Opposition Brief — Simmonds v. Credit Suisse Securities (USA) LLC

No. 40-1218 mene Court US.

IN THE MAY 26 2011

Supreme Court of the Mnited Stetee—

VANESSA SIMMONDS,

Petitioner,

v.

CREDIT SUISSE SECURITIES (USA) LLC, et al.,

Respondents.

a

On PerrriON FoR A Wait or CERTIORARS TO THE

Unrrep Stares COURT OF APPEALS FOR THE NINTH CiRCUIT

MOVING ISSUER RESPONDENTS’

BRIEF IN OPPOSITION

Davin H. KisTENBROKER

Counsel of Record

JONI S. JACOBSEN

KatTTeN Mucgiw RosenmAN LLP

525 West Monroe Street

Suite 1900

(312) 902-5200

david. kistenbroker@kattenlaw.com

Liaison Counsel for Moving

May 26, 2011 Issuer.Respondents

[Additiond! Counsel Listed on Signature Page]

236181 F

COUNSEL PRESS

(800) 274-8821 * (800) 859-6859

7

QUESTIONS PRESENTED

1. Whether the Ninth Circuit properly held that

Petitioner’s statutorily mandated pre-suit demand letters

were inadequate given that the letters failed to identify

the wrongdoing allegedly perpetrated and the legal action

Petitioner wanted the Moving Issuers’ boards to take on

the respective corporation’s behalf.’

2. Whether the Ninth Circuit properly rejected

Petitioner’s argument that demand should be excused as

futile given that a shareholder may not invoke the demand

futility exception after submitting a demand to the board.

3. Whether the Ninth Circuit properly converted

dismissal of Petitioner’s claims from without prejudice

to with prejudice given that the actual pre-suit demand

letters were considered by the court and found to be

inadequate, and thus any amendment would be futile.

12

RULE 29.6 DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of the Supreme

Court of the United States, the undersigned counsel

submits the Corporate Disclosure Statement for the

Moving Issuer Respondents set forth below:

Akamai Technologies, Inc. has no parent corporation

and no publicly held company owns 10% or more of its

stock.

Ariba, Inc. has no parent corporation and no publicly

held company owns 10% or more of its stock.

Asialnfo-Linkage, Inc., formerly known as AsiaInfo

Holdings, Inc., has no parent corporation and no publicly

held company owns 10% or more of its stock.

Aspect Medical Systems, Inc. is a wholly owned

subsidiary of Covidien PLC, a publicly held company.

Audible, Inc. is a wholly owned subsidiary of Amazon.

com, Inc., a publicly held company.

Capstone Turbine Corporation has no parent

corporation and no publicly held company owns 10% or

more of its stock.

CoSine Communications, Ine. has no parent

corporation and no publicly held company owns 10% or

more of its stock.

L-1 Secure Credentialing, Inc., formerly known as

Digimare Corporation, is a wholly owned subsidiary of

L-1 Identity Solutions Operating Company, which is a

a0

subsidiary of L-1 Identity Solutions, Inc., a publicly traded

company (“L-1”). On September 20, 2010, L-1 publicly

announced it had entered into an agreement under which

Safran, a French company, will acquire L-1 following the

sale of L-1’s government/intelligence services business to

BAE Systems. In February 2011, L-1 consummated the

sale of the stock and membership interests of the entities

comprising the L-1 Intel Business to BAE Systems. The

acquisition by Safran is subject to a number of conditions,

including, but not limited to, prior review by the U.S.

Committee on Foreign Investment in the United States

(CFIUS). In connection with the pending acquisition of

L-1 by Safran SA, the CFIUS informed L-1 on May 4,

2011 that it had accepted the refiled joint notification

which provides additional time to negotiate the terms

of a definitive mitigation agreement. This acceptance

commenced a new 30-day review period scheduled to

expire on June 2, 2011. L-1 expects the parties to work

diligently in an effort to finalize the agreement as quickly

as practicable; however, there can be no assurance that

a definitive mitigation agreement will be executed. L-1

expects the closing of the acquisition to occur within 30

to 40 days from the May 4, 2011 acceptance by CFIUS of

the refiling of the joint notification. The closing is subject

to the timing and successful completion of the CF IUS

process and assumes satisfaction or waiver of all other

applicable conditions.

Finisar Corporation has no parent corporation and

no publicly held company owns 10% or more of its stock.

InterNAP Network Services Corporation has no

parent corporation and no publicly held company owns

10% or more of its stock.

lw

Intersil Corporation has no parent corporation. There

are only two publicly traded companies that own 10% or

more of Intersil Corporation’s common stock, namely, T.

Rowe Price Associates, Inc. and FMR L.L.C.

Martha Stewart Living Omnimedia, Inc. has no

parent corporation and no publicly held company owns

10% or more of its stock.

Maxygen, Inc. has no parent corporation and no

publicly held company owns 10% or more of its stock.

NaviSite, Inc. was acquired by Time Warner Cable,

Ine. on April 21, 2011. Time Warner Cable, Inc., a publicly

traded company, is the sole shareholder of NaviSite, Inc.

On February 22, 2011, Occam Networks, Inc. was

acquired by Calix, Ine., a publicly traded Delaware

corporation. In the course of the acquisition (a “reverse-

triangular merger”), Occam Networks, Inc. was merged

into Oecam Networks, LLC, with Occam Networks, LLC

being the surviving entity. Occam Networks, ILC is a

wholly owned subsidiary of Calix, Inc.

Onvia, Inc. has no parent corporation and no publicly

held corporation currently owns 10% or more of its stock.

Openwave Systems, Inc. has no parent corporation

and no publicly held company owns 10% or more of its

stock.

Oplink Communications, Inc. has no parent corporation

and no publicly held company owns 10% or more of its

stock.

v

Packeteer, Inc. is a wholly owned subsidiary of Blue

Coat Systems, Inc., a publicly held company.

Perot Systems Corporation is a wholly owned

subsidiary of Dell, Inc., a publicly held company.

Priceline.com Incorporated has no parent corporation

and no publicly held company owns 10% or more of its

stock.

Red Hat, Ine. has no parent corporation and no

publicly held company owns 10% or more of its stock.

Saba Software, Inc. has no parent corporation. The

only publicly traded corporation that owns 10% or more

of Saba Software, Inc.’s common stock is T. Rowe Price

Associates, Ine.

Selectica, Inc. has no parent corporation and no

publicly held company owns 10% or more of its stock.

Silicon Laboratories, Inc. has no parent corporation

and no publicly held company owns 10% or more of its

stock.

Soapstone Networks Ine., formerly known as Avici

Systems, Inc., has no parent corporation and no publicly

held corporation owns 10% or more of its stock. Soapstone

Networks Inc. has been dissolved pursuant to Section

275 of the General Corporation Law of the State of

Delaware by the filing of a Certificate of Dissolution with

the Secretary of State of Delaware. The Certificate of

Dissolution became effective July 31, 2009, and the period

for winding up the affairs of Soapstone Networks Inc.

thereupon began.

ve?

Sonus Networks, Inc. has no parent corporation and

no publicly held company owns 10% or more of its stock.

Sycamore Networks, Inc. has no parent corporation

and no pubhely held company owns 10% or more of its

stock.

TheStreet.com, Inc. has no parent corporation and

no publicly held company owns 10% or more of its stock.

TiVo Inc. has no parent corporation. The only publicly

traded corporation that owns 10% or more of TiVo Inc.’s

common stock is Blackrock, Ine.

On July 21, 2009, Open Text Corporation, a publicly

traded Canadian corporation, acquired through an

indirect wholly owned subsidiary all of the issued and

outstanding common shares of Vignette Corporation.

vee

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..................

RULE 29.6 DISCLOSURE STATEMENT... ... TT

Meneses We CONTENTS . 00.60. ceccccasceees Vil

TABLE OF CITED AUTHORITIES ........... ix

5 te Os 8) ee nee I

COUNTER-STATEMENT OF THE CASE ..... 3

1. THE POLICIES UNDERLYING

BERS EMON IGLD) ow nici issn cswuneen 3

Il. BRIEF FACTUAL BACKGROUND ..... 4

Il. THE DISPOSITION BELOW ........... G

REASONS FOR DENYING THE PETITION .. i)

1. THE NINTH CIRCUIT'S DECISION

REGARDING PETITIONER'S

INADEQUATE DEMAND LETTERS

WAS PROPER AND DOES NOT

CONFLICT WITH ANY OTHER

EUSERUINIES vv ica cusdvscus vn sameeeun Fy)

A. The Ninth Circuit Is the Only Circuit

that Has Addressed the Substantive

Requirements of a Section 16(b)

Pa LCE eck bs soc xan i)

v2

Table of Contents

Page

B. The Ninth Circuit's Application of

AaMen Was PYODE? oss. cee cans 10

C. Petitioner’s Arguments Regarding

Kamen and Delaware's Pre-Suit

Demand Standard Are Unavailing

eee NE itn NE MRS ean 13

D. Rule 23.1's “Procedural Dictates”

Were Irrelevant to the Ninth Circuit's

ERRNO ote eee eee 15

Kk. The Ninth Circuit's Decision Does

Not Reward Insiders or Impede

Congressional Intent ............... 17

Fk. The Ninth Circuit’s Demand Ruling

Presents No Issue of Widespread

Application that Warrants the

(AOUTUS ARON ck ie ees cae ss 19

Il. THE NINTH CIRCUIT'S DECISION

REGARDING DEMAND FUTILITY

WAS PROPER AND DOES NOT

CONFLICT WITH ANY OTHER

SPI ein a eee eae ek 20

Il. THE NINTH CIRCUIT'S DECISION

REGARDING DISMISSAL WITH

PREJUDICE WAS PROPER AND

DOES NOT CONFLICT WITH ANY

tse ih Ob oe arr 23

CAPO Ee UII Sh ok oo dv ee on da eee sk eas oan es 2%

ww

TABLE OF CITED AUTHORITIES

Page

FEDERAL CASES

Blau v. Mission Corp.,

Bee Pigs (1 Gem Re 1OON) one eck tea eun 16

Burks v. Lasker,

ae vi | 7) a eo 1]

Colan v. Monumental Corp.,

o24 F’. Supp. 1023 (N.D. Ill. 1981) ............. 3,13

Coran v. Snap-on Tools Corp.,

408 F. Supp. 1060 (E.D. Wis. 1976)... 2.2... .. 20-21

Cramer v. Gen. Tel. & Elec. Corp,

Soc P.ce coe Oe Cir. YOTS).... 22... we cca 17

Daily Income Fund, Inc. v. Fox,

oe ee 2 | ar ee 15

Dottenheim v. Murchison,

cei F.20 (ot (oth Civ, IOK6) |... ck cee cece 16

Dreiling v. Am. Express Travel Related Servs.,

351 F. Supp. 2d 1077 (W.D. Wash. 2004),

revd on other grounds, 458 F.3d 942

RU IE, SI as oes eke ee eee ee ee 85S 9

Dreiling v. Am. Online Inc.,

578 F.30 995 Oth Cir. 2009)... .... 2... 000s 4

I

Cited Authorities

Page

Foman v. Davis,

Pee Mies PRED 25. 50o sk kde eae ee 24-25

Foremost-McKesson, Inc. v. Provident Sec. Co.,

Me W9e. ID) so os nies bac ncuseaevesneds 4

Gaubert v. Fed. Home Loan Bank Bad.,

De Bae OO CRIA, CAN. TI) ong ks oe cet nice ns 24

Grossman v. Johnson,

674 F.2d 115 (ist Cir. 1982)....... 2.0... eee 14, 17

Henss v. Schneider,

132 F. Supp. 60 (S.D.N.Y. 1955). ........ 3, 18, 18, 20

Heublein, Inc. v. Gen. Cinema Corp.,

Cae Vee (EL AE, Fe oc oh os ccc uscupeuns 4

In re Kauffman Mutual Fund Actions,

479 #20 257 (ist Cir. 1973) .. occ ee cs 23-24, 26

In re Silicon Graphics Inc. Sec. Litig.,

183 F.3d 970 (Oth Cir. 19909) . . ... 2... wanes 24

Kamen v. Kemper Fin. Servs., Inc.,

Se We ONE? oo te ke caer cee passim

Kanter v. Barella,

Seo ee 170 Ge Cir. S007). os iv aces cuscccuu us 24

x2

Cited Authorities

Page

Kern Cnty. Land Co. v.

Occidental Petroleum Corp.,

RRR LEED 5 on ccc ceewewees sense 4

Levner v. Saud,

903 F. Supp. 452 (S.D.NLY. 1994).............. 21

Lopez v. Smith,

203 F.3d 1122 (9th Cir. 2000)................. 25

Mendell v. Gollust,

909 F.2d 724 (2d Cir. 1990), affad,

PE Wit SOA EOPED, os cakes ecvncccnecevavese 22

Pellegrino v. Nesbit,

203 F.2d 463 Oth Cir. 1953)... 2... ccc ce ees 22

Potter v. Hughes,

546 F.3d 1051 (9th Cir. 2008)................. 14

Rothenberg v. United Brands Co.,

No. 74 Civ. 5735, 1977 WL 1014 (S.D.N.Y.

May 11, 1977), affd, 573 F.2d 1295

I Ee er. ow ciba bese eeu ees 22

Shlensky v. Dorsey,

574 F.2d 131 (Sd Cir. 1978) ... 0... ccc cee 25

Starrels v. First Nat'l Bank of Chicago,

Bro ©.00 1165 (itn Cir, 1969) . eee 24

X12

Cited Authorities

Page

Tellabs, Inc. v. Makor Issues & Rights,

Oe 8 TD ok eka ara e eee kee ake ee 24

STATE CASES

DiLorenzo v. Edgar,

No. Civ. 03-841-SLR, 2004 WL 609374

LER Ben. SE Bs EE as 5b ce va baer kee es 17, 22-23

FLI Deep Marine LLC v. McKim,

C.A. No. 4138-VCN, 2009 WL 1204363

EPUE: Somes Ue, Oe Es cs wc eee uS cece cacnee e's 8,16

Gatz v. Ponsoldt,

Civ. A. 174-N, 2004 WL 3029868

(EP: Ore, PO By OO nc eds coh es ve wlcavccsess 16

Khanna v. McMinn,

No. Civ. A 20545-NC, 2006 WL 1888744

(Es Se SE ok os pene see ae saueens 16

Segen v. Comvest Venture Partners, LP,

No. Civ. A. 04-822-JJF, 2005 WL 1320875

CER Ree. I a, NY sc 50s Choo Gee eae ee aws i eo

Spiegel v. Buntrock,

BT Re TOF CI BOO oc is eee wccswatss 3, 13, 21

Yaw v. Talley,

Civ, A. No. 12882, 1994 WL 89019

(idea. Ce, BR, , SO no oo uo os oe OS a ewe 12, 16

X12

Cited Authorities

Page

FEDERAL STATUTES

Section 16(a) of the Securities Exchange Act

of 1064, 16 U.S.A). 9 TOG a cosassdeazeeee 17, 18

Section 16(b) of the Securities Exchange Act

of 1964, 16 UA. § TOMS «sie cee eee passim

RULES

Federal Rule of Civil Procedure 23.1 .......... passim

Supreme Court Rule 30 .... 40005 ue esses 19, 22

OTHER AUTHORITIES

Peter Romeo & Alan Dye, Section 16 Treatise and

Reporting Guide (3d ed. 2008) ........... 14, 15, 22

]

INTRODUCTION

There is no conflict among federal courts on any

of the questions presented by Petitioner. Indeed, no

other circuit court has addressed the substantive

requirenients of a pre-suit demand under Section 16(b) of

the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b)

(“Section 16(b)”). The Ninth Circuit faithfully applied

this Court’s instruction to determine “the contours of

the demand requirement” by applying the law of the

Moving Issuers’ state of incorporation, here Delaware.

Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90 (1991).

And, the Ninth Circuit’s application of Delaware law to

evaluate the content of Petitioner’s Section 16(b) demand

letters was plainly correct. Noting that Petitioner’s

demand letters make no reference to the transactions on

which her complaints are based, Appendix to the Petition

(“Appendix” or “Pet. App.”) at 6la, the Ninth Circuit held

that the demand letters are inadequate because they fail

to identify the wrongdoing allegedly perpetrated and

the legal action she wanted the boards to take. Jd. at 59a.

In these circumstances, there is no issue worthy of this

Court’s review.

Petitioner does not challenge the Ninth Circuit’s

conclusion that her demand letters are inadequate under

Delaware law and explicitly acknowledges that “[n]o

decision from this Court, or any circuit court before

the Ninth Circuit decision, has ever addressed the

requirements of a Section 16(b) pre-suit demand.” Pet.

at 17. Petitioner nevertheless hopes to obtain the Court’s

review by creating a conflict where none exists. In fact,

her entire Petition is based on the false premise that the

Ninth Circuit’s decision “subjects Section 16(b) claims to

2

the procedural dictates of Rule 23.1” and thus conflicts

with decisions of other circuit courts. /d. at 16. Contrary

to Petitioner’s assertion, the Ninth Circuit specifically

refrained from deciding whether Rule 23.1 applies to

Section 16(b) claims, because that issue was not relevant

to its analysis. Pet. App. at 51a n.7. Petitioner’s purported

conflict is thus nonexistent and the Petition should be

denied.

Petitioner also seeks review of the Ninth Circuit’s

rejection of her attempt to excuse the inadequate

demand letters by arguing demand futility. Despite the

unambiguous opinion of the Ninth Circuit, she again

claims that the court erroneously “allowed Rule 23.1 to

govern its analysis” and that this creates a circuit split

worthy of review. Pet. at 28. As with the issue of adequacy

of demand, Petitioner’s attempt to obtain review based on

this false conflict must be rejected.

Finally, Petitioner seeks review of the Ninth Circuit’s

decision to dismiss the cases involving the Moving Issuers

with prejudice, rather than without prejudice. As the

Ninth Circuit made clear, dismissal with prejudice is

appropriate where amendment would be futile.

The Ninth Circuit’s decision to affirm the district

court’s dismissal of Petitioner’s complaints for failure to

make an adequate demand was proper. And, Petitioner

cannot show that the Ninth Circuit’s decision regarding

her demand letters is contrary to any prior decisions of

this Court or those of any other circuit court. For these

reasons and the reasons set forth below, the Petition

should be denied.

3

COUNTER-STATEMENT OF THE CASE

I. THE POLICIES UNDERLYING SECTION 16(b)

Petitioner’s complaints allege that the Underwriters’

violated Section 16(b) by engaging in prohibited “short-

swing” transactions in connection with the Initial Public

Offerings (IPOs) of the fifty-four Issuers between 1999

and 2000. See 15 U.S.C. § 78p(b).

Congress specifically included a demand requirement

in Section 16(b) and provided a sixty-day period during

which a corporation’s board has the opportunity to

investigate and initiate suit, if appropriate. Jd. (Section

16(b) suit may be brought by shareholder only “if the

issuer shall fail or refuse to bring such suit within sixty

days after request”). The policy behind the demand

requirement “‘is to assure that the stockholder affords

the corporation the opportunity to address an alleged

wrong without litigation, to decide whether to invest the

resources of the corporation in litigation, and to control

any litigation which does occur.” Pet. App. at 54a (quoting

Spiegel v. Buntrock, 571 A.2d 767, 773 (Del. 1990)); see also

Henss v. Schneider, 132 F. Supp. 60, 62 (S.D.N.Y. 1955)

(“The sixty day [demand] provision [in Section 16(b)] was

enacted for the benefit of the corporation and to afford it a

reasonable opportunity to assert and prosecute its claim in

its own name for the recovery of profits from the insider.”);

Colan v. Monumental Corp., 524 F. Supp. 1023, 1027 (N.D.

Ill. 1981) (Section 16(b)’s demand requirement allows a

corporation “to address shareholder complaints prior to

resorting to judicial intervention.”) (citation omitted).

2. “Underwriters” refers to the Underwriter Defendants

listed in the Petition at iii.

4

Section 16(b) is designed to protect investors, the

market, and issuers themselves from abuses by corporate

insiders’ speculative short-swing trading based on inside

information. See Kern Cnty. Land Co. v. Occidental

Petroleum Corp., 411 U.S. 582, 594-95 (1973). Because

Section 16(b) applies harshly to hold statutorily defined

insiders strictly liable for short-swing profits, this Court

has narrowly construed Section 16(b)’s reach. Foremost-

McKesson, Inc. v. Provident Sec. Co., 423 U.S. 232, 251-

52 (1976) (“[Section 16(b)] imposes liability without fault

within its narrowly drawn limits”). See also Dreiling v.

Am. Online Inc., 578 F.3d 995, 997, 1005 (9th Cir. 2009)

(noting the “narrow interpretation generally given Section

16(b) by Congress and all judicial precedent thus far”

and rejecting plaintiff's “novel theory of liability” which

would impermissibly “expand Section 16(b) beyond its

previously-established boundaries”). Section 16(b) “was

not intended to remedy all wrongs” and “is simply not

an antidote to all the ills that may plague the securities

market.” Heublein, Inc. v. Gen. Cinema Corp., 722 F.2d

29, 31 (2d Cir. 1983).

Il. BRIEF FACTUAL BACKGROUND

In July 2007 — eight years after the relevant IPOs

described in the Petition — Petitioner sent so-called

demand letters to the fifty-four Issuers’ boards of

directors. Pet. App. at 93a-94a. The nearly identical

demand letters each describe the alleged wrongful acts

and purported damages to be sought by the Issuers in a

single paragraph:

Notwithstanding the short-swing trading

prohibition of Section 16, the group, through

iis members engaged in purchase and sales

5

of company shares within periods of less than

six months during [the one-year relevant

period]. Additionally, despite the reporting

requirements of Section 16(a), neither the group

nor its members filed Section 16(a) reports

for these purchase and sale transactions. The

group members should therefore be compelled

to disgorge the profits they made through the

purehase and sale of Company Stock during

[the one-year relevant period].

Id. at 97a. Of the fifty-four Issuers that received Petitioner's

boilerplate demand letters, none brought suit. Pet. at 12.

In October 2007, Petitioner — who apparently acquired

shares of the Issuers at the direction of her father, a

securities attorney with experience in Section 16(b)

litigation — filed fifty-four separate complaints alleging

violations of Section 16(b). The complaints were “based

on the same set of facts as presented in [/n re Initial

Public Offering Securities Litigation, No. 21 MC 92

(SAS) (S.D.N.Y,)].” Pet. App. at 85a; see also id. at 83a.

In her complaints, Petitioner articulated a novel and

complex theory of liability that bears no resemblance to

the Section 16(b) claim contained in the demand letters.

See id. at 61a. Specifically, Petitioner’s complaints allege

that the Underwriters violated Section 16(b) by engaging

in the following alleged “Short-Swing Transactions”:

(1) sharing the profits of customers to whom they made

IPO allocations; (2) allocating shares of the Issuers’

stock to executives and other high-level insiders of other

companies, from which the Underwriters expected to

receive investment banking opportunities in return; and

(3) creating opportunities for other members of the alleged

group to profit from the sale of the Issuers’ stock in return

ERE

6

for future banking opportunities. /d. at 45a-46a. None of

these transactions are mentioned in the demand letters.

Il. THE DISPOSITION BELOW

On July 25, 2008, the Moving Issuers jointly filed

a motion to dismiss, arguing that Petitioner had failed

to serve the Moving Issuers with adequate pre-suit

demand letters and that her claims were time-barred.

Id. at 46a-47a. The Underwriters filed a separate motion

to dismiss, arguing that Petitioner’s claims were time-

barred, that her complaints failed to state a cause of

action under Section 16(b), and that the Underwriters

are protected by various exemptions from Section 16(b).

Id. at 46a.

On March 12, 2009, the district court granted the

Moving Issuers’ Joint Motion to Dismiss, holding that

Petitioner failed to serve adequate demand letters and

thus lacked standing to pursue claims arising from the

Moving Issuers’ IPQOs.* The district court correctly

found that Petitioner’s fifty-four nearly identical demand

letters “do not describe the same alleged wrongdoing that

she later describes in her complaints,” which the court

observed were based on a “complex and novel” theory

of liability. Jd. at 98a, 10la. Accordingly, the demand

3. The district court’s opinion is reported at 602 F. Supp.

2d 1202, and reprinted in the Appendix at 79a-113a. The district

court did not reach the Moving Issuers’ argument that Petitioner's

claims are barred by the two-year statute of limitations. The

district court did, however, reach the limitations issue in ruling

on the Underwriters’ motion to dismiss, holding that the claims

against the Underwriters based on the Non-Moving Issuers’ [POs

are time-barred. /d. at 105a-11 1a.

7

letters “did not put the Issuer Defendants on notice that

| Petitioner] was demanding that the corporation compel

the Underwriter Defendants to disgorge profits they

earned when customers to whom they allocated IPO

shares sold such shares in the aftermarket.” /d. at 98a. In

short, “nothing in the demand letters sent to the Issuer

Defendants, nor in any of the follow-up letters, explains

| Petitioner’s] multi-layered theory of recovery of profits

from short-swing trades.” /d. at 10la. The district court

concluded that the claims were “premised upon mere

suspicion,” “based almost entirely on conjecture,” and

were not of the type that “would further the congressional

intent of [Section 16(b)].” /d. at 98a n.13, 99a, 110a. The

court also rejected Petitioner’s attempt to excuse her

inadequate demand letters by arguing demand futility.

Id. at 102a-103a.

On appeal, the Ninth Circuit affirmed the district

court’s ruling that Petitioner’s demand letters are

insufficient because none of the transactions on which

Petitioner bases her complaints are “referenced in any

way” in her demand letters. /d. at 6la, 64a.‘ Specifically,

Petitioner’s “demand letters claimed that the Underwriters

4. The Ninth Circuit’s opinion, as amended by the order

denying the petitions for rehearing en banc, is reported at __

F.3d __, 2011 WL 135693, and is reprinted in the Appendix at

la-7Xa. The Ninth Circuit reversed the district court’s holding

that Petitioner's claims are barred by the applicable statute of

limitations. On April 15, 2011, the Underwriters filed a petition

for writ of certiorari with the Court on this issue in those cases

involving the Non-Moving Issuers’ IPOs (No. 10-1261). Because

the Ninth Circuit did not reach the statute of limitations in the

cases involving the Moving Issuers’ I POs, those cases are not part

of Underwriters’ petition.

8

directly bought and sold the Issuing Companies’ shares,

and accordingly requested that the Issuing Companies

seek disgorgement of the Underwriters’ trading profits,”

while her complaints seek the disgorgement of indirect

profits that the Underwriters received from “their

customers’ purchases and sales of the Issuing Companies’

shares.” /d. at 60a-61a (emphasis in original). Simply put,

“(t]he garden-variety Section 16(b) claim made out in these

demand letters bears no resemblance to the elaborate

scheme described in { Petitioner’s] Complaints.” /d. at 6la.

The Ninth Circuit, like the district court, also rejected

Petitioner’s argument that “the demand requirement

should be excused as futile,” ruling that “shareholders

may not invoke the futility exception after submitting a

demand to the board.” /d. at 64a (citing F'L/ Deep Marine

LLC v. McKim, C.A. No. 4138-VCN, 2009 WL 1204363, at

*3 n.17 (Del. Ch. Apr. 21, 2009)). In concluding, the Ninth

Circuit held that Petitioner “is barred from relitigating

issues relating to the adequacy of the demand letters,”

which were “litigated fully on the merits,” and instructed

the district court to dismiss the cases involving the Moving

Issuers’ IPOs with prejudice. Pet. App. at 71a.

9

REASONS FOR DENYING THE PETITION

I. THE NINTH CIRCUIT'S DECISION REGARDING

PETITIONER’S INADEQUATE DEMAND

LETTERS WAS PROPER AND DOES NOT

CONFLICT WITH ANY OTHER DECISION.

A. The Ninth Circuit Is the Only Circuit that Has

Addressed the Substantive Requirements of a

Section 16(b) Demand Letter.

There is no circuit split on any issue presented in

the Petition, including the required contents of a Section

16(b) demand letter, thus the Petition should be denied.

Petitioner concedes, as she must, that “[n]o decision from

this Court, or any circuit court before the Ninth Circuit

decision, has ever addressed the requirements of a Section

16(b) pre-suit demand when the insiders have failed to

comply with Section 16(a).” Pet. at 17. In fact, no circuit

court prior to the Ninth Circuit has ever addressed the

requirements of a Section 16(b) demand letter in any

context.® By definition, then, the Ninth Circuit’s decision

eannot conflict with the law of any other circuit.

Dissatisfied that both the Ninth Circuit and the

district court found her demand letters inadequate,

Petitioner now hopes to obtain this Court’s review

5. Moving Issuers are aware of only one district court opinion

(aside from the opinion below) that addresses the substantive

requirements of a Section 16(b) demand letter. See Dretling v. Am.

Express Travel Related Servs., 351 F. Supp. 2d 1077, 1085 (W.D.

Wash. 2004) (applying law of state of incorporation to evaluate

sufficiency of demand letter), rev'd on other grounds, 458 F.3d

942 (9th Cir. 2006).

a

10

by manufacturing a circuit split out of whole cloth.

Specifically, Petitioner claims that “the Ninth Circuit

decision subjects Section 16(b) to the procedural dictates

of Rule 23.1” in contravention of decisions from other

circuit courts which have held that Rule 23.1 does not apply

to Section 16(b) claims. /d. at 16. Petitioner’s assertion

misrepresents the Ninth Circuit’s holding, in which the

court explicitly refrained from deciding whether Rule

23.1 applies to Section 16(b) actions. Pet. App. at 5la n.7.

Rather, the Ninth Circuit relied on substantive state law

to evaluate the sufficiency of Petitioner’s demand letters.

Id. at 51a-52a (citing Kamen, 500 U.S. at 108). Accordingly,

Petitioner’s cases — none of which address the sufficiency

of a Section 16(b) demand or the propriety of looking to

state law for the required substance of a Section 16(b)

demand letter — in no way conflict with the Ninth Cireuit’s

decision. See Section D, infra.

B. The Ninth Circuit’s Application of Kamen Was

Proper.

The Ninth Circuit appropriately followed the

principles set forth in Kamen, 500 U.S. 90, in evaluating

the substance of Petitioner’s demand letters. In Kamen,

the Court considered whether it “should fashion a federal

common law rule obliging the representative shareholder

in a derivative action founded on the Investment Company

Act of 1940 to make a demand on the board of directors

even when such a demand would be excused as futile under

state law.” /d. at 92 (citation omitted). In answering this

question, the Court observed that although Rule 23.1

sets forth pleading requirements, it “does not create a

demand requirement of any particular dimension.” /d.

at 96 (emphasis in original). Rather, “the function of the

1]

demand doctrine in delimiting the respective powers of

the individual shareholder and of the directors to control

corporate litigation clearly is a matter of ‘substance,’

not ‘procedure.” /d. at 96-97. Thus, it was necessary to

“identify the source and content of the substantive law

that defines the demand requirement.” /d. at 97.

Reaffirming the teaching from its earlier decision,

Burks v. Lasker, 441 U.S. 471 (1979),® the Court explained:

“(Where a gap in the federal securities laws must be

bridged by arule that bears on the allocation of governing

powers within the corporation, federal courts should

incorporate state law into federal common law unless

the particular state law is inconsistent with the policies

underlying the federal statute.” Kamen, 500 U.S. at 108

(emphasis in original). Applying this principle, the Court

held that “the contours of the demand requirement,”

including the standards governing demand futility, must

be determined by the law of the state of incorporation.

Id. at 101.

As the Ninth Circuit held, this case fits squarely

within the holding of Kamen. Section 16(b) requires a

shareholder to make a demand on a corporation’s board

of directors and to wait sixty days before she is permitted

to sue, 15 U.S.C. § T8p(b), but “does not set forth any

6. In Burks, the Court stated that “‘[cjorporations are

creatures of state law,’ and it is state law which is the font of

corporate directors’ powers.” 441 U.S. at 478 (citation omitted).

Federal legislation “is generally enacted against the background

of existing state law; Congress has never indicated that the entire

corpus of state corporation law is to be replaced simply because

a plaintiffs cause of action is based upon a federal statute.” /d.

(citations omitted).

12

additional details regarding the nature and scope of this

statutory demand requirement.” Pet. App. at 5la. In

light of this silence, the Ninth Circuit turned to the law

of Delaware — the state of incorporation for each Moving

Issuer — to ascertain the substantive requirements for a

pre-suit demand. /d. at 5la-52a (citing Kamen, 500 U.S.

at 108).

Under Delaware law, a pre-suit demand letter must

“specifically state (i) the identity of the alleged wrongdoers,

(ii) the wrongdoing they allegedly perpetrated and the

resultant injury to the corporation, and (iii) the legal

action the shareholder wants the board to take on the

corporation’s behalf.’”’ Pet. App. at 55a (quoting Yaw

v. Talley, Civ.A. No. 12882, 1994 WL 89019, at *7 (Del.

Ch. Mar. 2, 1994). Applying this standard, the Ninth

Circuit correctly held that Petitioner’s demand letters

were inadequate because they failed to identify “‘the

wrongdoing . . . allegedly perpetrated’” and “‘the legal

action the shareholder wants the board to take on the

corporations’ behalf.” Pet. App. at 59a (quoting Yaw, 1994

WL 89019, at *7). Likewise, the follow-up letters that

Petitioner sent to twenty-five of the Issuers “completely

failed to provide sufficiently detailed information to permit

the boards to conduct a good faith inquiry into the alleged

wrongdoing.” Pet. App. at 6la-62a.

7. However, the Ninth Circuit explained that, in the Section

16(b) context, “a shareholder’s demand need not identify any

corporate injury in order to satisfy the demand requirement”

because “this requirement ‘frustrate[s] specific objectives’ of

Section 16(b) by adding an additional element to the Section 16(b)

cause of action.” Pet. App. at 60a n.18 (quoting Kamen, 500 U.S.

at 98).

13

C. Petitioner’s Arguments Regarding Kamen and

Delaware’s Pre-Suit Demand Standard Are

Unavailing.

Petitioner does not challenge the Ninth Circuit’s

conclusion that her demand letters are insufficient under

Delaware’s pre-suit demand standard. Rather, Petitioner

contends that the Ninth Circuit erred by following Kamen

and incorporating the substantive demand requirements

applied in traditional derivative actions because, she

argues, “Rule 23.1 demands differ materially from Section

16(b) demands in at least two respects.” Pet. at 18-19.

First, Petitioner claims that “in a Rule 23.1 suit,

the pre-suit demand is meant to ‘afford the directors

an opportunity to exercise their reasonable business

judgment,” whereas in a Section 16(b) suit, the “business

judgment of an issuer’s board is irrelevant.” Jd. at 19

(citations omitted). Yet Petitioner blatantly ignores that

the Ninth Circuit considered the differences between

Section 16(b) cases and traditional derivative cases and

also noted the similarities in the policies underlying the

demand requirements. Pet. App. at 54a-56a.

The Ninth Circuit emphasized the primary policy

underlying the pre-suit demand requirement: “‘[T Jo

assure that the stockholder affords the corporation

the opportunzty to address an alleged wrong without

litigation, to decide whether to invest the resources of

the corporation in litigation, and to control any litigation

which does occur.” /d. at 54a (quoting Spiegel, 571 A.2d

at 773 (emphasis added)). This policy is served by the

demand requirement in both the Rule 23.1 and Section

16(b) contexts. See supra at 3-4 (citing Henss, 132 F. Supp.

at 62; Colan, 524 F. Supp. at 1027).

14

The proceeding policy would be frustrated if, as

here, a shareholder could file and control a Section 16(b)

lawsuit after submitting a pro forma demand letter that

makes no mention of the alleged short-swing transactions

or legal theory she intends to pursue. See Pet. App. at

61a (wrongdoing and transactions alleged in Petitioner’s

complaints are not referenced in her demand letters); see

also id. at 63a (“were we to adopt Simmonds’s proposed

approach, Delaware’s demand standard would be

eviscerated”). While the business judgment rule may not

shield the board’s refusal to act on an adequate Section

16(b) demand letter, the board must still be given the

opportunity to investigate and pursue the claim in the

first instance. See Grossman v. Johnson, 674 F.2d 115, 120

(ist Cir. 1982) (“If anything, that special demand provision

(in Section 16(b)] indicates that Congress considered

a demand essential for a shareholder suit even though

Congress may have dispensed with other aspects of what

is now Rule 23.1.”).8 Thus, Petitioner’s argument provides

no justification for this Court’s review.

Second, Petitioner claims, for the first time, that

Kamen was misapplied because Section 16(b) “states

the demand requirement explicitly in the statute,” and

8. As explained by the Ninth Circuit, the “demand rule

‘is not merely a technical or unimportant requirement,” and is

“particularly relevant in the Section 16(b) context.” Pet. App.

at 55a (quoting Potter v. Hughes, 546 F.3d 1051, 1058 (9th Cir.

2008)). ““Anecdotal evidence suggests that well over 90 percent of

all Section 16(b) claims are settled privately without any lawsuit

being filed,” but this figure most certainly would be lower if

boards were not afforded the opportunity to address allegations

of short-swing trading. Pet. App. at 55a (quoting Peter Romeo &

Alan Dye, Section 16 Treatise and Reporting Guide § 9.01 [7]{c]

(3d ed. 2008)).

15

thus there is no gap to bridge. Pet. at 20. Yet Petitioner

acknowledges that “Section 16(b) does not set out

any requirements for the demand itself.” Jd. at 4. In

acknowledging the statute’s silence, Petitioner advocates

for deriving the substantive requirements for a pre-suit

demand letter from a treatise’s summary of what “usually

will” be contained in a demand letter in a typical Section

16(b) case. /d. at 17 (citing Peter Romeo & Alan Dye,

Section 16 Treatise and Reporting Guide § 9.02[4] (3d ed.

2008)). But Romeo & Dye does not even purport to set out

the “requirements” for Section 16(b) demand letters. Nor

does Petitioner cite any case law holding that courts should

incorporate a treatise, as opposed to state law, into federal

common law to bridge a gap in the federal securities laws.

In any event, the pro forma demand letter requirements

for which Petitioner claims to find support in a treatise

would be a particularly poor fit for the novel and complex

theory of liability on which her complaints are based. See

Section F, infra.

D. Rule 23.1’s “Procedural Dictates” Were

Irrelevant to the Ninth Circuit’s Decision.

Petitioner also claims that the Ninth Circuit

“{iJmpos[ed] heightened procedural rules” and “subject{ed|]

Section 16(b) to the procedural dictates of Rule 23.1.” Pet.

at 16, 19. This argument is patently false and conflates

Rule 23.1’s procedural requirements and the substantive

requirements of a pre-suit demand under Delaware law,

which are two separate and distinct concepts. See Section

B, supra; see also Daily Income Fund, Inc. v. Fox, 464

U.S. 523, 543 (1984) (Stevens, J., concurring) (“Rule 23.1

is not the source of [the demand] requirement”). The

Ninth Circuit did not hold (and Moving Issuers have

never argued) that Rule 23.1 applies to Section 16(b)

\

16

claims or otherwise controls the substance of a Section

16(b) demand letter. See Pet. App. at 5la n.7 (“(T]}wo of

our sister circuits have suggested that Rule 23.1 does not

apply in Section 16(b) actions. ... We refrain from deciding

this question because it is not relevant to our analysis”)

(citations omitted).

Despite Petitioner’s complaint that the Ninth Circuit

“relied on Rule 23.1 cases to conclude that Petitioner's

demands were not sufficient,” Pet. at 21, the court did not

rely on those cases for their application of Rule 23.1 or its

state counterpart. Rather, the decisions were relevant

to the Ninth Circuit’s opinion only in that they set forth

substantive Delaware law governing the contents of a pre-

suit demand letter. Pet. App. at 55a-56a, 56a n.13 (citing

FLI, 2009 WL 12043683, at *1 n.6 (setting forth Delaware’s

substantive requirements for a pre-suit demand letter);

Khanna v. McMinn, No. Civ.A. 20545-NC, 2006 WL

1388744, at *13 (Del. Ch. May 9, 2006) (same); Gatz v.

Ponsoldt, No. Civ.A. 174-N, 2004 WL 3029868, at *5 (Del.

Ch. Nov. 5, 2004) (same); Yaw, 1994 WL 8909, at *7 (same)).

See Section C, supra.

The Ninth Circuit’s decision, therefore, does not

conflict with any of the circuit court decisions cited by

Petitioner. Petitioner’s cases do not address the content

of a Section 16(b) demand letter, let alone suggest that the

Ninth Circuit was wrong when it turned to state law — not

Rule 23.1 — to determine the required contents of such

a letter. See Pet. at 22-24 (citing Blau v. Mission Corp.,

212 F.2d 77, 79 (2d Cir. 1954) (compliance with Rule 23.1’s

requirement that a shareholder plead contemporaneous

ownership is not required for Section 16(b) claims);

Dottenherm v. Murchison, 227 F.2d 737 (5th Cir. 1956)

17

(same); Grossman, 674 F.2d at 120 (in deciding whether

Rule 23.1 applies to Section 36(b) claims under Investment

Company Act, court rejected analogy between Section

36(b) and Section 16(b) because the latter contains its own

express demand requirement); Cramer v. Gen. Tel. & Elec.

Corp, 582 F.2d 259, 276 (8d Cir. 1978) (business judgment

rule inapplicable in Section 16(b) context)).’ Petitioner’s

attempt to fabricate a conflict should be rejected.

E. The Ninth Circuit’s Decision Does Not Reward

Insiders or Impede Congressional Intent.

Petitioner argues that the Ninth Circuit’s decision

will impede the enforcement scheme Congress designed

because without a Section 16(a) report, no outsider has

access to information required by the Ninth Circuit’s

decision. Pet. at 10. Petitioner is wrong. The information the

Ninth Circuit held was missing from Petitioner’s demand

letters — the “wrongdoing . . . allegedly perpetrated”

and “’the legal action the shareholder wants the board to

take on the corporation’s behalf” — would not have been

reflected in the Section 16(a) reports that Petitioner claims

should have been filed. Pet. App. at 59a (citation omitted);

9. For the same reasons, there is no conflict between the

Ninth Circuit’s decision and either of the district court decisions

cited by Petitioner. See Pet. at 23-24 (citing Segen v. Comvest

Venture Partners, LP, No. Civ.A. 04-822-JJF, 2005 WL 1320875,

at *4 (D. Del. June 2, 2005) (business judgment rule inapplicable

in Section 16(b) context); DiLorenzo v. Edgar, No. Civ. 03-841-

SLR, 2004 WL 609374, at *3 (D. Del. Mar. 24, 2004) (noting

business judgment rule and Rule 23.1’s pleading requirement of

contemporaneous ownership do not apply to Section 16(b) claims)).

See also infra at 24 (purported conflict with district court does

not warrant review by this Court).

1s

see id. at 6la. Under Petitioner’s theory of liability, the

persons who made the challenged purchases and sales

are not statutory insiders, officers, directors and major

shareholders whose trades would appear on Section 16(a)

reports, but rather customers of the Underwriters. See id.

(“According to the Complaints, the Underwriters violated

Section 16(b) when they profited indirectly through their

customers’ purchases and sales of the Issuing Companies’

shares”) (emphasis in original). Nor would a Section 16(a)

report reflect the indirect “profits the Underwriters

received through their investment banking operations,”

which Petitioner seeks to disgorge in her complaints." See

id. at 60a. I[t is telling that Petitioner was able to bring her

complaints despite the fact that no Section 16(a) reports

have ever been filed.

The requirement that a pre-suit demand letter contain

certain basic information to allow a corporation the fair

opportunity to act does not “reward insiders” or in any

way hinder a shareholder’s ability to proceed with the

suit once she has served a proper demand letter and the

sixty-day period expires. Instead, a standard requiring

sufficient information is necessary to protect the rights

afforded issuers by Section 16(b)’s demand requirement.

After making a sufficient demand, a shareholder is free

to pursue a Section 16(b) claim if the board declines to do

so. See, ¢.g., Henss, 182 F. Supp. at 62.

10. Even according to Petitioner, Section 16(a) reports are

only required to set forth “the short swing trading details, identify

the insiders and group members, specify the shares in which

the insiders have or share a pecuniary interest, and permit the

computation of the profits to be disgorged.” Pet. at 25

19

Petitioner also claims that the Ninth Circuit’s decision

to permit the Underwriters to challenge the adequacy of

the pre-suit demand letters through a motion to dismiss is

contrary to congressional intent. Pet. at ii, 26-27; see also

Pet. App. at 71a n.22. Petitioner, however, has identified no

circuit cases in conflict with the Ninth Circuit’s holding;

thus this issue does not warrant review by this Court. See

Supreme Court Rule 10.

F. The Ninth Circuit’s Demand Ruling Presents

No Issue of Widespread Application that

Warrants the Court’s Attention.

While application of Section 16(b)’s statute of

limitations has generated a significant division among the

circuits with far reaching implications, see Underwriters’

petition for writ of certiorari, No. 1261, the scope of Section

16(b)’s demand requirements has not. Thus, Petitioner not

only fails to identify a conflict, she also fails to identify

an issue of widespread application worthy of the Court’s

review.

In a typical Section 16(b) action, a shareholder

demands disgorgement of short-swing profits in company

stock from corporate insiders; thus the sufficiency of the

shareholder’s demand letter is rarely at issue. Petitioner,

however, seeks disgorgement from Underwriters of profits

earned “indirectly through their customers’ purchases

and sales of the Issuing Companies’ shares.” Pet. App. at

6la (emphasis tn original). Because Petitioner’s demand

letters vaguely describe “a garden-variety Section 16(b)

claim” that “bears no resemblance to the elaborate

scheme” alleged in her complaints, id., the adequacy of

Petitioner’s demand letters was unusually important in

4

20

this case. Thus, the district court and the Ninth Circuit

were required to ascertain and apply the applicable

standard for evaluating the contents of those letters. For

these reasons, Petitioner’s challenge to the Ninth Circuit’s

analysis of her demand letters does not involve an issue of

widespread application to which this Court should devote

its resources.

ll. THE NINTH CIRCUIT’S DECISION REGARDING

DEMAND FUTILITY WAS PROPER AND DOES

NOT CONFLICT WITH ANY OTHER DECISION.

The Ninth Circuit properly rejected Petitioner's

attempt to excuse her inadequate demand letters

by arguing demand futility. Petitioner attempts to

manufacture a conflict by arguing that the “Ninth Circuit

erred in its brief analysis of demand futility because,

again, it allowed Rule 23.1 to govern its analysis.” Pet. at

28. As with the issue of adequacy of demand, Petitioner’s

purported conflict is illusory. As its decision reflects,

the Ninth Circuit did not apply Rule 23.1, which “speaks

only to the adequacy of the shareholder representative’s

pleadings.” Kamen, 500 U.S. at 96; see also Section A,

supra. Instead, the Ninth Circuit properly considered law

from the Moving Issuers’ state of incorporation, Delaware,

in addressing Plaintiff’s unpled arguments regarding

demand futility and waiver. See Section B, supra; see also

Pet. App. at 52a (citing Kamen, 500 U.S. at 108)."'

11. It is important to note that Petitioner does not allege

demand futility in her complaints; she raised demand futility for

the first time in her Opposition Brief before the district court. See

Henss, 132 F. Supp. at 62-63 (dismissing Section 16(b) action where

shareholders failed to allege facts to justify filing suit before 60

day period expired); Coran v. Snap-on Tools Corp., 408 F. Supp.

21

Petitioner’s only retort is that substantive law from

Delaware is inapplicable because the business judgment

rule does not apply to Section 16(b) claims, Pet. at 28-

29, a point acknowledged in the Ninth Circuit’s opinion,

Pet. App. at 54a n.9. Unlike the Ninth Circuit, however,

Petitioner ignores that the demand requirement in both

16(b) and Delaware derivative cases provides a corporation

with the opportunity to evaluate a demand and initiate

suit on its own. See Section C, supra. In both contexts, a

shareholder who makes a demand waives the argument

of demand futility, because the law will not presume that

parties act in a meaningless way — that they undertook

futile actions. See, e.g., Spiegel, 571 A.2d at 775. By making

her demands, Petitioner waived any argument that

the Moving Issuers’ boards were incapable of properly

considering the respective demands and should have been

deprived of this opportunity. Levner v. Saud, 903 F. Supp.

452, 457 (S.D.N-Y. 1994).

There is no conflict or inconsistency between the Ninth

Circuit’s decision and the cases cited by Petitioner for the

proposition that Rule 23.1 does not apply to Section 16(b)

1060, 1061 (E.D. Wis. 1976) (Section 16(b) demand only excused

where demand futility facts “then known” to plaintiff are alleged

in complaint). And, while Petitioner claims she has “demonstrated

demand futility” in her briefs, Pet. at 27, she apparently bases this

conclusion on the fact that Moving Issuers challenged the adequacy

of the demand letters — a right to which they are entitled under

16(b) preeedent, as Petitioner acknowledges. /d. at 26. Moving

Issuers’ request to terminate the actions with prejudice also

cannot demonstrate futility, id. at 27, because Petitioner concedes

that dismissal on statute of limitations grounds (an argument

Moving Issuers presented in the distriet court and on appeal)

“should result in dismissal with prejudice.” /d. at 30 n.10.

99

nee

claims, and regardless, all of the cases cited by Petitioner

are factually inapposite. See Pet. at 29. In Pellegrino v.

Nesbit, 203 F.2d 463 (9th Cir. 1953), for example, the court

did not address demand futility; rather, the language

Petitioner quotes is from the court’s discussion of whether

an appellant can intervene, as a matter of right. Pet. at

29 (citing Pellegrino, 203 F.2d at 466-67). The fact that

a Shareholder may be entitled to intervene in an issuer’s

Section 16(b) suit does not alter the legal principle that

demand futility is judged at the time the complaint is filed,

not based on hindsight. See Rothenberg v. United Brands

Co., No. 74 Civ. 5735, 1977 WL 1014, at *3 (S.D.N-Y. May 11,

1977), aff'd, 573 F.2d 1295 (2d Cir. 1977); Romeo & Dye, §

9.03[2]{b]{iii] (demand futility in a §16(b) case “is measured

as of the date the complaint is filed”). Here, the Moving

Issuers never had the opportunity to evaluate whether

they should file suit because Petitioner failed to serve

adequate demand letters - a fact Petitioner repeatedly

ignores. Thus, this case has no relationship to those where

a company brought suit but later failed to prosecute.

Petitioner’s other cases fare no better. The only

other circuit court decision cited by Petitioner, Mendell

v. Gollust, 909 F.2d 724 (2d Cir. 1990), aff'd, 501 U.S. 115

(1991), addressed whether the plaintiff had standing after

a corporate merger, not demand futility. The remaining

two cases upon which Petitioner relies are district court

opinions that do not give rise to a cognizable conflict

within the meaning of Supreme Court Rule 10 and, in

any event, are inapposite. See Pet. at 29 (citing Segen

v. Comvest Venture Partners, LP, No. Civ.A. 04-822-

JJF, 2005 WL 1320875, at *2 (D. Del. June 2, 2005)

(addressing an adequate demand that was wrongfully

refused, not demand futility) and DiLorenzo v. Edgar,

23

No. Civ. 03-841-SLR, 2004 WL 609374, at *4 (D. Del. Mar.

24, 2004) (plaintiff specifically pled demand futility in his

complaint)). The Ninth Circuit’s rejection of Petitioner’s

demand futility argument was proper and her Petition

should be denied.

Ill. THE NINTH CIRCUIT’S DECISION REGARDING

DISMISSAL WITH PREJUDICE WAS PROPER

AND DOES NOT CONFLICT WITH ANY OTHER

DECISION.

The Ninth Circuit properly held that Petitioner's

claims should be dismissed with prejudice, and Petitioner

fails to identify any conflict or other justification to grant

her Petition on this issue.” Petitioner argues that the

Ninth Circuit’s decision to dismiss the cases with prejudice

(i) conflicts with the view that courts should “grant leave

to amend ‘freely,”” suggesting that she could have cured

the deficiencies through amendment, Pet. at 30-31; and

(ii) conflicts with Jn re Kauffman Mutual Fund Actions,

12. Contrary to Petitioner’s suggestion that the Ninth

Circuit’s decision to dismiss with prejudice was sua sponte, the

Moving Issuers and the Underwriters argued that amendment

of the complaint would be futile. See Moving Issuers-Appellees’

Principal Brief at 1 (“re-filing would be futile because the District

Court specifically held that Simmonds could not serve demand

letters while these actions were pending”); see also Underwriter

Defendants-Appellees-Cross-Appellants' Reply Brief at 7-9 (all

54 claims should be dismissed with prejudice because petitioner

failed to demonstrate how defects in her pre-suit demands could be

remedied by granting leave to amend); Underwriter Defendants-

Appellees-Cross-Appellants’ Brief at 55 (“if the Court affirms the

District Court’s decision —- either on statute of limitations grounds

or on any other alternative grounds presented — it should convert

the without prejudice dismissals to with prejudice dismissals”).

24

479 F.2d 257 (1st Cir. 1973), one of the very cases upon

which the Ninth Circuit relied in converting the dismissal

io “with prejudice.” Pet. at 31-32. Petitioner is wrong on

both counts.

First, the Ninth Circuit noted that it has “previously

held that a complaint may be dismissed with prejudice

on account of the plaintiff's failure to satisfy the demand

requirement, ...and various other circuits have reached

the same conclusion. . . . [The] decision to convert the

dismissal is not unprecedented.” Pet. App. at 70a. Other

than Kauffman, discussed below, Petitioner ignores the

numerous cases cited by the Ninth Circuit — all of which

are in the demand context and consistent with its holding.'®

Instead, Petitioner argues that the decision to dismiss her

claims with prejudice conflicts with the general proposition

that amendment be freely granted. But the cases she cites

all recognize that leave to amend may be denied for a

myriad of reasons, including where amendment of the

complaint would be futile. Pet. at 30-31 (citing Foman v.

Davis, 371 U.S. 178, 182 (1962) (rejecting the “outright

refusal to grant [ ] leave without any justifying reason,”

13. See Pet. App. at 70a, 70a n.21 (citing /m re Silicon

Graphics Inc. Sec. Litig., 183 F.3d 970, 990-91 (9th Cir. 1999),

abrogated on other grounds by Tellabs, Inc. v. Makor Issues &

Rights, 551 U.S. 308, 322-24 (2007) (upholding dismissal without

leave to amend where plaintiff failed to identify how deficiencies

could be cured and where such amendment would be futile); Kanter

vw. Barella, 489 F.3d 170, 181 (38d Cir. 2007) (same); Starrels v. First

Nat'l Bank of Chicago, 870 F.2d 1168, 1172 (7th Cir. 1989) (same);

Gaubert v. Fed. Home Loan Bank Bd., 863 F.2d 59, 69 (D.C. Cir.

1988) (same; citing Foman v. Davis, 371 U.S. 178, 182 (1962), for

the proposition that such a dismissal is warranted where “the

amendments would not serve any purpose’”)).

25

but noting amendment may be denied where it would be

futile) and Lopez v. Smith, 203 F.3d 1122 (9th Cir. 2000)

(reversing the denial of leave to amend on account of a

mere technical error by a pro se plaintiff, but noting that

court may dismiss with prejudice where defects cannot

be cured through amendment)).

Here, dismissal with prejudice was appropriate

because Petitioner cannot cure the deficiencies identified

by the Ninth Circuit. The actual] demand letters (as

opposed to Petitioner's allegations regarding the content

of the demand letters) were properly considered by

the district court and reviewed by the Ninth Circuit,

which characterized the contents of the demand and

“follow-up” letters as “bearing no resemblance to the

elaborate scheme described in Simmonds’s complaint”

and “completely fail{ing] to provide sufficiently detailed

information to permit the boards to conduct a good

faith inquiry,” respectively. Pet. App. at 61a-62a. Thus,

Petitioner cannot amend her complaints to provide

additional allegations relating to the content of the demand

letters; the defects are in the demand letters themselves.

Moreover, Shlensky v. Dorsey, a Third Circuit decision

relied upon by the Ninth Circuit, specifically holds that

an inadequate demand cannot be cured by serving a new

demand letter after the filing of the complaint. 574 F.2d

131, 141-42 (8d Cir. 1978) (affirming dismissal without

leave to amend). Indeed, the district court ruled that

it would “not permit [Petitioner] to amend her demand

letters while pursuing this action,” as to do so after the suit

14. The Ninth Circuit reviewed the district court’s dismissal

for failure to comply with the demand requirements for abuse of

discretion. Pet. App. at 48a.

26

had been initiated would reduce the demand requirement

to a “meaningless formality.” Pet. App. at 102a (citation

omitted).

Second, despite Petitioner’s attempt to manufacture

a circuit split, the Ninth Circuit and the First Circuit

in Kauffman both held that where the issue of demand

has been litigated and further amendment would be

futile, dismissal may be with prejudice as to that issue.

Indeed, the First Circuit explained that “[t]he dismissal

is with prejudice on the issue of the obligation to make a

demand on the directors with respect to that substantive

complaint,” noting that the plaintiff “is precluded from

relitigating the very question which was litigated in

the prior action.” Kauffman, 479 F.2d at 267 (citations

omitted) (emphasis added). Far from being in conflict with

Kauffman, the Ninth Circuit specifically held that “[w]e

agree with the First Circuit’s approach in Kauffman.

Simmonds is barred from relitigating issues relating

to the adequacy of the demand letters. ... As with any

issue litigated fully on the merits, shareholders may

not endlessly relitigate the adequacy of their pre-suit

demand.” Pet. App. at 71a. Because Petitioner provides no

reason to justify this Court’s review, the Petition should

be denied.

15. The First Circuit specifically noted that “[iJn affirming

we must, however, comment upon one phrase in the order of the

district court granting the motion to dismiss, that it is ‘without

prejudice.’ This must mean without prejudice as to the substantive

cause of action.” Kauffman, 479 F.2d at 267.

27

CONCLUSION

For the foregoing reasons, the Court should deny the

Petition.

May 26, 2011

ANDREW H. PontTious

JOHN V. ERICKSON

TimMoTHY M. Wonc

COLLETTE ERICKSON

FARMER AND O’NEILL LLP

235 Pine Street

San Francisco, CA 94904

John H. Chun

Summit Law Group

315 Fifth Avenue South

Seattle, WA 98104

Counsel for Respondent

Cosine Communications,

Ine.

L. REx SEARS

WorRKMAN NYDEGGER

1000 East Gate Tower

60 East South Temple

Salt Lake City, UT 84111

Respectfully submitted,

Davip H. KISTENBROKER

Counsel of Record

JONI S. JACOBSEN

MICHAEL J. LOHNES

AHARON S. KAYE

KATTEN MucHIN

RosENMAN LLP

525 West Monroe Street

Chicago, IL 60661

(312) 902-5200

david.kistenbroker@

kattenlaw.com

THoMAS M. JONES

BENJAMIN J. STONE

Cozen O’ Connor

1201 Third Avenue

Seattle, WA 98101

Liason Counsel for

Respondent Moving

Issuers

Counsel for Respondents

Akamai Technologies,

Inc., Ariba, Inc., Asialnfo

Holdings, Inc., Aspect

Medical Systems,

STEPHEN J. KENNEDY

ATER WyYnnE LLP

Two Union Square

601 Union Street

Seattle, WA 98101

Counsel for Respondent

Finisar Corporation

MICHAEL CHARLSON

RoBIN EvE WECHKIN

Hocan Lovetts US LLP

525 University Avenue

Palo Alto, CA 94301

Counsel for Respondent

Maxygen, Inc.

JOHN C. TANG

LATHAM & WaTKINS LLP

140 Seott Drive

Menlo Park, CA 94025

STEPHEN P. CaPLow

Davis WRIGHT TREMAINE

1201 Third Avenue

Seattle, WA 98101

Counsel for Respondent

TiVo Inc.

28

Audible, Inc., Avici

Systems, Inc., Capstone

Turbine Corporation,

Digimarc Corporation,

InterNAP Networks

Service Corporation,

Intersil Corporation,

Martha Stewart Living

Omnimedia, Inc., NaviSite

Inc., Occam Networks, Inc.,

Onvia, Inc., Openwave

Systems Inc., Oplink

Communication, Inc.,

Packeteer Inc., Perot

Systems Corporation,

priceline.com

Incorporated, RedHat,

Inc., Saba Software, Inc.,

Selectica, Inc., Silicon

Laboratories, Inc., Sonus

Networks, Inc., Sycamore

Networks, Inc., TheStreet.

Com, Inc., Vignette

Corporation