Court Opinion

ID: 4687592
Source: CourtListenerOpinion
Date Created: 2021-05-17 20:00:54.163337+00
Date Added: 2024-06-11T08:04:42.006974
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                              MAY 17 2021
                     UNITED STATES COURT OF APPEALS                        MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

STEPHEN LOPES; et al.,                           No.   20-16033

              Plaintiffs-Appellants,             D.C. Nos.    4:18-cv-06665-JST
                                                              4:18-cv-06922-JST
 and

ANANDA PATTI,                                    MEMORANDUM*

              Plaintiff,

 v.

FITBIT, INC.; JAMES PARK,

              Defendants-Appellees.

                    Appeal from the United States District Court
                      for the Northern District of California
                      Jon S. Tigar, District Judge, Presiding

                             Submitted May 13, 2021**
                              San Francisco, California

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: THOMAS, Chief Judge, MILLER, Circuit Judge, and RESTANI,***
Judge.

      Plaintiffs appeal the district court’s Rule 12(b)(6) dismissal of their

complaint alleging violations of Section 10(b) and 20(a) of the Securities Exchange

Act and SEC Rule 10b-5. 15 U.S.C. §§ 78j(b), 78t(a); 17 C.F.R. § 240.10b-5. We

have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm. Because the parties

are familiar with the history of the case, we need not recount it here. We review a

12(b)(6) dismissal de novo, taking Plaintiffs’ factual allegations as true. Oregon

Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 603 (9th Cir. 2014).

      To adequately plead an action under Section 10(b) or Rule 10b-5, Plaintiffs

must allege, among other things, a “material misrepresentation or omission.” Id.

“[A] statement is misleading if it would give a reasonable investor the impression

of a state of affairs that differs in a material way from the one that actually exists.”

Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co.,

845 F.3d 1268, 1275 (9th Cir. 2017) (internal quotation marks omitted). Plaintiffs

argue that statements made by Fitbit’s CEO James Park made on the CNBC

television program Mad Money were misleading because they challenged the

      ***
             The Honorable Jane A. Restani, Judge for the United States Court of
International Trade, sitting by designation.
                                            2
credibility and reliability of an analyst’s report that indicated that retailers had too

much inventory of a new Fitbit product.

      However, the district court properly concluded that this interpretation

mischaracterizes Park’s statements. In response to a question about whether to

“trust the [report] versus what ultimately the results will be,” Park disclaimed any

comment on the report, saying “without knowing how that analyst did the [report],

I can’t really say.” He then noted several facts that are not inconsistent with the

report being credible or with his disclaimer, including that the product had recently

begun shipping, and its success on Amazon.com. Near the end of the interview,

after the host expressed some skepticism regarding analysts, Park made vague

statements about staying true to the company’s mission and looking out for

shareholders. None of these statements suggest that Park challenged the credibility

of the analyst’s report, see Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d

1049, 1064–65 (9th Cir. 2008) (stating that the court is not “required to indulge

unwarranted inferences in order to save a complaint from dismissal”), and so

Plaintiffs have not adequately pleaded a misrepresentation or omission that would

mislead a reasonable investor.

      Even if the statements could have been construed as Plaintiffs argue,

Plaintiffs have failed to plead facts giving rise to a “strong inference” of scienter.

                                            3
See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007) (holding

that a strong inference is one that is “cogent and at least as compelling as any

opposing inference”). To the contrary, the actual content of the statement raises

the inference that Park intended to avoid commenting on the report, while

conveying some optimism for the product’s ultimate success. For similar reasons,

the allegations do not raise a strong inference of deliberate recklessness, as the

danger of misleading investors by implication was not “so obvious that the actor

must have been aware of it.” In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1053

(9th Cir. 2014) (quoting Hollinger v. Titan Cap. Corp., 914 F.2d 1564, 1569 (9th

Cir.1990) (en banc)).

      The district court also properly dismissed the Section 20(a) claim. A

Section 20(a) claim for control person liability requires a primary violation of

securities law, City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align

Tech., Inc., 856 F.3d 605, 623 (9th Cir. 2017), and Plaintiffs failed to adequately

plead a Section 10(b) or Rule 10b-5 violation.

      AFFIRMED.

                                           4