Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Jordon v. Hoag

United States District Court, N.D. California, San Jose Division

February 22, 2018

J. D. JORDON, Plaintiff,
JAY C. HOAG, Defendant.



         Plaintiff 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.

         This 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.


         Plaintiff 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.

         Plaintiff 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.

         According 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 convert.” Id.

         Plaintiff 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[0] 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, 000.” Id.

         Plaintiff 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.


         A. Federal Rule of Civil Procedure 12(b)(6)

         Federal 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).

         When 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.

         Also, 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 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.