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In re Mellanox Technologies, Ltd.

United States District Court, Northern District of California

December 17, 2014

In re MELLANOX TECHNOLOGIES, LTD. SECURITIES LITIGATION

ORDER GRANTING MOTION TO DISMISS Re Dkt. No. 102

JAMES DONATO, United States District Judge.

In this securities fraud action, defendants have moved to dismiss plaintiffs' second amended complaint for failure to state a claim. Dkt. No. 102. The Court previously dismissed plaintiffs amended complaint for failure to plead materiality, falsity and scienter to the standards required by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4. Dkt. No. 94.

At the hearing on defendants' present motion, plaintiffs acknowledged that the third iteration of their complaint is similar in many ways to the prior version that the Court dismissed. And for the reasons stated below, those aspects of the third amended complaint which are new are insufficient to propel this case over the pleading bar set by the PSLRA. Plaintiffs have candidly admitted that they would not have much else to add even if they were to be given another chance to amend. The Court consequently dismisses the case with prejudice.

BACKGROUND

The relevant factual background is well known to the parties and was discussed in depth in the Court's prior order (Dkt. No. 94), and the Court will not repeat it here. In brief, plaintiffs allege that Mellanox Technologies, Ltd. and three of its current and former executives — Eyal Waldman, Michael Gray and Jacob Shulman — made a number of materially false or misleading statements between April 19, 2012 and January 2, 2013 about the company's prominence in the interconnect market and its prospects for future growth and revenue generation.[1]On January 3, 2013, Mellanox announced in its 4Q earnings call that it had failed to meet its projected revenue for that quarter, marking its first "revenue miss" since the company went public five years prior. Plaintiffs assert, based on the allegedly false or misleading statements, that defendants have violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), 78(t)-l; Rule 10b-5 promulgated thereunder by the Securities Exchange Commission, 17 C.F.R. § 240.10b-5; and the Israel Securities Law, 1968.

Finding that the amended complaint was "unclear as to which of Defendants' representations are alleged to support Plaintiffs' claims, and which are included solely to provide background information, " Dkt. No. 94 at 32 n.10, the Court previously closely analyzed each statement alleged in the amended complaint. It concluded that many of the statements alleged by plaintiffs were either non-actionable corporate puffery or were protected by the PSLRA's safe harbor (which applies to forward-looking statements that are accompanied by meaningful cautionary language), and that plaintiffs had not adequately alleged the required falsity for any statement. The Court further concluded that plaintiffs' failure to adequately plead scienter constituted an alternative ground for dismissing the entire amended complaint.

This is the backdrop against which the Court now considers plaintiffs' second amended complaint and defendants' motion to dismiss it. Finding, among other things, that the second amended complaint again does not clearly delineate which statements are being alleged as background and which are actually being targeted as the basis for liability, the Court directed plaintiffs to prepare a chart that specifically identifies: (1) each statement alleged to have been false or misleading, (2) the reason(s) the statement was false or misleading when made, and (3) if an allegation regarding the statement or omission is made on information and belief, all facts on which the belief is formed. Dkt. No. 111. Plaintiffs prepared a chart identifying twelve separate statements and brought the chart to the motion hearing, where it became the basis for the Court's discussion with the parties. Plaintiffs have filed that chart on the case docket as Dkt. No. 113, Ex. A, and in this order, the Court refers to the allegedly false statements by the number they are given in that chart.

DISCUSSION

As a preliminary matter, plaintiffs' counsel forthrightly acknowledged at the hearing that many of the twelve statements alleged by plaintiffs in the second amended complaint are "similar" or "close" to statements the Court previously dismissed. Plaintiffs' counsel also explained that the "reasons why [the] statements were false and misleading" were the same for all twelve statements, with the exception that for Statements 6 through 12, there was an additional allegation regarding an "admission" by Waldman on January 17, 2013 regarding a "cable issue." See Dkt. No. 113, Ex. A. The Court finds that falsity still has not been adequately pled for any of the twelve statements.

I. STATEMENT NO. 1

The statements identified by plaintiffs as "Statement No. 1" are identical, word for word, with statements already addressed and dismissed by the Court in its prior order. Compare Dkt. No. 113, Ex. A at 1 with Dkt. No. 94 at 23-24. The Court previously concluded that the amended complaint "does not allege facts to suggest that Waldman's statements were false when made." Dkt. No. 94 at 25. Plaintiffs' counsel acknowledged at the hearing that there was nothing new about Statement No. 1. This alone is sufficient for dismissal.

But even if the Court were to consider the facts listed in plaintiffs' chart as the reasons why Waldman's statements were allegedly false or misleading — i.e., problems in the company's sales to Apple, delays in delivering cable orders to customers and the anticipated effects of a looming federal sequestration, Dkt. No. 113, Ex. A at 1 — those alleged facts have nothing at all to do with Waldman's statements about the continued deployment of supercomputers and the company's current "large deals." As before, the second amended complaint does not sufficiently plead any "reason or reasons why the [alleged] statement is misleading." 15 U.S.C. § 78u-4(b)(l). Statement No. 1 is dismissed.

II. STATEMENT NO. 2

Plaintiffs' "Statement No. 2" is comprised of two parts. See Dkt. No. 113, Ex. A at 3. The first includes Waldman's statements about customers who "are growing, " customers' usage of the company's products which is "just growing, " and the "growing" number of applications and datacenters which are being deployed. Id. These statements are indistinguishable from the types of comments previously dismissed as non-actionable, corporate ...


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