at 1052) is ‘clear error’

requiring the altering of the judgment under Rule 59(e)[.]” Reply

(Doc. 150) at 11-13 (other citation omitted). 

Further weakening plaintiff’s position is the fact that, in

accordance with Foman, there were both “apparent [and] declared

reason[s]” for denying amendment, as the earlier discussion of

amendment in Apollo III shows. See Foman 371 U.S. at 182, 83 S.Ct.

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28 25 In Apollo I, this court did discuss Eminence Capital in some depth.

See Apollo I, 633 F.Supp. at 831-832. 

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227. In Foman either “apparent or declared reason[s]” must be

given for denying amendment; so either would suffice, but here

there were both. See id. (emphasis added). The “declared reasons”

were previously enumerated. The “apparent reasons” – particularly

futility - can be gleaned from the Apollo III analysis. Therefore,

plaintiff has not met the “very exacting standard” of showing clear

error due to the fact that Apollo III did not expressly discuss the

Foman factors. 

Plaintiff’s argument that it was clear error not to “discuss,”

“address,” or “follow” Eminence Capital” in Apollo III is equally

unpersuasive. 25 See Mot. (Doc. 146) at 14:22; Reply (Doc. 150) at

13:26. The apparent basis for this argument is the Court’s

realization in Eminence Capital that because of the difficulty in

establishing a “bright-line” rule for pleading securities fraud,

“[a]dherence to th[e] principle[]” of “extreme liberality” in grant

of leave to amend “is especially important in the context of the

PSLRA.” Eminence Capital, 361 F.3d at 1052; and 1051 (citations

and internal quotation marks omitted). Consistent with that view,

the Ninth Circuit held that a district court’s denial of leave to

amend in a securities fraud action was an abuse of discretion. 

There was no clear error in Apollo III by not “follow[ing]

Eminence Capital, however. See Reply (Doc. 150) at 13:26 (emphasis

added). That is because, inter alia, there is one critical factual

distinction between that case and the record before this court in

Apollo III. There, in “defend[ing] the dismissal with

prejudice[,]” plaintiffs advised the district court “that the

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special committee will release a report that will provide all the

requisite details [required to plead a case under PSLRA].” 

Eminence Capital, 316 F.3d at 1053 ((internal quotation marks

omitted). When considering whether to grant plaintiff’s one line

“request” for leave to amend in Apollo III, plaintiff did not make

a similar “proffer that additional evidence was forthcoming which

would enable them to add necessary details to their [SAC].” See

id. Plaintiff did nothing. Thus, it has not shown that it was

clear error for this court not to “follow” Eminence Capital. 

Likewise, given that important factual distinction, the court fails

to see how it could be clear error to neither “discuss” nor

“address” Eminence Capital. It is difficult to conceive of a

situation, like the present one, where a plaintiff can avail itself

of the relatively liberal amendment standards set forth in Eminence

Capital, while simultaneously making no effort to show why it

should be allowed to amend its complaint, and circumventing the

Local Rules by not submitting a proposed amended complaint. 

Plaintiff also is unable to establish clear error for another

reason – its failure to come forward, when requesting leave to

amend, with any additional facts to satisfy the PSLRA’s pleading

requirements. DSAM Global Value Fund v. Altris Software, Inc., 288

F.3d 385 (9th Cir. 2002), is illustrative of how that can be fatal

when seeking leave to amend for a second time. In DSAM Global, the

district court dismissed the FAC with leave to amend because

plaintiff failed to properly plead scienter under the PSLRA. After

plaintiffs filed their SAC, finding that amendment would be futile,

the district court dismissed it “for the same reason but this time

without leave to further amend.” Id. at 388. Affirming that

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dismissal without leave to amend, the Ninth Circuit reasoned that

plaintiff had “conducted extensive factual investigation, ha[d] all

of the necessary documents, and . . . failed to come forward with

additional facts that would meet the scienter pleading

requirements. Id. at 391; see also Silicon Graphics, 183 F.3d at

991 (“appropriate” to dismiss with prejudice a derivative action

where plaintiff “failed to set forth any facts which he could add

to save his complaint[]”). 

Here, based upon the content of the SAC and its accompanying

exhibits, it is reasonable to infer that plaintiff conducted at

least a fairly extensive factual investigation. Likewise, much

like DSAM Global, there is nothing to suggest that plaintiff does

not have all of the necessary documents, at least with respect to

publicly filed documents. The SAC relies extensively upon such

documents and, with two exceptions, all of the 40 exhibits filed

with the SAC are public documents. See SAC Index of Exhibits (Doc.

122-1) at 1-3. Most important, however, is that as in DSAM Global,

plaintiff did not include additional facts of any kind to support

its cursory request for leave to amend. That omission was

particularly glaring in the absence of a proposed amended

complaint. As this court reasoned in Apollo III, when noting the

absence of a proposed draft complaint, perhaps plaintiff “does not

have any additional facts[;] [o]therwise, surely plaintiff would

have brought them to the attention of the court and defendants.” 

Apollo III, 2011 WL 1253250, at *37 n. 28 (emphasis added). In

that respect this case is not unlike Vantive, where the Ninth

Circuit found it was “not unreasonable for the district court to

conclude that it would be pointless to give the plaintiffs . . .

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another chance to amend[]” where, for one thing, they “declined to

say what additional facts they might plead if given the chance to

amend.” Vantive, 283 F.3d at 1097-1098. 

For all of the reasons discussed above, plaintiff, as the

party seeking to reopen the judgment, has not met the “very

exacting standard” of showing clear error with respect to this

court’s denial of its request to amend in Apollo III. See Campion,

2011 WL 1935967, at *1 (citation and internal quotation marks

omitted). 

Plaintiff is trying to rectify this serious omission, by

claiming, as earlier stated, “[t]hat amendment would not be futile

because [it] can . . . address the deficiencies identified in

[Apollo III[.]” See Mot. (Doc. 146) at 14:25-26 (emphasis omitted). 

Plaintiff would do that “by submitting an amended complaint which”

would supposedly:

(i) correct[] any ‘discrepancies and inconsistencies’ 

between the [SAC’s] allegation and the accounting 

errors admitted as part of Apollo’s restatement on 

which plaintiffs rely; (ii) provide[] a more detailed 

explanation of how Apollo’s restatement supports their 

allegations of falsity and fraud; (iii) further 

describe[] how defendants’ false accounting for options

backdating led to the errors in Apollo’s financial 

statements; (iv) explain[] in more detail how such 

practices clearly violated the applicable accounting 

rules; (v) include[] additional financial analysis 

of the stock option grants issued by Apollo consistent

with those pled and approved by the Ninth Circuit 

in Finisar III; and (vi) plead[] additional facts 

sufficient to respond to the Court’ findings with 

respect to other false statements alleged in the 

complaint. 

Id. at 16:11-20. Based upon this list, plaintiff contends that

“because it is not clear . . . that the [SAC] would not be saved by

any amendment, the Court should modify its judgment to provide

plaintiff[] with an opportunity to” do so. Id. at 16:21-24

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26 See also Apollo III, 2011 WL 1253250, at *2 - *17.

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(citation and internal quotation marks omitted). As the court

construes the foregoing, plaintiff is contending that it was clear

error to dismiss the SAC without leave to amend because amendment

would not be futile. 

The flaw in this reasoning is that when this court denied

plaintiff’s wholly unsupported request to amend, it had just

engaged in a comprehensive and detailed analysis of the SAC which,

with attached exhibits, was approximately 500 pages. See Apollo

III, 2011 WL 1253250, at *18, n. 15. In so doing, a number of ways

in which both the SAC’s backdating allegations and its false and

misleading statements were not plead with the requisite degree of

particularity were identified and discussed. As to the backdating

allegations, “a critical part of the alleged fraudulent scheme[,]”

there was “a culmination of pleading deficiencies . . .

compel[ling] the conclusion that the SAC's backdating allegations

[we]re not plead with the requisite particularity.” Id. at *17. 

That was “evidenced by internal inconsistencies, ambiguities, and

erroneous and misleading factual allegations which do not comport

with Apollo’s own stock chart[,]” discussed in depth in Apollo III. 

Id.26 

Further, “the SAC include[d] precisely th[e] same five grant

allegations” as the FAC, “and add[ed] a sixth grant date – October

20, 2003.” Id. at *1. Additionally, there were a “a number of

[other] similarities between the FAC and the SAC.” Id. at *2, n.4. 

As to the October 20, 2003, grants, however, “[t]he ambiguous,

inconsistent and sometimes erroneous allegations of th[os]e . . .

grants[,]” as discussed in Apollo III, “magnified the court’s

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concern, inter alia, regarding the factual accuracy of allegations

as to th[]e [original] five grant dates.” Id. at *12. In Apollo I

the court “accepted at face value the accuracy of the FAC’s

allegations pertaining to the five grant dates therein[.] Id. The

court could not do that in Apollo III because “the factual

inaccuracies in the October 20, 2003 grant allegations mandate[d]

closer examination of the other five grant date allegations.” Id.

The court proceeded to engage in an undeniably tedious analysis

revealing the shortcomings as to the original five grant dates. 

See id. at *13-*17. In that respect, “plaintiff offer[ed] very

little substantively to refute any of defendants’ arguments[.]” Id.

at *12. 

The SAC included 54 allegedly false and misleading statements,

which the court divided into two categories for analytical

purposes. The starting point for analyzing the accounting

statements were “those . . . which undermine[d] rather than

advance[d] plaintiff’s fraud theory[.]” Id. at *20. Among other

things, for the sake of argument, the court assumed that “Apollo’s

Restatement [wa]s an admission that certain accounting statements

were false when made[.]” Id. at *23. That assumption could not

“cure the SAC’s failure to plead falsity with particularity[,]”

because:

The lack of particularity primarily

 arises from the manner in which the SAC relies 

upon the Restatement. It is not enough to simply

allege that a given statement is false and

misleading and then baldly rely upon a restatement. 

Rule 9(b) and the PSLRA demand more. That is 

especially so here where the Restatement does 

not always support the SAC’s allegations and, 

on its face, the correlation between the Restatement

and the false statements is fairly attenuated.

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Id. Further, “[a]lthough the form ha[d] changed, plaintiff did not

cure what this court previously found to be “[p]erhaps the most

troubling aspect of the [FAC] – the vague allegations of deception 

. . . unaccompanied by a particularized explanation stating why the

defendant[s’] alleged statements or omissions [we]re deceitful.” 

Id. at *24 (quoting Apollo I, 633 F.Supp.2d at 786) (other citation

and internal quotation marks omitted). Indeed, “[t]he SAC’s

changes in form only highlight[ed] the substantive deficiencies of

the SAC, . . . revealing that it d[id] not plead falsity with the

requisite degree of particularity.” Id. at *18. From the

foregoing, it is apparent why, when confronted with the plaintiff’s

completely unsupported request for leave to amend, this court

“quite reasonably believed that [another] amended complaint would

suffer the same fatal flaws as the [SAC][,]” and perhaps the FAC,

given the similarities between the two. See James Cape, 453 F.3d

at 401. Consequently, given the perfunctory nature of plaintiff’s

request to amend in Apollo III, and the entire record as

constituted at that time, this court could not anticipate how the

SAC could be saved by further amendment. Therefore, the court

gives no credence to the notion that amendment was not futile. 

Hence, it was not clear error to dismiss the SAC without leave to

amend.

As earlier noted, plaintiff’s reply claims that its 74 page

DTAC, which includes allegations based upon “the services of a

leading independent statistical expert on backdating,” which

plaintiff “retained[,]” DTAC (105-1) at 17:13, ¶ 48, now

“demonstrates that leave to amend is not futile[.]” Reply (Doc.

150) at 13:1-2 (bold emphasis omitted) (italicized emphasis added). 

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Plaintiff describes that DTAC as “essentially an offer of proof

demonstrating that amendment would not clearly be futile[.]” Id.

at 15:1. 

Quite simply, it is too late in the day for this argument. 

This is the type of argument and “offer of proof,” even if not in

the form of a DTAC, which plaintiff should have brought to the

court’s (and the defendants’) attention when requesting leave to

amend in opposition to defendants’ motion to dismiss the SAC. 

Plaintiff’s failure to do so runs afoul of the Ninth Circuit’s

well-settled rule that “[a] motion for reconsideration may not be

used to raise arguments or present evidence for the first time when

they could reasonably have been raised earlier in the litigation.” 

See Marlyn Nutraceuticals, 571 F.3d at 877 (case citation and

internal quotation marks omitted) (emphasis in original). 

Before concluding, it is necessary to briefly consider

plaintiff’s assertion that “standing alone, the Court’s warning

that claims could be dismissed was not a sufficient basis to

warrant denial of leave to amend[.]” Mot. (Doc. 146) at 16:25-26

(emphasis omitted). The record contradicts this assertion. The

court enunciated four specific reasons for denying the request for

leave to amend, set forth herein. The court’s prior “warning” was

not a basis for that determination. Even if plaintiff so construes

Apollo III, as is evident, that was not the only reason given. 

There is, thus, no merit to this assertion. 

In sum, with respect to the amendment issue, plaintiff has not

met the “very exacting standard” necessary to show clear error so

as to justify reopening a final judgment pursuant to Fed.R.Civ.P.

59(e). See Campion, 2011 WL 1935967, at *1 (citation and internal

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quotation marks omitted). It has not shown, based upon the entire

record before the court when it denied plaintiff’s request for

leave to amend, that the alleged clear error was “one that is plain

and indisputable, and that amounts to a complete disregard of the

controlling law[.]” See In re Wahlin, 2011 WL 1063196, at *2

(citations and internal quotations omitted). Given the unique

situation facing this court in Apollo III, certainly it was not

“dead wrong” to deny amendment. See Campion, 2011 WL 1935967, at

*1 (quoting Hopwood, 236 F.3d at 273 (citation omitted)). 

Conclusion

In moving to reopen and modify the final judgment in this case

pursuant to Fed.R.Civ.P. 59(e), plaintiff endeavored to show that:

(1) Finisar III and Ernst each constituted a change in controlling

law; (2) dismissal of its claims based on defendants’ allegedly

false and misleading statement as to APB 25, IRS Code § 162(m) and

the SOx certifications was manifestly erroneous; and (3) denial of

its request for leave to amend was clearly erroneous. Plaintiff

was unsuccessful. Because plaintiff has not shown that it is

entitled to the extraordinary remedy of relief under Rule 59(e),

for all of the reasons set forth herein, the court hereby DENIES

“Lead Plaintiff’s FED.R.CIV.P. 59(e) Motion to Alter or Amend

Judgment” (Doc. 146). 

DATED this 30th day of March, 2012.

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Copies to counsel of record

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