FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

YORK COUNTY ON BEHALF OF 

THE COUNTY OF YORK 

RETIREMENT FUND; MARYLAND 

ELECTRICAL INDUSTRY 

PENSION FUND, Individually and on 

Behalf of All Others Similarly 

Situated, 

Plaintiffs-Appellants,

 v. 

HP, INC.; DION J. WEISLER; 

CATHERINE A. LESJAK; 

RICHARD BAILEY; ENRIQUE 

LORES, 

Defendants-Appellees.

No. 22-15501 

D.C. No.

4:20-cv-07835-

JSW 

OPINION

Appeal from the United States District Court

for the Northern District of California

Jeffrey S. White, District Judge, Presiding

Argued and Submitted February 6, 2023

San Francisco, California

Filed April 11, 2023
2 YORK COUNTY V. HP, INC. 

Before: Jay S. Bybee and Patrick J. Bumatay, Circuit 

Judges, and Richard D. Bennett,* District Judge.

Opinion by Judge Bybee 

SUMMARY**

Securities Fraud

The panel reversed the district court’s dismissal, as timebarred, of a securities fraud action brought against HP Inc. 

and remanded for further proceedings. 

Lead plaintiff Maryland Electrical Industry Pension 

Fund alleged that HP and individual defendants made 

fraudulent statements about HP’s printing supplies 

business. The district court concluded that the complaint, 

filed in 2020, was barred by the two-year statute of 

limitations, 28 U.S.C. § 1658(b)(1), because the public 

statements, loss in profits, and reductions in channel 

inventory at the heart of Maryland Electrical’s claims had all 

taken place by 2016. 

Adopting the reasoning of the Second Circuit, the panel 

held that, under the discovery rule discussed in Merck & Co., 

Inc. v. Reynolds, 559 U.S. 633 (2010), a reasonably diligent 

plaintiff has not “discovered” one of the facts constituting a 

securities fraud violation until he can plead that fact with 

* The Honorable Richard D. Bennett, United States District Judge for the 

District of Maryland, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has 

been prepared by court staff for the convenience of the reader.
YORK COUNTY V. HP, INC. 3 

sufficient detail and particularity to survive a motion to 

dismiss for failure to state a claim. The panel held that a 

defendant establishes that a complaint is time-barred under 

§ 1658(b)(1) if it conclusively shows that either (1) the 

plaintiff could have pleaded an adequate complaint based on 

facts discovered prior to the critical date two years before the 

complaint was filed and failed to do so, or (2) the complaint 

does not include any facts necessary to plead an adequate 

complaint that were discovered following the critical date.

The panel held that defendants’ allegedly fraudulent 

statements, on their own, were insufficient to start the clock 

on the statute of limitations. Instead, Maryland Electrical 

could not have discovered the facts necessary to plead its 

claims, including the “fact” of scienter, until after the 

publication of a Securities and Exchange Commission order 

in 2020. Accordingly, the complaint was timely. 

COUNSEL

Steven F. Hubachek (argued), Darryl J. Alvarado, Rachel A. 

Cocalis, and Darren J. Robbins, Robbins Geller Rudman & 

Dowd LLP, San Diego, California, for Plaintiffs-Appellants. 

Brian M. Lutz (argued), Michael J. Kahn, and Macey L. 

Olave, Gibson Dunn & Crutcher LLP, San Francisco, 

California; Steven M. Schatz (argued), Wilson Sonsini 

Goodrich & Rosati, Palo Alto, California; Sara B. Brody, 

Sidley Austin LLP, San Francisco, California; Robin 

Wechkin, Sidley Austin LLP, Issaquah, Washington; Lissa 

M. Percopo and Andrew D. Ferguson, Gibson Dunn & 

Crutcher LLP, Washington, D.C.; Katherine L. Henderson, 

Wilson Sonsini Goodrich & Rosati, San Francisco, 

California; for Defendants-Appellees.
4 YORK COUNTY V. HP, INC.

OPINION

BYBEE, Circuit Judge:

Plaintiffs alleging securities fraud must bring their 

claims within “2 years after the discovery of the facts” that 

give rise to their complaint. 28 U.S.C. § 1658(b)(1). In this 

case, the district court held that Appellant Maryland 

Electrical failed to meet this timeline because its claim arose 

from allegedly fraudulent statements that were published 

roughly five years before it filed its complaint. We disagree; 

the allegedly fraudulent statements, on their own, were 

insufficient to start the clock on the statute of limitations. 

Instead, we conclude that Maryland Electrical could not 

have discovered the facts necessary to plead its claims until 

after the publication of a Securities and Exchange 

Commission (“SEC”) order in 2020. As a result, we hold 

that Maryland Electrical’s complaint was timely under 

§ 1658(b)(1), and we reverse and remand.

I. BACKGROUND

A. Factual History

In November 2015, the Hewlett-Packard Company split 

into two entities: Appellee HP Inc. (“HP”) and Hewlett 

Packard Enterprise.1 HP kept the Hewlett-Packard 

Company’s consumer electronics and printing business, 

1 These facts are drawn from the complaints filed in this action by 

Maryland Electrical, the lead plaintiff, and York County, the original 

plaintiff. We have also relied on facts in a cease-and-desist order issued 

by the Securities and Exchange Commission and referred to in the 

complaints. For purposes of this appeal, we must accept as true the facts 

alleged in the complaint. See Bafford v. Northrop Grumman Corp., 994 

F.3d 1020, 1025 (9th Cir. 2021).
YORK COUNTY V. HP, INC. 5

whereas Hewlett Packard Enterprise retained the HewlettPackard Company’s corporate-facing technology 

infrastructure and services business. The heart of the newlyformed HP—and the source of most of its profits—is its 

printing supplies business. Generally, HP sells its printers at 

a loss, which it recovers over time through sale of printing 

supplies like toner and ink cartridges. 

During the period relevant to this case, HP sold its 

supplies through a “push model.” Under this model, HP 

offered incentives to “Tier 1” distributors to purchase 

printing supplies. Those Tier 1 distributors, in turn, sold to 

“Tier 2” distributors who sold HP products to other resellers 

or to end users. 

To measure its channel inventory—the total inventory 

that HP and its distributors had in stock—HP created a 

metric called Weeks of Supply (“WOS”). WOS measured 

how many weeks HP could supply its products if sales 

continued at the same pace as that of prior weeks. HP 

calculated WOS by dividing its Tier 1 inventory by the 

average number of units sold in previous weeks. Tier 2 

inventory was excluded from HP’s WOS calculations. 

HP set target ranges for WOS and pressed regional 

managers to stay below the upper end of those ranges. 

Because WOS excluded Tier 2 inventory, sales managers 

could reduce their WOS number by facilitating the sale of 

inventory from Tier 1 distributors to Tier 2 distributors. By 

doing so, managers could boast a WOS below the target 

ceiling even if channel inventory as a whole was increasing.

To shift more inventory from Tier 1 to Tier 2, sales 

managers engaged in two practices: gray marketing and 

pull-ins. Gray marketing involved selling supplies to a 

distributor who would then sell those supplies outside of its 
6 YORK COUNTY V. HP, INC.

assigned territory. These sales, offered at a discount, 

“cannibaliz[ed]” sales from local distributors, who would 

have to lower prices to compete with marked-down goods 

from other territories. Pull-ins, also known as accelerations, 

were steep discounts offered by HP to encourage distributors 

to take additional shipments in a given quarter. These pullins left Tier 2 and other downstream distributors with a full 

inventory at the beginning of the following quarter, deflating 

sales and creating the expectation that HP would offer 

discounts again later in the quarter. Together, these practices 

allowed HP to reach quarterly sales targets to the detriment 

of overall profits. 

HP did not disclose these practices to investors. Nor did 

HP disclose its WOS data, WOS targets, or how it calculated 

WOS. Instead, during calls with investors, HP would merely 

state whether it was within or above its target WOS ranges. 

As the SEC explained, because “HP did not report to the 

market Tier 2 channel inventory[,] . . . disclosures about the 

company’s position relative to its channel inventory ceiling 

only told part of the story regarding HP’s channel health.”

The SEC discovered these practices following a yearslong investigation into HP. As a result of the investigation, 

the SEC issued an order (“SEC Order”) instituting ceaseand-desist proceedings against HP. Issued at the end of 

September 2020, the SEC Order accepted a settlement offer 

from HP, with HP agreeing to pay a $6 million fine without 

admitting or denying the allegations contained in the order. 

Chief among those allegations was that, “[b]etween 

November 2015 and June 2016, HP’s disclosures regarding 

channel inventory and gross margin omitted material 

information . . . causing HP’s disclosures to be incomplete 

and misleading.” Specifically, the SEC highlighted HP’s 

failure to disclose the effects of its gray marketing and pull-
YORK COUNTY V. HP, INC. 7

in practices. The SEC Order also faulted HP for its use of 

the term “channel inventory” in conjunction with its WOS 

metric, finding that this usage implied that WOS “included 

all of HP’s channel inventory and was a measure of HP’s 

overall channel health,” when, in reality, HP “included only 

its Tier 1 channel inventory.” The SEC called “HP’s channel 

inventory disclosures . . . materially misleading.”

B. Procedural History

On November 5, 2020, within six weeks of the issuance 

of the SEC Order, York County, a retirement fund and 

purchaser of HP stock, filed a class complaint against the 

Appellees, HP and a handful of its executives (jointly, 

“HP”). The complaint alleged that HP’s trade practices 

violated § 10(b) of the Securities Exchange Act of 1934, 15 

U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b5. The complaint also alleged that the executive defendants 

violated § 20(a) of the Securities Exchange Act, 15 U.S.C. § 

78t(a). These violations, the complaint alleged, injured 

those who purchased HP common stock from November 6, 

2015 to June 2, 2016, the class period.

York County filed its complaint as a class action under 

the Private Securities Litigation Reform Act (“PSLRA”). 

The PSLRA tasks the district court with designating a lead 

plaintiff. 15 U.S.C. § 78u-4(a)(3)(B). Initially, York County 

sought designation as lead plaintiff. However, in January 

2021, Maryland Electrical moved for appointment as lead 

plaintiff, which the district court granted the following 

month. Maryland Electrical filed a complaint consolidating 

class claims on April 21, 2021. 

HP moved to dismiss on procedural and substantive 

grounds. Procedurally, HP claimed that Maryland 

Electrical’s claims were time-barred by the two-year statute 
8 YORK COUNTY V. HP, INC.

of limitations, 28 U.S.C. § 1658(b)(1), and the five-year 

statute of repose, id. § 1658(b)(2). On the merits, HP moved 

to dismiss the complaint for failing to plead the elements 

necessary to its claim with the particularity required by the 

PSLRA and Federal Rule of Civil Procedure 9(b).

The district court granted the motion to dismiss as timebarred under the statute of limitations. That statute of 

limitations required Maryland Electrical to bring its 

complaint within “2 years after the discovery of the facts 

constituting the violation[s]” that form the basis of its 

securities claims. 28 U.S.C. § 1658(b)(1). The district court 

found that the public statements, loss in profits, and 

reductions in channel inventory at the heart of Maryland 

Electrical’s claims had all taken place by 2016. Thus, the 

district court reasoned, if Maryland Electrical was a 

reasonably diligent plaintiff, it would have discovered the 

operative facts of its complaint in 2016, more than four years 

before it filed its complaint and far beyond the two-year 

statute of limitations. The district court did not address HP’s 

arguments under the statute of repose or Rule 9(b).

After the district court explained that it was granting the 

motion to dismiss on statute of limitations grounds, the 

district court observed in a footnote that HP made some of 

the statements at issue after Maryland Electrical had sold its 

shares of HP stock. Reasoning that a plaintiff cannot be 

harmed by misrepresentations that did not induce the 

purchase or sale of stock, the district court stated that 

Maryland Electrical lacked standing to assert claims for 

misrepresentations that occurred after it sold that last of its 

HP stock. See Shurkin v. Golden State Vintners, Inc., 471 F. 

Supp. 2d 998, 1024 (N.D. Cal. 2006); ER 13.
YORK COUNTY V. HP, INC. 9

II. JURISDICTION AND STANDARD OF REVIEW

The district court had jurisdiction under 28 U.S.C. § 

1331. We have jurisdiction under 28 U.S.C. § 1291. We 

review a district court’s dismissal of a claim on statute of 

limitations grounds de novo. Sharkey v. O’Neal, 778 F.3d 

767, 770 (9th Cir. 2015).

III. DISCUSSION

A. Overview of the Discovery Rule

The statute of limitations at issue is contained in 28 

U.S.C. § 1658(b)(1). It provides that private actions alleging 

securities fraud must be brought no more than “2 years after 

the discovery of the facts constituting the violation” of 

securities laws. The Supreme Court discussed § 1658(b)(1) 

at length in Merck & Co., Inc. v. Reynolds, 559 U.S. 633 

(2010). The facts in Merck are not necessary to understand 

its holding and application to this case. Three points from 

Merck are important here. 

First, Merck reasoned that, by using the word 

“discovery” in § 1658(b)(1), Congress evinced an intent to 

incorporate a “discovery rule” into the statute. Id. at 646. In 

the context of fraud, a discovery rule recognizes that “a 

defendant’s deceptive conduct may prevent a plaintiff from 

even knowing that he or she has been defrauded.” Id. at 644. 

Thus, a discovery rule means that a claim does not accrue 

until “the litigant first knows or with due diligence should 

know facts that will form the basis for an action.” Id.

(quotation and emphasis omitted). The Court concluded that 

“‘discovery’ as used in [§ 1658(b)(1)] encompasses not only 

those facts the plaintiff actually knew, but also those facts a 

reasonably diligent plaintiff would have known.” Id. at 648.
10 YORK COUNTY V. HP, INC.

Second, Merck held that the statute of limitations in § 

1658(b)(1) does not begin to run until after the plaintiff has 

discovered “the facts constituting the violation” and that 

includes the “‘fact’ of scienter.” Id. (quoting 28 U.S.C. § 

1658(b)(1)). To rule otherwise would “frustrate the very 

purpose of the discovery rule” by allowing a defendant to 

avoid liability upon “conceal[ing] for two years that he made 

a misstatement with an intent to deceive.” Id. at 649.

And third, Merck distinguished between the discovery 

rule and inquiry notice. Under an inquiry notice system, a 

claim begins to accrue once “a plaintiff possesses a quantum 

of information sufficiently suggestive of wrongdoing that he 

should conduct a further inquiry.” Id. at 650 (internal 

quotation marks omitted). But the point at which a plaintiff 

knows enough to investigate “is not necessarily the point at 

which the plaintiff would already have discovered the facts 

showing scienter.” If inquiry notice triggered the limitations 

period, the period might run “before ‘discovery’ can take 

place.” Id. at 651. The Court rejected this approach, finding 

the inquiry notice rule incompatible with the statutory 

language that accrual of a claim begins after discovery. Id.

Following Merck, the Second Circuit observed that

Merck left unresolved the question of “how much 

information” a reasonable investor must have about the facts 

of a securities violation “before it is deemed ‘discovered’ for 

purposes of commencing the statute of limitations.” City of 

Pontiac Gen. Employees’ Ret. Sys. v. MBIA, Inc., 637 F.3d 

169, 174 (2d Cir. 2011). As the Second Circuit queried, 

“Are the facts ‘discovered’ when a reasonable investor 

would suspect a violation,” or “[w]hen the reasonable 

investor would become absolutely convinced that the 

violation occurred,” or perhaps “[w]hen the reasonable 

investor could prove in a courtroom that the violation 
YORK COUNTY V. HP, INC. 11

occurred?” Id. Taking cues from Merck’s reference to 

pleading requirements and the “basic purpose of a statute of 

limitations,” the Second Circuit held “that a fact is not 

deemed ‘discovered’ until a reasonably diligent plaintiff 

would have sufficient information about that fact to 

adequately plead it in a complaint.” Id. at 175; see also 

Merck, 559 U.S. at 649 (a § 10(b) claim is not discovered 

until the “plaintiff can set forth facts in the complaint 

showing that it is ‘at least as likely as’ not that the defendant 

acted with the relevant knowledge or intent” (quoting 

Tellabs Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 328 

(2007)). The Third Circuit, as well as district courts within 

our circuit, have adopted this same standard. See, e.g., 

Pension Tr. Fund for Operating Eng’rs v. Mortg. Asset Sec. 

Transactions, Inc., 730 F.3d 263, 275 (3d Cir. 2013); 

Rieckborn v. Jefferies LLC, 81 F. Supp. 3d 902, 915 (N.D. 

Cal. 2015); Stichting Pensioenfonds ABP v. Countrywide 

Fin. Corp., 802 F. Supp. 2d 1125, 1135 (C.D. Cal. 2011);

Orbis Glob. Equity Fund Ltd. v. NortonLifelock Inc., No. 

CV-21-01995, 2023 WL 1800963, at *5–6 (D. Ariz. Feb. 7, 

2023). Although we have recognized the impact of Merck, 

we have not had occasion to address these questions. See 

Strategic Diversity, Inc. V. Alchemix Corp., 666 F.3d 1197, 

1206 (9th Cir. 2012); Betz v. Trainer Wortham & Co., Inc., 

610 F.3d 1169, 1171 (9th Cir. 2010). The parties advocate 

for different applications of the MBIA standard to the facts 

before us, but neither disputes the correctness of MBIA itself. 

We agree with the Second Circuit’s analysis in MBIA 

and adopt its reasoning. Accordingly, we hold that a 

“reasonably diligent plaintiff has not ‘discovered’ one of the 

facts constituting a securities fraud violation until he can 

plead that fact with sufficient detail and particularity to 
12 YORK COUNTY V. HP, INC.

survive a 12(b)(6) motion to dismiss.” MBIA, 637 F.3d at 

175.

B. Discovery Rule at the Motion to Dismiss

We now turn to the question of what a defendant must 

show at the motion-to-dismiss stage to show that a claim is 

untimely under § 1658(b)(1). Maryland Electrical argues 

that dismissal under § 1658(b)(1) is only appropriate when 

the defendant can “conclusively show” that the plaintiff had 

discovered its claim more than two years before filing its 

initial complaint. See Drew v. Equifax Info. Servs., LLC, 690 

F.3d 1100, 1111 (9th Cir. 2012). To meet this burden, the 

defendant would have to show the precise date that the 

plaintiff learned of the facts necessary to support its claim. 

Otherwise, the defendant cannot show that the plaintiff has 

discovered its claim, and, consequently, that the statute of 

limitations started to run. Because the district court did not 

identify such a date, Maryland Electrical asks that we 

remand to the district court to do so.

We find Maryland Electrical’s reading of § 1658(b)(1) 

overly rigid. See, e.g., Merck, 559 U.S. at 653–54 (rejecting 

a statute of limitations defense without determining a precise 

date when the plaintiffs “discovered” the facts necessary to 

their claim). We think that Merck provides a better measure. 

There, to evaluate whether the plaintiffs’ complaint was 

time-barred, the Court first identified what it called “the 

critical date,” or the date “two years before th[e] complaint 

was filed.” Merck, 559 U.S. at 638. Next, the Court 

determined which facts2 the complaint alleged occurred 

2 The Court also took into account the timing of events that permitted 

discovery of other facts. See id. at 641–42 (describing the publication of 
YORK COUNTY V. HP, INC. 13

before and after that date. Id. at 638–44. And finally, after 

laying some legal groundwork, id. at 644–53, the Court 

asked whether “the facts constituting the violation” were 

discoverable prior to the critical date, id. at 653–54. In sum, 

rather than determine exactly when the plaintiffs discovered 

the facts necessary to plead their complaint, the Court 

evaluated whether events preceding the critical date were 

sufficient to allege “the facts constituting the violation.” 28 

U.S.C. § 1658(b)(1). See 559 U.S. at 654 (holding that 

because no event preceding the critical date constituted 

“discovery” of facts necessary to bring the complaint, the 

plaintiffs’ suit was timely).

The Merck approach aligns with bedrock pleading 

principles. Those principles permit the dismissal of a claim 

under § 1658(b)(1) without selecting a precise date of 

discovery. Though “ordinarily, affirmative defenses may 

not be raised on a motion to dismiss,” we may “consider an 

affirmative defense on a motion to dismiss when there is 

some obvious bar to securing relief on the face of the 

complaint.” U.S. Commodity Futures Trading Comm’n v. 

Monex Credit Co., 931 F.3d 966, 972–73 (9th Cir. 2019) 

(cleaned up and internal quotation marks omitted). “In other 

words, dismissal based on an affirmative defense is 

permitted when the complaint establishes the defense.” Id. 

A complaint that pleads a securities fraud claim based only 

on conduct discovered more than two years prior to the filing 

of the complaint necessarily establishes a § 1658(b)(1) 

statute of limitations defense. See Zarecor v. Morgan 

Keegan & Co., Inc., 801 F.3d 882, 887 (8th Cir. 2015) 

(declining to “pinpoint exactly when a reasonably diligent 

articles in the Wall Street Journal that permitted discovery of possible 

wrongdoing as “important events that occurred after the critical date”).
14 YORK COUNTY V. HP, INC.

plaintiff would have discovered ‘the facts constituting the 

violation’” when it was clear from the complaint that the 

plaintiffs had done so more than two years before bringing 

suit); FirstBank Puerto Rico, Inc. v. La Vida Merger Sub, 

Inc., 638 F.3d 37, 40 (1st Cir. 2011) (“As Firstbank’s own 

allegations leave no doubt that its suit is time-barred, the 

judgment of dismissal is affirmed.”). Thus, a defendant 

establishes that a complaint is time-barred under § 

1658(b)(1) if it conclusively shows that either (1) the 

plaintiff could have pleaded an adequate complaint based on 

facts discovered prior to the critical date and failed to do so, 

or (2) the complaint does not include any facts necessary to 

plead an adequate complaint that were discovered following 

the critical date.

C. Whether Maryland Electrical’s Claim Is Barred by § 

1658(b)(1)

Maryland Electrical filed its complaint on April 21, 

2021, making April 21, 2019 the critical date for our 

inquiry.3 If Maryland Electrical knew or reasonably could 

have known of the elements of its claim before this critical 

date, its claim is untimely under § 1658(b)(1). On the other 

hand, if any element of the claim was discovered after the 

critical date, then the claim is timely. 

As the Court did in Merck, 559 U.S. at 638–44, we divide 

the facts alleged to have occurred before the critical date and 

those alleged to have occurred after it. The complaint 

3 In its briefing, Maryland Electrical contends that the relevant filing date 

is when York County—not Maryland Electrical—filed its complaint. 

Though this question is vital to determining whether the complaint is 

barred by the statute of repose, we need not answer it here because both 

filing dates are within two years of the date the SEC Order was issued.
YORK COUNTY V. HP, INC. 15

alleges that HP made all the false statements and 

misrepresentations at issue between November 2015 and 

July 2016, well before the critical date. In September 2020, 

after the critical date of April 2019, the SEC issued its order 

instituting cease and desist proceedings against HP.

According to Maryland Electrical, the SEC Order put 

HP’s prior statements in a new context, revealing that 

ostensibly innocuous statements were actually intentional 

misrepresentations. Simply put, Maryland Electrical claims 

that it did not have information to plead scienter until after 

the SEC Order was issued. Thus, according to Maryland 

Electrical, it did not “discover[] . . . the facts constituting the 

violation” until after the critical date. 28 U.S.C. § 

1658(b)(1).

In its order dismissing Maryland Electrical’s complaint, 

the district court gave only passing mention to the SEC 

Order. Rather than discuss the effect of the SEC Order, the 

district court focused on HP’s conduct that preceded the 

critical date. This misses Maryland Electrical’s real 

argument—that its claim was not “discovered” until the 

issuance of the SEC Order provided sufficient evidence of 

scienter.

Because Maryland Electrical has pleaded facts that postdate the critical date, HP has two ways to show that 

Maryland Electrical’s claim is barred by § 1658(b)(1). First, 

HP can show that Maryland Electrical could have pleaded its 

claim based solely on things that it knew or should have 

known prior to the critical date. See Merck, 559 U.S. at 653–

54. Or, in the alternative, HP can show that the SEC Order 

provided no information necessary to Maryland Electrical’s 

claim. 
16 YORK COUNTY V. HP, INC.

HP does not really attempt the first approach—showing 

that Maryland Electrical had the facts necessary to plead its 

claims prior to the critical date. Rather, like the district court 

opinion, HP recites statements preceding the critical date 

that Maryland Electrical claims were false or misleading. 

But out of context, these statements are innocuous. For 

example, one set of statements involve HP executives telling 

investors that they monitored Tier 1 and Tier 2 channel 

inventory levels and that those levels fell within target WOS 

ranges. Without additional information, these statements 

seem like standard assurances to shareholders; they could 

not form the basis of a claim for securities fraud. It is only 

after learning that Tier 2 channel inventory was excluded 

from HP’s WOS calculations that the misleading nature of 

these statements comes into view. It was the SEC Order that 

revealed the extent of HP’s use of gray marketing and pullins and that HP had “omitted material information regarding 

the impact of [these] practices on [the WOS] metrics, 

causing HP’s disclosures to be incomplete and misleading.” 

HP does not explain how Maryland Electrical could have 

known of these allegedly fraudulent practices prior to the 

critical date. Nor does HP explain how Maryland Electrical 

could have pleaded scienter without discovering these 

practices. Thus, HP has failed to show that Maryland 

Electrical could have pleaded an adequate complaint prior to 

the critical date. 

For the same reasons, HP fails to show that the SEC 

Order did not provide information necessary for Maryland 

Electrical to plead an adequate complaint. HP claims that 

the SEC Order actually undermines Maryland Electrical’s 

complaint because it alleges only non-fraud violations and 

did not find any executives acted with scienter. But the 

SEC’s decision not to charge a defendant with fraud does not 
YORK COUNTY V. HP, INC. 17

“hurt[]” a plaintiff’s “ability to plead a strong inference of 

scienter.” In re VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 

694, 707 n.5 (9th Cir. 2012) (internal quotation marks 

omitted). The order claims that HP disclosed information 

about its supply channel health that contradicted its own 

internal data. The disclosure of information that contradicts 

internal data creates a “strong inference” that HP 

“knowingly misled” the public as to the state of the 

company. Reese v. Malone, 747 F.3d 557, 572 (9th Cir. 

2014), overruled on other grounds by City of Dearborn 

Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc., 

856 F.3d 605 (9th Cir. 2017) (en banc) (internal quotation 

marks omitted). Although other information in the SEC 

Order could suggest that HP executives lacked scienter, such 

facts are irrelevant at this stage, where we must accept 

Maryland Electrical’s allegations as true. See Verifone, 704 

F.3d at 707 n.5; see also Tellabs, 551 U.S. at 524 (“The 

inference that the defendant acted with scienter need not be 

irrefutable . . . or even the most plausible of competing 

inferences.” (internal quotation marks omitted)). What 

matters is that Maryland Electrical has plausibly alleged that 

the SEC Order provided facts and context without which it 

could not have otherwise pleaded scienter.

We conclude that HP has failed to meet its burden to 

show that Maryland Electrical discovered the facts 

constituting its claims more than two years prior to the filing 

of its complaint. Thus, the district court erred in dismissing 

Maryland Electrical’s complaint on statute of limitations 

grounds.
18 YORK COUNTY V. HP, INC.

***

We decline to rule on Maryland Electrical’s standing as 

lead plaintiff,4 the statute of repose or the adequacy of 

Maryland Electrical’s complaint. See Planned Parenthood 

of Greater Wash. and N. Idaho v. U.S. Dep’t of Health & 

Hum. Servs., 946 F.3d 1100, 1111 (9th Cir. 2020) (“In 

general, an appellate court does not decide issues that the 

trial court did not decide.”). We express no opinion on those 

issues and leave them for the district court to address in the 

first instance. 

IV. CONCLUSION

For the foregoing reasons, we reverse the district court 

order and remand for further proceedings consistent with this 

opinion.

REVERSED and REMANDED.

4 In a footnote, the district court stated that Maryland Electrical lacks 

standing to challenge statements that HP made after Maryland Electrical 

had sold its HP shares. But because this footnote followed the district 

court’s dismissal of Maryland Electrical’s entire complaint, the footnote 

did not have the effect of dismissing any claims. We therefore consider 

the footnote “mere dicta.” United States v. Charette, 893 F.3d 1169, 

1174 (9th Cir. 2018) (quoting United States v. Henderson, 961 F.2d 880, 

882 (9th Cir. 1992)).