United States District Court, N.D. California, San Jose Division
J. D. JORDON, Plaintiff,
JAY C. HOAG, Defendant.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS RE:
DKT. NO. 105
J. DAVILA, UNITED STATES DISTRICT JUDGE
J.D. Jordan brings this action under Section 16(b) of the
Securities and Exchange Act of 1934 to recover
“short-swing” profits he alleges were realized by
Defendants Jay C. Hoag, TCV VII L.P., TCV VII (A), L.P., and
TCV Member Fund, L.P. from transactions in securities issued
by Netflix, Inc. As they have twice previously, Defendants
move to dismiss the Third Amended Complaint
(“TAC”). Dkt. No. 105. Plaintiff opposes.
matter is suitable for decision without oral argument, and
the hearing scheduled for March 8, 2018, will be vacated.
Civ. L.R. 7-1(b). Because Plaintiff's latest attempt to
plead a Rule 16(b) claim remains deficient, Defendants'
motion will be granted for the reasons explained below.
FACTUAL AND PROCEDURAL BACKGROUND
is a shareholder of Netflix. TAC, at ¶ 5. He alleges it
is “100% certain that on November 28, 2011, the Hoag
Group purchased a $200, 000, 000 Non Interest bearing
Convertible Note.” Id. at ¶ 13. This Note
had two provisions: “[o]ne which gave Hoag a right to
purchase from Netflix 2, 331, 060 hare for $85.7979 each,
using the $200, 000, 000 paid for the note as payment for the
exercise price.” Id. This option is known as a
“call equivalent position.” Id.
alleges the second provision, operative as of March 15, 2013,
was a “put equivalent position” owned by Netflix.
Id. at ¶ 14. “This provision allowed
Netflix to require Hoag to buy the 2, 331, 060 shares for
$85.7979 if in the future, Netflix stock rose more than
$42.00 from the price at which it was trading on November 28,
2011, which was $69.75.” Id.
to the TAC, Netflix exercised its option on April 23, 2013,
when the stock was trading for approximately $183,
“requiring that Hoag ‘purchase'” the
shares. Id. at ¶¶ 10, 43. “The
exercise by Netflix cancelled Hoag et al's right to
contends the exercise of Netflix's option violated Rule
16(b) because it is “matchable” to another
transaction by Hoag and his affiliates. Id. at
¶ 45. He alleges it is “100% certain that there
were non exempt sales of 344, 700 share by the Hoag group on
January 31, 2013 for $163.00 per share and sales of 450,
00 shares at $215.75 per share on April 25, 2013.”
Id. at ¶ 46. “These two sales when
matched with 794, 700 of the 2, 331, 060 acquisition on April
23, 2013 resulted in a profit of approximately $85, 000,
filed this action in 2015 “in order to recover
short-swing insider trading profits” allegedly realized
by Hoag, and amended his complaint on July 24, 2015. The
court dismissed the amended complaint for failure to allege
standing. Dkt. No. 65. The second amended complaint was later
dismissed for failure to state a plausible claim. Dkt. No.
101. Plaintiff filed the TAC on October 18, 2017. Dkt. No.
102. This motion followed.
Federal Rule of Civil Procedure 12(b)(6)
Rule of Civil Procedure 8(a) requires a plaintiff to plead
each claim with sufficient specificity to “give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal quotations
omitted). The factual allegations in the complaint
“must be enough to raise a right to relief above the
speculative level” such that the claim “is
plausible on its face.” Id. at 556-57. A
complaint that falls short of the Rule 8(a) standard may be
dismissed if it fails to state a claim upon which relief can
be granted. Fed.R.Civ.P. 12(b)(6). “Dismissal under
Rule 12(b)(6) is appropriate only where the complaint lacks a
cognizable legal theory or sufficient facts to support a
cognizable legal theory.” Mendiondo v. Centinela
Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).
deciding whether to grant a motion to dismiss, the court must
generally accept as true all “well-pleaded factual
allegations.” Ashcroft v. Iqbal, 556 U.S. 662,
664 (2009). The court must also construe the alleged facts in
the light most favorable to the plaintiff. See Retail
Prop. Trust v. United Bhd. of Carpenters & Joiners of
Am., 768 F.3d 938, 945 (9th Cir. 2014) (providing the
court must “draw all reasonable inferences in favor of
the nonmoving party” for a Rule 12(b)(6) motion).
However, “courts are not bound to accept as true a
legal conclusion couched as a factual allegation.”
Iqbal, 556 U.S. at 678.
the court usually does not consider any material beyond the
pleadings for a Rule 12(b)(6) analysis. Hal Roach
Studios, Inc. v. Richard Feiner & Co., 896 F.2d
1542, 1555 n. 19 (9th Cir. 1990). Exceptions to this rule
include material submitted as part of the complaint or relied
upon in the complaint, and material subject to ...