United States District Court, N.D. California
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
SECOND AMENDED COMPLAINT DOCKET NO. 75
M. CHEN, UNITED STATES DISTRICT JUDGE
a securities fraud class action relating to the acquisition
of Ruckus Wireless Inc. (“Ruckus”) by Brocade
Communications Systems, Inc. (“Brocade”) in May
2016. Lead Plaintiff is the City of Pontiac General
Employees' Retirement System, one of the shareholders of
Ruckus. Defendants are as follows:
• Ruckus's Board of Directors (consisting of Selina
Y. Lo (also President and CEO of Ruckus), Georges Antoun,
Barton Burstein, Gaurav Garg, Stewart Grierson, Mohan Gyani,
and Richard Lynch);
• Seamus Hennessy (Ruckus's CFO);
• Stallion Merger Sub Inc. (“Merger Sub”) (a
wholly owned subsidiary of Brocade and the entity set up as
the formal purchaser of Ruckus stock); and
• Morgan Stanley & Co. LLC (“Morgan
Stanley”) (Ruckus's financial advisor for the
the Court granted a motion to dismiss filed by a majority of
the defendants named above, but with leave to amend. Lead
Plaintiff thus filed a second amended complaint
(“SAC”). All Defendants named above now move for
dismissal of the SAC.
considered the parties' briefs and accompanying
submissions, as well as the oral argument of counsel, the
Court hereby GRANTS Defendants motion.
FACTUAL & PROCEDURAL BACKGROUND
SAC, Lead Plaintiff alleges as follows.
the merger with Brocade, “Ruckus was a global supplier
of advanced Wi-Fi solutions.” SAC ¶ 43. At the end
of December 2015, Ruckus's financial performance was
strong and had exceeded the prior year's financial
performance. See SAC ¶ 47. “Despite
Ruckus' improving metrics and strong prospects, the Board
was concurrently pursuing a sale of the Company.” SAC
and Brocade first entered into merger discussions in or about
August 2015. See SAC ¶ 54. (Prior to that, the
companies had worked together with apparent success. See,
e.g., SAC ¶ 53.) Discussions continued through
March 9, 2016, Brocade gave Ruckus its best and final offer .
. . of $6.45 in cash and 0.75 shares of Brocade common stock
(valued at the time of the offer at $14.06 per Ruckus
share).” SAC ¶ 65 (emphasis added). The Ruckus
Board accepted the offer on the same day. See SAC
April 6, 2016, the companies announced the merger agreement.
The proposed merger would be effected through a tender offer.
See SAC ¶¶ 2, 68.
Ruckus Board recommended that shareholders tender their
shares in a 14D-9 filed with the SEC. See SAC ¶
3. In the 14D-9, Ruckus stated that the implied value of the
merger consideration was $14.43 per Ruckus share
“(based on the closing price of [Brocade] Common Stock
on . . . the last trading day prior to the approval by the
[Ruckus] Board of the Merger Agreement).” Defs.'
RJN, Ex. 1 (14D-9, at 29). The closing price of Brocade stock
at that point in time was $10.64. See Defs.'
RJN, Ex. 1 (14D-9, at 34). The $14.43 merger
consideration was “an approximate premium of
44% based on the closing price per [Ruckus] Share of $10.00
on April 1, 2016.” Defs.' RJN, Ex. 1 (14D-9, at
29); see also SAC ¶ 4.
tender offer launched on April 29, 2016, and ended on May 27,
2016. Because enough shares were tendered (a majority),
the merger was completed on May 27, 2016, or shortly
thereafter. See SAC ¶¶ 2, 69; see
also RJN, Ex. 1 (14D-9, at 2) (providing that a majority
of shares must be tendered).
indicated above, at the time the parties entered into the
merger agreement (March 9, 2016), the merger consideration
for each Ruckus share had an implied valued of $14.06.
See SAC ¶ 65. In the 14D-9 that Ruckus filed
with the SEC, Ruckus stated that the implied value of the
merger consideration was $14.43 per Ruckus share.
See SAC ¶ 4. However, by the closing date of
the tender offer (May 27, 2016), the merger consideration
value had declined to $12.90 per Ruckus share. See
SAC ¶ 65.
SAC, Lead Plaintiff has asserted both federal and state
claims. With respect to the federal claims, the main claim is
a violation of § 14(e) of the 1934 Securities Exchange
Act.Section 14(e) covers an untrue
statement of material fact or omission of fact with respect
to a tender offer. Section 14(e) provides in relevant part as
It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in the
light of the circumstances under which they are made, not
misleading or to engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any tender
offer or request or invitation for tenders, or any