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November 21, 2002


The opinion of the court was delivered by: Samuel Conti, United States District Judge.


Pursuant to Federal Rule of Civil Procedure 60(a), the Court has corrected three clerical errors in its previous order. On page two, line 23, and page three, lines 1 and 18, the Court referred to meetings in March and April of 2000. The meetings were in 1999 and the dates now have been corrected.




The above captioned action is a consolidated putative class action securities law suit. A variety of plaintiffs (collectively "Plaintiff's" or the "Class") filed actions on behalf of all persons who purchased the common stock of the Clorox Company ("Clorox") between October 19, 1998 and August 11, 1999 alleging violations of the Securities Exchange Act of 1934 ("Exchange Act"), as amended by the Private Securities Litigation Reform Act (the "PSLRA"). 15 U.S.C. § 78u-4 (1996). Defendants now have moved for partial summary judgment and summary judgment on the pleadings. For the following reasons, Defendants' motion is granted.


This Court's previous orders provide a thorough discussion of the facts and issues in this case, and here a briefer summary will suffice. This case arises out of Clorox's purchase of First Brands Company. Following the acquisition, Clorox experienced difficulty integrating First Brands. The difficulty resulted in large part from several of First Brands' business practices. In particular, First Brands often would accompany sales with promises of future rebates or other promotions, recording the earnings but deferring acknowledgment of costs. Honoring First Brands' commitments and dealing with the aftereffects of these practices caused a decline in Clorox's earnings, and in 1999, when Clorox announced the decline, its stock plummeted.

Plaintiffs allege that Clorox made a series of misrepresentations regarding the merger, optimistically projecting short term success even as it realized it was facing difficulty, and understating the extent of problems resulting from First Brands' practices. These alleged statements formed the basis for each of Plaintiffs' complaints.

On November 7, 2000, the Court granted Defendants' motion to dismiss Plaintiffs' First Amended Complaint ("FAC") without prejudice. On December 20, 2000, Plaintiffs filed a Second Amended Complaint ("SAC"), which was dismissed without prejudice by the Court's order of June 13, 2001 ("Second Dismissal") Plaintiffs filed the present Third Amended Complaint ("TAC") on August 31, 2001.

Although it concluded that the vast majority of the TAC suffered from the same infirmities as its predecessors, the Court denied Defendants' motion to dismiss this third complaint. The Court found that Plaintiffs had stated a claim based on two allegations. First, Plaintiffs alleged that, at a March 4, 1999, meeting with representatives from Merrill Lynch, Defendants misrepresented the amount of time they believed they would need to clear out First Brands' excess inventory and reported that First Brands' business was on track for growth "going forward." Second, Plaintiffs alleged that on an April 22, 1999, conference call Defendants again made similar misrepresentations regarding the temporary nature of the inventory problem and First Brands' overall health. The Court found that these alleged statements, in combination with allegations elsewhere in the complaint that Clorox was well aware that at least some of First Brands' promotional obligations would take eighteen to twenty-four months to work through and that Clorox was in a "near panic" about this inventory problem, created a sufficient inference of fraud to meet the Exchange Act's heightened pleading standard.*fn1 The Court declined, in the context of a 12(b)(6) motion, to dismiss the complaint in part and retain it in part, and instead denied the motion to dismiss in its entirety.

Following this denial, Plaintiffs served extensive discovery requests upon Defendants. According to Plaintiffs, Defendants have been recalcitrant in complying with those requests, insisting that the only proper subjects of discovery are the materials surrounding the March 4 and April 22, 1999 statements, and producing only limited documents regarding those meetings. Defendants, however, assert that they have provided all relevant materials pertaining to those meetings, that materials pertaining to other statements are not properly subject to discovery, and that the materials they have produced clearly establish that the alleged statements never were made. Accordingly, Defendants argue that no evidence exists to support an essential element of Plaintiffs' fraud charges and that those charges must be dismissed.

In the alternative, Defendants argue that such statements, if they were made, were forward-looking and accompanied by meaningful cautions of uncertainty. Accordingly, Defendants urge that both the PSLRA's Safe Harbor Provision and the judicially-created "bespeaks caution" doctrine prevent either alleged statement from being the basis of a successful securities fraud claim.

In addition to moving for summary judgment on the claims based on the statements at the conference and conference call, Defendants have moved for judgment on the pleadings on all of Plaintiffs' other allegations.


A. Summary Judgment and Judgment on the Pleadings

Summary judgment is proper only when there is no genuine issue of material fact and, when viewing the evidence in the light most favorable to the nonmoving party, the movant is clearly entitled to prevail as a matter of law. Fed.R.Civ.Proc. 56(c); Cleary v. News Corp., 30 F.3d 1255, 1259 (9th Cir. 1994). Once a summary judgment motion is made and properly supported, the nonmoving party may not rest on mere allegations, but must set forth specific facts showing that there is a genuine issue for trial. Fed R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). In other words, the nonmoving party must show that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

If the party lacks evidence sufficient to oppose this motion, it may request, pursuant to Rule 56(f), that the court stay the motion pending further discovery. The party must submit "(a) a timely application which (b) specifically identifies (c) relevant information (d) where there is some basis for believing that the information sought actually exists." Visa Int'l Serv. Assoc. v. Bankcard Holders of America, 784 F.2d 1472, 1475; Terrell v. Brewer, 935 F.2d 1015, 1018 (9th Cir. 1991); Fed. Rule Civ. Proc. 56(f). Thus, to successfully obtain a summary judgment motion in the face of a request for a Rule 56(f) continuance, the moving party must demonstrate that no current factual dispute exists and the non-moving party must fail to demonstrate the possible existence of relevant undiscovered material.

Judgment on the pleadings under Rule 12(c) is appropriate "when, taking all the allegations in the pleading as true, the moving party is entitled to judgment as a matter of law." Heliotrope General, Inc. v. Ford Motor Co., 189 F.3d 971, 979 (9th Cir. 1999). In Heliotrope, the 9th Circuit held that judgment on the pleadings was appropriate when a ...

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