FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: CCIV / LUCID MOTORS 

SECURITIES LITIGATION, 

______________________________ 

MAX ROYAL LLC; SEUNG R. LEE; 

HEE K. LEE; AARON LAN; 

PARADIGM BUSINESS PARK LLC; 

SICHAO XU, 

Plaintiffs-Appellants, 

 v. 

ATIEVA, INC., DBA Lucid Motors; 

PETER RAWLINSON, 

Defendants-Appellees.

No. 23-16049 

D.C. No. 4:21-cv09323-YGR 

OPINION

Appeal from the United States District Court

for the Northern District of California

Yvonne Gonzalez Rogers, District Judge, Presiding

Argued and Submitted June 13, 2024

San Francisco, California

Filed August 8, 2024
2 MAX ROYAL LLC V. ATIEVA, INC.

Before: Ronald M. Gould, Richard C. Tallman, and Ryan 

D. Nelson, Circuit Judges.

Opinion by Judge Gould

SUMMARY*

Securities Fraud

The panel affirmed, on an alternative ground, the district 

court’s dismissal of a securities fraud class action under 

§§ 10(b) and 20(a) of the Exchange Act and SEC Rule 10b5.

Plaintiff-investors alleged that electric car company 

Atieva, Inc., d/b/a Lucid Motors, and Lucid CEO Peter 

Rawlinson made misrepresentations about Lucid that 

affected the stock price of Churchill Capital Corp. IV, or 

CCIV, a special purpose acquisition company in which 

plaintiffs were shareholders and that later acquired 

Lucid. The district court held that plaintiffs had statutory 

standing but dismissed the action for failure to allege a 

material misrepresentation.

The panel affirmed on the ground that plaintiffs lacked 

Section 10(b) standing under the Birnbaum Rule, which 

confines standing to “purchasers or sellers of the stock in 

question.” Agreeing with the Second Circuit, the panel held 

that, in a case of alleged misstatements made in advance of 

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

been prepared by court staff for the convenience of the reader.
MAX ROYAL LLC V. ATIEVA, INC. 3

an anticipated merger, purchasers of a security of an 

acquiring company do not have standing under § 10(b) to sue 

the target company for alleged misstatements that the target 

company made about itself prior to the merger between the 

two companies.

COUNSEL

Jake Bissell-Linsk (argued), Carol C. Villegas, and 

Guillaume Buell, Labaton Keller Sucharow LLP, New York, 

New York; Jeremy A. Lieberman and Brenda F. Szydlo, 

Pomerantz LLP, New York, New York; Shannon L. 

Hopkins, Levi & Korsinsky LLP, New York, New York; for 

Plaintiffs-Appellants.

Brian M. Burnovski (argued), Daniel J. Schwartz, and ChuiLai Cheung, Davis Polk & Wardwell LLP, New York, New 

York; Neal Potischman, Davis Polk & Wardwell LLP, 

Menlo Park, California; for Defendants-Appellees.
4 MAX ROYAL LLC V. ATIEVA, INC.

OPINION

GOULD, Circuit Judge:

Plaintiff-investors brought this securities fraud class 

action against auto manufacturer Atieva, Inc., d/b/a Lucid 

Motors (“Lucid”) and Lucid CEO Peter Rawlinson 

(together, “Defendants”), alleging that Defendants made 

misrepresentations about Lucid that affected the stock price 

of a company in which Plaintiffs were shareholders and that 

later acquired Lucid. Defendants moved to dismiss 

Plaintiffs’ action under Federal Rule of Civil Procedure 

(“FRCP”) 12(b)(6), contending that Plaintiffs lacked 

standing and that Plaintiffs had failed to allege a material 

misrepresentation. The district court held that Plaintiffs had 

standing but granted Defendants’ motion to dismiss on the 

grounds that Plaintiffs had not sufficiently alleged 

materiality. We have jurisdiction under 28 U.S.C. § 1291, 

and we affirm the dismissal of the suit on the alternative

ground that Plaintiffs lack standing.

I. BACKGROUND

A. Facts

Before February 2021, Lucid was a private company in 

the business of manufacturing electric cars. On February 22, 

2021, Lucid was acquired by a nonparty company, Churchill 

Capital Corporation IV (“CCIV”), and then these two 

companies merged into one. CCIV was a “special purpose 

acquisition company” (“SPAC”). SPACs are publicly 
MAX ROYAL LLC V. ATIEVA, INC. 5

traded companies created for the sole purpose of acquiring 

another company within a limited window of time.1

Merger negotiations between Lucid and CCIV occurred

between January 11 and February 22, 2021. During that 

time, it was widely speculated that CCIV would acquire 

Lucid, based on extensive reporting in the financial press. 

However, neither CCIV nor Lucid spoke publicly about the 

merger negotiations during this time. On February 5 and 12, 

2021, Lucid CEO Rawlinson made misrepresentations about 

Lucid’s ability to meet certain production targets. In an

interview on CNBC, Rawlinson confirmed the interviewer’s 

understanding that “[Lucid] expect[ed] to produce 6,000 to 

7,000 units [in 2021]” and represented that “we’ve already 

built our first phase of our factory in Arizona, which is good 

for 34,000 units.” In a pre-recorded video aired by CNBC, 

Rawlinson stated that Lucid’s cars were ready for production 

and would “be launching this year, this Spring [2021].”

Plaintiffs purchased CCIV stock at various times after 

Rawlinson’s public statements but before the merger was 

announced. Plaintiffs did not purchase or own any interest 

in Lucid, because Lucid was a privately held company 

before the merger.

On the day that the merger was announced, Defendants 

first publicly disclosed that Lucid expected to produce only

577 cars in 2021, far lower than the 6,000-7,000 Rawlinson 

had estimated days earlier in his televised February 5 CNBC

appearance. Defendants also at that time disclosed that 

production would begin months later than Rawlinson’s 

1 How special purpose acquisition companies (SPACs) work, 

PRICEWATERHOUSECOOPERS LLP, 

https://www.pwc.com/us/en/services/consulting/deals/library/spacmerger.html (last visited May 14, 2024).
6 MAX ROYAL LLC V. ATIEVA, INC.

previous projection. CCIV’s stock price plunged in response 

to the unexpectedly grim production news.

B. District Court Proceedings

Plaintiffs filed suit, alleging that Defendants’

misrepresentations and their corresponding effect on 

CCIV’s stock price amounted to securities fraud actionable 

under Sections 10(b) and 20(a) of the Exchange Act and SEC 

Rule 10b-5. 

Defendants moved to dismiss Plaintiffs’ claims on the 

grounds that Plaintiffs lacked standing and had failed to state 

a claim under FRCP 12(b)(6). In re CCIV, Case No. 4:21-

cv-9323-YGR, 2023 WL 325251, at *1 (N.D. Cal. Jan. 11, 

2023). On standing, Defendants “assert[ed] that to have 

Section 10(b) standing, plaintiffs must allege the defendant 

made misrepresentations about the security actually 

purchased or sold by the plaintiffs.” Id. at *4. On the merits, 

Defendants contended that Plaintiffs had not adequately 

alleged a misrepresentation, scienter, or materiality. Id. at 

*1.

The district court first held that Plaintiffs had standing. 

Id. at *10. The district court agreed with Plaintiffs’ 

construction of the legal standard for Section 10(b) standing, 

concluding that a plaintiff has standing if he purchased or 

sold a security affected by a defendant’s alleged 

misrepresentations, even if the purchased security was not 

the subject of the misrepresentations. Id.

Proceeding to the merits, the district court concluded that 

Plaintiffs had not adequately pleaded that Defendants’

alleged misrepresentations were material. Id. at *10-11. The 

district court granted Plaintiffs leave to amend their 

complaint to add materiality allegations. Id. at *11. But 
MAX ROYAL LLC V. ATIEVA, INC. 7

when Plaintiffs later moved to amend, the district court 

denied the proposed amendments as futile, concluding that 

Plaintiffs had not plausibly alleged materiality. The district 

court dismissed the action with prejudice, and Plaintiffs 

timely appealed both the district court’s initial dismissal 

order and its final dismissal order denying leave to amend.

II. ANALYSIS

A. Standard of Review

“A dismissal for failure to state a claim pursuant to 

Federal Rule of Civil Procedure 12(b)(6) is reviewed de 

novo. All allegations of material fact in the complaint are 

taken as true and construed in the light most favorable to the 

plaintiff.” Stoner v. Santa Clara Cnty Office of Educ., 502 

F.3d 1116, 1120 (9th Cir. 2007) (internal citations and 

quotation marks omitted). Likewise, a district court’s 

decision regarding standing is reviewed de novo. Fair Hous. 

of Marin v. Combs, 285 F.3d 899, 902 (9th Cir. 2002).

B. Standing

1. Legal Standard

“Section 10(b) of the Exchange Act bars conduct 

involving manipulation or deception, manipulation being 

practices that are intended to mislead investors by artificially 

affecting market activity, and deception being 

misrepresentation, or nondisclosure intended to deceive.” 

Desai v. Deutsche Bank Sec. Ltd., 573 F.3d 931, 938 (9th 

Cir. 2009) (quoting Ganino v. Citizens Utils. Co., 228 F.3d 

154, 161 (2d Cir. 2000)); 15 U.S.C. § 78j. Section 20(a) of 

the Exchange Act imposes secondary liability on controlling 

persons involved in a primary Section 10(b) violation. In re 

Genius Brands Int’l, Inc. Sec. Litig., 97 F.4th 1171, 1180 

(9th Cir. 2024); 15 U.S.C. § 78t(a).
8 MAX ROYAL LLC V. ATIEVA, INC.

Section 10(b) gives the SEC rulemaking power to 

prohibit the use of “manipulative or deceptive device[s] or 

contrivance[s] . . . in connection with the purchase or sale of 

any security.” 15 U.S.C. 78j(b). SEC Rule 10b-5, 

promulgated thereunder, states: 

It shall be unlawful for any person, directly 

or indirectly, by the use of any means or 

instrumentality of interstate commerce, or of 

the mails or of any facility of any national 

securities exchange . . . .

(a) To employ any device, scheme, or 

artifice to defraud, [or]

(b) To make any untrue statement of a 

material fact or to omit to state a material 

fact necessary in order to make the 

statements made, in the light of the 

circumstances under which they were 

made, not misleading . . .

in connection with the purchase or sale of 

any security.

17 C.F.R. 240.10b-5.

Although the text of Section 10(b) does not provide a 

private right of action, courts create one, and the Supreme 

Court—wary of such judicially created causes of action—

has cautioned against expanding it further. See Stoneridge 

Partners, LLC v. Sci. Atlanta, Inc., 552 U.S. 148, 164-65 

(2008) (“Congress did not enact [the right of action] in the 

text of the relevant statutes. . . . [which] “caution[s] against 

its expansion.”) To limit the class of plaintiffs who may 

bring an action under Section 10(b), the Supreme Court has 
MAX ROYAL LLC V. ATIEVA, INC. 9

adopted the “purchaser-seller rule” (also known as the 

“Birnbaum Rule”), which confines standing to “purchasers 

or sellers of the stock in question.” Blue Chip Stamps v. 

Manor Drug Stores, 421 U.S. 723, 742 (1975). The stock in 

question is “the security to which the prospectus, 

representation, or omission relates.” Id. at 747. The 

Supreme Court recognized that the Birnbaum Rule’s bright 

line could be fairly criticized as “an arbitrary restriction 

which unreasonably prevents some deserving plaintiffs from 

recovering damages.” Id. at 738. But the Court was 

persuaded by the “countervailing advantages” of the brightline rule—namely, that it prevented “endless case-by-case 

erosion” of the limitations on standing that would result from

courts’ engaging in a “shifting and highly fact-oriented 

disposition of” whether plaintiffs have standing. Id. at 739, 

755.

The Second Circuit is the only circuit court to have 

considered Section 10(b) standing in the context we face 

today: alleged misstatements made in advance of an 

anticipated merger. In Menora, the Second Circuit held that 

“purchasers of a security of an acquiring company do not 

have standing under Section 10(b) to sue the target company 

for alleged misstatements the target company made about 

itself prior to the merger between the two companies.” 

Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd., 54 

F.4th 82, 88 (2d Cir. 2022); accord Ontario Pub. Serv. Emps.

Union Tr. Fund v. Nortel Networks Corp., 369 F.3d 27, 34

(2d Cir. 2004). Menora rejected the plaintiffs’ contention 

that “they [had] standing because there was a sufficiently 

‘direct relationship’ between [the target’s] misstatements 

about itself and the price of [the acquirer’s] shares.” 

Menora, 54 F.4th at 86. The Second Circuit reasoned that 

adopting “Plaintiffs’ ‘direct relationship’ test” would result 
10 MAX ROYAL LLC V. ATIEVA, INC.

in a “‘shifting and highly fact-oriented’ inquiry . . . requiring 

courts to determine whether there was a sufficiently direct 

link between one company’s misstatements and another 

company’s stock price.” Id. at 87 (quoting Blue Chip, 421 

U.S. at 755). Menora instead reaffirmed Blue Chip’s brightline rule: that standing depends on “whether the plaintiff 

bought or sold the securities about which the misstatements 

were made.” Id. at 88 (citing Nortel, 369 F.3d at 32).

Here, the district court considered and expressly rejected 

the reasoning of the Second Circuit, noting that the Ninth 

Circuit had not yet spoken on the limits of Section 10(b) 

standing. We now address that issue and agree with the 

Second Circuit that the Birnbaum Rule and Blue Chip limit 

Section 10(b) standing to purchasers and sellers of the 

security about which the alleged misrepresentations were 

made. Thus, we endorse and apply the bright-line rule that 

we think is commanded by Supreme Court precedent in Blue 

Chip.

As noted above, Blue Chip limits standing to “purchasers 

or sellers of the stock in question.” 421 U.S. at 742. 

Plaintiffs contend that the “stock in question” is “the security 

about which Plaintiffs allege injury,” and not necessarily a 

security of the company that made the alleged 

misrepresentations. Plaintiffs further contend that the “Blue 

Chip rule merely checks whether plaintiffs allege injury 

from the purchase or sale of a security” and that standing is 

determined based on “whether the security plaintiff 

purchased is sufficiently connected to the misstatement.”

For several reasons, we conclude that Plaintiffs’

construction of standing is inconsistent with Blue Chip. 

First, Blue Chip says that the “stock in question” means the 

security about which the alleged misrepresentations were 
MAX ROYAL LLC V. ATIEVA, INC. 11

made. The Supreme Court held that a plaintiff must 

demonstrate he purchased or sold “the securities described 

in the allegedly misleading prospectus” and must allege that 

he was misled by “the representations contained in” “a 

prospectus of the issuer.” Id. at 727, 746. The Court also 

described the “virtue of the Birnbaum rule,” adopted by Blue 

Chip, as “limit[ing] the class of plaintiffs to those who have 

at least dealt in the security to which the prospectus, 

representation, or omission relates.” Id. at 747.

Plaintiffs ignore the plain language of Blue Chip and 

assert that Section 10(b) standing extends to any stockowner 

who claims that the misstatements of another person or 

company negatively affected the value of the owner’s stock. 

Under Plaintiffs’ desired formulation of the standard, 

hypothetical plaintiffs would need only to have purchased a 

security—any security—to satisfy the purchaser-seller 

requirement. But Plaintiffs’ interpretation of the securities 

laws would vastly expand the boundaries of Section 10(b) 

standing and contradict the express limiting purpose of the

Birnbaum Rule. The Supreme Court has cautioned that 

Section 10(b) does not “provide a cause of action to the 

world at large,” and “should not be interpreted to provide a 

private cause of action against the entire marketplace in 

which the issuing company operates.” Stoneridge, 552 U.S. 

at 162 (cleaned up) (quoting Blue Chip, 421 U.S. at 733 n.5).

Also, Plaintiffs’ construction of Section 10(b) standing 

would require courts to determine “whether the security 

plaintiff purchased is sufficiently connected to the 

misstatement” on a case-by-case basis. Plaintiffs cite no

authority for this proposition and do not point to any cases 

that have analyzed whether a security is sufficiently 

connected to a misstatement for standing purposes. Further, 

in proposing this “sufficiently connected” test, Plaintiffs ask 
12 MAX ROYAL LLC V. ATIEVA, INC.

us to engage in the fact-intensive inquiry that the Supreme 

Court expressly rejected. The Second Circuit considered a 

similar proposed standard—which it named the “direct 

relationship test”—and rejected it, reasoning that it would 

entail a “highly fact-oriented inquiry.” Menora, 54 F.4th at 

87 (citation and punctuation omitted). 

We agree with the Second Circuit’s reasoning in Menora

and likewise reject Plaintiffs’ “sufficiently connected” test. 

The Supreme Court adopted a bright-line rule for standing—

even at the risk of it being “arbitrary” in some cases—to 

avoid the type of “endless case-by-case” analysis 

contemplated by Plaintiffs. See Blue Chip, 421 U.S. at 738-

39, 755; see also Fin. Sec. Assurance, Inc. v. Stephens, Inc., 

500 F.3d 1276, 1283 (11th Cir. 2007) (“[T]he Court 

deliberately endorsed a standing rule that would not be 

subject to ‘endless case-by-case erosion’ by courts 

employing a functional analysis to every new group of 

potential plaintiffs.” (quoting Blue Chip, 421 U.S. at 755)). 

Plaintiffs’ “sufficiently connected” test is anything but a 

bright-line rule and would require an extensive qualitative 

analysis by a court at the outset of a securities action. This 

is not consistent with Blue Chip. Instead, the plain language 

of Blue Chip makes clear that a plaintiff has standing under 

Section 10(b) if the plaintiff purchased or sold the securities

about which the alleged misrepresentations were made.

2. Application

Having clarified the requirements of Section 10(b) 

standing, we turn to whether Plaintiffs satisfy those 

requirements. Under the Birnbaum Rule and Blue Chip, the 

question is whether Plaintiffs purchased or sold the securities

about which Defendants’ alleged misrepresentations were 

made.
MAX ROYAL LLC V. ATIEVA, INC. 13

It is undisputed that the securities about which 

Defendants allegedly made misrepresentations were those of

Lucid. Under the Birnbaum Rule, Plaintiffs would need to 

have purchased or sold Lucid stock to have standing to bring 

this action under Section 10(b). Here, Plaintiffs did not

purchase or sell Lucid stock, as Lucid was a privately held 

company during the relevant period. Plaintiffs purchased 

CCIV stock, but their complaint does not allege that anyone

made misrepresentations about CCIV stock. Because 

Plaintiffs did not purchase or sell the securities about which 

the alleged misrepresentations were made, Plaintiffs lack 

standing under Section 10(b). 

That CCIV later acquired Lucid does not change our 

analysis. At the time of Defendants’ alleged 

misrepresentations, CCIV and Lucid were two entirely 

separate companies. Lucid’s alleged misrepresentations

made about itself cannot be imputed to another company that 

later acquired it. See Menora, 54 F.4th at 88. Although there 

are exceptions to the Birnbaum Rule, there is no recognized 

exception for transactions involving SPACs. See Sec. Inv. 

Prot. Corp. v. Vigman, 803 F.2d 1513, 1518-20 (9th Cir. 

1986) (explaining the limited exceptions to the Birnbaum

Rule). If Congress wants to treat SPAC acquisitions 

differently than traditional mergers, it has the authority to do 

so. Cf. Non-Financial Disclosures, SEC. L. HANDBOOK

§ 5:105 (discussing proposed rule to “align the regulation of 

de-SPAC transactions with that of traditional IPOs”). In 

view of the Supreme Court’s express guidance on this issue 

in Blue Chip, we decline to undertake that expansion of 

Section 10(b) standing. Stoneridge, 552 U.S. at 165 (“The 

decision to extend the cause of action is for Congress, not for 

us.”).
14 MAX ROYAL LLC V. ATIEVA, INC.

C. Materiality

We affirm the district court’s dismissal of Plaintiffs’ 

claims on the alternative ground that Plaintiffs lack standing 

under Section 10(b). In re Rigel Pharm., Inc. Sec. Litig., 697 

F.3d 869, 875 (9th Cir. 2012) (“[D]ismissal may be affirmed 

on any proper ground, even if the district court did not reach 

the issue or relied on different grounds or reasoning.”).

Because we conclude that Plaintiffs lack standing, we need 

not and do not consider the district court’s ruling on

materiality.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the district 

court’s dismissal of Plaintiffs’ claims under FRCP 12(b)(6) 

on the alternative ground that Plaintiffs lack standing under 

Section 10(b).