Court Opinion

ID: 9372464
Source: CourtListenerOpinion
Date Created: 2023-02-21 18:00:44.455597+00
Date Added: 2024-06-11T17:16:35.640701
License: Public Domain

NOT FOR PUBLICATION                         FILED
                    UNITED STATES COURT OF APPEALS                        FEB 21 2023
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

KWOK KONG,                                      No.    22-15396

                Plaintiff-Appellant,            D.C. No. 4:20-cv-06617-PJH

and
                                                MEMORANDUM*
REENA SAINT JERMAIN,

                Plaintiff,

 v.

FLUIDIGM CORPORATION; et al.,

                Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Northern District of California
                   Phyllis J. Hamilton, District Judge, Presiding

                      Argued and Submitted February 6, 2023
                            San Francisco, California

Before: BYBEE and BUMATAY, Circuit Judges, and BENNETT,** Senior
District Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Richard D. Bennett, United States Senior District
Judge for the District of Maryland, sitting by designation.
      In this putative class action, Plaintiff-Appellant Kwok Kong brings securities

fraud claims against a lab equipment manufacturer and two of its executive officers

based on several financial projections made to investors throughout fiscal year 2019.

In the operative Second Amended Complaint (“SAC”), Kong alleges violations of

Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, which

prohibit material misrepresentations or omissions in relation to the purchase or sale

of corporate securities. 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. The district court

dismissed the SAC, finding that the Appellees’ challenged statements were not

materially misleading, and that Kong failed to plead a strong inference of scienter.

We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

      Defendant-Appellee Fluidigm Corporation, Inc. (“Fluidigm”) manufactures

microfluidics and mass cytometry equipment. Fluidigm’s mass cytometry enterprise

expanded between 2018 and 2019, and its stock price nearly doubled during this

timeframe. However, Fluidigm’s mass cytometry sales declined sharply during the

second half of 2019, resulting in a substantial drop in the company’s stock price.

According to the SAC, Fluidigm and its top executives received internal reports in

October and November 2018 projecting that this decline would occur. Kong alleges

that Fluidigm CEO Christopher Linthwaite and CFO Vikram Jog (the “Individual

Defendants”) concealed these projections and made several statements on quarterly

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revenue calls that misled investors to believe that the company’s mass cytometry

pipeline would remain profitable and continue to grow.

      Section 10(b) of the Securities Exchange Act of 1934 proscribes the use of

“any manipulative or deceptive device” in violation of “such rules and regulations

as the [Securities and Exchange] Commission may prescribe.” 15 U.S.C. § 78j(b).

Implementing this directive, SEC Rule 10b-5 prohibits material misrepresentations

and omissions “in connection with the purchase or sale of any security.” 17 C.F.R.

§ 240.10b-5. To state a claim under these provisions, a securities fraud plaintiff must

allege, as relevant here, “a material misrepresentation or omission by the defendant,”

and scienter. Macomb Cnty. Emp. Retirement Sys. v. Align Tech., Inc., 39 F.4th 1092,

1096 (9th Cir. 2022) (quoting Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S.

258, 267 (2014)). We hold that Kong’s claim falls short at the first hurdle, as none

of the statements challenged in the SAC constitute material misrepresentations or

omissions that may sustain a securities fraud claim. Accordingly, we affirm on the

first issue and need not reach the question of scienter.

      First, Kong challenges revenue and growth forecasts that are shielded by the

safe harbor provision of the Private Securities Litigation Reform Act (“PSLRA”),

15 U.S.C. § 78u-5. “The PSLRA’s safe harbor provision exempts from liability

forward-looking statements accompanied by [meaningful] cautionary language.” In

re Atossa Genetics Inc. Sec. Litig., 868 F.3d 784, 798 (9th Cir. 2017). Many of the

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statements at issue “are classic growth and revenue projections, which are forward-

looking on their face.” Police Retirement Sys. of St. Louis v. Intuitive Surgical, Inc.,

759 F.3d 1051, 1058 (9th Cir. 2014). During investment calls in Q1, Q2, and Q3

2019, the Individual Defendants made statements such as: “We have certainly strong

growth throughout the back half of the year in general;” “[w]e see no reason why

the trend lines won’t continue to revert back towards the norm;” and “we think Q4,

given what’s setting up right now, is going to be a very strong cycle for placements

of instruments and order placements.” These statements assess “how various future

events will play out”—they do not describe “specific, concrete circumstances that

have already occurred.” Wochos v. Tesla, Inc., 985 F.3d 1180, 1192 (9th Cir. 2021)

(emphasis in original). Additionally, these comments were accompanied by

meaningful cautionary language in Fluidigm’s SEC filings and analyst calls, which

warned investors of the potential for increased competition and market fluctuations.

      Second, while some statements fall outside the safe harbor, most constitute

puffery that is not actionable as a matter of law. Ordinarily, “‘vague statements of

optimism like good, well-regarded, or other feel good monikers,’ are not actionable

because ‘professional investors, and most amateur investors as well, know how to

devalue the optimism of corporate executives.’” Intuitive Surgical, 759 F.3d at 1060

(quoting In re Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 2010)). Throughout

Q1 and Q2 2019, the Individual Defendants lauded Fluidigm’s mass cytometry

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enterprise, assuring investors that “[m]ass cytometry adoption is robust” and

“thriving;” that “the mass cytometry portfolio has done outstanding;” that “the mass

cytometry franchise has grown extremely strongly;” and that “the funnel is, on the

whole, very deep.” These generalized, optimistic remarks are precisely the kind of

“feel good monikers” that this Court has characterized as puffery. Intuitive Surgical,

759 F.3d at 1060. Cf. Macomb, 39 F.4th at 1098–99 (characterizing as puffery

comments regarding a “great growth market” and “huge market opportunity” for the

defendant’s products).

      Third, and finally, Kong challenges a few present-tense statements involving

trends in the mass cytometry market. “[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 Local 338

Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1275 (9th Cir. 2017) (citation

omitted) (alteration in original). A statement may be misleading if it omits “a

material fact necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading.” Matrixx Initiatives v.

Siracusano, 563 U.S. 27, 37 (2011).

      The Individual Defendants made several concrete statements about trends in

the market and the competitive landscape. These include assertions such as “mass

cytometry adoption continues at a brisk pace, including an uptick in new customer

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adoption;” “there’s not a fundamental change in the overall competitive landscape

as we see it right now;” and “we’re seeing no real trend change in the mass cytometry

business overall.” Kong contends that these statements are misleading, as the

Individual Defendants failed to disclose the reports they received in 2018 projecting

an impending downturn. However, the Individual Defendants did not conceal “real-

time financial information” indicating that the market was deteriorating—rather,

Fluidigm was experiencing record growth at the time they made these comments.

Cf. Macomb, 39 F.4th 1099 (“Significantly, at the time Align’s executives made the

six challenged statements, the company’s sales were still growing in China, albeit at

a diminished rate.”). Accordingly, we hold that their statements were not materially

misleading when made.

      AFFIRMED.

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