United States District Court, N.D. California
ANTON BIELOUSOV, Individually and on Behalf of All others Similarly Situated, Plaintiff,
GOPRO, INC. and NICHOLAS D. WOODMAN, Defendants.
ORDER DENYING MOTION TO DISMISS FIRST AMENDED
COMPLAINT (DOCKET NOS. 57, 58, 64)
CLAUDIA WILKEN United States District Judge.
GoPro, Inc., Nicholas Woodman, Brian McGee, and Anthony Bates
move to dismiss Lead Plaintiff Troy Larkin's Amended
Class Action Complaint (1AC). Plaintiff opposed the motion and
Defendants filed a reply. The Court held a hearing on June
27, 2017. Having considered the parties' papers and
argument, the Court denies the motion to
following facts are alleged in the 1AC.
is a publicly traded Delaware corporation headquartered in
San Mateo, California. 1AC ¶ 28. It makes and sells
mountable and wearable cameras, drones and accessories.
Id. ¶¶ 2, 28, 32. Nicholas Woodman is
GoPro's founder and chief executive officer. Id.
¶ 29. Brian McGee is the company's chief financial
officer. Id. ¶ 30. Anthony Bates is a director
of the company and previously served as its president.
Id. ¶ 31.
September 19, 2016, GoPro unveiled two new HERO5 model
cameras and the Karma® quadcopter drone, which was
GoPro's entry into the drone market. Id.
¶¶ 3-4; 64-66; 94. GoPro stated that the Karma
drone would be available on October 23, 2016, globally, at
select retailers and announced pricing for the drone.
Id. ¶¶ 4, 70, 94. McGee told investors
that the drone would take GoPro to “new heights”
and that the company was on track to meet February 3, 2016
revenue guidance of $1.35-1.5 billion revenue for 2016.
Id. ¶ 6; see also Id. ¶¶ 56,
alleges, however, that these and other statements by
Defendants were false and misleading. GoPro was suffering a
severe shortage of Karma drones. Id. ¶¶
7-8, 18, 71-76, 80. There also was a shortage of HERO5
cameras. Id. ¶¶ 81-84. Those drones that
were available had an obvious battery latch design defect
that led to a product recall on November 8, 2016.
Id. ¶¶ 10, 18, 67-69, 78-80, 88-89. As
this information became public, GoPro's share price fell
from a class period high of $17.68 per share on October 5,
2016 to close at $10.41 per share on November 9, 2016.
Id. ¶¶ 9, 11, 16, 19-21, 90-93, 160-163.
alleges that Defendants knew of the product shortages due to
GoPro's use of a cloud-based NetSuite enterprise resource
planning system that gave them real-time access to supply
chain information. Id. ¶¶ 11-13, 22,
33-47, 61, 63, 135. They were motivated to use the NetSuite
system because of previous inventory issues. Id.
¶¶ 13, 50-53. They also were or should have been
aware of the design defect because it would have been obvious
during adequate product testing and Woodman himself had used
the drone extensively. Id. ¶¶ 11, 14, 22,
GoPro scoured the Internet for videos captured via the
company's devices, and thus Defendants likely were aware
of user videos of crashing drones that were posted on
YouTube. Id. ¶¶ 14, 48-49, 78-79, 137.
November 16, 2016, Plaintiff Anton Bielousov filed the
original complaint in this action. On February 6, 2017, the
Court appointed Troy Larkin as lead plaintiff for a putative
class of purchasers of GoPro stock. On March 14, 2017, Lead
Plaintiff Larkin filed the 1AC, alleging that Defendants made
various false or misleading statements between September 19,
2016 and November 8, 2016 about GoPro's HERO5 camera and
Karma drone and misled investors regarding its ability to
meet its previous revenue guidance. Plaintiff asserts two
claims for violations of the Securities Exchange Act of 1934
(Exchange Act), 15 U.S.C. §§ 78a-78lll. The first
claim is against all Defendants for violations of §
10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule
10b-5, 17 C.F.R. § 240.10b-5. The second claim is
against the individual Defendants only as control persons of
GoPro, for violations of § 20(a) of the Exchange Act, 15
U.S.C. § 78t(a).
complaint must contain a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a). On a motion under Rule
12(b)(6) for failure to state a claim, dismissal is
appropriate only when the complaint does not give the
defendant fair notice of a legally cognizable claim and the
grounds on which it rests. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). In considering
whether the complaint is sufficient to state a claim, the
Court takes all material allegations as true and construes
them in the light most favorable to the plaintiff.
Metzler Inv. GMBH v. Corinthian Colls., Inc., 540
F.3d 1049, 1061 (9th Cir. 2008). However, this principle is
inapplicable to legal conclusions; “[t]hreadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, ” are not taken as true.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 555).
addition to the pleading requirements of Rule 8, there are
more demanding pleading requirements for certain causes of
action, especially securities fraud.” In re Rigel
Pharm., Inc., Sec. Litig, 697 F.3d 869, 876 (9th Cir.
2012). Rule 9(b) provides that in “alleging fraud or
mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”
Fed.R.Civ.P. 9(b). The allegations must be “specific
enough to give defendants notice of the particular misconduct
which is alleged to constitute the fraud charged so that they
can defend against the charge and not just deny that they
have done anything wrong.” Semegen v. Weidner,
780 F.2d 727, 731 (9th Cir. 1985). Statements of the time,
place and nature of the alleged fraudulent activities are
sufficient, provided the plaintiff sets forth “what is
false or misleading about a statement, and why it is
false.” In re GlenFed, Inc., Sec. Litig., 42 F.3d 1541,
1548 (9th Cir. 1994), superseded by statute on other grounds,
Private Securities Litigation Reform Act of 1995 (PSLRA),
Pub. L. No. 104-67.
1995, Congress enacted the PSLRA, which amends the Exchange
Act. Under the PSLRA, a plaintiff must “state with
particularity both the facts constituting the alleged
violation, and the facts evidencing scienter, i.e., the
defendant's intention to deceive, manipulate, or
defraud.” Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 313 (2007) (internal
quotation marks omitted).
PSLRA requires that the complaint “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.” 15 U.S.C. § 78u-4(b)(1). “This
means that a plaintiff must provide, in great detail, all the
relevant facts forming the basis of her belief.” In
re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 985
(9th Cir. 1999), abrogated on other grounds by S. Ferry LP,
No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008).
Factual allegations that are not based on a plaintiff's
personal knowledge are allegations that are made on
information and belief. See Id. at 985, 998 n.21.
Thus, for example, if a plaintiff's sole basis for an
allegation is a statement from a non-plaintiff witness, that
allegation is made on information and belief, and the
plaintiff must plead all facts on which that belief is based.
See Id. at 985, 998 n.21. This does not mean,
however, that a plaintiff must, for each allegation plead on
information and belief, state every fact possessed that is in
any way related to the allegation. Id. at 999 &
Rule 9(b) does not require that scienter be plead with
particularity, see Concha v. London, 62 F.3d 1493,
1503 (9th Cir. 1995), the PSLRA does. See 15 U.S.C. §
78u-4(b)(2). The PSLRA provides that “the complaint
shall, with respect to each act or omission alleged to
violate this chapter, state with particularity facts giving
rise to a strong inference that the defendant acted with the
required state of mind.” 15 U.S.C. § 78u-4(b)(2).
The “‘required state of mind' in §
78u-4(b)(2) refers to the scienter requirement applicable to
the underlying securities fraud claim brought by the
plaintiff.” Silicon Graphics, 183 F.3d at 975.
10(b) of the Exchange Act makes it unlawful for any person to
“use or employ, in connection with the purchase or sale
of any security . . . any manipulative or deceptive device or
contrivance in contravention of such rules and regulations as
the [SEC] may prescribe.” 15 U.S.C. § 78j(b). Rule
10b-5(b) provides that it is “unlawful for any person,
directly or indirectly, . . . to make any untrue statement of
a material fact or to omit to state a material fact necessary
in order to make the statements made, in the light of the
circumstances under which they were made, not
misleading[.]” 17 C.F.R. § 240.10b-5(b). The PSLRA
thus requires that a plaintiff plead with particularity