The opinion
1
2
3
4 UNITED STATES DISTRICT COURT
5 NORTHERN DISTRICT OF CALIFORNIA
6
7 NEW YORK CITY FIRE DEPARTMENT Case No. 24-cv-01234-PCP
PENSION FUND, et al.,
8
Plaintiffs, ORDER GRANTING MOTION TO
9 DISMISS SECOND AMENDED
v. COMPLAINT
10
SNOWFLAKE INC., et al., Re: Dkt. No. 109
11
Defendants.
12
13 Every stock purchase carries the risk that the stock’s price will decrease. This risk may be
14 particularly pronounced where an investor purchases a growing company’s stock with the hope
15 that the company will experience “super growth” that will continue to accelerate rather than level
16 off over time, resulting in substantial stockholder gains. Unfortunately for stockholders, not every
17 company experiences such Nvidia-like growth.1 And when a company’s growth continues but
18 slows, the market often reacts.
19 This securities fraud class action lawsuit by eleven New York City retirement funds is one
20 of several recently filed cases initiated after a company’s stock price fell under such
21 circumstances. During the putative class period, defendant Snowflake Inc. continued to grow and
22 in fact surpassed the quarterly revenue guidance that it had provided to the market. But its stock
23 price nonetheless fell in March 2022 after it announced “disappointing” quarterly results and
24 lowered its projected rate of revenue growth. Based on that price drop, plaintiffs filed suit against
25 Snowflake, its former CEO Frank Slootman, and its former CFO Michael Scarpelli.
26 The federal securities laws are not intended to provide an “insurance policy” against such
27
1 investor losses. Brown v. Ambow Educ. Holding Ltd., No. 12-cv-5062 PSG AJWX, 2014 WL
2 523166, at *9 (C.D. Cal. Feb. 6, 2014). Instead, they protect the market’s integrity by prohibiting
3 certain fraudulent misstatements or omissions that mislead investors. Defendants move to dismiss
4 plaintiffs’ second amended complaint under Federal Rule of Civil Procedure 12(b)(6), contending
5 that plaintiffs do not plausibly allege that they engaged in such conduct. For the following reasons,
6 the Court agrees and grants defendants’ motion.
7 BACKGROUND
8 Snowflake is a software company that offers cloud data storage and analytics services.2
9 Snowflake customers receive a “warehouse” to store data on the cloud and to conduct “advanced
10 querying and analytics.” Rather than sell customers a license or subscription to access its platform,
11 Snowflake sells its services in “credit” units. Credits function as a measure of a customer’s use of
12 Snowflake’s services. The number of credits a customer uses per hour depends on the size of its
13 data warehouse and the analytics it runs. Most of Snowflake’s revenue comes from capacity
14 contracts, under which customers commit to using a certain number of credits, measured in
15 dollars, within a given time frame—e.g., to use $100,000 worth of credits within two years.
16 Snowflake realizes revenue when customers use, or consume, their credits. Snowflake uses
17 the metric “RPO,” or remaining performance obligations, to measure the value of credits
18 remaining on customer contracts that have not yet been consumed. Snowflake realizes revenue
19 both when customers use credits during their contract terms and when customers forfeit their
20 credits by failing to consume them during their contract terms. RPO is thus a measure of customer
21 demand and anticipated revenue.
22 Snowflake went public on September 16, 2020, with an initial IPO valuation of $70 billion.
23 Snowflake’s stock price peaked in November 2021, shortly before Slootman and Scarpelli sold
24 millions of stock shares and earned hundreds of millions in profits on December 15, 2021. On a
25 March 2, 2022, earnings call, defendants announced “disappointing” results for the last quarter of
26
27
1 fiscal year 2022 and lower growth rate guidance for fiscal year 2023. Defendants also announced
2 that Snowflake was rolling out platform enhancements, including a warehouse scheduling service
3 and an improved chip processor. These enhancements remedied inefficiencies in Snowflake’s
4 platform, which would lead to lower credit consumption and a slower conversion of RPO to
5 revenue. Defendants anticipated a revenue headwind of $97 million for the fiscal year due to the
6 platform enhancements. Snowflake’s stock price dropped following the earnings call.
7 Plaintiffs allege that defendants made 45 false and misleading statements and material
8 omissions about Snowflake’s business practices and performance prior to the March 2022 call that
9 misled investors into believing Snowflake was a super-grower company. In particular, plaintiffs
10 allege that Snowflake knowingly oversold credits to customers when they entered contracts, which
11 resulted in customers experiencing one of two problems. One group did not use all their credits
12 during their contract periods. The other group consumed their credits too quickly due to
13 inefficiencies in credit pricing and in Snowflake’s platform, including poor user controls that led
14 customers to accidentally blow through credits from “runaway queries.” Both trends, plaintiffs
15 allege, “effectively forced [customers] to purchase credits they did not need” and inflated RPO.
16 Snowflake allegedly implemented the platform enhancements to remedy some of these
17 inefficiencies but delayed rolling out and announcing the enhancements.
18 Plaintiffs bring claims on behalf of all persons who purchased Snowflake Class A common
19 stock on or between September 16, 2020, and March 2, 2022. Plaintiffs allege: (1) a violation of
20 Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 against Snowflake,
21 Slootman, and Scarpelli; and (2) a violation of Section 20(a) of the Act against Slootman and
22 Scarpelli. Defendants move to dismiss both claims under Rule 12(b)(6).
23 LEGAL STANDARD
24 Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include a “short and plain
25 statement of the claim showing that the pleader is entitled to relief.” If the complaint fails to state a
26 claim, the defendant may move for dismissal under Federal Rule of Civil Procedure 12(b)(6).
27 Dismissal is required if the plaintiff fails to allege facts allowing the Court to “draw the reasonable
1 678 (2009). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a
2 cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v.
3 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6)
4 motion, a plaintiff need only plead “enough facts to state a claim to relief that is plausible on its
5 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
6 In considering a Rule 12(b)(6) motion, the Court must “accept all factual allegations in the
7 complaint as true and construe the pleadings in the light most favorable” to the non-moving party.
8 Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1029–30 (9th Cir. 2009). While legal
9 conclusions “can provide the [complaint’s] framework,” the Court will not assume they are correct
10 unless adequately “supported by factual allegations.” Iqbal, 556 U.S. at 679. Courts do not “accept
11 as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable
12 inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (quoting Sprewell
13 v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)).
14 A Section 10(b) violation requires “a material misrepresentation or omission of fact,
15 scienter, a connection with the purchase or sale of a security, transaction and loss causation, and
16 economic loss.” Curry v. Yelp Inc., 875 F.3d 1219, 1224 (9th Cir. 2017). “A securities fraud
17 complaint under § 10(b) and Rule 10b-5 must satisfy the dual pleading requisites of Federal Rule
18 of Civil Procedure 9(b) and the PSLRA [Private Securities Litigation Reform Act].” In re
19 VeriFone Holdings, Inc. Securities Litigation, 704 F.3d 694, 701 (9th Cir. 2012). Rule 9(b) states:
20 “In alleging fraud or mistake, a party must state with particularity the circumstances constituting
21 fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be
22 alleged generally.” Fed. R. Civ. P. 9(b). And “[t]he PSLRA significantly altered pleading
23 requirements in private securities fraud litigation by requiring that a complaint plead with
24 particularity both falsity and scienter.” Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002).
25 For plaintiffs in private securities fraud class actions, the PSLRA creates “formidable
26 pleading requirements to properly state a claim and avoid dismissal under Fed. R. Civ. P.
27 12(b)(6).” Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1055 (9th Cir. 2008).
1 reason or reasons why the statement is misleading, and, if an allegation regarding the statement or
2 omission is made on information and belief, … with particularity all facts on which that belief is
3 formed.” Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990–91 (9th Cir. 2009). To
4 adequately plead scienter the complaint must “state with particularity facts giving rise to a strong
5 inference that the defendant acted with the required state of mind.” Id. at 991.
6 In Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007), the Supreme
7 Court held that a “strong inference” of scienter exists “if a reasonable person would deem the
8 inference of scienter cogent and at least as compelling as any opposing inference one could draw
9 from the facts alleged.” In the Ninth Circuit, a court must conduct a dual inquiry in assessing
10 whether this standard is met: “[F]irst, it determines whether any one of the plaintiff’s allegations is
11 alone sufficient to give rise to a strong inference of scienter; second, if no individual allegations
12 are sufficient, it conducts a ‘holistic’ review to determine whether the allegations combine to give
13 rise to a strong inference of scienter.” Glazer Capital Management, L.P. v. Forescout
14 Technologies, Inc., 63 F.4th 747, 766 (9th Cir. 2023). The strong inference standard applies only
15 to the element of scienter, not to falsity. Id. (“Falsity is subject to a particularity requirement and
16 the reasonable inference standard of plausibility set out in Twombly and Iqbal, and scienter is
17 subject to a particularity requirement and a strong inference standard of plausibility.”).
18 ANALYSIS
19 I. Plaintiffs fail to state a claim under Section 10(b) because they do not plead falsity
with particularity.
20
21 To state a claim under Section 10(b), plaintiffs must plead the falsity of material statements
22 or omissions. Curry, 875 F.3d at 1224. A statement is false or misleading “if it would give a
23 reasonable investor the impression of a state of affairs that differs in a material way from the one
24 that actually exists.” Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985 (9th Cir. 2008)
25 (cleaned up). The purportedly false or misleading statement must “directly contradict what the
26 defendant knew at that time.” Weston Family Partnership LLLP v. Twitter, Inc., 29 F.4th 611, 619
27 (9th Cir. 2022). Even if a statement is not false, it may be misleading if it omits material
1 required ... only when necessary ‘to make ... statements made, in the light of the circumstances
2 under which they were made, not misleading.’” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S.
3 27, 44 (2011) (quoting 17 C.F.R. § 240.10b-5(b)). Thus, “once defendants choose to tout positive
4 information to the market, they are bound to do so in a manner that wouldn’t mislead investors,
5 including disclosing adverse information that cuts against the positive information.” Schueneman
6 v. Arena Pharm., Inc., 840 F.3d 698, 706 (9th Cir. 2016) (cleaned up). “[E]ven general statements
7 of optimism, when taken in context, may form a basis for a securities fraud claim when those
8 statements address specific aspects of a company’s operation that the speaker knows to be
9 performing poorly.” In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1143 (9th Cir. 2017).
10 Whether a plaintiff alleges a false statement or an omission, they must allege materiality.
11 “[A] misrepresentation or omission is material if there is a substantial likelihood that a reasonable
12 investor would have acted differently if the misrepresentation had not been made or the truth had
13 been disclosed.” Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir.
14 2005).3
15 The statements and omissions that plaintiffs allege were false or misleading fall into five
16 categories.
17 A. RPO Figures and Economic Performance
18 Many of the statements that plaintiffs allege were false and misleading concerned RPO.
19 See Statement Nos. 1, 4, 5, 6, 12, 13, 14, 15, 21, 24, 25, 26, 29, 35, 36, 37, 38, and 39.4 At the
20 hearing on defendants’ motion, plaintiffs clarified that they do not allege that the RPO figures that
21 defendants reported for given financial periods were false. Rather, plaintiffs allege that RPO was
22 not an accurate indicator of future revenue because defendants knew the RPO numbers were
23 inflated by their sales practices. In plaintiffs view, because Snowflake’s RPO numbers were
24
25 3 Defendants’ request for judicial notice of Exhibits A through Y to their motion is granted. The
exhibits include SEC filings, transcripts of earnings calls and conferences, and analyst reports that
26 are either incorporated by reference into the second amended complaint or the proper subject of
judicial notice. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998–1003 (9th Cir. 2018);
27 Fed. R. Evid. 201. The Court takes judicial notice of the existence and content of the exhibits, but
not the truth of any facts therein. See Khoja, 899 F.3d at 999–1000, 1003; Dkt. 112.
1 inflated, certain statements about Snowflake’s past performance were false or misleading,
2 including that Snowflake “finished [the] fiscal year with strong performance” and “saw strong
3 consumption trends across [its] customer base in Q3.” Statement Nos. 8 and 16. But these
4 statements are inactionable puffery. Generally, “vague statements of optimism like ‘good,’ ‘well-
5 regarded,’ or other feel good monikers” are held to be inactionable “puffing” because
6 “professional investors, and most amateur investors as well, know how to devalue the optimism of
7 corporate executives.” In re Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 2010). Statements
8 characterizing performance and credit consumption as “strong” are precisely the kinds of “mildly
9 optimistic, subjective assessment[s]” that courts tend to find inactionable. Id.; see, e.g., In re
10 Splash Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059, 1076–77 (N.D. Cal. 2001)
11 (“[S]tatements which use[] the words ‘healthy’, ‘strong’, … ‘robust’, ‘well-positioned’, ‘solid’ and
12 ‘improved’… [are] vague and nonactionable.”); In re SunPower Corp. Sec. Litig., 769 F. Supp. 3d
13 1042, 1057 (N.D. Cal. 2025) (discussing caselaw that found statements about a “strong
14 foundation” inactionable).
15 Plaintiffs also clarified at the motion hearing that they do not allege that defendants’
16 projections for RPO and revenue were false or misleading. See Statement Nos. 12, 25, 38. In fact,
17 plaintiffs conceded that demand for Snowflake’s platform continued to grow, and that Snowflake
18 met or exceeded its revenue guidance during the class period. Instead, plaintiffs challenge
19 defendants’ statements about Snowflake’s anticipated rate of revenue growth and credit
20 consumption. See Statement Nos. 31, 32, 34, and 43. These statements, plaintiffs argue,
21 misrepresented the extent to which Snowflake’s growth rate would remain steady or continue to
22 accelerate. For example, in an August 25, 2021, earnings call, Scarpelli stated, “Obviously, longer
23 term, [net revenue expansion] will come down as our customer base becomes larger. … Looking
24 at it, I don’t see any real slowdown in the near-term future, but definitely, over time, that number
25 will come down.” Statement No. 31. On a December 1, 2021, earnings call, Slootman said, “As
26 you see from the metrics that we report on, there is a very, very steady aggressive growth
27 happening quarter-on-quarter. But we sort of haven’t reached that tipping point yet, where sort of
1 that, that will happen at some point.” Statement No. 43.
2 These statements about Snowflake’s future growth rate are forward-looking and protected
3 by the PSLRA’s safe harbor. The PSLRA provides that a defendant “shall not be liable” for any
4 forward-looking statement that is “identified as a forward-looking statement, and is accompanied
5 by meaningful cautionary statements identifying important factors that could cause actual results
6 to differ materially from those in the forward-looking statement.” 15 U.S.C. § 78u-5(c). A
7 forward-looking statement is “any statement regarding (1) financial projections, (2) plans and
8 objectives of management for future operations, (3) future economic performance, or (4) the
9 assumptions ‘underlying or related to’ any of these issues.” No. 84 Employer-Teamster Joint
10 Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 936 (9th Cir. 2003) (citing
11 15 U.S.C. § 78u-5(i)). “[I]n order to establish that a challenged statement contains non-forward-
12 looking features ... a plaintiff must plead sufficient facts to show that the statement goes beyond
13 the articulation of plans, objectives, and assumptions and instead contains an express or implied
14 concrete assertion concerning a specific current or past fact.” Wochos v. Tesla, Inc., 985 F.3d
15 1180, 1191 (9th Cir. 2021) (cleaned up) (quoting Quality Sys., 865 F.3d at 1142, 1144).
16 The statements here are forward-looking because they concern future economic
17 performance and growth. See No. 84, 320 F. 3d at 936. To the extent the statements imply current
18 knowledge by defendants, the knowledge implied is about a lack of future risk factors, rather than
19 “current or past fact[s].” See Wochos, 985 F.3d at 1191–92 (“Tesla’s various statements that it was
20 ‘on track’ to achieve this goal and that ‘there are no issues’ that ‘would prevent’ Tesla from
21 achieving the goal are likewise forward-looking statements.”). That knowledge thus related to
22 assumptions underlying defendants’ predictions for future performance, which the safe harbor
23 protects. See No. 84, 320 F. 3d at 936. Moreover, the earnings calls during which defendants made
24 these statements began with standard cautionary language warning against undue reliance on
25 statements discussing “expected performance,” “long-term growth,” and “overall future
26 prospects.” 5 Courts have found similar language sufficiently “meaningful” to merit safe harbor
27
1 protection. See Weston v. DocuSign, Inc., 669 F. Supp. 3d 849, 878 (N.D. Cal. 2023) (discussing
2 the cautionary language in Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051,
3 1059–60 (9th Cir. 2014) and In re Solarcity Corp. Sec. Litig., 274 F. Supp. 3d 972, 994 (N.D. Cal.
4 2017)). Defendants’ statements concerning Snowflake’s future growth are thus shielded by the
5 PSLRA’s safe harbor provision. See Statement Nos. 31, 32, 34, and 43.
6 In sum, defendants’ statements about Snowflake’s past and anticipated performance are not
7 actionable. See Statement Nos. 8, 16, 31, 32, 34, and 43.
8 B. Sources of Demand and Growth
9 Plaintiffs allege that defendants’ statements about the drivers of RPO, revenue growth, and
10 customer demand were false or misleading. The first set of statements variously attributed RPO
11 and revenue growth to Snowflake’s “customer base realizing the value of our platform,” “large
12 enterprises really want[ing] to do multiyear deals,” “strength in sales across the board,” “more
13 multimillion-dollar deals as well as [] customers’ willingness to engage in multi-year contracts,”
14 “more multimillion dollar relationships,” and “strength in customer consumption.” Statement Nos.
15 5, 7, 17, 18, 22, 23, 25, 27, and 28. The second set of statements characterized demand for
16 Snowflake’s products as organic and customer driven. See Statement Nos. 20 (“I mean we’ve been
17 bottled up literally for generations. And now there’s a situation where there is no upper limit to
18 how much you can do.”) and 33 (“[A] lot of what Snowflake does is what we call enabling the
19 demand. In other words, we’re not creating it. … So there’s a lot of latent, bottled-up, pent-up
20 demand that has literally grown over decades. … [T]hat is really the explosion of the enablement
21 of demand that was already there, is really the big, big driver behind Snowflake.”).
22 Plaintiffs argue that these statements are false and misleading because Snowflake
23
make forward-looking statements, including statements related to the expected performance of our
24
business, future financial results, strategy, products and features, long-term growth and overall
future prospects. These statements are subject to risks and uncertainties, which could cause them
25
to differ materially from actual results. Information concerning those risks is available in our
earnings press release distributed after market close today and in our SEC filings, including our
26
most recently filed Form 10-Q for the fiscal quarter ended [DATE], and the Form 10-Q for the
quarter ended [DATE], that we will file with the SEC. We caution you to not place undue reliance
27
on forward-looking statements and undertake no duty or obligation to update any forward-looking
1 manufactured demand and growth by overselling credits to customers, encouraging customers to
2 consume unused credits that they did not need, and allowing the proliferation of platform
3 inefficiencies that caused customers to burn through their credits too quickly. Plaintiffs contend
4 that the testimony of 48 confidential witnesses (CWs)—39 former employees and 9 customers—is
5 collectively sufficient to plead that these phenomena were widespread enough to contradict
6 defendants’ statements. The Court disagrees.
7 The CW testimony is insufficient because it does not plausibly establish that the trends
8 identified by plaintiffs impacted Snowflake’s business so significantly as to render defendants’
9 statements about demand false or misleading. Taken together, the CW testimony from former
10 employees provides evidence regarding certain sales practices and customer trends within
11 Snowflake. But the testimony does not allege, with particularity, the prevalence of these practices
12 and trends or their impact on Snowflake’s overall business. For example, the former employee
13 CWs said that “[m]any,” “some,” or “a lot of” their customers were oversold credits or that it was
14 “pretty common,” there were a “ton of instances,” or “sometimes” customers under-consumed
15 their credits. Two CWs said that runaway queries “happened ‘more often than you would think’”
16 and that customers “often blew through” their credits. Two other CWs estimated that about 30–
17 40% of their 60 or 70 accounts were underperforming or oversold credits. Three CWs pointed to
18 only a single customer. Moreover, of the former employee CWs, some worked with, for example,
19 “six or seven customers,” “5–15 large accounts,” or “20 customers based in Utah.” The Court
20 cannot determine from these allegations how many of Snowflake’s customers experienced such
21 issues in relation to Snowflake’s customer base as a whole. Indeed, the former customer CWs
22 represent only 9 Snowflake accounts, and it is not clear that they are a representative sample.
23 Plaintiffs concede that they are unaware of what percentage of customers were unhappy
24 with the pricing or performance of Snowflake’s platform or how frequently customers experienced
25 runaway queries, and that no CWs speak to companywide trends. Although it is not necessary for
26 any one CW to speak to companywide trends on their own, the CW testimony, collectively, must
27 do so in this case for plaintiffs to allege with particularity that the statements challenged here—all
1 particularized allegations from which the Court can conclude that the CW testimony reflects
2 companywide patterns, it is entirely plausible that the CW testimony reflects a limited set of
3 customers and that defendants’ statements about the company as a whole were not false or
4 misleading.
5 Other cases in which courts have found CW testimony sufficient to establish falsity are
6 illustrative. Robb v. Fitbit Inc., for example, involved “misdescriptions of specific or absolute
7 characteristics of a product” and plaintiffs who alleged “not that users have difficulty using the
8 product but that the product itself does not do the thing that it claims to do.” 216 F. Supp. 3d 1017,
9 1028–29 (N.D. Cal. 2016). In Leventhal v. Chegg, Inc., the defendants represented that only a
10 “tiny fraction of users” cheated on the platform, and that instances of cheating were “very
11 isolated,” while the CW testimony plausibly alleged that cheating was widespread. 721 F. Supp.
12 3d 1003, 1014–15 (N.D. Cal. 2024). And in E. Ohman J:or Fonder AB v. NVIDIA Corp., plaintiffs
13 challenged the misattribution of revenue to certain sources in response to direct questions about
14 the source of that revenue. 81 F.4th 918, 936–37 (9th Cir. 2023); see also 3226701 Canada, Inc. v.
15 Qualcomm, Inc., No. 15-cv-2678-MMA (WVG), 2017 WL 4759021, at *20–21 (S.D. Cal. Oct.
16 20, 2017) (finding statements that only one company was experiencing issues with a product were
17 false or misleading when customers and news outlets reported that other company’s experienced
18 similar issues). Here, plaintiffs do not allege that defendants represented that the Snowflake
19 platform was free of inefficiencies, that customers never complained about pricing or
20 functionality, or that customers never over- or under-consumed credits. While the CW testimony
21 they have presented would be sufficient to establish the falsity of such statements, this case does
22 not involve such claims.
23 Plaintiffs also do not provide corroborating information to bolster their CW testimony. The
24 courts in Nvidia, Chegg, and Robb all relied on former employee and customer testimony in
25 conjunction with empirical analyses, independent studies, and other informational sources. Nvidia,
26 81 F.4th at 929–32; Chegg, 721. F. Supp. 3d at 1012–14; Robb, 216 F. Supp. 3d at 1028–29. The
27 allegations here lack comparable “multiple and varying sources” from which the Court could
1 216 F. Supp. 3d at 1029.
2 Finally, plaintiffs argue that, under Nvidia, any evaluation of CW testimony should focus
3 not on whether CWs can attest to companywide phenomena but rather on the “the level of detail
4 provided …, the corroborative nature of the other facts alleged …, the coherence and plausibility
5 of the allegations, the number of sources, the reliability of the sources, and similar indicia.” See 81
6 F.4th at 938. But the Ninth Circuit in Nvidia explained how to assess the reliability of a CW’s
7 testimony and personal knowledge. Id.; see Weston, 669 F. Supp. 3d at 881–83 (considering CW
8 reliability and personal knowledge as a distinct question from “whether the statements reported by
9 the confidential witnesses are themselves indicative of scienter”). Here, the Court considers not
10 whether the CWs had the personal knowledge sufficient to support their testimony, but whether
11 that testimony, even if accepted as reliable and considered collectively, is sufficient to plead falsity
12 with particularity. It is not.
13 Accordingly, plaintiffs fail to allege with particularity that defendants’ statements about the
14 sources of Snowflake’s demand and growth were false or misleading. See Statement Nos. 5, 7, 17,
15 18, 22, 23, 25, 27, and 28.
16 C. Customer Consumption and Satisfaction
17 Similarly, plaintiffs allege that defendants’ statements regarding customer consumption
18 and satisfaction were false or misleading. One group of statements concerned the quantity and rate
19 at which customers consumed their credits and their interest in multi-year contracts. See Statement
20 Nos. 2 (“Consumption for most customers accelerates from the beginning of their usage to the end
21 of their contract terms and often exceeds their initial capacity commitment amounts.”), 9 (“So it
22 all depends upon the industry they’re in, but on average, we’re seeing our customers consume
23 more than we would expect.”), 18, 19, 34, 40, and 45.6 Another group of statements concerned
24 customers’ reasons for consumption and tolerance for Snowflake’s high costs. See Statement Nos.
25 11 (“So people are getting used to spending way more money on this class of service than they
26
27
6 The Court notes that one CW affirmed that larger customers typically signed longer contracts.
1 ever imagined. And the reason is they now can and they now need to, right? … [T]hey see
2 advantage in doing it, right?”), 20 (“[W]e also see organizations really getting used to managing
3 consumption … because, oftentimes, there are very compelling business reasons why they need to
4 consume these services as opposed [to] just looking at the amount of spend.”), and 42 (“We’re
5 really resetting what is normal and what is appropriate spend for this class of computing.”).
6 Plaintiffs fail to adequately allege that these statements were false or misleading. As
7 discussed above, the CW testimony is insufficient to plead with particularity that the customer
8 trends plaintiffs identify—over- and under-consumption of credits and dissatisfaction with price
9 and platform performance—are representative of the companywide customer experience.
10 Although some customers may have experienced these problems and made such complaints,
11 plaintiffs’ allegations do not plausibly allege, with particularity, that enough did so to render
12 defendants’ statements false or misleading.
13 Moreover, plaintiffs’ argument that defendants “should have disclosed customer
14 complaints themselves” is unsupported by the law. Securities law prohibits false and misleading
15 statements; it does not prohibit “statements that are incomplete” or compel the disclosure of all
16 potentially adverse information in a company’s possession. Brody v. Transitional Hosps. Corp.,
17 280 F.3d 997 (9th Cir. 2002). Defendants did not have to account for the full range of customer
18 experiences each time they spoke about customer behavior and satisfaction, nor did they have to
19 explain why customers over- or under- consumed credits for the sake of completeness.
20 Defendants, in fact, disclosed many customer complaints in the same statements that
21 plaintiffs allege were false or misleading. For example, defendants said that some customers
22 overconsumed credits. See Statement Nos. 45 (“[T]here were some of our top 10 customers that
23 over-consumed, but we did see over-consumption on average across the board from our
24 customers.”), 11 (“[S]ometimes [credits] go[] a little bit too quick.”), and 41 (explaining that the
25 biggest thing holding customers back is credits “are running away from them maybe a little bit too
26 quickly”). Defendants said that customers often initially under-consumed credits. See Statement
27 Nos. 19 (“And what we find is – so [customers] consume very little in the first 6 months, and then
1 are some that are down, that happen[s] every quarter, but there’s a lot more that were above their
2 forecast.”). And defendants said that customers were initially averse to Snowflake’s price. See
3 Statement Nos. 11 (noting that “it takes time for people to get used to” the amount of spend on
4 Snowflake’s service) and 42 (“[I]n the beginning, people have sticker shock, yes.”). Taken
5 together, these statements would not “give a reasonable investor the impression of a state of affairs
6 that differs in a material way from the one that actually exists.” See Berson, 527 F.3d at 985.
7 Plaintiffs therefore fail to allege with particularity that defendants’ statements about
8 customer consumption and satisfaction were false or misleading. See Statement Nos. 2, 9, 11, 18,
9 19, 20, 34, 40, 42, and 45.
10 D. Platform Resources and Performance
11 Plaintiffs allege that various statements by defendants concerning Snowflake’s customer
12 service were false and misleading. See Statement Nos. 3 and 30. Snowflake’s IPO prospectus
13 stated, “When a customer’s consumption during the contract term does not exceed its commitment
14 amount, it may have the option to roll over any unused capacity to future periods, generally on the
15 purchase of additional capacity.” Statement No. 3 (emphasis added). And on an earnings call,
16 when Scarpelli was asked whether he felt good about the resources available to make sure
17 customers were on track to start consuming their credits within 9 to 12 months, he answered,
18 “Yes.” Statement No. 30.
19 Plaintiffs do not allege with particularity how these statements were false or misleading.
20 As to the first statement, plaintiffs allege it was misleading for defendants not to disclose that a
21 customer’s credits could only be rolled over if they purchased additional credits at the same or
22 greater value than their original contractual commitment. But the statement itself indicated that
23 rolling over credits was not a guarantee and might require additional purchases. In addition,
24 plaintiffs offer conflicting allegations as to when Snowflake’s strict rollover policy took effect.
25 The statement is from the prospectus issued on September 16, 2020. Some CWs, however, allege
26 that customers complained about the strict rollover policy in the summer of 2019, while others say
27 the policy only came into effect after the IPO. E.g., Dkt. 107 ¶¶ 135, 138. As to the second
1 their credits because, even if that was true, it was only due to platform inefficiencies that led them
2 to burn through credits. This is a misreading of the statement. Scarpelli only affirmed that he
3 “fe[lt] good” about the resources available to customers. Plaintiffs do not challenge the resources
4 available to customers.
5 Plaintiffs also allege that statements concerning Snowflake’s platform capabilities were
6 false or misleading. See Statement Nos. 10, 20, 41, and 42. For example, Scarpelli said that the
7 “product we’re delivering today is so much better than what it was … the performance on it every
8 year gets better and better.” Statement No. 10. Slootman said that “business units can decide
9 where they want to run those workloads, how often they want to run it, how they want to provision
10 it. … It’s not sort of a runaway utility model.” Statement No. 42. He also said that customers “are
11 really accountable for what they do and don’t do. We have hard limits. We have soft limits. We
12 have notifications. We have dashboards.” Statement No. 20.
13 These statements, according to plaintiffs, obscured platform inefficiencies and the extent of
14 customer complaints about these inefficiencies. But on some of the same calls in which defendants
15 made these statements, they also said that one of the biggest issues facing customers was credits
16 “running away from them maybe a little bit too quickly.” See Statement No. 41. In addition,
17 regardless of the platform’s inefficiencies, plaintiffs do not allege that its capabilities were not an
18 improvement over prior iterations. As discussed below, plaintiffs’ theory as to why these
19 statements were false and misleading is in tension with the fact that Snowflake ultimately rolled
20 out platform improvements—a recognition in itself that the product was not perfect. And, again, it
21 is not clear from the CW testimony to what extent customers ran into problems with runaway
22 queries or found the platform’s controls ineffective.
23 Accordingly, plaintiffs do not allege with particularity that the statements about
24 Snowflake’s customer service and platform performance were false or misleading. See Statement
25 Nos. 3, 10, 20, 30, 41, and 42.
26 E. Platform Enhancements
27 Finally, plaintiffs allege that defendants failed to disclose that certain platform
1 consumption and Snowflake’s revenue. A plaintiff can plead a violation of Section 10(b) through a
2 material omission of fact. Curry, 875 F.3d at 1224. “To be actionable under the securities laws, an
3 omission must be misleading; in other words it must affirmatively create an impression of a state
4 of affairs that differs in a material way from the one that actually exists.” Brody, 280 F.3d at 1006.
5 Plaintiffs’ theory is that defendants “delayed announcing” the platform enhancements and
6 their anticipated effect on Snowflake’s revenue until the March 2, 2022, earnings call even though
7 the enhancements were extensively tested and previewed throughout the summer and fall of 2021.
8 Defendants therefore allegedly knew well before March 2022 that the platform enhancements
9 would reduce credit consumption and materially impact revenue, in part because the
10 enhancements were in fact developed to address price and product inefficiencies.
11 The problem with this theory is that plaintiffs do not point to any statements misleading
12 investors into believing that Snowflake would not pursue platform enhancements or undertake
13 efforts to improve the customer experience. Instead, statements during the class period should
14 have dissuaded investors from having that impression. Some of defendants’ statements were made
15 as part of generic disclosures and warnings. See Dkt. 109, Ex. A at 20 (“[F]luctuations in customer
16 consumption resulting from our introduction of new features or capabilities to our systems [] may
17 impact customer consumption.”); Ex. N at 20 (same); Ex. P at 4 (“[Y]ou can expect more platform
18 enhancements from us going forward.”); Ex. D at 5 (“We regularly introduce product and
19 performance enhancements that lower the cost for our customers to run Snowflake.”). Others were
20 more specific. For example, on a May 26, 2021, earnings call, defendants explained that they “just
21 rolled out” a “new storage compression technology” that they anticipated would “take about $13
22 million of our revenue away from the company because the economics of our storage is so much
23 better for our customer. … Switch is a good thing for our customers.” Dkt. 109, Ex. D. at 7–8. In
24 response to a question on that call about whether this improvement was “symbolic of any change
25 in pricing strategy” and “a greater willingness now to pass these types of cost savings on to
26 customers,” Scarpelli replied that “our philosophy has always been to pass that on to customers.
27 But there’s other performance improvements as well. For instance, we’re working on a new chip
1 that to have an impact, and that’s more of next year you’ll see that. And we have always done that
2 and continue to improve the performance of our product that goes directly to the benefit of our
3 customers.” Dkt. 109, Ex. D at 9. Where defendants warned of platform enhancements, even
4 generally, and had previously implemented platform improvements to the financial benefit of
5 customers, investors could have reasonably anticipated similar enhancements in the future.
6 Moreover, even if defendants did not disclose the scope of the platform enhancements and
7 anticipated reduction in revenue sooner, plaintiffs do not adequately allege that they needed to do
8 so; as demonstrated by the statements above, defendants did not create an impression that
9 investors should not expect platform improvements, customer savings, or a resulting impact on
10 revenue. See Brody, 280 F.3d at 1006. Plaintiffs therefore fail to plead with particularity a material
11 omission.
12 Similarly, plaintiffs fail to allege with particularity that defendants’ statement that “at
13 Snowflake, we’re 100% focused on price performance for our customers” was false or misleading.
14 Statement No. 44. Plaintiffs themselves allege that the platform enhancements improved price
15 performance for customers. Their argument that these enhancements should have been rolled out
16 sooner may speak to questionable business practices, but not to whether defendants misled
17 investors and committed securities fraud.
18 * * *
19 In sum, plaintiffs fail to plead with particularity that defendants made any false or
20 misleading statements or material omissions. Because this is dispositive as to plaintiffs’ Section
21 10(b) claim, the Court need not consider whether plaintiffs have adequately pleaded scienter or
22 loss causation.
23 II. Plaintiffs fail to state a claim under Section 20(a).
24 Section 20(a) imposes liability on individuals who “control[] any person” who has
25 violated, among other laws, Section 10(b) and Rule 10b-5. 15 U.S.C. § 78t(a); Zucco, 552 F.3d at
26 990. Section 20(a) requires a primary violation of the securities laws. See Prodanova v. H.C.
27 Wainwright & Co., LLC, 993 F.3d 1097, 1113 (9th Cir. 2021).
] Accordingly, their Section 20(a) claim falls with their claim under Section 10(b).
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CONCLUSION
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Defendants’ motion to dismiss plaintiffs’ second amended complaint is granted. Plaintiffs
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are granted leave to file an amended complaint by March 24, 2026. Failure to timely file an
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amended complaint will result in dismissal of plaintiffs’ claims with prejudice.’
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IT IS SO ORDERED.
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Dated: February 17, 2026
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10 P. Casey Fitts
United States District Judge
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%6 7 Plaintiffs’ second amended complaint, despite having a length of 163 pages, failed to state a
valid claim for relief. Should plaintiffs file a third amended complaint, the Court strongly
97 || encourages plaintiffs to take a more succinct and streamlined approach and to focus their
allegations on only those statements and omissions for which they can adequately plead all of the
4g || tequirements for a securities fraud claim, including not only falsity but also scienter and loss
causation.