The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS*fn1
Defendants California Infrastructure and Economic Development Bank ("I-Bank") and Orrick, Herrington & Sutcliffe LLP ("Orrick") (collectively, "Defendants") filed a motion to dismiss Plaintiff William George's ("George") first amended consolidated complaint under Federal Rule of Civil Procedure 12(b)(6) and the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Defendants argue George has not "alleged facts sufficient to state a claim for violation of Section 10(b) of the Securities Exchange Act of 1934 or Rule 10b-5(a), (b) or (c) promulgated thereunder," and since George's complaint "is the fourth separate pleading effort in this case," the dismissal ruling should be with prejudice. (Not. of Mot. to Dismiss 2:9-11; Mot. to Dismiss 25:14-15.) George opposes Defendants' dismissal motion.
An entity named Copia Claims initiated this action on June 10, 2009, filing a complaint alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, arising from allegedly misleading statements and omissions in a prospectus used to market bonds issued by I-Bank in 2007. In an order issued on September 15, 2009, George was appointed to be the lead plaintiff for the putative class action. Thereafter, on October 20, 2009, George filed an initial "consolidated complaint." Defendants filed a dismissal motion on December 4, 2009; however, on December 29, 2009, George filed a first amended consolidated complaint, mooting Defendants' dismissal motion. Defendants' pending dismissal motion was filed on February 5, 2010, and addresses George's first amended consolidated complaint.
When reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "[t]he court accepts the plaintiff['s] allegations as true and construes them in the light most favorable to the plaintiff." Metzler Inc. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (quotation and citation omitted). "[D]ismissal [is] inappropriate unless the plaintiff['s] complaint fails to state a claim to relief that is plausible on its face. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). "[R]review is generally limited to the face of the complaint, materials incorporated by reference, and matters" which may be judicially noticed. Id. Defendants' dismissal motion is accompanied by a request that judicial notice be taken of certain press reports and bankruptcy filings related to this case. However, this request need not be decided since these documents are not necessary for resolution of Defendants' dismissal motion.
Since George's first amended consolidated complaint is "a putative securities fraud class action, [it] is also subject to the pleading requirements of the PSLRA." Metzler, 540 F.3d at 1061 (citing DSAM Global Value Fund v. Altris Software, Inc., 288 F.3d 385, 388 (9th Cir. 2002)). The PSLRA imposes "heightened pleading requirements" which "are an unusual deviation from the usually lenient requirements of [the] federal rules . . . ." Ronconi v. Larkin, 253 F.3d 423, 437 (9th Cir. 2001). This heightened standard is explained by the Ninth Circuit as follows:
In order to state a claim for securities fraud that complies with the dictates of the PSLRA, the complaint must raise a "strong inference" of scienter- i.e., a strong inference that the defendant acted with an intent to deceive, manipulate, or defraud. In reviewing a complaint under this standard, the court must consider all reasonable inferences to be drawn from the allegations, including inferences unfavorable to the plaintiffs. This examination requires the court to survey the complaint in its entirety, not to simply scrutinize individual allegations in isolation. The PSLRA also requires that the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. By requiring specificity, [15 U.S.C.] § 78u-4(b)(1) prevents a plaintiff from skirting dismissal by filing a complaint laden with vague allegations of deception unaccompanied by a particularized explanation stating why the defendant's alleged statements or omissions are deceitful.
Metzler, 540 F.3d at 1061 (quotations and citations omitted) (emphasis in original).
II. George's First Amended Consolidated Complaint
George and the proposed class members purchased certain section 501(c)(3) revenue bonds issued by Defendant I-Bank between June 1, 2007 and December 1, 2008 (the "2007 Bonds"). (First Amended Consolidated Compl. ("FAC") ¶ 12.)
Defendant I-Bank is a "public instrumentality of the State of California" which "issues tax exempt revenue bonds" that "create public benefits in California communities where a sponsored project is located by enhancing the economic, social or cultural quality of life for local residents." (Id. ¶ 2.)
Defendant Orrick is "an entity comprised . . . of Members of the State Bar of California engaged in the active practice of law . . . ." (Id. ¶ 3.) I-Bank employed Orrick to provide it with legal services in connection with the issuance of certain section 501(c)(3) revenue bonds in 1999 and 2007. (Id. ¶¶ 4, 5.)
I-Bank loaned the proceeds of the 1999 and 2007 bond issuances to a California non-profit corporation named COPIA: The American Center for Wine, Food and the Arts ("Copia"), which is located in Napa, California. (Id. ¶¶ 18, 30, Exs. 1, 2.)
B. The 1999 and 2007 Bond Issuances
I-Bank issued approximately $70 million in revenue bonds in 1999 (the "1999 Bonds"). (FAC ¶¶ 5, 20.) Orrick served as bond counsel for this bond issuance. (Id. ¶ 5.) I-Bank loaned the proceeds from the 1999 bond issuance to Copia to finance the construction and development of Copia's cultural institution, museum and educational center in Napa. (FAC Ex. 2.) The terms of the 1999 bond transaction were embodied in an indenture entered into by I-Bank and BNY Western Trust Company on July ...