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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

SAN FRANCISCO REGIONAL CENTER 

LLC, et al.,

Defendants.

Case No. 17-cv-00223-RS 

ORDER DENYING MOTION TO 

DISMISS

Defendant Comprehensive Care Of Oakland, L.P. and its general partner, defendant 

Comprehensive Care Of California, LLC, (collectively, “Compcare”) move to dismiss two of the 

four claims for relief in the complaint brought against them and numerous other defendants by the 

Securities and Exchange Commission (“SEC”). Pursuant to Civil Local Rule 7-1(b), the matter is 

suitable for disposition without oral argument, and the hearing set for May 18, 2017 is vacated. 

The motion will be denied.

The general background of this action has been set forth in a prior order and will not be 

recounted here. Compcare seeks dismissal of the first two claims for relief, both of which allege

violations of §10(b) of the Exchange Act and Rule 10b-5. A prima facie claim for a violation of § 

10(b) of the Exchange Act and Rule 10b-5 has five elements: “(1) a material misrepresentation or 

omission of fact, (2) scienter, (3) a connection with the purchase or sale of a security, (4) 

transaction and loss causation, and (5) economic loss.” Zucco Partners, LLC v. Digimarc Corp., 
ORDER DENYING MOTION TO DISMISS

CASE NO. 17-cv-00223-RS

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United States District Court

Northern District of California

552 F.3d 981, 990 (9th Cir. 2009). The pleading of such claims must also satisfy the particularity

requirements of Rule 9 of the Federal Rules of Civil Procedure. See SEC v. Berry, 580 F. Supp. 

2d 911, 920 (N.D. Cal. 2008).1

Compcare contends the SEC has not pleaded sufficient facts showing that Compcare—as 

opposed to other defendants—engaged in any prohibited conduct, and that the claims against it fail 

under both Rule 12(b)(1) and Rule 9. Compcare’s argument, however, is premised on 

disregarding the extensive allegations of conduct undertaken by defendant Thomas Henderson in 

connection with, and as a manager of, Compcare. In addition to general allegations describing the 

overall alleged scheme, which included Compcare, paragraphs 58-64, pages 12-15, of the 

complaint focus on Compcare specifically. 

Compcare insists these alleged wrongful acts cannot be imputed to it because Henderson 

was effectively a “rogue agent” acting adversely to Compcare’s interest. Compcare also points to 

the rule that in the context of a fraud suit involving multiple defendants, a plaintiff must, at a 

minimum, “identif[y] the role of [each] defendant [ ] in the alleged fraudulent scheme.” Swartz v. 

KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007).

Compcare’s reliance on limitations on “group pleading” is unavailing. If the allegations 

regarding Henderson’s conduct taken in connection with Compcare are attributable to it, there is 

no question that Compcare’s “role” in the scheme is adequately delineated. Because Compcare’s 

attempt to distance itself from Henderson by declaring him a “rogue” agent does not present an 

issue that can be adjudicated at the pleading stage, those allegations are indeed attributable to 

Compcare. Accordingly, the motion to dismiss must be denied.

 

1 On reply, Compcare acknowledges that the heightened standard for pleading scienter under the 

Private Securities Litigation Reform Act, 15 U.S.C. § 78u–4(b)(2), does not apply here, where the 

plaintiff is the SEC. See Berry, 580 F. Supp. 2d at 920-21.
ORDER DENYING MOTION TO DISMISS

CASE NO. 17-cv-00223-RS

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United States District Court

Northern District of California

IT IS SO ORDERED.

Dated: May 15, 2017

______________________________________

RICHARD SEEBORG

United States District Judge