Amicus Curiae Brief — Cyan, Inc. v. Beaver Cnty. Emps. Ret. Fund, 138 S. Ct. 440 (2017) (No. 15-1439)
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RECORD
AND
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No. 15-1439 Suprame a. US
K
Cyan, Inc., et al.,
Petitioners,
v.
BEAVER COUNTY EMPLOYEES
RETIREMENT FUND, et al.,
Respondents.
On Wait or CERTIORARI TO THE CourRT OF APPEAL OF
THE State or CALiFoRNiA, First APPELLATE DIsTRICT
BRIEF OF ALIBABA GROUP HOLDING LIMITED,
GOPRO, INC., KITOV PHARMACEUTICALS
HOLDINGS LTD., LENDINGCLUB CORPORATION,
NOVUS THERAPEUTICS, INC., PACIFIC
BIOSCIENCES OF CALIFORNIA, INC., SIERRA
ONCOLOGY, INC., SNAP INC., AND XBIOTECH INC.
AS AMICI CURIAE IN SUPPORT OF PETITIONERS
JONATHAN K. YoUNGWooD James G. KREISSMAN
Simpson THACHER Counsel of Record
& Barrett LLP Simona G. STRAUSS
425 Lexington Avenue STEPHEN P. BLAKE
New York, NY 10017 ELizaBeTH H. Wurre
& Bartietr LLP
2475 Hanover Street
Palo Alto, CA 94304
(650) 251-5000
jkreissman@stblaw.com
Counsel for Amici Curiae
In THE | SEP ~5 2017
Supreme Court of the United E OF THE CLER
i
TABLE OF CONTENTS
Page
pp TOR A gk a ee ree oe il
TABLE OF CITED AUTHORITIES ............ i
STATEMENT OF INTEREST OF AMICI
CURIAK
SUMMARY OF ARGUMENT
ARGUMENT
If.
ITT,
CONGRESS PASSED THE PSLRA
AND SLUSA AS A CHECK AGAINST
ABUSIVE SECURITIES STRIKE SUITS
AND TO PROMOTE UNIFORM AND
CONSISTENT ENFORCEMENT OF
THE FEDERAL SECURITIES LAWS ..
PLAINTIFFS HAVE FLOCKED
TO STATE COURTS TO LITIGATE
PUTATIVE SECURITIES ACT CLASS
SER sccktaaendbndes sae cenvevasys
RESPONDENTS’ INTERPRETATION
OF SLUSA HAS PRODUCED RAMPANT’
ABUSES AND INEFFICIENCIES IN
THE LITIGATION OF SECURITIES
FEE CURA Ss a paceeveenacecasdencs
oe ee Oe CO £82 es eer ae a Ce 4828 Se eS ea ae ee
Sa OS e868 e £620 6:3 2 ae. ea 2S
oe. Be Se ere OP Pee C882 22 2S 26 ee 6 C.6 ee
iV
C,
CONCLUSION
ii
Table of Contents
State Court Actions Are Not Subject
To Centralization By The Judicial
Panel On Multidistrict Litigation,
Thus Adding To Issuers’ Burdens ....
The Pleading Standards Applied By
Many State Courts Do Not Provide A
Meaningful Check Against Frivolous
Securities Act Litigation ............
Inconsistent Outcomes In Securities
Class Actions Litigated In Both State
And Federal Courts Are Not Only A
Result Of Perceived Differences In
yl
Liberal State Court Discovery
Practices Impose Significant And
Asymmetrical Costs On Issuers F'rom
‘The Outset Of State Court Securities
Class Action Litigation..............
Se. 6.82 6 @ 2 Oe 2 ese 622 2 2 2 e 6 C.2 eres ee eS
Page
21
TABLE OF APPENDICES
Page
APPENDIX A — LITIGATION AGAINST
ISSUERS IN CALIFORNIA STATE
SE sia Sc Wks hb Gees LEER RT eee Rs la
APPENDIX B — ALIBABA STATE AND
F PENNS Ran ROIEE TIES ov cca ncecsciccccsesc 7a
APPENDIX C — SUNRUN STATE AND
pi FA yy ty 1 Bee 2la
LV
TABLE OF CITED AUTHORITIES
Page
CASES
Aguilar v. Atl. Richfield Co.,
25 Cal. 4th 826 (July 11, 2001)................... 21
Align Tech., Inc. v. Bao Tran,
179 Cal. App. 4th 949 (2009) ......... 0.0... eee 14
Altayyar v. Ktsy, ine.,
No. 1:15-ev-02785-AMD-RER
(EER Gses SNE SD Bly DOD bc cv ccessvcccecneds )
Altayyur v. Etsy, Inc.,
No. 17-1180 (2d Cir. docketed Apr. 21, 2017). ....... 9
Asheroft v. Iqbal,
EE GNM, os escucesecnecessevess passim
Bell Atl. Corp. v. Twombly,
SR I wu cs aebce ceca been wes passim
Bock v. Hansen,
ma Cae. Bm. Sie BIB GD . ow ccc ccc cnccvccs 14
Bucks Cty. Emps. Ret. Fund v. Ally Fin. Inc.,
No. 16-013616-CZ (Mich. Cir. Ct.
deters GacneteL eke Vac aes 7
Buelow v. Alibaba Grp. Holding Ltd.,
No. CIV535692 (Cal. Super Ct.
San Matco Cty. filed Oct. 5, 2015) .............. 7,8
a}
Cited Authorities
Page
Buelow v. Alibaba Grp. Holding Lid.,
No. C1V535692 (Cal. Super Ct.
San Mateo Cty. Dec. 22, 2016) ............ 18, 19-20
Christine Asia Co., Lid. v.
Alibaba Grp. Holding Lid.,
192 F. Supp. 3d 456 (S.D.N-Y. 2016) ........ 17, 18-19
Christine Asia Co., Ltd. v.
Alibaba Grp. Holding Ltd.,
No. 16-2519 (2d Cir. docketed July 20, 2016)... ..... Ss
City of Birmingham Ret. & Relief Sys. v.
ZTO Express (Cayman) Inc.,
No. 01-CV-2017-902004.00
Fs he a Ss era i
Del E. Webb Corp. v. Structural Materials Co.,
133 Cal. App. BG GSS CIGS1) ww ccc ccccces 13-14
Doe v. City of L.A.,
oe ey es ee er 13
Doheny Park Terrace Homeowners Ass'n, Inc. v.
Truck Ins. Exch.,
BO Cah, A GE TOTS GOGO) oo ccc cccecececees 18
Krickson v. Snap ine.,
No. 2:17-cv-03679-SVW-AGR
See Rs I I ETD ooo bicv bc as. vere ceseces 9
v2
Cited Authorities
Fairbank v. Wunderman Cato Johnson,
212 F.3d 528 (9th Cir. 2000) ........
Franceschi v. Franchise Tax Ba.,
1 Cal. App. 5th 247 (2016) ..........
Page
reesveetwaes 21
Friends of Glendora v. City of Glendora,
182 Cal. App. 4th 573 (2010) ........
Gaynor v. Miller,
205 F. Supp. 3d 935 (B.D). Tenn. 2016)
Gonzalez v. Avinger, Inc.,
No. 17-C1V-02284 (Cal. Super. Ct.
San Mateo Cty. filed May 23, 2017). .
Greenberg v. Sunrun Inc.,
No. 3:16-ev-02480-CRB
(N.D. Cal. filed May 6, 2016)........
Greenberg v. Sunrun Inc.,
233 F. Supp. 3d 764 (N.D. Cal. 2017) .
Greyhound Corp. v. Superior Court,
56 Cal. 2d 365 (196])...............
Grotewtel v. Avinger, Inc.,
No. 17-CI V-02240 (Cal. Super. Ct.
San Mateo Cty. filed May 22, 2017) ..
Vil
Cited Authorities
Groteurel v. Avinger, Inc.,
No. 4:1 /-ev-03400-C W
(N.D. Cal. filed June 12, 2017) .............
Guo v. ZTO Express (Cayman) Inc.,
No. 17-CIV-03676 (Cal. Super. Ct.
San Mateo Cty. filed Aug. 11, 2017).........
Gupta v. Snap Inc.,
No. 2:17-cv-05054-SV W-AGR
(C.D. Cal. filed July 10, 2017) ..............
Hsieh v. Snap Inc.,
No. BC669394 (Cal. Super. Ct.
Los Angeles Cty. filed July 25, 2017). .......
Hung v. iDreamSky Tech. Lid.,
No. 15-CV-2514 (JPO), 2016 WL 299034
es a TC I Ss oc os Sees deacccrec
In re Avalanche Biotechnologies, Inc.
S’holder Litig.,
No. CIV536488 (Cal. Super. Ct.
San Mateo Cty. filed Dec. 7, 2015)..........
In re CafePress Inc. Sholder Litig.,
No. CIV522744 (Cal. Super. Ct.
San Mateo Cty. filed July 10, 2013) .........
In re Countrywide Fin. Corp. Mortg.-Backed
Sec. Litig.,
MDL No. 2265, 2011 WL 11761004
hs SP Mp OED ss vires Wstedosecanes
veda 9
nates 28
VLU
Cited Authorities
in re Ktsy, Ine. S’holder Litig.,
No. C1V534768 (Cal. Super. Ct.
San Mateo Cty. filed July 21, 2015) ........
In re Facebook, Inc., LPO Sec.
& Derivative Litig.,
899 F. Supp. 2d 1374 WUJ.P.M.L. 2012) .......
In re Fore ye, Inc. Sec. Litig.,
No. 1-14-CV-266866, 2015 WL 13546104
(Cal. Super. Ct. Santa Clara Cty. Aug. 11, 2015) .. .14
In re Mobilelron, Inc. S’holder Litig.,
No. 1-15-CV-284001 (Cal. Super. Ct.
Santa Clara Cty. Oct. 4, 2016). ............
In re Pac. Biosciences of Cal., Inc. Sec. Litig.,
No. CIVS509210 (Cal. Super. Ct.
San Mateo Cty. filed Oct. 21,2011) ........
In re Pac. Biosciences of Cal., Inc. Sec. Litig.,
No. CIV509210 (Cal. Super. Ct.
San Mateo Cty. May 25, 2012) ............
In re Sunrun Inc. S’holder Litig.,
No. CIV538215 (Cal. Super. Ct.
San Mateo Cty. filed Apr. 13, 2016) ........
In re Sunrun Inc. S’holder Litig.,
No. CIV538215 (Cal. Super. Ct.
San Mateo Cty. Jan. 17, 2017).............
ze
Ciled Authorities
In re Zynga Inc. Sec. Litig.
No. C 12-04007 JSW, 2014 U.S. Dist.
LEXIS 21673 (N.D. Cal. Feb. 25, 2014). ......... .30
fuso v. Snap, Inc.,
No. 17-CIV-03710 (Cal. Super. Ct.
Sun Mateo Cty. filed Aug. 14, 2017)............. 7,9
Lee v. Wells Fargo Bank N.A..,
No. 34-2013-00153873-CU-OR-GDS,
2014 WL 3732002 (Cal. Super. Ct.
Sacramento Cty. July 25, 2014) ................. 14
Leyte-Vidal v. Semel,
zo Cal. App. 4th 1001 (2018) ... 1... cece eee 14
Luther v. Countrywide Fin. Corp.,
BO CE. Aa. GER Fee ED oo eee eee 6,7
Mattco Forge, Inc. v. Arthur Young & Co.,
223 Cal. App. 8d 1429 (1990)... 0... ccc ee ee eee 28
McKelil v. Wash. Mut., Inc.,
142 Cal. App. 4th 1467 (2006)... 0. cece eee 13
Merrill Lynch, Pierce, Fenner & Smith Inc. v.
Dabit,
DCN CO ct Ociudtanas den maneted 26, 30
Newby v. Enron Corp.,
338 F.3d 467 (Sth Cir. 2003) .................... 27
a
Cited Authorities
Nolte v. Cedars Sinai Med. Ctr,
236 Cal. App. 4th 1401 (2015) .. 2.2... 0. ..00000..
Olberding v. Avinger, Inc.,
Nos. 4:17-cv-03398-CW, 4:17-cv-03401-CW
(PEED Comk, OUR BE BET) on ccc cece stccaseccess
Olberding v. Avinger, Inc.,
No. 17-CLV-02307 (Cal. Super. Ct.
San Mateo Cty. filed May 25, 2017)..........00...
Ommnicare, Inc. v. Laborers Dist. Council Constr.
Indus. Pension Fund,
135 S. Ct. 1318 (2015)... 0. eee eee
Oshorne v. Yasmeh,
No. B262043, 2016 WL 4039863
(Cal. Ct. App. July 28, 2016)...................,
Palin v. New York Times Co.,
No. 17-CV-4853 (JSR), 2017 WL 3712177
GSTD.N.Y. Amat, 2B, BOUT)... ccc cc ccc ccccccccs
Pearson v. Vill. of Greenup, Til.,
No. 09-CV-0699-MJR, 2009 WL 4789259
i2
eee 11-12
Petrie v. Flec. Game Card, Inc.,
761 F.3d 959 (Sth Cir. 2014)... 0.
2
Cited Authortlies
Plymouth Cty. Ret. Sys. v. Model N Inc.,
No. CIV530291 (Cal. Super. Ct.
San Mateo Cty. filed Sept. 5, 2014) ..........
Popescu v. Apple Inc.,
t Cad. An GE SOG) on a ove cdewenrnes
Pub. Emps.’ Ret. Sys. of Miss. v. Endo Int'l ple,
No. 2017-02081-MJ (Pa. Ct. Com. PI.
ees PUN, Bees WOE os oe v0 nndare nes Oto ee
Reyes v. Zynga Inx.,
No. CGC -12-522876 (Cal. Super. Ct.
San Francisco Cty. Feb. 11, 2015) ...........
Robinson v. Audience, Inc.,
No. 1-12-CV-232227 (Cal. Super. Ct.
Santa Clara Cty. Sept. 3, 2013)..............
Schwartz v. Concordia Int'l Corp.,
No. 16-CV-6576 (NGG) (CLP),
2017 W!. 2559777 (E.D.N.Y. June 12, 2017)...
Simpson v. Snap Inc.,
No. BC662444 (Cal. Super. Ct.
Los Angeles Cty. filed, May 23, 2017). ........
Small v. Fritz Cos.,
BO Cab. St BEF GRR 6 os ose caccetap eee
anal 4
eur
Cited Authorities
Page
Stoneridge Inv. Partners, LLC v.
Scientific-Atlanta, Inc.,
aac cincauunseeeccees 26
Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
ES 12
Wiley v. Envivio, Inc.,
No, C1V517185 (Cal. Super. Ct.
San Mateo Cty. filed Oct. 5, 2012) ............... 28
STATUTES & RULES
EE 10
Cal. Civ. Proc. Code § 425.10(a)(1).................. 13
es CAND @ GOLIO 6. cece cece esecess 14
aca ecawe caus ttedis ecccees 12
cr cnc uw 6b bees cbcocsse Is
SE Se 14
Private Securities Litigation Reform Act of 1995,
Pub. L. No. 104-67, 109 Stat. 787. .......... passim
Securities Act of 1933, ch. 38, 48 Stat. 74....... passim
Rayo)
Cited Authorities
Page
SU REM OTONODS goss che coca ccoccaal
OP Chas PUI on cna eiva tena taceneceguapes ae
Se PR © TUNED kod nteccctaneheaenthucdenieans 5
pe ee 8 ee
ERLE h © CRIED 6.600 600s dn nwaceekeeasas 5, 26
Securities Exehange Act of 1934,
Se ete PES Kciccecnosccoeeecvosenvess x
Securities Litigation Uniform Standards Act of 1998,
Pub. L. No. 105-353, 112 Stat. 3227......... passim
Se ca ee 2h adh ddd a Ok ed eankeetectewauens |
Pk, GIs ESPNU SES ha che koe ew death ab aves ae eaay ]
LEGISLATIVE MATERIALS
H.R. Conf. Rep. No. 104-369 (1995) ....... 2, 4-5, 26-27
H.R. Conf. Rep. No. 105-803 (1998) ...............5-6
COURT DOCUMENTS
Hr’g Tr., Hosey v. Costolo, No. 16-CIV-02228 (Cal.
Super. Ct. San Mateo Cty. Mar. 17, 2017)... 15-16, 29
LW
Cited Authorities
Page
Hr’g Tr., Jn ve Castlight Health Inc. S’holder
Litig., No. C1V533203 (Cal. Super. Ct.
San Mateo Cty. Jan. 27, 2016). ............ 20000. 29
Pls’ Suppl. Submission in Opp. to Defs.’ Dem. re Order
lintered in the led. See. Fraud Action, Buelow
v. Alibaba Grp. Holding Ltd., No. CTV534692
(Cal. Super. Ct. San Mateo Cty. July 15, 2016)... .. 19
Rep.’s Tr. of Proceedings, Buelow v. Alibaba Grp.
Holding Litd., No. C1V535692 (Cal. Super.
Ct. San Mateo Cty. Oct. 20 and 24, 2016) ...... 15, 20
Rep.’s Tr. of Proceedings, Geller v. LendingClub
Corp., No. C1V537300 (Cal. Super. Ct.
San Mateo Cty. Sept. 30, 2016).................. 29
Rep.’s Tr. of Proceedings, Giavara v. Gol’ro,
Ine., No. C1V537077 (Cal. Super. Ct.
Sem Bates Civ. NOU Bo, BOW «oc ccccccccccccce: 29
OTHER AUTHORITIES
49A Cal. Jur. 3d Pleading § 141 (2017) .............. 13
Beverly Reid O’Connell & Karen L.
Stevenson, Rutter Group Practice Guide:
Federal Civil Procedure Before Trial,
Cal. & 9th Cir. ds. 9 11:610 (2017) ..........., 27-28
eV
Cited Authorities
Page
Elizabeth M. Weldon & Sean J. O'Hara, Litigating
in California State Court but Not a Local? ....... 16
Erie E. Younger, Younger on California
Motions § 6:26 (2d ed. 2016) ...........0.0ceeeee 16
Laura A. McDonald, estoring the Balance After
the Private Securities Litigation Reform
Act of 1995, 38 Fla. St. U. L.J. 911 (2011) ......... 25
Lawyers for Civil Justice et al., Liligation
Cost Survey of Major Companies (2010).......... 25
Victor Marrero, The Cost of Rules, The Rule of
Costs, 37 Cardozo L.J. 1599 (2016). ..............
]
STATEMENT OF INTEREST OF AMICI CURIAE:
Amici are issuers of securities that trade on cither the
New York Stock Exchange or NASDAQ. Amici have all
been sued in putative class actions under the Securities
Act of 1933 (“Securities Act”) in state court in California.
This brief is submitted in support of Petitioners’ assertion
that the Securities Litigation Uniform Standards Act
of 1998 (““SLUSA”) eliminated state court jurisdiction
over covered class actions that allege only claims under
the Securities Act and that such actions are subject to
exclusive federal court jurisdiction.
Amici are Alibaba Group Holding Limited, GoPro,
{ne., Kitov Pharmaceuticals Holdings Ltd., LendingClub
Corporation, Novus Therapeutics, Inc. (formerly okai
Pharmaceuticals, Inc.), Pacific Biosciences of California,
Inc., Sierra Oncology, Inc, (formerly ProN Ai Therapcutics,
Inc.), Snap Inc., and X Biotech LIne.
SUMMARY OF ARGUMENT
Congress passed the Private Securities Litigation
Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737
(“PSLRA”), to impose stricter substantive and procedural
1. Pursuant to Supreme Court Rule 37.38(a), aneici curiae
submit this brief in support of a case before the Court for oral
argument. Petitioners’ and Respondents’ consent to the filing of
amicus briefs have been filed with the Clerk. Pursuant to Supreme
Court Rule 37.6, amici curiae certify that no party or counsel!
for a party authored any portion of this brief or madc a monetary
contribution intended to fund its preparation or submission. No
person other than anzici curiae, its members, or its counsel have
made such a monetary contribution.
2
controls on securities fraud claims and curtail abusive
practices in such litigation. In reaction, many plaintiffs
flocked to state courts, where they hoped that differences
in procedural and substantive law would provide them a
friendlier forum. Congress responded by enacting the
Securities Litigation Uniform Standards Act of 1998,
Pub. L. No, 105-353, 112 Stat. 3227 (““SLUSA”). SLUSA
climinated state court subject matter jurisdiction over
class actions asserting claims under the Securities Act,
ch. 38, 48 Stat. 74. SLUSA’s text and history both make
plain why Congress chose to do so: Congress wanted
class actions bringing federal securities law claims to be
litigated in federal court, under uniform national rules,
to promote uniformity and consistency in securities class
action litigation.
The interpretation of SLUSA espoused by Respondents
flies in the face of that design. And because that
interpretation has been erroneously followed by some
courts over the past decade, this Court need not wonder
what practical impact it would have. The evidence is
already there: Respondents’ interpretation has led to
an explosion of state court Securities Act class actions.
It has subjected issuers to multiple, simultaneous suits
in state and federal court. It has produced inconsistent.
outcomes on the merits. And it has vpened the door to
the very ills—“the targeting of deep pocket defendants
... Without regard to their actual culpability,” and “the
abuse of the discovery process” that imposes massive costs
and forces settlement—that Congress sought to eliminate
when it enacted its reforms. H.R. Conf, Rep. No. 104-369,
at 31-32 (1995).
3
Indeed, because of the mistaken interpretation
advanced by Respondents, the volume of state court
Securities Act class actions has increased dramatically
despite SLUSA. In just the past six years, at least
50 issuers were sued in Securities Act class actions
in California state courts alone. Such cases cannot
be centralized by the Judicial Panel on Multidistrict
Litigation and instead must be litigated separately. That
imposes significant additional costs on the newly public
companies typically named as defendants in these cases
(who also typically must indemnify the underwriters of
their offerings that are named as defendants). The multi-
pronged litigation also creates the potential for conflicts
with federal decisions involving substantially identical
allegations.
The risk of inconsistent outcomes is not just
theoretical. In two recent instances, issuer defendants
were sued in both state and federal court in class actions
alleging violations of the federal sccurities laws. Although
the complaints challenged the same allegedly false or
misleading statements, the federal courts dismissed the
claims with prejudice while the state courts allowed the
claims to proceed. These divergent results stem from
differing judicial philosophies, and sometimes different
pleading standards. State courts—and particularly
California courts, where most state court Securities
Act class actions have been brought—often permit the
pleading of conclusory “ultimate facts” and decline
to apply the plausibility standards announced by this
Court in Twombly and Iqbal. Indeed, state courts have
repeatedly refused to dismiss Securities Act complaints
no matter how improbable the allegations may be. As a
result, complaints that would be dismissed in federal court
regularly survive dismissal in state court.
4
Just as important, state courts regularly refuse to
recognize the automatic discovery stay imposed by the
PSLRA. Indeed, many California courts have explicitly
invited plaintiffs to take discovery while a demurrer (the
California state court equivalent of a motion to dismiss)
is pending. Moreover, in those rare instances where
California state courts have held that plaintiffs failed to
state a claim, they have frequently encouraged plaintiffs
to take discovery so that they can beef up their otherwise
deficient allegations before filing an amended complaint.
Thus, unlike the federal system, California state courts
have allowed plaintiffs to discover their way into an
arguably colorable claim. These practices are contrary
to the PSLRA’s goal of eliminating fishing expedition
discovery. And they impose the extraordinary expense
of discovery on issuers facing baseless claims.
These results are precisely what Congress sought
to avoid when it provided for the application of uniform,
national rules for Securities Act claims. For these reasons,
and those set forth in Petitioners’ brief, the judgment of
the California Court of Appeal should be reversed.
ARGUMENT
1, CONGRESS PASSED THE PSLRA AND SLUSA
AS A CHECK AGAINST ABUSIVE SECURITIES
STRIKE SUITS AND TO PROMOTE UNIFORM
AND CONSISTENT ENFORCEMENT OF THE
FEDERAL SECURITIES LAWS
Congress passed the PSLRA to curb perceived
“abusels}” in private securities litigation that were injuring
“the entire U.S. economy.” H.R. Conf. Rep. No. 104-369,
5
at 31-32 (1995). The House Conference Keport highlighted
nuisance filings, “the targeting of deep pocket defendants
_,. without regard to their actual culpability,” and “abuse
of the discovery process to impose costs so burdensome
that it is often economica! for the victimized party to
settle.” /d. at 31. The PSLRA enacted both substantive
and procedural controls on the litigation of cases brought
under the federal securities laws. These included a
mandatory stay of discovery pending a motion to dismiss,
15 U.S.C. § 77z-1(b)(1), and a requirement that plaintiffs
file certifications setting forth their transactions in the
security at issue during the class period. /d. § 77z-1(a){2).
SLUSA was passed three years after the PSLRA. As
Petitioners explain, SLUSA accomplished three things.
First, it prohibited plaintiffs from bringing class actions
under state securities laws by precluding those actions
altogether. Jd. § 77p(b); see also id. § 77p(c). Second, it
provided that “mixed” class actions alleging claims under
both the Securities Act and state law would be litigated
in federal court by allowing such actions, if brought in
state court, to be removed to federal court, where the
state claims would be dismissed and the federal claims
adjudicated. Jd. $§ 77p(c), 77v(a). And third, it ensured
that class actions alleging claims only under the Securities
Act would be litigated in federal court by eliminating
state court jurisdiction over such actions. /d. § 77v{a).
SLUSA made these changes to “enact national standards
for securities class action lawsuits involving nationally
traded securities.” Pub. L. No. 105-353, § 2(5), 112 Stat
3227, 3227; see also H.R. Conf. Rep. No. 105-803, at 13
(1998) (“[T]his legislation establishes uniform national
rules for securities class action litigation involving our
national capital markets.”). To this end, SLUSA “make/s/
6
Federal court the exclusive venue for most securities
fraud class action litigation.” H.R Conf. Rep. No. 105-
803, at 15 (1998) (emphasis added). “The purpose of this
title is tou prevent plaintiffs from seeking lo evade the
protections that Federal law provides against abusive
litigation by filing suit in Slate, rather than in Federal,
court.” Id. at 13 (emphasis added).
Congress's stated goal could hardly have been clearer.
Unfortunately, that goal has been thoroughly frustrated
as some courts have misinterpreted SILUSA to allow
Securities Act class actions filed in state court to remain
in state court. The result has been a significant increase in
state court Securities Act class actions and an increasing
divergence of both practices and outcomes between state
and federal Securities Aet class actions.
Il. PLAINTIFFS HAVE FLOCKED TO STATE
COURTS TO LITIGATE PUTATIVE SECURITIES
ACT CLASS ACTIONS
At a time when most complex class action litigation
is being litigated in federal courts, Plaintiffs are filing
state court class actions asserting exclusively Securities
Act claims with increasing frequency. Most of these suits
are being filed in the state courts of California. Indeed,
since the California Court of Appeal held in Luther ».
Countrywide Financial Corp., 195 Cal. App. 4th 789
(2011), that state courts have jurisdiction over Securities
Act class actions despite SLUSA, at least 50 securities
issuers have been named as defendants in Securities Act
class action suits in California state courts. See Appendix
7
A.’ By contrast, only six issuers were sued in Securities
Act elass actions in California state courts in the entire
decade preceding /.uwther. See Br. of the Securities
Industry and Financial Markets Association, ct al. as
Amici Curiae in Supp. of the Pet. for Writ of Cert. at 7.°
2. Plaintiffs have also filed Securities Act class action suits
against issuers in other state courts. See, e.g., Bucks Cty. Hniups. Ret.
Fund v. Ally Fin. Inc., No. 16-013616-CZ (Mich. Cir. Ct. filed Oct.
21, 2016); ?’uh. mips.” Ret. Sys. of Miss. v. Endo Tat’? pic, No. 2017-
U2081-MJ (Pa. Ct. Com. PI. filed Feb. 28, 2017) (removed to E.D. Pa.,
No. 17-1466, and remanded on Aug. 28, 2017); City of Birmingham
Ret. & Relref Sys. v. ZTO Express (Cayman) Inc., No. 01-CV-2017-
902004,.00 (Ala. Cir. Ct. filed May 16, 2017) (removed to N.D. Ala.,
No. 2:17-CV-1091-RKDP, and stayed pending Cyan). No doubt litigation
of Securities Act claims in state courts outside of California would
be even more prevalent had many federal district courts outside of
California not determined that Securities Act claims are removable.
See, e.g., Schwartz v. Concordia Int'l Corp., No. 16-CV-6576 (NGG)
(CLP), 2017 WL 2559777, at *8 (E.D.N.Y. June 12, 2017); Huang v.
iDreumSky Tech. Lid., No. 15-CV-2514 (JPO), 2016 WL 299034, at
*4 (S.D.NLY. Jan. 25, 2016); Gaynor v. Miller, 205 F. Supp. 3d 935,
945-46 (F..D. Tenn. 2016).
3. More than 50% of these California state court actions were
filed in the Superior Court for the County of San Mateo, which has
become a magnet jurisdiction, with non-resident plaintiffs filing
Jawsuits to take advantage of what they deem to he a favorable
venue. See, e.g., Buelow v. Ababa Grp. Holding Ltd., No. CIV535692
(Cal. Super. Ct. San Mateo Cty. filed Oct. 5, 2015) (lawsuit against
ecommerce company with principal operations in China); /a re Ltsy,
Ine. S‘hoider Litig., No. CIV534768 (Cal. Super. Ct. San Mateo Cty.
filed July 2i, 2015) (awsuit against Brooklyn-based ecommerce
company with no San Mateo operations); Guo v. ZTO Express
(Cayman) Fac., No. 17-CTV-03676 (Cal. Super. Ct. San Mateo Cty.
filed Aug. 11,2017) Uawsuit against China-based logistics company);
duso v. Suap, Inc., No. 17-C]1V-03710 (Cal. Super. Ct. San Mateo
Cty. filed Aug. 14, 2017) (lawsuit against Los Angeles-based social
networking company with no San Mateo operations).
x
This dramatic growth in state court Securities Act
litigation has left many issuers subject to competing,
multi-forum litigation arising from nearly identical
challenges to the same statements in public offering
materials. Since 2011, at least half of the 50 issuers sued
in Securities Act class actions in California state court
have also faced contemporancous securities fraud lawsuits
in federal district courts. See Appendix A. These federal
suits inelude not only parallel lawsuits under the Securities
Exchange Act of 1934, 15 U.S.C. § 78a et seq. (“xchange
Act”), which cannot be maintained in state court, but also
parallel Securities Act Jawsuits that challenge the same
alleged misrepresentations being challenged in state court
under the same federal statute. Fur example:
* Alibaba was sued in an Exchange Act class
action in the Southern District of New York and a
Securities Act class action in California Superior
Court (San Mateo County);*
* Sunrun was sued in a Securities Act class action
in the Northern District of California and a
Securities Act class action in California Superior
Court (San Mateo County);®
4, Christine Asa Co., Lid. v. Alibaba Grp. Holding Lid., No.
1:15-md-02631-CM (S.D.NLY. filed June 24, 2015), appeal docketed,
No. 16-2519 (2d Cir. July 20, 2016); Buelow v. Alibaba Grp. Holding
Lid., No. CIV535692 (Cal. Super. Ct. San Mateo Cty. filed Oct. 5,
2015).
5. Greenberg v. Sunrun ince., No. 3:16-ev-02480-CRB (N.D. Cal.
filed May 6, 2016); /n ve Sunrun Inc. S holder Litig., No. CIV538214
(Cal. Super. Ct. San Mateo Cty. filed Apr. 13, 2016).
9
* Etsy was sued in a Securities Act and Exchange
Act class action in the Eastern District of New
York and a Securities Act class action in California
Superior Court (San Mateo County);* and
* Snap was sued in two Securities Act and Exchange
Act class actions in the Central District of
California and three Securities Act class actions
in California Superior Court (San Mateo and Los
Angeles Counties).’
As discussed below, the proliferation of California state
court Securities Act litigation can be explained only by the
many differences in how state and federal courts handle
such cases. These differences place issuer defendants
in state court actions at a meaningful disadvantage and
result in marked inconsistencies in outcomes in paralle!
state and federal court securities litigation.
6. Altayyar v. Etsy, Inc., No. t:15-cv-02785-AMD-RER
(F..D.N.Y, filed May 13, 2015), appeal! docketed, No. 17-1180 (2d Cir.
Apr. 21, 2017); in re Aisy, Inc. Sholder Litig., No. CIV534768 (Cal.
Super. Ct. San Mateo Cty. filed July 21, 2015).
7. Erickson v. Snap Inc., No. 2:17-ev-08679-SV W-AGR (C.D.
Cal. filed May 16, 2017); Gupta v. Snap Jnc., No. 2:17-cv-05054-SV W-
AGR (C.D. Cal. filed July 10, 2017); fuse v. Snap, imc., No. 17-C1V-
04710 (Cal. Super. Ct. San Mateo Cty. filed Aug. 14, 2017); Hsieh »v.
Snap Inc., No. BC669394 (Cal. Super. Ct. Los Angeles Cty. filed July
25, 2017); Simpson v. Snap Inc., No. BC662444 (Cal. Super. Ct. Los
Angeles Cty. filed May 23, 2017) (voluntarily dismissed following
removal, C.D. Cal.).
10
Ill. RESPONDENTS’ INTERPRETATION OF SLUSA
HAS PRODUCED RAMPANT ABUSES AND
INEFFICIENCIES IN THE LITIGATION OF
SECURITIES ACT CLAIMS
A. State Court Actions Are Not Subject To
Centralization By The Judicial Panel On
Multidistrict Litigation, Thus Adding To
Issuers’ Burdens
Federal actions with “one or more common questions
of fact” ean be centralized in a single federal district. 28
U.S.C. § 1407(a). This procedure is aimed to advance the
“just and efficient conduct” of actions. Jd. The Judicial
Panel on Multidistrict Litigation (“JPML”) regularly holds
that having asingle judge preside over related actions has
the effect of “providing consistency, preventing conflicting
rulings, and greatly reducing the duplicative expenditure
of judicial and party resources.” Jn re Countrywide Fin.
Corp. Mortg.-Backed Sec. Litig., MDL No. 2265, 2011
WL 11761004, at *1 (J.P.M.L. Dec. 21, 2011). Indeed, the
JPML routinely consolidates federal securities litigation,
including in cases involving Securities Act and Exchange
Act claims. See, e.g., In re Facebook, Inc., LPO Sec. &
Derivative Litig., 899 F. Supp. 2d 1374, 1375 (J.P.M.L.
2012).
The JPML is powerless, however, to act with respect to
state court actions. Under Respondents’ interpretation of
SLUSA, therefore, there is no way to consolidate multiple
federal and state court securities actions into a single
court, even when they involve the exact same claims and
allegations. That frustrates SLUSA’s goal of streamlining
litigation and preventing inconsistent rulings.
ll
It alse imposes substantial additional burdens on
issuer defendants. Specifically, forcing companies to
defend parallel state and federal class actions imposes
massive litigation costs on the newly public companies that
are typically named as defendants in cases under Section
Ll of the Securities Act.* These burdens are particularly
severe because issuers are almost always contractually
bound to pay the attorneys’ fees of the initial public
offering (“IPO”) underwriters that are typically named
as co-defendants in Securities Act claims. Moreover, these
indemnified underwriters’ fees are generally not covered
by director and officer insurance policies and must be
borne by the issuers themselves.
B. The Pleading Standards Applied By Many State
Courts Do Not Provide A Meaningful Check
Against Frivolous Securities Act Litigation
Federal courts function as gatekeepers against
baseless litigation and repeatedly reference this role in
considering pleading challenges. See, e.g., Palin v. New
York Times Co., No. 17-CV-4853 (JSR), 2017 W L 3712177,
at *1 n.1 (S.D.N-Y. Aug. 29, 2017) (“By requiring district
courts to make plausibility determinations based on the
pleadings, the Supreme Court has, in effect, > de district
courts gatekeepers.”) (citing /gba/ and Twom ny); Pearson
v. Vill. of Greenup, Ill., No. 09-CV-0699-MJR, 2009 WL
8. These burdens are further compounded in the case of
foreign private issuers, who may face litigation in their home
countries, in addition to both federal and state court suits. This
exposure to parallel state and federal litigation places the U.S.
capital markets at a competitive disadvantage and is yet another
negative consequence of the frustration of SLUSA’s goal of
achieving uniform standards for securities litigation.
12
4789259, at *2 (S.D. Ill. Dec. 9, 2009) (“The Court has a
role as a gatekeeper tu prevent a plaintiff with a largely
groundless claim from being allowed to take up the
time of a number of other people, with the right to do so
representing an in terrorem increment of the settlement
value.”) (citing Twombly) (quotation marks omitted).
Such a check is particularly appropriate in securities
class action litigation, which this Court has recognized,
“if not adequately contained, can be employed abusively
tu impose substantial costs on companies and individuals
whose conduct conforms to the law.” Teliabs, inc. v. Makor
issues & Rights, Ltd., 551 U.S. 308, 313 (2007).
The federal courts’ gatekeeper role is closely related
to federal pleading standards. As this Court has held on
multiple occasions starting with Bell Atlantic Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556
U.S. 662 (2009), federal] plaintiffs must state “a plausible
claim for relief,” and judges evaluating the pleadings
must engage in “a context-specific task that requires the
reviewing court to draw on its judicial experience and
common sense.” /gbal, 556 U.S, at 679. Unless the pleading
“nudge|s plaintiff's} claims across the line from conceivable
to plausible,” the complaint is subject to dismissal under
Federal Rule of Civil Procedure 8. Twombly, 550 U.S. at
570. More recently, this Court explicitly held that /gbai
applies to Securities Act claims in federal court, and
that meeting the pleading standard “is no small task for
an investor.” Omnicare, Inc. v. Laborers Dist. Council
Constr. Indus. Pension Fund, 135 S. Ct. 1318, 1332 (2015).
9. Although Twombiy and /qbal post-date the PSLRA and
SLUSA, this Court's decision in Omnicuare makes clear thal the
pleading standard set forth in those cases is consistent with SLUSA's
13
By contrast, state courts often view state pleading
rules as laxer than federal rules and decline to exercise a
gatekeeper function. In California, for example, plaintiffs
typically argue that a complaint must contain only “l[a]
statement of the facts constituting the cause of action,
in ordinary and concise language.” Cal. Civ. Proc. Code
§ 425.10(a)(1). Many California state courts have suggested
that the operative standard is “fair notice,” which permits
the pleading of “ultimate” facts, z.e., “the facts constituting
the cause of action”—rather than “evidentiary” facts, i.¢.,
details that support the general factual assertions being
made. Doheny Park Terrace Homeowners Ass'n, Inc. v.
Truck Ins. Exch., 132 Cal. App. 4th 1076, 1098-99 (2005);
see also McKell v. Wash. Mut., Inc., 142 Cal. App. 4th
1457, 1469 (2006) (“The rules of pleading require . . . only
general allegations of ultimate fact. The plaintiff need
not plead evidentiary facts supporting the allegation of
ultimate fact.”) (citations omitted); Doe v. City of L.A.,
42 Cal. 4th 531, 550 (2007); 49A Cal. Jur. 3d Pleading
§ 141 (2017) (“[A] complaint is not insufficient . .. because
essential facts appear only inferentially, as conclusions of
law, by way of recital, or as informal] and argumentative
allegations.”) (footnotes omitted).
Moreover, in addition to accepting mere notice
pleading, California state courts often reject the federal]
plausibility requirement and instead hold that “facts
alleged in the pleading are deemed to be true, however
goa) of effectuating the intent of the PSLRA and making [federal
courts gatekeepers for securities suits. /d. Moreover, regardless
of when the plausibility requirement was articulated, it is now the
law in federa] courts but, as discussed below, is not applied by many
state courts, thus resulting in a lack of uniformity in the evaluation
of challenges to Securitics Act pleadings.
14
improbable they may be.” Dei 8. Webb Corp. v. Structural
Materials Co., 128 Cal. App. 3d 593, 604 (1981) (emphasis
atided).” And several have explicitly declined to “examine
the ‘plausibility’ of allegations on a demurrer pursuant
to Code of Civil Procedure § 430.10 in the same way that
federal courts may examine the ‘plausibility’ of allegations
on a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) and Iqbal.” Lee v. Wells Fargo Bank
N.A., No. 34-2013-00158873-CU-OR-GDS, 2014 WL
3732002, at *3 (Cal. Super. Ct. Sacramento Cty. July 25,
2014); see also In re Frrelye, Inc. Sec. Litig., No. 1-14-
CV-266866, 2015 WL 13546104, at *12 & n.91 (Cal. Super.
Ct. Santa Clara Cty. Aug. 11, 2015) (court “not inclined to
apply the federal heightened pleading standards set forth
in [Twombly/Igqbal)” and noting that “|t}here appear to be
no published cases in California applying the Twombly/
/qbal pleading standards to a Section 11 or Section 12(a)
(2) action filed in state court”)."!
10. See also, e.g., Osborne v. Yasmeh, No. B262043, 2016 WL
4049863, at *11 (Cal. Ct. App. July 28, 2016) (“[T]Jhe facts alleged in
the pleading are deemed to be true, however improbable they may
be.”); Franceschi v. Franchise Tax Bd., 1 Ca). App. 5th 247, 256 (2016)
(same); Popescu v. Apple Inc., 1 Cal. App. Sth 39, 44 (2016) (same);
Noite ». Cedars Sinai Med. Ctr., 236 Cal. App. 4th 1401, 1406 (2015)
(same); Hock v. iansen, 225 Cal. App. 4th 215, 220 (2014) (same);
Leyte-Vidal v. Semel, 220 Cal. App. 4th 1001, 1007 (2013) (same);
Friends of Glendora v. City of Glendora, 182 Cal. App. 4th 578, 576
(2010) (same); Align Tech., Inc. v. Bao Tran, 179 Cal. App. 4th $49,
958 (2009) (same).
11. Although amici provide the Court with examples of
decisions in which stale courts reject the plausibility standard
or apply “loose” pleading standards, amici believe, and issuers
regularly and rightfully argue, that state courts should apply greater
scrutiny to Sccuritics Act complaints, similar to the scrutiny applied
15
These pleading standards can be outcome
determinative. While federal courts regularly dismiss
baseless Securities Act class actions on the pleadings with
prejudice, amici are unaware of any California court that
has sustained an initital demurrer to a Securities Act class
action without leave to amend. Indeed, multiple California
trial courts in Securities Act class actions have highlighted
what they consider to be “liberal” and “loose” pleading
standards as a principal reason for overruling demurrers
to Securities Act class action complaints:
¢ “The real primary analysis of the Court ts, yes, the
Court is interpreting Federal] law, but the Court is
bound by a much looser pleading standard under
California law than ... under the Federal! Rules of
Civil Procedure ....That’s really the analysis of
the Court. It’s a much lesser burden. That’s all.”
Rep.’s Tr. of Proceedings at 9:22-10:3, Buelow v.
Alibaba Grp. Holding Ltd., No. CTV435692 (Cal.
Super. Ct. San Mateo Cty. Oct. 20 and 24, 2016)
(overruling demurrer).
* “You have to do a liberal pleading, accept it all
as true. ... And you want me to be looking at
news] articles and then seeing, you know, what
is the nature and substance of each and how they
compare [to the allegedly omitted informativn].
And that’s just not in a state court pleading
procedure ....” Hr’g Tr. at 14:8-9, 11-14, Hosey
by federal courts. Amzcz, who are at different stages in their various
state court proceedings, do not intend, through this submission, to
waive any such arguments or to make any concessions or admissions
with respect to their individual circumstances or cascs.
16
v. Costolo, No. 16-CTV-02228 (Cal. Super. Ct. San
Mateo Cty. Mar. 17, 2017) (overruling demurrer).
* Overruling demurrer based on “ultimate factual
allegation” deemed sufficient “for purposes of
California pleading standards.” Order on Dem.
at 5-6, Robinson v. Audience, Ine., No. 1-12-
CV-232227 (Cal. Super. Ct. Santa Clara Cty.
Sept. 3, 2013); see also Order re: Dem. at 8, Jn
ve Mobilelron, Inc. S’holder Litig., No. t-15-CV-
284001 (Cal. Super. Ct. Santa Clara Cty. Oct. 4,
2016) (same).'”
These differences have led to inconsistent outcomes on
dispositive motions, even in cases where plaintiffs in
federal and state court are challenging precisely the same
alleged misrepresentations in offering documents.
One example of this phenomenon involves Alibaba,
the world’s largest ecommerce company, which runs
online marketplaces similar to Amazon Marketplace and
12. As one commentator recognized, ‘a dcftedant to a weak
claim may stand a chance of disposing of the lawsuit with a motion
to dismiss under the Twombly/Iqbal standard ... . Faced with
the same circumstances in a California state court, however, a
defendant .. . would have to accept the complaint’s allegations at
face value without applying a plausibility standard.” Elizabeth
M. Weldon & Sean J. O'Hara, Litigating in Catiforniu State
Court but Not a Local?, Mar. 25, 2013, hitps://www.swlaw.com/
assets/pdf/publications/2013/03/25/ Litigating %20in%20
California%20State%20Court%20Part%201.pdf; see aiso Erie FE.
Younger, Younger on California Motions § 6:26 (2d ed. 2016) (“An
argument (even if true) that [a] plaintiff wil! never be able to prove
a claim is simply a waste of time in a demurrer.”).
17
eBay. Alibaba conducted its IPO in September 2014. In
January 2015, a document purported to memorialize a
meeting between Alibaba and Chinese regulators that
took place several months before Alibaba’s IPO, during
which the regulators allegedly spoke critically of Alibaba’s
response to the sale of counterfeit goods by third-
party merchants on its ecommerce platforms. Alibaba’s
stock price dropped following the initial posting of this
document but continued to trade al approximately 50%
above its [PO price. Seven Exchange Act securities fraud
lawsuits were filed in federal district courts around the
country and were thereafter centralized by the Judicial
Panel on Multidistrict Litigation before Chief Judge
Colleen MeMahon in the Southern District of New York.
Christine Asia Co., Ltd. v. Alibaba Grp. Holding Ltd.,
192 F. Supp. 3d 456 (S.D.N_Y. 2016) (the “Alibaba Federal
Litigation”). Seven months later, and coinciding with a
global stock market decline, Alibaba’s stock price dropped
below its IPO price for the first time. Three Securities Act
lawsuits were then filed in California Superior Court (San
Mateo County) challenging allegedly false and misleading
statements in Alibaba’s IPO registration statement (the
“Alibaba California Litigation”). Plaintiffs relied on the
same document on which plaintiffs in the Alibaba Federal
Litigation relied. These lawsuits could not be consolidated
with the pending [ederal actions because they were filed
in state court."
15. Alibaba had removed the state court action, but it was
remanded, and the California Superior Court subsequently rejected
Alibaba’s argument that it lacked subject matter jurisdiction to hear
the Securities Act claims. ‘The parties engaged in approximately six
months of discovery in California before Alibaba’s demurrer was
even considered.
18
The allegations asserted in the Alibaba Federal
Litigation and the Alibaba California Litigation had, in
the words of the state court judge, an “extraordinary
degree of factual overlap.” Tentative Order at 14, Buelow
v. Alibaba Grp. Llolding Lid., No. CIV535692 (Cal. Super.
Ct. San Mateo Cty. Oct. 17, 2016, incorporated by reference
in final order Dec. 22, 2016). Indeed, both actions asserted
the same alleged misrepresentations and omissions. See
Appendix B. The only distinctions of any significance
between the two actions were (1) the federal securities
statute under which plaintiffs claimed violations, and (2)
the court in which they were filed.
‘The outcome of Alibaba’s challenges to the pleadings
was not similar, however. In the Alibaba Federal
Litigation, Chief Judge McMahon of the Southern District
of New York granted Alibaba’s motion to dismiss with
prejudice after finding that Alibaba’s IPO registration
statement was neither false nor misleading. Christine
Asia, 192 F. Supp. 3d at 482. In reaching this decision,
the court reviewed Alibaba’s IPO disclosures and
concluded that the registration statement was “unusually
comprehensive,” “accurate and sufficiently candid” and
“fully disclose[d] all substantive investment risks.” /d.
at 459, 469, 477. The decision was not based on a Jack of
particularity or specificity in the pleadings and did not
require application of Federal Rule of Civil Procedure
9(b) or heightened PSLRA pleading standards. Instead,
the federa] court concluded that even if the allegations
were accepted as true, the challenged statements were
either not “materiaJly misleading and actionable” or
were “too general to be considered false or misleading.”
fd. at 478. Finally, Chief Judge McMahon concluded that
“Defendants were under no duty to disclose” Alibaba’s
19
meeting with Chinese regulators. /d. at 482. Significantly,
the court determined that plaintiffs’ failure to plead
actionable false statements was “‘substantive’ rather
than the result of an ‘inadequately or inartfully pleaded’
complaint.” /d. ‘Thus, the court dismissed the Alibaba
Federal Litigation with prejudice.
By contrast, the court in the Alibaba California
litigation declined to adopt the federal court’s reasoning
based on perceived differences in state and federal
pleading standards and thus overruled Alibaba’s demurrer.
Plaintiffs had opposed Alibaba’s demurrer by arguing that
the “Federal rules of pleading differ from the rules of
pleading in California state courts,” specifically including
‘goal among pleading rules that were inapplicable in state
court. Plaintiffs further contended that under “normal
California pleading requirements,” their complaint must
be “liberally construed,” and Alibaba’s demurrer must
be overruled “so long as [the complaint} apprises the
defendant of the factual basis for the claim.” Pls.’ Suppl.
Submission in Opp. to Defs.’ Dem. re Order Mntered in
the Fed. Sec. Fraud Action at 2-3, Buelow v. Alibaba
Grp. Holding Ltd., No. CIV535692 (Cal. Super. Ct. San
Mateo Cty. July 15, 2016). The San Mateo Superior Court
accepted Plaintiffs’ argument and overruled Alibaba’s
demurrer on the basis of the state court’s more liberal
pleading standard:
The Court agrees with Defendants that given
the extraordinary degree of factua) overlap
between this case and [the Alibaba Federal
Litigation] it is important to address the
reasoning for the Court’s decision. However, it
is also important to keep in mind that the Court
20
in [the Alibaba Federal] Litigation] viewed the
adequacy of the allegations pursuant to a much
stricter federal pleading standard.
Tentative Order at 14, Buelow v. Alibaba Grp. Holding
Ltd., No. CIV535692 (Cal. Super. Ct. San Mateo Cty. Oct.
17, 2016, incorporated by reference in final order Dec. 22,
2016), ‘The Court decided that “[t]he pleading standards in
federa) and state court are different, and this distinction
affects the Court’s analysis of Defendants’ demurrer”
and that “[uJnder state pleading standards Plaintiffs’
Complaint must be liberally construed.” Jd. at 6, 16
(quotation marks omitted). Notwithstanding the fact that
Chief Judge McMahon’s ruling was premised on the legal
question of whether, even accepting plaintiff’s allegations
as true, Alibaba’s risk disclosures were misleading, the
Superior Court’s “primary analysis” was based on the
perceived difference in federal and “much looser” state
pleading standards. Rep.’s Tr. of Proceedings at 9:22-10:1,
Buelow v. Alibaba Grp. Holding Ltd., No. C1VS35692 (Cal.
Super. Ct. San Mateo Cty. Oct. 20 and 24, 2016). Moreover,
with respect to Alibaba’s argument that its disclosures
were sufficient Lo warn investors of the allegedly concealed
risks, the Superior Court held that this question, which the
federal court had resolved in connection with the motion
to dismiss, “cannot be resolved by demurrer.” Tentative
Order at 16, Buelow v. Alibaba Grp. Holding Lid., No.
CIV535692 (Cal. Super. Ct. San Matco Cty. Oct. 17, 2016,
incorporated by reference in final order Dee. 22, 2016).
If a consistent pleading standard had been applied,
the Superior Court should have dismissed the Alibaba
California Litigation with prejudice just as Chief Judge
McMahon had dismissed the Alibaba Federal Litigation
2]
with prejudice. Instead, the state court’s perceived
stark difference between the state and [ederal pleading
standards led it to allow the case to continue with merits
discovery even though the relevant factual allegations
and legal standards for falsity were identical in the two
actions."
C. Inconsistent Outcomes In Securities Class
Actions Litigated In Both State And Federal
Courts Are Not Only A Result Of Perceived
Differences In Pleading Standards
}ederal and state courts considering virtually identical
challenges to registration statements have reached
conflicting decisions even in cases that have not turned
on pleading standards. Such was the case for Sunrun, a
San Francisco-based residential solar power company. [1
conducted its IPO on NASDAQ in August 2015. Before the
company’s IPO, a public utility had submitted a proposal
14. Federal and California courts have also applied different
summary judgment standards. In federal court, “a moving defendant
may shift the burden of producing evidence Lo the nonmoving plaintiff
merely by ‘showing’— that is, pointing out through argument—
the absence of evidence to support plaintiff's claim.” Fairbank v.
Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000). By
contrast, many California courts permit burden shifting only after
the moving party presents evidence—rather than just argument—
that the nonmoving plaintiff cannot meet its burden. See Aguilar »v.
All. Richfield Co., 25 Cal. 4th 826, 854-55, as modified (July 11, 2001)
(rejecting federal] standard); Fairbank, 212 I'.3d at 532 (contrasting
federal and California standards). This high burden diminishes the
availability of summary judgment as a tool to resolve Securities Act
claims in California court on important issues, such as the existence
of a false or misleading statement, and provides yet another reason
why limiting Securities Act class actions to federal] court is the only
way to cffectuate Congressional intent.
22
to the Nevada Public Utility Commission (“Nevada PUC”)
to limit net metering policies, on which Sunrun relied to
sell solar panels in Nevada. In the Company’s registration
statement, Sunrun stated that it focuses on “favorable
policy environments” with net metering programs.
Sunrun warned investors that the “expiration, elimination
or reduction of... rebates and incentives could adversely
impact” its business and specifically disclosed that
“changes to net metering policies may significantly reduce
demand for electricity from our solar service offerings”
and that utility companies and other specia! interests were
“currently challenging solar-related policies to reduce the
competitiveness of residential solar energy.” In January
2016, Sunrun announced that it was withdrawing from the
Nevada solar power market because the Nevada PUC had
cut certain net metering policies. A Securities Act class
action was filed in California Superior Court in April 2016.
See Inre Sunrun Inc. S’holder Litig., No. CIV538215 (Cal.
Super. Ct. San Mateo Cty. filed Apr. 13, 2016) (the “Sunrun
California Litigation”). In May 2016, a parallel Securities
Act lawsuit was filed in the Northern District of California.
Greenberg v. Sunrun Inc., No. 3:16-cv-02480-CRB (N.D.
Cal. filed May 6, 2016) (the “Sunrun Federal Litigation”).
The allegations in the Sunrun Federal! litigation and
the Sunrun California Litigation are virtually identical.
Both cases assert the same legal claims (violations of
Sections 11, 12(a)(2) and 15 of the Securities Act), challenge
the same registration statement and prospectus, and
premise their claims on the same factual circumstances.
See Appendix C (comparison of allegations). The only
materia] difference between the two actions is the court
in which they were filed. However, yet again, these two
nearly identical cases produced diametrically opposite
outcomes.
23
In the Sunrun Federal Litigation, Judge Charles
Breyer of the Northern District of California granted
Sunrun’s motion to dismiss with prejudice. His decision
carefully analyzed Sunrun’s IPO disclosures, including
Sunrun’s regulatory risk factors, and concluded that
plaintiffs had not sufficiently pleaded falsity. For example,
Judge Breyer explained that the company’s statement
that it entered “favorable policy environments” was not
false, “as the company’s exit from Nevada made painfully
clear.” Greenberg v. Sunrun Inc., 233 F. Supp. 3d 764, 772
(N.D. Cal. 2017). Additionally, Judge Breyer explained
that plaintiff’s allegation that Sunrun “sugarcoated”
its Nevada regulatory risks was “a mirage” because
Sunrun’s disclosures adequately warned that regulatory
developments could adversely affect its business. /d. at
773. The court dismissed the complaint with prejudice,
concluding that “leave to amend would be futile. The
Prospectus, after all, says what it says.” Jd. at 775.
By contrast, in the Sunrun California Litigation, the
San Mateo Superior Court overruled Sunrun’s demurrer
and allowed the case to proceed to discovery without
explicitly analyzing Sunrun’s IPO disclosures. Case
Mgmt. Order #2 at 3-4, Inve Sunrun Inc. S’holder Litig.,
No. CIV538215 (Cal. Super. Ct. San Mateo Cty. Jan. 17,
2017). Instead, the Superior Court simply concluded
that plaintiffs had “adequately pleaded” the claim. /d. It
also noted that it would not engage in the legal analysis
performed by the federal court to consider whether the
registration statement was false or misleading in light of
its disclosures and publicly available information:
Although Defendants strongly argue that the
statements were not false and misleading, and
24
asked the Court to make that determination
by interpretation of the Nevada legislation
diseussed in the Complaint, such an inquiry
is more appropriate on [a summary judgment]
motion not demurrer here.
/d. at 3. Thus, the state and federal courts considering
identical claims against Sunrun engaged in a starkly
different level of analysis and reached diametrically
opposed outcomes.
Sunrun is far from the only issuer that faces the
potential] for conflicting outcomes in Securities Act
litigation. For example, earlier this year, three plaintiffs
filed nearly identical Securities Act suits in San Mateo
Superior Court related to the IPO of Avinger, Inc., a
medical device company. See Olberding v. Avinger, Inc.,
No. 17-CIV-02307 (Cal. Super. Ct. San Mateo Cty. filed
May 25, 2017); Gonzalez v. Avinger, Inc., No. 17-CIV-
02284 (Cal. Super. Ct. San Mateo Cty. filed May 23, 2017);
Grotewrel v. Avinger, Inc., No. 17-CIV-02240 (Cal. Super.
Ct. San Mateo Cty. filed May 22, 2017). In all three cases,
the defendants removed to the U.S. District Court for
the Northern District of California. Two of the plaintiffs
moved to remand, which motions were granted based on
the federal court’s interpretation of the Securities Act’s
anti-removal bar. Order Granting Mots. to Remand,
Olberding v. Avinger, Inc., Nos. 4:17-ev-03398-CW,
4:17-ev-03401-CW (N.D. Cal. July 21, 2017). Because the
third plaintiff did not seek remand, however, one case
continues to move forward in federal court. Grotewiel v.
Avinger, Inc., No. 4:17-ev-03400-CW (N.D. Cal. filed June
12, 2017). Thus, Avinger faces a meaningful possibility of
divergent future outcomes. As set forth in Appendix A,
25
other issuers facc a similar risk based on parallel securities
class action litigation procceding simultancously in state
and federal courts.
DD. Liberal State Court Discovery Practices
Impose Significant And Asymmetrical Costs
On Issuers From The Outset Of State Court
Securities Class Action Litigation
Past the pleading stage, state courts continue to
handle Securities Act cases differently than their federal
counterparts, allowing discovery to proceed where federal!
courts do not. These discovery costs exponentially increase
the cost of litigation. Vietor Marrero, 7’he Cost of Rules,
The Rule of Costs, 37 Cardozo L.J. 1599, 1656-57 (2016)
(“[D]iscovery is unmatched among the major sources of
litigation costs; it generates more legal fees and expenses
than any other round of court proceedings. According
to various estimates, discovery can consume from fifty
to as much as ninety percent of total legal! costs in some
cases.”); see Lawyers for Civil! Justice et al., Litigation
Cost Survey of Major Companies 5 (2010).
In securities litigation, the financial burden of
discovery is “asymmetric” because, “|wlhile plaintiffs
incur minima] costs, defendants are required to produce
numerous records and deponents, making the process
extremely ‘expensive and time-consuming.” Laura A.
MeDonald, Restoring the Balance After the Private
Securities Litigation Reform Act of 1995, 38 Fla. St. U.
L.J. 911, 916 (2011) (footnotes omitted). Moreover, as stated
above, the burdens on issuer defendants in Securities Act
cases are particularly acute because they must normally
pay the underwriter defendants’ defense costs, including
the cost of the underwriters’ discovery efforts.
26
in an effort to shield issuers from the high cost of
discovery in weak or frivolous securities class action
litigation, the PSLRA provides that in private securities
actions filed in federal court, “all discovery and other
proceedings shall be stayed during the pendency of any
motion to dismiss.” 15 U.S.C. § 77z-1(b)(1). By conditioning
access to discovery on a plaintiff's ability to plead past a
motion to dismiss, Congress affirmed its intent that the
motion to dismiss phase be a meaningful hurdic. The
mandatory discovery stay was motivated by concern that
plaintiffs were “targeting [|] deep-pocket defendants” and
making “vexatious discovery requests” to develop inchoate
or insufficient claims or to extract settlements from
defendants who would find it less expensive to settle than
to pay the high cost of discovery. Merrill Lynch, Pierce,
Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 81 (2006); see
also Stoneridge Inv. Partners, LLC v. Scientific-Atlanta,
Inc., 552 U.S. 148, 163 (2008) (“{E]xtensive discovery
... allows plaintiffs with weak claims to extort settlements
from innocent companies.”); H.R. Conf. Rep. No. 104-369,
at 31 (1995) (“|A]busive practices committed in private
securities litigation include . .. the abusc of the discovery
process to impose costs so burdensome that it is often
economical for the victimized party to settle.”).
The PSLRA discovery stay reflected Congressional
intent that plaintiffs should not be allowed to use
discovery as a way to manufacture an arguably colorable
securities claim after filing a deficient complaint. Congress
recognized that plaintiffs had been filing abusive “lawsuits
against issuers of securities and others whenever there
is a significant change in an issuer’s stock price, without
regard to any underlying culpability of the issuer, and
with only faint hope that the discovery process might
27
lead eventually to some plausible cause of action.” H.R.
Conf. Rep. No. 104-369, at 31 (1995). And in enacting the
PSLRA, “Congress clearly intended that complaints in
these securities actions should stand or fall based on the
actual knowledge of the plaintiffs rather than information
produced by the defendants after the action has been
filed.” Petrie v. Elec. Game Card, Inc., 761 F.3d 959,
966 (9th Cir. 2014) (quotation marks omitted); Newby
v. Enron Corp., 338 F.3d 467, 471 (65th Cir. 2003) (“The
stay protected defendants from plaintiffs who would use
discovery to substantiate an initially frivolous complaint.”)
(citing H.R. Conf. Rep. No. 104-369, at 31, 32 (1995)).
Here again, the interpretation advanced by
Respondents has turned this clear Congressional
command on its head. Unfortunately tor defendants in
Securities Act class actions filed in California state court,
California courts frequently do not enforce the PSLRA
discovery stay. See, e.g., Order Denying Defs.’ Mot. to
Stay Proceedings at 9-13, Jn re Pac. Biosciences af Cal.,
Inc. Sec. Litig., No. C1V4509210 (Cal. Super. Ct. San Mateo
Cty. May 25, 2012) (calling defendants’ argument that
PSLRA applied to action “creative” but “not persuasive”
because “it is only a discovery stay of federal securities
class actions filed in federal court”); Small v. Fritz Cos.,
30 Cal. 4th 167, 178 (2003) (holding that “the PSLRA
governs only actions in federal court” and “do(es] not
affect state court [] actions”). Instead, California has long
“liberally construed |its procedures] in favor of discovery.”
Greyhound Corp. v. Superior Court, 56 Cal. 2d 355, 383
(1961), superseded by statute on other grounds, Stats.
1963, ch. 1744, § 1, p. 3477-79, as recognized by Cotto v.
Superior Court, 64 Cal. 4th 480 (2012). Indeed, California
28
provides for far broader discovery compared to the federal
rules’ new “proportionality” standard. See Beverly Reid
O’Connell & Karen L. Stevenson, Rutter Group Practice
Guide: Federal Civil Procedure Before Trial, Cul. & 9th
Cir. Eds. 9 11:610 (2017). Although California courts have
discretion to grant stays where justice permits, stays
during the pendency of motions challenging pleadings
tend to be the exception rather than the rule. It is thus
common for discovery to commence in securities cases
before demurrers are even briefed, let alone decided.
See In re Sunrun Inc. S’holder Litig., No. CIV538215
(Cal. Super. Ct. San Mateo Cty. filed Apr. 13, 2016)
(commencing discovery before demurrers resolved); /n re
Pac. Biosciences of Cal., Inc. Sec. Litig., No. CIV509210
(Cal. Super. Ct. San Mateo Cty. filed Oct. 21, 2011) (same);
In re Avalanche Biotechnologies, Inc. Sholder Litig., No.
C1V536488 (Cal. Super. Ct. San Mateo Cty. filed Dec. 7,
2015) (same); Plymouth Cly. Ret. Sys. v. Model N Inc., No.
C1V530291 (Cal. Super. Ct. San Matco Cty. filed Sept. 5,
2014) (same); Wiley v. Envrvio, Inc., No. C1V517185 (Cal.
Super. Ct. San Mateo Cty. filed Oct. 5, 2012) (same); Jn re
CafePress Inc. S’*holder Litig., No. C1V522744 (Cal. Super.
Ct. San Mateo Cty. filed July 10, 2013) (same).
Moreover, California courts often hold that pleading
deficiencies do not affect the right to take discovery. See,
e.g., Mattco Forge, Inc. v. Arthur Young & Co., 223 Cal.
App. 3d 1429, 1436 n.3 (1990). Accordingly, California
courts frequently permit (and even encourage) plaintiffs to
take discovery even after a demurrer has been sustained
with leave to replead. As one Superior Court succinctly
put it:
29
California law is clear. [Plaintiffs] have the
opportunity to take discovery, to amend their
complaint. And the fact that a demurrer has
been sustained with leave to amend, if anything,
bolsters their right to discovery, not negates it.
Rep.’s T'r. of Proceedings at 58:18-22, Geller v. LendingClub
Corp., No. C1V537300 (Cal. Super. Ct. San Mateo Cty.
Sept. 30, 2016) (sustaining demurrer in part and ordering
further discovery); see also Hr’g Tr. at 28:1-2, /na re
Castlight Health Inc. S’holder Littg., No. C1V533203 (Cal.
Super. Ct. San Mateo Cty. Jan. 27, 2016) (“There's no stay
on discovery. Do whatever you need.”); Hr’g Tr. at 49:18-19,
Hosey v. Costolo, No. 16-C1V-02228 (Cal. Super. Ct. San
Mateo Cty. Mar. 17, 2017) (setting deadline for amended
pleading after sustaining demurrer as to Section 15 claim
so that plaintiffs would have “enough time to propound”
discovery as to that claim); Rep.’s Tr. of Proecedings at
4:16-19, Giavara v. GoPro, Inc., No. CIV537077 (Cal.
Super. Ct. San Mateo Cty. Nov. 22, 2016) (defense counsel
noting that plaintiffs had “receiv[ed] tens of thonsands
of pages in extensive discovery” before making second
attempt to plead claims).
These discovery practices provide yet another stark
eontrast to the system of checks and halances that
Congress created through the PSLRA and SLUSA.
Allowing Securities Act class actions to proceed to
early merits discovery in state court further frustrates
Congress’s intent of encouraging uniform and consistent
enforcement of the federa! securities laws. This practice
also undermines Congress's goal of discouraging frivolous
securities litigation. To the contrary, by permitting,
and even encouraging, fishing expedition discovery,
30
state courts allow plaintiffs to “discover their way” into
arguably colorable claims despite lacking a valid initia!
cause of action.”
CONCLUSION
In short, the interpretation of SLUSA advanced by
Respondents imposes on issuers the very burdens and
disadvantages that Congress sought to eliminate when it
enacted the PSLRA and SLUSA. These disadvantages
lead, in turn, to the “extortionate settlements” that the
PSLRA and SLUSA sought to stem. Dabit, 547 U.S. at 81.
By properly construing SLUSA as eliminating state court
jurisdiction for Securitics Act class actions, this Court has the
ability to eliminate this jurisdiction-based outcome disparity.
Amici respectfully suggest that the Court avail itself of this
opportunity to return all Securities Act class action litigation
to the level federal playing field that Congress mandated.
The judgment below should be reversed.
15. The PSI.RA's requirement thal securities plaintiffs file
certifications setling forth their transactions in the security at issue,
15 U.S.C. 8 77z-1(a)(2), further protects federa) court defendants
but not state court defendants. In /n re Zynga Ine. Securities
Litigation, defendants in a lawsuit filed in federal court were able
to determine based on the plaintiff's PSLRA certification, which
set forth plaintiff's stock purchase dates, that the plaintiff lacked
standing to pursue Securities Act claims. The federal court granted
their motion to dismiss on this basis. No, C 12-04007 JSW, 2014 U.S.
Dist. LEXIS 24673, at *9-11 (N.D. Cal. Feb. 25, 2014). By contrast,
in eyes v. Zynga Inc., which was filed in state court, because the
plaintiff was not required to file a PSLRA certification, defendants
could not determine whether the plaintiff lacked standing until
shortly before the case was dismissed, after more than two years of
litigation. See Order Granting Pl. Robert Reyes’ Unopposed Req.
fur Voluntary Dismissal of Action, Reyes v. Zynga Dic., No. CGC-12-
522876 (Cal. Super. Ct. San Francisco Cty. Feb. 11, 2015).
JONATHAN K, YOUNGWOOD
Simpson ‘THACHER
& BarTLetr LLP
425 Lexington Avenue
New York, NY 10017
(212) 455-2000
3l
Respectfully submitted,
JAMES G. KREISSMAN
Counsel of Record
Suwona G. Strauss
STEPUFN P. BLAKE
ELIZABETH H. WHITE
Simpson THACHER
& Bartlett LLP
2475 Hanover Street
Palo Alto, CA 94304
(650) 251-5000
jkreissman@stblaw.com
Counsel for Amici Curiae
September 5, 2017
APPENDIX
la
APPENDIX A — LITIGATION AGAINST
ISSUERS IN CALIFORNIA STATE COURT
ISSUER _| CALIFORNIA an ~. piece re
NAME COUNTY C .
NUMBER CASE(S)
F 1-15-CV-
Al0 Networks Santa Clara 276207
Aerohive San Mudie CIV534070
| Networks
Exchange Act
‘TVAQ5
Alibaba San Mateo CIV535692 (S.D.N.Y)
: CIV537817
Apigee San Matco 17-CIV.02788
1. 1-15-CV-
Atmel Santa Clara OR6958
: ws. 1-12-CV-
Audience Santa Clara 939997
Securities Act
Avalanche * vWweecauy | and Exchange
Bistechnologies | ~°" *#** CIVES64B5 | A ot (ND.
Cal.)
; 17-ClV- Securities Act
Avinger San Mateo Qv2R4 (N_D. Cal.”
CafePress San Mateo CIV522'744
1. Removed to the Northern District of California and no
motion to remand was filed. Two other removed actions had been
remanded following plaintiffs’ motions.
2a
Appendix A
ISSUER | CALIFORNIA | eee A EIRAL
NAME COUNTY
NUMBER CASKE(S)
Castlight . .
Health San Mateo C1IV533203
; Exchange Act
Clovis Oneology | San Mateo CIV537068 (D. Colo.)
Code Rebel Los Angeles | BC624918 mpeg ae
ae 1-15-CV-
Coupons.com Santa Clara 278399 7
a CGC-14-
Cyan < San Francisco 538355
Securities
‘ ‘ Act and
CytRx Los Angeles BC541426 Exchange Act
art 7 (C.D. Cal.)
Envivio San Mateo CIV517185 mae gee
: Securities
Etsy San Mateo _| CIV534768 hol ae
(E.D.N-Y.)
Facebook? San Mateo CIV514065
- ae Se 1-14-CV- Exchange Act
FireEKye Santa Clara BERGE (ND. Cal.)
2. Remaved and centralized by JPML in Southern District of
New York before remand motion was decided.
3a
Appendix A
ISSUER | CALIFORNIA ry ‘saan,
NAME COUNTY
NUMBER CASE(S)
Securities Act
or eae CGC-16- and Exchange
Fitbit San Francisco 552062 Act (ND.
ae < Cal.) 14
GoPro San Mateo CIV537077 —
Kitov ee 17-C1V- Exchange Act
Pharmaceuticals | "0 """° 00620 ~— | (S.D.N.Y,)
Securitics Act
LendingClub ; and Exchange
Corporation San Mateo CIV537300 Act (N_D.
z= : SS
i 1-15-CY-
MobileLron Santa Clara 284001 =
Model! N c San Mateo C1V530291 ieee:
NantKwest Los Angeles BC621292 ; reed
Natera San Mateo CIV537409
nae BCV-16-
NRG Yield — 100867 :
| Ooma . San Mateo CIV5386959
' Securities Act
Pacific and Exchange
Biosciences of San Mateo CIV509210
California ona
ee | Cal.) nse
Pacific Coast .
Oil Trust Los Sanconel : BC550418 2 ed
4a
Appendix A
ISSUER | CALIFORNIA| MASTER | PARALLEL
NAME COUNTY CASE FEDERAL
4 NUMBER CASE(S)
ProNAi cae les. 17-C1V Exchange Act
Therapeutics ; 00595 (S.D.N.Y,)
16-CLV-
Pure Storage San cual oss |
Revance CS re eN 1-15-CV-
Therapeutics D rence 287794
Securities
: cleus Act and
Sientra San Matco C1V536013 Exchange Act
a : ms | (C.D, Cal.)
Smart i at Saenee Securities Act
Technologies |" | 614673 —__| (SDNY)
17-C1V- Securities
‘ ‘ A
om ee eae Act and
a Suny es ae Exchange Act
Beles” | BO669394 | (C.D. Cal)
8. Removed to the Northern District of California; pending
motions to remand and to transfer venue to the Central District of
California.
4. Removed to the Central District of California, related to
the existing action in that district, then remanded su sponte.
A separate action in Los Angeles County Superior Court was
removed to the Central District and voluntarily dismissed.
Ba
Appendix A
ISSUER | CALIFORNIA | ieee ee NRAL,
NAME COUNTY <
NUMBER CASE(S)
Securities
. ; 30-2011- Act and
visaee Orange 00489022 | Exchange Act
6 1S pee ee ee
| aan Securities Act
SunEdison® San Mateo ee” and Exchange
eae! Pee Act (§.D.N.Y.)
pao: ‘tTywreeoi- | vecuritses Act
Sunrun er San Mateo | esbiewpmees (NLD. Cal.)
TerraForm wereernes | securities Act
ae 2 ee. eee LOE Cl
Securities
Tokai fan Bameli CGC-16- Act and
Pharmaceuticals | °°" “T@*“S°° | 553796 Exchange Act
_ (1), Mass.) — F
TrueCar* Los Angeles | BC590999 eee,
5. Removed under 28 U.S.C. § 1452 (related to bankruptcy
proceedings).
6. Removed under 28 U.S.C. § 1452 (related to bankruptcy
proceedings).
7. Removed and voluntarily dismissed with no remand motion
filed.
6a
Appendix A
ncncthsctciamleetioets
ISSUER | CALIFORNIA a a
NAME COUNTY
NUMBER CASE(S)
37-2017-
TrueChoice i Mee 23035-
Solutions s B CU-FR-
even _|cTtL po ae
3 16-CIV-
liducanl [fame ome
2 al Exchange Act
en on BC602793 (WD. Tex.)
CGC-15-
543531
Xoom San Francisco
CGC-15-
Fate Pi ae oa 544655
ZELTIQ Alameda G12621290
a ee eee
: Securities Act
ZO Express San Mateo Hil (N.D. Ala.’
et, rca _ | and 8.D.N.Y.)
Zynga San Francisco CGC-12- Exchange Act
ledieatiye 4 $60 | 522876 =| (ND. Call.)
8. Removed to the Northern District of Alabama from Alabama
Circuit Court and stayed pending this Court’s decision in Cyan.
7a
APPENDIX B — ALIBABA STATE
AND FEDERAL LITIGATION
Alibaba Comparison of Alleged Omissions
and Misrepresentalions
| Challenged Statement/
Omission in California’
Challenged Statement/
Omission in S.D.N.Y.’
1
“(T lhe Registration
Statement failed to
disclose that... . on
July 16, 2014, senior
executives from Alibaba
had met with senior
Chinese government
regulators and officials,
who explained that
Alibaba’s e-commerce
businesses were in
serious violation of the
laws and regulations of
the People’s Republic of
China (*PRC’).” (9 109)
ms
“The Registration
Statement . . . failed
to disclose that .. . on
July 16, 2014, senior
executives from Alibaba
had met with senior SAIC
and AIC officials and
were told that Alibaba’s
e-commerce businesses
were in serious violation
of PRC laws and
regulations ....”
(f 102)
Ll. Allegations taken from the Consolidated Complaint filed in
Buelow vu Alibaba Group Hoidiny Limited, No. CTV535692 (Cal. Super
Ct. San Mateo Cty.) on March 25, 2016.
2. Allegations taken from the Consolidated Complaint filed in Jr
ve Alibaba Group Holding Limited Securities Litigation (also referred
to us Christine Asia Co., Ltd. v. Alibaba Group Holding Liniited), No.
1:15-md-02631-CM (S8.D.N.Y.) on July 1, 201b.
Na
Appendix B
Challenged Statement/ | Challenged Statement/
Omission in California Omission in S.D.N-Y.
“The Registration “The Registration
Statement also failed to
disclose that Chinese
regulators and officials
had threatened Alibaba
with thousands of
financial penalties -
each with a target of
1.0% of daily sales on its
e-commerce platforms
pee .” (0 110)
“The Registration
Statement also failed
to disclose .. . that
the SAIC had already
commenced the ‘Red
Shield Web Sword’
special program to clean
up rampant abuses on
e-commerce platforms,
including eounte ‘eiting
and consumer ft aud, with
Alibaba as one of its main
targets.” (7 110)
Statement .. . failed
to disclose . . . that
SAIC had threatened
Alibaba with thousands
of financial penalties
— each with a target of
1.0% of daily sales on its
ecommerce platforms.”
(F 102)
— — - ee —-
“The Registration
Statement also failed to
disclose that the SATC
had commenced the ‘Red
Shield and Web Sword’
special program to clean
up rampant abuses in
Alibaba’s ecommerce
platforms, ineluding
counterfeiting and
consumer fraud, and that
the SAIC considered
Alibaba one of its main
| targets.” (f 103)
Ga
Appendiz h
Challenged Statement/ | Challenged Statement/
Omission in California Omission in S.D.N.Y.
“|'T jhe regulatory and
legal system in China is
complex and developing,
and future regulations
may impose additional
requirements on our
business.” (4 111)
“(The regulatory and
legal system in China is
complex and developing,
and future regulations
may impose additional
requirements on our
business.” (% 106)
“Maintaining the trusted
status of our ecosystem
is critical to our success,
and any failure to do so
could severely damage
our reputation and brand,
which would have a
material! adverse effect
on vur business, financial
condition and results of
operations.” (% 111)
“Maintaining the trusted
status of our ecosystem
is critical to our success,
and any failure to do so
could severely damage
our reputation and brand,
which would have a
material adverse effect
on our business, financial
condition and results of
| operations.” (fF 108) +
10a
Appendia B
Challenged Statement/ | Challenged Statement/
Omission in California Omission in S.D.N.Y.
Alibaba’s “ability to
maintain our position
as a trusted platform
for online and mobile
commerce is based in
large part upon: ... the
quality and breadth of
products and services
offered by sellers through
our marketplaces; [and]
the strength of our
consumer protection
measures.” (4 111)
“Alibaba’s ‘ability to
maintain our position
as a trusted platform
for online and mobile
commerce is based in
large part upon: ... the
quality and breadth of
products and services
offered by sellers through
our marketplaces; (and]
the strength of our
consumer protection
measures.” (1 110)
“We have received
in the past, and we
anticipate we will
reecive in the future,
communications alleging
that items offered or
sold through our online
marketplaces by third
parties ... infringe
_.., intellectual property
rights.” (4 113)
“We have received
in the past, and we
anticipate we will
receive in the future,
communications alleging
that items offered or
sold through our online
marketplaces by third
parties ... infringe
... intellectual property
es:
rights.” (1 112)
Se
|
lla
Appendix B
Challenged Statement/
Omission in California
Challenged Statement/_
Omission in S.D.N.Y.
“Morcover, iliega},
fraudulent or collusive
activities by our
employees could also
subject us to liability or
negative publicity. For
instance, we learned that
in early 2011 and 2012 in
two separate incidents,
certain of our employees
had accepted payments
frum sellers in order
to receive preferential
treatment on Alibaba.com
and Juhuasuan.” (4 113) | |
“If... information
disseminated through our
... websites were deemed
by the PRC government
to violate any content
restrictions, we would
not be able to continue to
display such content and
could become subject to |
penalties ..., which could
materially and adversely
affect our business... .”
(V7 115)
Le — —_ —— —
“Moreover, illegal,
fraudulent or collusive
activities by our
employees could also
subject us to liability or
negative publicity. For
instance, we learned that
in early 2011 and 2012 in
two separate incidents,
certain of our employees
had aecepted payments
from scllers in order
to receive preferential
treatment on Alibaba.com
and Juhuasuan.” (‘ 118)
ee eee -t—t—t—
“If... information
disseminated through our
... websites were deemed
by the PRC government
Lo violate any content
restrictions, we would
not be able to continue to
display such content and
could become subject to
penalties ..., which could
materially and adversely
affect our business... .”
(f 125)
12a
Appendix B
| Challenged Statement/
Omission in California
Challenged Statement/ |
Omission in S.D.N_Y.
“(T]f we do not take
appropriate remedial
action against sellers
or service providers
for actions they engage
in that we know, or
should have known,
would infringe upon the
rights and interests of
consumers, we may be
held jointly Jiable with the
seller or service provider
for such infringement.”
“IT ]f we do not take
appropriate remedia!
action against sellers
or service providers
for actions they engage
in that we know, or
should have known,
would infringe upon the
rights and interests of
consumers, we may be
held jointly liable with the
seller or service provider
for such infringement.”
(1 125)
115)
“To protect consumers,
brand owners and
legitimate sellers and to
maintain the integrity
of our marketplaces, we
have put in place a broad
range of measures Lo
prevent counterfeit and
pirated goods from being
offered and sold on our
marketplaces.” (f 117)
Ee
|
x
“To protect consumers,
brand owners and
legitimate sellers and to
maintain the integrity
of our marketplaces, we
have put in place a broad
range of measures to
prevent counterfeit and
pirated goods from being
offered and sold on our
—<4
marketplaces.” (1127)
l3a
Appendix B
Challenged Statement/ | Challenged Statement/_
Omission in California Omission in S.D.N.Y.
“We have implemented
measures to prevent,
detect and reduce the
occurrence of fictitious
transactions on Taobao
Marketplace and Tmall
including... .” (4 117)
“We maintain a ‘no
Lolerance’ policy with
regard to counterfeit and
fictitious activities on our
marketplaces.” (7 119)
Se ees
“We have implemented
measures to prevent,
detect and reduce the
occurrence of fictitious
transactions on Taobao
Marketplace and T'mall
including... .” (1 129)
“We maintain a ‘no
tolerance’ policy with
regard to counterfeit and
fictitious activities on our
marketplaces.” (4 131)
“Violation of these laws,
rules and regulations
may result in penalties,
including fines,
confiscation of advertising
income, orders to
cease dissemination
of the advertisements
and orders to publish
an advertisement
correcting the misleading
information.” ( 121)
rules and regulations
“Violation of these laws,
may result in penalties,
including fines,
confiscation of advertising
income, orders to
cease dissemination
of the advertisements
and orders to publish
an advertisement
correcting the misleading |
information.” (4 144) |
l4a
Appendix £8
| Challenged Statement/
Omission in California
Challenged Statement/ _
Omission in S.D.NY.
$m
“These newly issued
measures impose more
stringent requirements
and obligations on... the
marketplace platform
providers. For exampie,
the marketplace platiorm
providers are obligated
to examine the legal
status of each third-
party merchant selling
products or services on
the platform and display
on a prominent location
on the web page of such
merchant the information
stated in the merchant’s
business license or a link
to such business license
eee Ce
“These newly issued
measures impose more
stringent requirements
and obligations on... the
marketplace plutform
providers. For example,
the marketplace platform
providers are obligated
to examine the legal!
status of each third-
party merchant selling
products or services on
the platform and display
on a prominent location
on the web page of such
merchant the information
stated in the merchant’s
business license or a link
to such business license
cae <0 ee?
—
$$ S$ —___ —_
Sil
~
15a
Appendix B
Alibaba Comparison of Core Factual Allegations
[ Core Factual | Core Factual
Allegations in Allegations in S.D.N.Y.‘
California‘
The July 16, 2014 Meeting
“J Just two months prior,
on July 16, 2014, senior
executives from Alibaba
| had met with senior
Chinese .. . officials, who
explained that Alibaba’s
e-commerce businesses
were in serious violation
of [PRC] laws and
regulations ....” (4 109;
see also T 28)
earlier on July 16,
“(J just two munths
2014, senior executives
from Alibaba had met
with senior SAIC and
AIC officials and were
told that Alibuba’s
e-commerce businesses
were in serious violation
ot PRC laws and
regulations ....” (7 102;
see also 415, 7-10, 63-75,
91-92, 94-97, 107, 123,
140, 142, 146, 148, 150,
152, 159, 166-68, 173, 177)
8. Allegations taken from the Consolidated Complaint filed in
Buelow v. Alibaba Group Holding Lrmated, No. CTV535692 (Cal. Super.
Ct. San Mateo Cty.) on March 25, 2016.
4. Allegations taken from the Consolidated Complaint filed in J
re Alibaba Group Holding Liniled Securities Litigation (also referred
to as Christine Asia Ca, Lid. « Alibaba Group Holding Limited), No,
}:14-md-02631-CM (S.D.N.Y.) on July 1, 2075.
16a
Appendix 3
Core Factual
Allegations in
California
Core Factual
Allegations in S.D.N.Y.
At the July 16, 2014
meeting, the SAIC
“notified Alibaba of
a variety of illegal
business practices” on its
e-commerce platforms,
including:
* “sale of counterfeit
goods,”
* “sale of... prohibited
items,”
* “takling) bribes from
merchants,”
* “faking transactions,”
* “false and misleading
advertising,” and
* “anticompetitive
behavior.”
(11 28, 109; see also
19 112, 114, 116, 118, 120,
122)
“At the July 16, 2014
meeting, the SAIC
admonished Alibaba for
... avariety of illegal
business practices” on its |
e-commerce platforms,
including:
* “sale of counterfeit
goods,”
« “sale of... forbidden
items,”
* “ltlaking bribes from
merchants,”
* “faking transactions,”
* “false and misleading
advertising,” and
* “anticompetitive
behavior.”
(1 8; see also 1% 70, 109,
111, 113, 115, 117, 119,
126, 128, 180, 1382-33, 168,
177, 193)
17a
Appendix &
Gore Factual
Core Factual
Allegations in Allegations in S.D.N.Y.
California
“Chinese regulators “SAIC had threatened
... had threatened Alibaba with thousands
Alibaba with thousands
of financial penalties
— each with a target of
1.0% of daily sales on its
ecommerce platforms
tee’ (4110; see also
1114)
of financial penalties
- each with a target of
1.0% of daily sales on its
e-commerce platforms.”
(7 102; see also 09 11, 72,
104, 109, 113, 119, 123,
126, 140, 142, 146, 148,
150, 152, 159, 168, 172,
208)
“Alibabw’s fimancial
performance was
reasonably likely to be
materially impacted in
order to comply with
applicable regulations
....” (1 118(d); see also
4 112).
“Alibaba’s financial
performance was
reasonably likely to be
materially impacted as a
consequence of yielding
to SAIC pressure... .”
(7 104; see also 11 4, 117,
128, 143)
me
18a
Appendix B
mis: Core Factual §| Core Factual
Allegations in Allegations in 8.D.N.Y.
= California
66 7
”
“(T]he SAIC had already
commenced the ‘Red
Shield Web Sword’
special program to clean
up rampant abuses on
e-commerce platforms,
including counterfeiting
and consumer fraud, with
Alibaba as one of its main
targets.” (1 110; see also
1 122(a))
“(The SAIC had
commenced the ‘Red
Shield and Web Sword’
special program to clean
up rampant abuses in
Alibaba’s e-commerce
platforms, including
counterfeiting and
consumer fraud, and that
the SAIC considered
Alibaba one of its main
targets.” (1 103; see alsu
"1 58-62, 107, 122, 140,
143, 145, 159, 163-66, 177)
Leiciciccans
”
“{Oln January 28, 2015,
before the opening
of trading, ... SAIC
... released a White
Paper aceusing Alibaba
of engaging in the very
illegal conduct disclosed
to Alibaba exccutives in
duly 2014.” (f 127; see also
1136)
“On January 27, 2015
in the evening, after
market close, ... SAIC
... released a white
paper detailing Alibaba’s
illegal business practices
... previously identified
fat] the July 16, 2014
... meeting. (1 15; see
also V% 191-93)
EE ee
19a
Appendix fh
a _ $$$ $$ $$
Ss
Core Factual Core Factual
Allegations in Allegations in §.D.N.Y.
California
“(O|n January 29, 2015, “(O)]n January 29, 2015,
Alibaba issued a press
release announcing mixed
financial results for 4Q14,
and addressing the SAIC
White Paper.” (1 130; see
also §] 40)
Various media and
analysts covered the
“White Paper.” (See
1 36-38, 41-42, 44-46, 48,
51, 127-28, 131-32, 134-37,
139, 142-44)
145-46)
“('T he price of Alibaba
AI)S’s dropped” after
the release of the “White
Paper.” (9% 39, 43, 47, 590,
52-53, 129, 133, 138, 141,
=a
.,, Alibaba issued a
press release announcing
... mixed financial
results and address|[ing')
.,, the SAIC White
Paper.” (f 209; see also
141 17, 210, 220-24, 227)
Various media and
analysts covered the
“White Paper.” (See
1 16, 18, 134-135, 175,
195-98, 202-04, 208, 211-
12, 214, 216-18, 234)
ey
a Se
“(T |he price of Alibaba
ADS dropped” after the
release of the “White
Paper.” (9 16, 19-20, 201,
207, 218, 215)
Appendi« B
cme a
Core Factual
Allegations in
California
y Core Factual
Allegations in S.D.N.Y.
Counterfeit Facilitati
“Alibaba in fact did
tolerate the sale of
_inauthentie goods on its
web platforms and either
permitted or turned a
blind eye to fictitious
transactions on its
e-commerce platforms.”
(1120)
“In truth Alibaba
tolerated the sale of non
genuine merchandise
on its websites and
permitted, indeed in
some cases created,
fictitious transactions
on its e-commerce
platforms.” (4 132; see
also 49 133, 227-29)
4
“Taobao had optimized
its search engines to
specifically search and
identify counterfeit
vendors... .” (11 120)
“Alibaba... facilitatel[s]
and encourage[s] the sale
of an enormous number
of Counterfeit Products
through [its] self-
described ‘ecosystem,’
Pes.
— -——
“Taobao had optimized
iis search engines to
specifically search and
identify vendors of
counterfeit products.”
({ 133; see alsvu 99 227-29)
| 252-74)
“Alibaba is intentionally
facilitating the offer
and sale of counterfeit
products on its
ecommerce platforms.”
(| 252; see ulso 1 120,
130-32, 134-36, 151-53,
185, 187, 227-29, 238-43,
ee
meen
Zila
APPENDIX C —
SUNRUN STATE
AND FEDERAL LITIGATION
Sunrun Comparison of
Alleged Omissions and
Misrepresentations'
Challenged Statement/ | Challenged Statement/
Omission in California? | Omission in N.D. Cal.’
“(T jhe Registration
Statement claimed to
‘provide homeowners
with simple, predictable
pricing for solar energy
that is insulated from
rising retail) electricity
prices.”” (4% 39)
Sunrun “provide[d]
homeowncrs With simple,
predictable pricing for
solar energy that is
insulated from rising
retail electricity prices.”
(41 86)
Sunrun “focused its
resources on markets
with... favorable policy
environments - s (942) :
EE
Sunrun “foensled its)
resources on markets
with . . . favorable policy
environments...” (# 81)
Sell
1. Allemphasis and alterations are removed unless otherwise
noted.
2. Allegations taken from the Consolidated Complaint filed
in In ve Sunrun Shareholder Litigation, No. CIV538215 (Cal.
Super. Ct. San Mateo Cty.) on Oct. 17, 2016.
3. Allegations taken from the Consolidated Amended
Complaint filed in Greenberg v. Sunren Ine., No. 3:16-ev-02480-
CRB (N.D. Cal.) on Oct. 21, 2016.
Appendix C
Challenged Statement/
Omission in California
“{I)n addition to changes
in general rates charged
to all residential
customers, utilities are
increasingly seeking
solar-specific charges
(which may be fixed
charges, capacity-based
charges, or other rate
charges) ...
[Alny of these changes
could materially reduce
the demand for our
products and could limit
the number of markets
in which our products
are competitive with
electricity provided by
the utilities.” (% 47)
“We rely on net metering
and related policies to
offer competitive pricing
to homeowners in all! our
current markets, and
changes to net metering
policies may significantly
reduce demand for
electricity from our solar
service offerings.” (“| 82)
234
Appendix C
Challenged Statement/ | Challenged Statement/
Omission in California | Omission in N.D. Cal.
“Utilities, their trade
associates, and fossil
fuel interests in the
country are currently
challenging net metering
policies, and seeking
either to eliminate it, cap
it, or impose charges on
homeowners that have
adopted net metering. . . .
Nevada... has!
metering caps.... If
the net metering caps in
_,. other jurisdictions
are reached without an
expansion of net metering
policies, homeowners
in the future wil! be
unable to recognize the
cost savings associated
with net metering they
currently enjoy.” (7 47)
“Utilities, their trade
associates, and fossil
fucl interests in the
country are currently
challenging net metering
policies, and seeking
either to climinate it, cap
it, or impose charges on
homeowners that have
adopted net metering. ...
Nevada... hafs]
the net metering caps in
_.. other jurisdictions
arc reached without an
expansion of net metering
policies, homeowners
in the future will be
unable to recognize the
cost savings associated
with net metering they
currently enjoy.” (4 82)
24a
Appendix C
we offer our solar service
offerings, only Nevada is
expected to reach its cap
fon net metering] within
the next 12 months unless
the cap is increased. We
currently expect Nevada
to reach its cap in the
next month unless it is
increased. However,
legislation has been
adopted that requires
that an uncapped
program approved
by the Nevada Public
Utilities Commission
be implemented in
Nevada no later than
December 31, 2015. If
changes to net metering
policies oecur without
grandfathering to
existing homeowners,
those existing
homeowners could be
negatively impacted
which could create a
default risk from those
homeowners. Our ability
Challenged Statement/ | ‘Challenged Statement/ |
Omission in California Omission in N.D. Cal.
“Of the states in which “Of the states in which
we offer our solar service |
offerings, only Nevada is
expected to reach its cap
lon net metering] within
the next 12 months unless
the cap is increased. We
currently expect Nevada
to reach its cap in the
next month unless it is
increased. However,
legislation has been
adopted that requires
that an uncapped
program approved
by the Nevada Public
Utilities Commission
be implemented in
Nevada no later than
December 31, 2015. If
changes to net metering
policies oceur without
grandfathering to
existing homeowncrs,
those existing
homeowners could be
negatively impacted
which could create a
default risk frorm those
homeowners. Our ability |
25a
Appendix C
Omission in California
Challenged Statement/ | Challenged Statement/
Omission in N.D. Cal.
to sell our solar services
may be adversely
impacted by the failure to
expand existing limits to
net metering.” (% 47)
to sell our solar services
may be adversely
impacted by the failure to
expand existing limits to
net metering.” (1 82)
Sunrun “currently
provided solar energy
services in Arizona,
California, Delaware,
Colorado, Connecticut,
Hawaii, Maryland,
Massachusetts, Nevada,
New Hampshire, New
Jersey, New York,
Oregon, Pennsylvania and
South Carolina, as well as
the District of Columbia.”
i a
Sunrun “eurrently
provide|d| solar energy
services in Arizona,
California, Delaware,
Colorado, Connecticut,
Hawaii, Maryland,
Massachusetts, Nevada,
New Ilampshire, New
Jersey, New York,
Oregon, Pennsylvania
and South Carolina, as
well as the District of
Columbia.” (4 84)
26a
Appendix C
Challenged Statement/
Omission in California
§ Challenged Statement/ |
Omission in N.D. Cal.
Sunrun’s “business was
concentrated in certain
markets, putting it at
risk of region specific
disruptions...
|AJs of March 31, 2015,
approximately 58% of
Sunrun’s customers were
in California and [] the
Company then expected
much of its near-term
future growth to occur in
California.” (9 45)
———— —<— _ $$ a — —_____
Sunrun’s “business was
concentrated in certain
markets,” but Sunrun
“identified only California
as a state in which it had
concentrated business.”
( 84)
27a
Appendia C
Sunrun Comparison of Core Factual Allegations‘
‘CoreFactual | CoreFactual |
Allegations in Allegations in N.D. Cal.‘
California‘
“Sunrun’s ... business
entails net metering...”
(9 32)
“Net metering is vital to
Sunrun’s business model
a oe
“CN jJearly half the states
that permit nct metering
have reconsidered their
net metering policies over
the past year.” (4% 33)
“On July 31, 2015, NV
Energy la Nevada
public utility]... filed
an application with the
Nevada Public Utilities
Commission (‘PUC’)
seeking to curtail [net
metering programs]}.”
(T 36)
“(O)n July 31, 2015, NV
“By the time of its
August 2015 [PO, net
metering subsidies were
under heavy attack in
Sunrun’s most important
_markets.” (4 49)
4
_~
nergy [a Nevada public
utility] submitted a
tariff proposal to reduce
inequitable net metering
subsidies.” (57)
J
4. All emphasis and alterations are removed unless otherwise
noted,
5. Allegations taken from the Consolidated Complaint filed
in /n re Sunrun Shareholder Litigation, No. C1V538215 (Cal.
Super. Ct. San Mateo Cty.) on Oct. 17, 2016.
6. Allegations taken from the Consolidated Amended
Complaint filed in Greenberg v. Sumrwn Inc., No, 3:16-cy-02480-
CRB (N.D. Cal.) on Oct, 21, 2016.
28a
Appendix C
Core Factual —
Allegations in
California
Core Factual
Allegations in N.D. Cal.
“If NV Energy got the
changes it sought... it
threatened to destroy
Sunrun’s ... business in
Nevada.” ({ 36).
“The proposal ... was
extremely unfavorable
for Sunrun” and “the
net metering subsidies
... were unquestionably
threatened.” (V9 57, 58)
“(Oln January 7, 2016, the
Company admitted that it
was ceasing all operations
in Nevada.” (% 53)
|
|
“On January 7, 2016,
Sunrun issued a press
release announcing that
it would cease conducting
business in Nevada
beeause the Nevada PUC
had cut net metering
subsidies.” (9 95)
a
“When Sunrun reported
its fiscal 2015 results
and fiscal 2016 guidance
on March 10, 2016, the
Company also admitted
that residential} solar
growth would decline in
2016 due to its having
halted operations in
Nevada.” (4 53)
—EEE —
“On March 10, 2016
... Sunrun issued a press
release ... reporting
disappointing fiscal 2015
results. Specifically,
the Company admitted
that it had failed to meet
revenue guidance because
of its exit from Nevada.”
(1 97)
29a
Appendix C
Core Factual Core Factual
Allegations in Allegations in N.D. Cal.
California
“| | Jnvestors learned “(T]he Company told
for the first time the investors for the first
full extent of customer time exactly how
concentration the concentrated the
Company had in Nevada | Company had become
...at ~20%ofSunrun’s | in Nevada.... where
direct deployments.” volume grew from almost
("| 54) zero to reach about 20%.”
(4 98)
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