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NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GREAT PACIFIC SECURITIES, et al., 

Plaintiffs-Appellants

 v. 

BARCLAYS CAPITAL, INC., et al., 

Defendants-Appellees. 

No. 16-56804

D.C. No. 8:14-cv-01210-DSF-SH

MEMORANDUM*

On Appeal from the United States District Court

for the Central District of California

Dale S. Fischer, District Judge, Presiding

Argued and Submitted April 13, 2018

San Francisco, California

Before: BEA and MURGIA, Circuit Judges, and MOLLOY, ** District Judge.

This case concerns claims by Plaintiff Great Pacific Securities (“Great 

Pacific”) that Barclays Capital Inc. (“Barclays”) made a series of fraudulent 

misrepresentations and omissions regarding its Liquidity Cross (“LX”) dark pool. 

Dark pools are private stock exchanges where clients can trade securities in real time,

 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

** The Honorable Donald W. Molloy, United States District Judge for the 

District of Montana, sitting by designation. 

FILED

JUL 30 2018

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
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without contemporaneously disclosing information to the public. Dark pools have 

gained popularity as institutional traders seek to avoid computerized High Frequency 

Traders (“HFTs”), which use public information about public trades to execute 

thousands of trades a second before the publicly known trades are fully executed, to

take advantage of slower moving traders. HFTs skim information off publicly 

known buy and sell orders before those orders have been executed and use that 

information to profit by “trading ahead” of the publicly known trades to buy stocks 

that the HFTs know will appreciate due to a yet unfilled, but publicly known, buy 

order.

According to Great Pacific, one of Barclays’ customers, Barclays marketed 

LX and other various trading tools to institutional investors as a means to avoid these 

“aggressive” HFTs. Great Pacific alleges that, in fact, Barclays misrepresented both 

the number of aggressive HFTs trading in LX and its ability and intent to police LX 

for aggressive HFT behavior. According to Great Pacific, these misrepresentations 

caused institutional investors to execute trades in LX and pay higher prices on 

purchases, receive lower prices on sales, and pay fees to Barclays when they would 

not have otherwise. 

Great Pacific filed a class action lawsuit in the District Court for the Central 

District of California on behalf of itself and all other similarly-situated traders 

alleging state law claims for concealment, violation of California’s Unfair 
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Competition Law (the “UCL”), Cal. Bus. & Prof. Code §§ 17200210, and violation 

of California’s False Advertising Law (the “FAL”), see Cal. Bus. & Prof. Code 

§§ 17500509. The lawsuit was transferred to the Southern District of New York 

as part of a multi-district litigation against Barclays. In the Southern District of New 

York, Great Pacific’s first amended complaint (“FAC”) was dismissed without 

prejudice for failure to state a claim. The case was then transferred back to the 

Central District, where Great Pacific filed a second amended complaint (“SAC”) and 

then filed the operative third amended complaint (the “TAC”). Barclays moved to 

dismiss the TAC and the district court granted the motion with leave to amend. Great 

Pacific declined the opportunity to amend the TAC and appealed to this court. 

We review de novo a district court’s decision to grant a motion to dismiss for 

failure to state a claim. Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 

(9th Cir. 2012). “To survive a motion to dismiss, a complaint must contain sufficient 

factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). To 

plead a claim for fraud with particularity, as required by Rule 9(b), a party’s 

“[a]verments of fraud must be accompanied by ‘the who, what, when, where, and 

how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 

1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). 

The plausibility standard of Rule 8 also applies to cases subject to Rule 9(b). See 
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Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 

2011).

1. The TAC did not state a claim for concealment. Under California law, 

“[c]oncealment is a species of fraud . . . .” Moncada v. W. Coast Quartz Corp., 164 

Cal. Rptr. 3d 601, 607 (Ct. App. 2013). “As with all fraud claims, the necessary 

elements of a concealment/suppression claim consist of ‘(1) misrepresentation (false 

representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); 

(3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) 

resulting damage.’” Hoffman v. 162 N. Wolfe LLC, 228 Cal. App. 4th 1178, 1185–

86 (2014), as modified on denial of reh’g (Aug. 13, 2014) (quoting Alliance Mortg.

Co. v. Rothwell, 10 Cal.4th 1226, 1239 (1995)). Because concealment requires the 

allegation of fraud, the circumstances of the fraud are subject the heightened 

pleading standard established by Rule 9(b) and must be pleaded with particularity. 

See Vess, 317 F.3d at 1103.

The district court correctly found that the TAC failed to plead reliance with 

particularity. Specifically, the TAC failed to plead that Great Pacific received and 

was aware of the representations regarding LX which it claims were false. See 

Slakey Bros. Sacramento, Inc. v. Parker, 265 Cal. App. 2d 204, 208 (1968) (stating 

that a plaintiff “cannot be defrauded by misrepresentations which never reach him 

and of which he had no knowledge at the time of his loss”). With the exception of 
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one iteration of a pitchbook distributed by Barclays to its clients, the TAC fails even 

to allege that Great Pacific received the specific marketing materials and 

representations cited by the TAC. With respect to the one pitchbook the TAC states 

Great Pacific received, the TAC fails to plead whether anyone at Great Pacific read 

the pitchbook or how Great Pacific personnel relied on the pitchbook. Thus, the 

TAC failed to plead with particularity the “who, what, when, where, and how” of its 

reliance. See Vess, 317 F.3d at 1103, 1106.

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2. As the district court held, Great Pacific’s FAL and UCL claims based on 

Barclays’ alleged misrepresentations fail for the same reasons as its concealment 

claim. The FAL makes it unlawful for any person to “induce the public to enter into 

any obligation” based on a statement that is “untrue or misleading, and which is 

known, or which by the exercise of reasonable care should be known, to be untrue 

or misleading.” Cal. Bus. & Prof. Code § 17500. The UCL is intended “to protect 

both consumers and competitors by promoting fair competition in commercial 

markets for goods and services.” Kasky v. Nike, Inc., 27 Cal. 4th 939, 950 (2002). 

Further, the UCL defines “unfair competition” as “any unlawful, unfair or fraudulent 

business act or practice and unfair, deceptive, untrue or misleading advertising and 

 

1 The TAC also claims that Barclays defrauded its customers by failing 

to disclose various regulatory violations. This claim fails because the TAC does not 

adequately allege that Barclays knew that it was omitting material information, that 

it intended to deceive its clients, or that Great Pacific would have acted differently 

had it known of the regulatory violations. 
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any act prohibited by [the false advertising law (§ 17500 et seq.)].” Id.(quoting Cal. 

Bus. & Prof. Code § 17200). Violations of the FAL necessarily support a UCL 

claim. Id. at 950. Plaintiffs alleging claims under the FAL and UCL are required to 

plead and prove actual reliance on the misrepresentations or omissions at issue. See 

Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 326–27 (2011). Just like Great 

Pacific’s concealment claim, these allegations are subject to Rule 9(b)’s particularity 

standard. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). As 

discussed above, the TAC fails to plead reliance with particularity.2

3. The district court did not err in denying Great Pacific’s motion for discovery

after it filed its SAC. “[P]laintiffs must satisfy the pleading requirements of Rule 

8 before the discovery stage, not after it.” Mujica v. AirScan Inc., 771 F.3d 580, 593

(9th Cir. 2014) (emphasis in the original). It is not too much to ask that a plaintiff 

be able to allege he read and relied on the claimed misleading information before 

requiring the defendant to disclose what it knows about which plaintiff relied on its 

communications. As a result, the district court did not err in denying Great Pacific 

discovery until Great Pacific filed a well-pleaded complaint that satisfied Rule 8’s 

requirements. See id.

 

2 Great Pacific’s UCL claim based on Barclays’ alleged violation of 

various regulations fails because Great Pacific failed to allege that it suffered an 

economic injury due to these violations, as required to state a UCL claim. See 

Kwikset, 51 Cal. 4th at 320 (holding that economic injury caused by the unfair 

business practice is a necessary element of a UCL claim).
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In light of the above, we AFFIRM the district court’s judgment dismissing 

Great Pacific’s claims and denying Great Pacific’s request for discovery.