Court Opinion

ID: 4679081
Source: CourtListenerOpinion
Date Created: 2021-04-20 20:00:37.150008+00
Date Added: 2024-06-11T08:03:48.519773
License: Public Domain

NOT FOR PUBLICATION                         FILED
                    UNITED STATES COURT OF APPEALS                        APR 20 2021
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

JOHN E. GOLUB, On Behalf of Himself             No.    19-16975
and All Others Similarly Situated,
                                                D.C. No. 3:17-cv-06653-WHO
                Plaintiff-Appellant,

and                                             MEMORANDUM*

BRIAN CARPENTER,

                Plaintiff,

 v.

GIGAMON INC.; COREY M. MULLOY;
PAUL A. HOOPER; ARTHUR W.
COVIELLO, Jr.; JOAN A. DEMPSEY;
TED C. HO; JOHN H. KISPERT; PAUL E.
MILBURY; MICHAEL C. RUETTGERS;
ROBERT E. SWITZ; DARIO ZAMARIAN;
ELLIOTT MANAGEMENT
CORPORATION; ELLIOTT
ASSOCIATES, L.P.; ELLIOTT
INTERNATIONAL, L.P.; EVERGREEN
COAST CAPITAL CORPORATION;
GINSBERG HOLDCO, INC.; GINSBERG
MERGER SUB, INC.,

                Defendants-Appellees.

                   Appeal from the United States District Court

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                       for the Northern District of California
                 William Horsley Orrick, District Judge, Presiding

                      Argued and Submitted October 14, 2020
                      Submission Vacated December 15, 2020
                           Resubmitted April 13, 2021
                            San Francisco, California

Before: FERNANDEZ, WARDLAW, and COLLINS, Circuit Judges.

      Lead Plaintiff John Golub (Golub) appeals from the district court’s dismissal

of his putative securities class-action lawsuit alleging a violation of § 14(a) of the

Securities Exchange Act of 1934 and Securities and Exchange Commission Rule

14a-9. We have jurisdiction, 28 U.S.C. § 1291, and we affirm.

      The Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-

5, required Golub’s amended complaint to “specify each statement alleged to have

been misleading,” in Gigamon’s proxy statement and “the reason or reasons why

the statement is misleading.” 15 U.S.C. § 78u-4(b)(1). To that end, we read

Golub’s amended complaint to allege: (1) five misrepresentations in connection

with statements of opinion (AC ¶ 97(a)-(e)) and (2) two omissions in connection

with statements of opinion (AC ¶¶ 90–96). We “examine [these] individual

allegations in order to benchmark whether they are actionable,” but “consider the

allegations collectively and examine the complaint as a whole.” Police Ret. Sys. of

St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1058 (9th Cir. 2014).

      We, like the district court, focus chiefly on whether Golub sufficiently

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pleaded facts demonstrating falsity and surmounting the PSLRA’s safe-harbor

provision. “We review the district court’s dismissal” on these grounds “de novo.”

Wochos v. Tesla, Inc., 985 F.3d 1180, 1188 (9th Cir. 2021). Our accompanying

opinion lays out the relevant standards for determining actionable falsity. As to the

PSLRA’s safe harbor, that provision insulates a defendant from liability “for a

false or misleading statement if it is forward-looking and either is accompanied by

cautionary language or is made without actual knowledge that it is false or

misleading.” Id. at 1190 (internal quotation marks and citation omitted). We

analyze each of the various categories of alleged misrepresentations and omissions

in Golub’s complaint with these standards in mind.

      1. We begin with the five alleged misrepresentations of the opinion of the

Board of Directors (“the Board”) that Golub identified in his complaint. “[A]

statement of opinion may . . . involve a representation of material fact that, if that

representation is false or misleading, could be actionable.” Id. at 1189; see also

Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1095 (1991). Such a statement

affirms at least that “the speaker actually holds the stated belief.” Wochos, 985

F.3d at 1189 (internal quotation marks and citation omitted). Moreover, “some

sentences that begin with opinion words like ‘I believe’ contain embedded

statements of fact.” Id. (emphasis removed) (internal quotation marks and citation

omitted). We assume that Golub intended to plead an actionable misrepresentation

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under either theory.

      With regard to the first theory, the complaint fails to allege plausible

“misstatement[s] of the psychological fact of the speaker’s belief.” Va.

Bankshares, 501 U.S. at 1095. The allegations in Golub’s complaint admit of “two

possible explanations” for the proxy’s statements regarding the Board’s opinions—

“only one of which can be true and only one of which results in liability.” In re

Century Aluminum Co. Secs. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013). On the

one hand, these allegations are consistent with the possibility that Gigamon’s

Board held very positive views of the company’s long-term future, but conveyed

the opposite impression in the proxy statement to effect the sale of the company by

whatever means necessary. On the other hand, these allegations are also consistent

with Gigamon having received two consecutive quarters of disappointing and

unexpected results, which affected the directors’ views of the company’s present

value and long-term success. Golub accordingly was required to plead

“[s]omething more . . ., such as facts tending to exclude the possibility that the

alternative explanation is true.” Id.

      Like the district court, we conclude he has not done so. His allegations that

Gigamon and its directors suspiciously strayed from their previous “long-term”

view of Gigamon’s prospects—suddenly adopting a “quarter-on-quarter”

perspective—is betrayed by his own allegations that the Gigamon directors revised

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their opinions regarding the company’s prospects only after two consecutive

quarters of disappointing results.

      Meanwhile, the May and July 2018 press statements that his complaint

identifies lend no support on this front. The positive figures listed in these press

statements are not inconsistent with the Board’s professed determination in the

proxy statement that Gigamon remained on a growth trajectory, albeit a more

gradual one than the Board had expected before FY 2017’s Q2 and Q3 results.

Thus, they do not support the inference that the Board believed one thing, yet said

another. See In re Read-Rite Corp., 335 F.3d 843, 846 (9th Cir. 2003), abrogated

on other grounds by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776 (9th Cir. 2008).

      2. Alternatively, interpreting Golub’s complaint as challenging certain

misrepresentations of embedded facts within these five statements of opinion, we

conclude that such a challenge cannot succeed. At most, three of these alleged

misrepresentations contain embedded statements of fact. See AC ¶¶ 97(b), (d), (e).

And most of those embedded statements cannot evade the PSLRA’s safe-harbor

provision, as they are in and of themselves forward-looking statements regarding

the company’s future financial performance, see 15 U.S.C. § 78u-5(i)(1)(A), (C);

In re Quality Sys., Inc. Secs. Litig., 865 F.3d 1130, 1146 (9th Cir. 2017),

accompanied by adequate cautionary language, see Intuitive Surgical, Inc., 759

F.3d at 1059–60.

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        Indeed, the only embedded fact that surmounts the PSLRA safe harbor is the

statement that “the Company was currently performing at levels even below the

Case C projections” when the directors decided to rely on the Case C projections

on October 24, 2017. AC ¶ 97(e). But Golub has made no other allegations

relating to the company’s performance at that specific moment in time. He thus

“pleaded no facts that would establish falsity in [this] sense.” Wochos, 985 F.3d at

1196.

        3. As for the alleged omissions in connection with statements of opinion, we

conclude that Golub has again failed to allege falsity or to overcome the PSLRA’s

safe harbor. Such a claim required Golub to “identify particular (and material)

facts going to the basis for [Gigamon’s and the Board’s] opinion—facts about the

inquiry the issuer did or did not conduct or the knowledge it did or did not have—

whose omission makes the opinion statement at issue misleading to a reasonable

person reading the statement fairly and in context.” Omnicare, Inc. v. Laborers

Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175, 194 (2015). “That is no

small task.” Id. And “whether an omission makes an expression of opinion

misleading always depends on context,” because “investor[s] take[] into account

the customs and practices of the relevant industry.” Id. at 190; see also

Desaigoudar v. Meyercord, 223 F.3d 1020, 1023–24 (9th Cir. 2000) (“The SEC

has historically disfavored forecasts and value estimates in proxy statements.”).

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      Accordingly, Gigamon’s alleged non-disclosure of partial FY 2017 Q4

earnings in advance of the December 22, 2017 shareholder vote did not render

false or misleading the Board’s opinion that Gigamon would face “continued

challenges . . . to grow top-line revenue and accurately predict its quarterly

results.” Public companies generally release quarterly earnings only after a given

quarter has ended. Moreover, one quarter of positive results—following two

quarters of unexpectedly poor numbers—does not render misleading the Board’s

opinion (as of December 22, 2017) that these particular challenges would continue.

See City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.,

856 F.3d 605, 615 (9th Cir. 2017) (“[L]iability is not necessarily established by

demonstrating that ‘an issuer knows, but fails to disclose, some fact cutting the

other way,’ because ‘[r]easonable investors understand that opinions sometimes

rest on a weighing of competing facts.’” (alteration in original) (quoting Omnicare,

575 U.S. at 189–90)).

      Golub failed to plead facts sufficient to show that the omission of the

Updated Case B Projections rendered materially false or misleading the Board’s

opinion that those projections were “overstated.” Moreover, the Board stated that

it endorsed the proposed sale based on the Updated Case C Projections and

disclosed those projections to its shareholders. Given this context, Golub failed to

plead facts showing that the omission of details about the Updated Case B

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Projections made the Board’s “expression of opinion misleading.” Omnicare, 575

U.S. at 190.

      In addition, both statements allegedly rendered misleading by this omission,

see AC ¶¶ 90, 96, are entirely forward-looking and accompanied, as discussed

above, by adequate cautionary language in the proxy statement. The PSLRA thus

bars any claim based on these omissions. See 15 U.S.C. § 78u-5(c)(1) (noting the

safe harbor’s application to an “omission of a material fact necessary to make the

statement not misleading”); In re Cutera Secs. Litig., 610 F.3d 1103, 1112–13 (9th

Cir. 2010) (finding claim based on omission relating to revenue projections barred

by safe-harbor provision).

      4. Because Golub has failed to state an actionable claim under § 14(a), we

also affirm the dismissal of his § 20(a) claims against all Defendants. Wochos, 985

F.3d at 1197.

      AFFIRMED.

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