Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-00347/USCOURTS-cand-3_15-cv-00347-4/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE LEAPFROG ENTERPRISE, INC.

SECURITIES LITIGATION,

___________________________________/

This Document Relates to:

All Actions.

Case No. 15-cv-00347-EMC 

ORDER DENYING PLAINTIFFS’

MOTION FOR LEAVE TO FILE A 

MOTION FOR RECONSIDERATION

Docket No. 90

On August 2, 2016, this Court dismissed Plaintiffs’ claims with leave to amend. See

Docket No. 88 (“Order”). Plaintiffs now ask the Court for leave to file a motion for 

reconsideration of the Order. See Docket No. 90 (“Motion”). Defendants LeapFrog Enterprises, 

Inc. (“LeapFrog”), John Barbour, and Raymond Arthur oppose Plaintiffs’ Motion. See Docket 

No. 92.

The Court DENIES Plaintiffs’ Motion.

A. Legal Standard

Local Rule 7-9(a) requires a party to seek leave before filing a motion for reconsideration. 

The moving party must demonstrate that (1) a material difference in fact and law exists from that 

which was presented to the Court; (2) new law or material facts have emerged; or (3) the Court 

manifestly failed to consider material facts or dispositive legal arguments. Civ. L.R. 7-9(b). 

A party may not repeat arguments already presented. Civ. L.R. 7-9(c). Furthermore, a 

motion for reconsideration is an “extraordinary remedy, to be used sparingly in the interests of 

finality and conservation of judicial resources.” Kona Enters. v. Estate of Bishop, 229 F.3d 877, 

890 (9th Cir. 2000). “[A] motion for reconsideration should not be granted, absent highly unusual 

circumstances, unless the district court is presented with newly discovered evidence, committed 

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United States District Court

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clear error, or if there is an intervening change in the controlling law.” 389 Orange St. Partners v. 

Arnold, 179 F.3d 656, 665 (9th Cir. 1999) (discussing Fed. R. Civ. Proc. 59(e)).

B. Discussion

Reconsideration would not comport with “conservation of judicial resources.” Plaintiffs’ 

request for leave to file a motion for reconsideration appears to reach only the Court’s findings on 

material falsity. See Mot. at 2. The motion does not seek reconsideration of the Court’s finding 

that Plaintiffs failed to plead scienter with regard to the accounting allegations. Further, the Court 

dismissed with leave to amend non-accounting allegations. Plaintiffs have not suggested they will

not file a Second Amended Complaint. When they do, there is little doubt defendants will again 

move to dismiss. 

The issues Plaintiffs seek to revisit in the instant motion can be raised in the next round of 

briefing on the motion to dismiss the amended complaint. It is more effective to hear all issues on 

one motion rather than on a piecemeal basis. Upon the next amendment to the complaint, the 

Court advises the plaintiffs to address the defects noted in its Order even if it believes the Order 

did not apply the correct legal standard. Should the Court dismiss the next amended complaint, 

the Court will likely not permit a further amendment. Plaintiffs must give it their best shot. 

For example, whether the Court credits Plaintiffs’ legal argument made in the current 

motion (and which expectedly will be repeated in the next round), it notes that the First Amended 

Complaint (“FAC”) does not contain specific allegations which explain why a one-quarter stock 

drop establishes LeapFrog’s future cash flows would decrease, thus resulting in long-lived asset 

impairment. Nor does the FAC contain specific allegations why that drop was considered 

“sustained” under applicable accounting rules or case law, and was so significant that it required

goodwill impairment even in the absence of most other impairment factors. If Plaintiffs continue 

to rely on stock price as the most significant factor requiring impairment, Plaintiffs should do their 

best to articulate the nexus between stock price and the other factors in the goodwill analysis, and 

between stock price and future cash flows in the long-lived asset analysis. 

As another example, the allegations in the FAC does not sufficiently explain when 

LeapFrog learned of the information Plaintiffs contend should have affected its 2Q15 reporting. 

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Was such information obtained after the close of the quarter on September 30, 2014, but prior to 

the filing of that quarter’s 10-Q? See, e.g., FAC ¶ 141 (representing what Defendants knew on 

November 3, 2014). If so, should post-quarter information affect reporting for the closed quarter?

Finally, the Court recognizes that the bulk of its Order discussed material falsity. In the 

interests of streamlining future pleading, the Court cautions Plaintiffs that its focus on material 

falsity does not imply Plaintiffs successfully pled other elements. Plaintiffs must plead 

“allegations respecting all the material elements necessary to sustain recovery under some viable 

legal theory.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (2007) (emphasis added) (internal 

citations omitted).

This order disposes of Docket No. 90.

IT IS SO ORDERED.

Dated: August 31, 2016

______________________________________

EDWARD M. CHEN

United States District Judge

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