Cement Masons & Plasterers Joint Pension Trust

Filing 81

Order by Hon. Samuel Conti granting 67 Motion to Dismiss.(sclc1S, COURT STAFF) (Filed on 6/12/2013)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE NORTHERN DISTRICT OF CALIFORNIA

8

United States District Court

For the Northern District of California

9

11

CEMENT MASONS & PLASTERERS
JOINT PENSION TRUST,
individually and on behalf of
all others similarly situated,

12

Plaintiffs,

10

v.

13
14

EQUINIX, INC., STEPHEN M.
SMITH, and KEITH TAYLOR,

15
Defendants.
16

) Case No. 11-01016 SC
)
) ORDER GRANTING MOTION TO
) DISMISS
)
)
)
)
)
)
)
)
)
)
)

17
18
19

I.

INTRODUCTION
Plaintiffs Cement Masons & Plasterers Joint Pension Trust

20

("Cement Masons") and the International Brotherhood of Electrical

21

Workers Local 697 Pension Fund ("IBEW") (collectively,

22

"Plaintiffs") bring this putative securities class action against

23

Equinix, Inc. ("Equinix"), and Equinix's CEO, Stephen M. Smith

24

("Smith"), and CFO, Keith D. Taylor ("Taylor") (collectively,

25

"Defendants").

26

was artificially inflated between July 29, 2010 and October 5, 2010

27

(the "Class Period") due to allegedly false and misleading

28

statements made by Defendants, and that Equinix's stock price

Plaintiffs assert that the price of Equinix stock

1

plummeted over 33 percent when the falsity of these statements was

2

revealed.
Plaintiffs' previous attempts to state a claim against

3
4

Defendants have been unsuccessful.

The Court dismissed Plaintiffs'

5

First Amended Complaint ("FAC") and Second Amended Complaint

6

("SAC") with leave to amend.

7

Order").1

8

No. 66 ("TAC"), which Defendants now move to dismiss pursuant to

9

Federal Rule of Civil Procedure 12(b)(6), ECF No. 67 ("MTD").

ECF Nos. 40 ("FAC Order"), 63 ("SAC

Plaintiffs recently filed a Third Amended Complaint, ECF

The

United States District Court

For the Northern District of California

10

motion is fully briefed, ECF Nos. 70 ("Opp'n"), 74 ("Reply"), and

11

appropriate for determination without oral argument pursuant to

12

Civil Local Rule 7-1(b).
The Court finds that the TAC does not assert any new facts

13
14

that could remedy the pleading deficiencies previously identified

15

by the Court.

16

are virtually identical to those set forth in the FAC and SAC and

17

rejected in the Court's prior orders.

18

motion to dismiss is GRANTED and Plaintiffs' case is DISMISSED WITH

19

PREJUDICE.

Indeed, the facts and legal theories pled in the TAC

Accordingly, Defendants'

20
21

II.

BACKGROUND

22

A.

Factual Background

23

Equinix is a public corporation that provides carrier-neutral

24

data centers and internet exchanges.

25

businesses with partners and customers around the world through a

26

1

27
28

TAC ¶ 5.

Equinix connects

Cement Masons & Plasterers Joint Pension Trust v. Equinix Inc.,
2012 WL 685344, 2012 U.S. Dist. LEXIS 28094 (N.D. Cal. Mar. 2,
2012); Cement Masons & Plasterers Joint Pension Trust v. Equinix,
Inc., 11-01016 SC, 2012 WL 6044787, 2012 U.S. Dist. LEXIS 172711
(N.D. Cal. Dec. 5, 2012).

2

1

global platform of high-performance data centers called

2

International Business Exchanges ("IBX(s)").

3

customers to safeguard their infrastructure, house their assets and

4

applications closer to users, and collaborate with partners and

5

customers.

6

through three offerings available to customers at its ninety-two

7

IBXs: collocation services, interconnection services, and managed

8

IT services.

9

shared, equipped facilities for their computer and data systems.

United States District Court

For the Northern District of California

10

Id.

Id.

IBXs enable

Equinix generates substantially all of its revenue

Id. ¶¶ 7-10.

These services provide customers with

See id.
Equinix acquired Switch and Data, one of its competitors,

11
12

during the second quarter of 2010.

Id. ¶ 13.

13

financial results for that quarter were positive.

14

2010, the day before the commencement of the Class Period, the

15

Company issued a press release announcing that it had posted its

16

thirtieth consecutive quarter of sequential growth, reporting

17

revenues of $296.1 million.

18

Equinix offered financial projections for the third quarter 2010

19

("3Q10") and fiscal year 2010 ("FY10").

20

revenue of $335 to $338 million and FY10 revenue of $1.225 to

21

$1.235 billion (the "July 28 guidance").

22

EBITDA2 for FY10 was expected to be between $535 and $540 million.

23

TAC Ex. C.

Id. ¶¶ 102-03.

Equinix's overall
On July 28,

In the same release,

Equinix forecasted 3Q10

Id. ¶ 102.

Adjusted

24

The guidance was accompanied by cautionary language.

25

28 press release stated: "This press release contains forward-

26

2

27
28

The July

Adjusted EBITDA is defined as income or loss from operations plus
depreciation, amortization, accretion, stock-based compensation
expense, restructuring charges, acquisition costs, and gains on
asset sales.

3

1

looking statements that involve risks and uncertainties.

Actual

2

results may differ materially from expectations discussed in such

3

forward-looking statements."

4

the release included "unanticipated costs or difficulties relating

5

to the integration of companies we have acquired"; "competition

6

from existing and new competitors"; and "the loss or decline in

7

business from our key customers."

8

directed investors to further discussions of risk factors contained

9

in its recent quarterly and annual reports filed with the SEC.

The risk factors identified in

Id.

Id.

The press release also

Id.

United States District Court

For the Northern District of California

10

The cited 10-Q contains a sixteen-page "Risk Factor" section, which

11

discusses, among other things: the risk of increased churn; the

12

possibility of increased pricing pressure from competitors; and

13

dependence on key "magnet customers."

14

FAC Order at 11-12.

Also on July 28, 2010, Defendants made a number of statements

15

concerning Equinix's pricing strategy.

16

responding to investor questions about whether Equinix could

17

maintain its firm pricing in the face of an increasingly

18

competitive environment, Smith commented: "We're not going to go

19

below a threshold," and "[w]e're maintaining the discipline on the

20

floors and ceilings we have on our pricing and the sales force is

21

staying very, very disciplined on price."

22

On a conference call,

TAC ¶¶ 14, 66.

Smith conceded that there would be certain exceptions to this

23

stable pricing strategy: "If it's a strategic deal and it's a

24

magnetic deal for us, we'll get more aggressive."

25

Smith also stated: "So, yes there's pricing pressure there and yes

26

we lots of times walk away with it if it's a strategic customer we

27

might get a little more aggressive."

28

reiterated Equinix's pricing strategy in a talk with investors on

4

Id. ¶ 107.

Id. ¶ 106.

Taylor later

1

September 15, 2010, stating: "[W]e're not going to trade price for

2

volume," and "this is sort of a consistent message you've heard

3

from us previously, that pricing is stable, it's firm."

4

135.

Id. ¶¶ 21,

On October 5, 2010, the last day of the Class Period, Equinix

5
6

announced in a press release that it now expected 3Q10 revenue of

7

$328 to $330 million, a 2.2 percent reduction from the July 28

8

guidance, and FY10 revenue of $1.215 billion, a 1.2 percent

9

reduction from the July 28 guidance.

Id. ¶ 142.

However, Equinix

United States District Court

For the Northern District of California

10

also increased its adjusted EBITDA outlook to $540 million for

11

FY10.

TAC Ex. G.

12

In a conference call with investors on the same day, Smith

13

stated that the downward revision in revenue was due to understated

14

churn (i.e., customer attrition) assumptions, lower than expected

15

revenues related to the company's Switch and Data assets, and

16

customer discounts that were not fully contemplated when Equinix

17

offered the July 28 guidance.

18
19
20
21
22

TAC ¶ 142.

Smith explained:

[W]e just had an assumption that was missed in the
guidance. . . .
So it was an error on our part.
Should've seen it in Q2.
We caught it part way
through. We wanted to see the September flash so we'd
make darn sure we knew what the heck we were looking
at. And that's why we decided to get that behind us,
looking at the September flash and getting it out to
you guys today.

23
Id. ¶ 146.

In responding to question about falling prices, Taylor

24
stated:
25
26
27
28

"[W]hen we went in and, if you will, provided those
credits to the customers, we made some adjustments in
debit and credit memos. And those weren't fully
contemplated when we offered guidance. And so what we
had is basically a June exit rate that didn't fully
represent that adjustment . . . . [T]he impact of the

5

credits and debits going through our systems and how
people forecast those assumptions caused us . . . to
provide a guidance range that didn't fully contemplate
that credit or debit note."

1
2
3

Id.

4

Smith also addressed Equinix's pricing strategy, stating that

5

Equinix had provided discounts to a number of strategic customers:

6
During the second and third quarters, there were
certain discounts and credit memos issued to a number
of strategic customers in exchange for longer-term
contracts.
As we've discussed in the past, we have
been incenting our salesforce to extend the contract
terms of magnet customers, though this can result in a
price concession for some.

7
8
9

United States District Court

For the Northern District of California

10
11

TAC Ex. H at 3.

Smith made similar statements in response to

12

analysts' questions on the call: "We historically have said we will

13

not trade volume for price.

14

There are magnets that will go after, and we will adjust.

15

case, it's just over 10 percent is the effect of the adjustment on

16

their existing pricing."

But these are strategic magnets.
In this

Id. at 12.

Plaintiffs claim that the discounts Equinix offered were even

17
18

larger than those disclosed on October 5, pointing to allegations

19

from a confidential witness ("CW") who was formerly the "Regional

20

Director, Inside Sales East" at Switch and Data and Equinix.

21

46.

22

brought potential deals unless they would definitely close, so

23

discounts were widely offered with little oversight" and that the

24

CW "regularly approved discounts between 10-30%."

25

CW also states that, "prior to and during the Class Period, Equinix

26

sales reps themselves were empowered to offer a customer up to a

27

10% discount without any supervisory or managerial approval," and

28

"it was not uncommon for discounts to rise above 30% with the

TAC ¶

The CW states that "Equinix executives did not want to be

6

Id. ¶ 128.

The

1

approval of the Finance Director . . ."

Id. ¶ 130.

There is no

2

indication that this practice was ever disclosed to the market

3

during the Class Period.
Investors reacted negatively to the October 5, 2010

4
5

announcements.

The following day, Equinix's stock price fell from

6

$106.09 on October 5 to $70.34, a one-day loss of over 33 percent

7

of shareholder equity.

Id. ¶ 177.

8

B.

Procedural History

9

Cement Masons, which had purchased Equinix stock during the

United States District Court

For the Northern District of California

10

Class Period, filed the instant action in federal court on March 4,

11

2011.

12

that is represented by the same counsel as Cement Masons, was

13

appointed as lead plaintiff on August 8, 2011.

14

8, 2011 Order").

15

asserting causes of action for (1) violations of Section 10(b) of

16

the Securities Exchange Act of 1934 ("the Exchange Act") and of

17

United States Securities and Exchange Commission ("SEC") Rule 10b-

18

5; and (2) violations of Section 20(a) of the Exchange Act.

19

Order at 6.

20

of false and misleading statements concerning: (1) Equinix's

21

financial forecasts for 3Q10 and FY10; (2) Equinix's pricing

22

strategy; (3) the integration of Switch and Data's sales force; and

23

(4) Equinix's ability to provide accurate financial forecasts.

24

On March 4, 2012, the Court granted Defendants' motion to

ECF No. 1 ("Compl.").

IBEW, another Equinix stockholder

ECF No. 23 ("Aug.

The FAC was filed about six weeks later,

Mar. 2

The crux of the FAC was that Defendants made a number

Id.

25

dismiss the FAC, but granted Plaintiffs leave to amend their

26

complaint.

27

not actionable because they fell under the safe harbor for forward-

28

looking statements set out in the Private Securities Litigation

The Court found that Equinix's financial forecasts were

7

1

Reform Act ("PSLRA").

2

Plaintiffs failed to adequately plead the falsity of Defendants'

3

statements concerning Equinix's pricing strategy and the

4

integration of the Switch and Data sales force.

5

Specifically, the Court held that "Defendants maintained a

6

consistent position on pricing throughout the class period."

7

at 14.

The Court also found that

Plaintiffs filed their SAC on May 2, 2012.

8
9

FAC Order at 13.

Id. at 15.

Id.

Like the FAC, the

SAC alleged that Defendants made false and misleading statements

United States District Court

For the Northern District of California

10

concerning Equinix's pricing strategy and the integration of Switch

11

and Data.

12

2010 financial forecasts for 3Q10 and FY10 were actionably false.

13

SAC ¶ 10 n.2.

14

including the former regional director discussed above.

15

dismissed the SAC with leave to amend, once again finding that

16

Plaintiffs had failed to allege falsity of the statements

17

concerning the Switch and Data integration and Defendants' pricing

18

strategy.

19

allege loss causation as to the CW allegations, reasoning: "The

20

only public disclosures alleged by Plaintiffs occurred on October

21

5, and those disclosures merely revealed that Equinix had offered

22

10 percent discounts to certain 'magnet customers.'"

23

18.

24

revealed to the market during the Class Period, it could not have

25

caused Equinix's stock price to drop on October 6.

26

However, Plaintiffs no longer alleged that the July 28,

The SAC included allegations from five CWs,
The Court

The Court also found that Plaintiffs had failed to

SAC Order at

Because the widespread discounting described by the CW was not

Id. at 18-19.

The TAC attempts to revive Plaintiffs' allegations and legal

27

theories concerning Defendants' financial forecasts and their

28

statements regarding pricing and discounts.

8

The factual

1

allegations in the TAC are more or less the same as those asserted

2

in the FAC and the SAC.

3

that the Court has already rejected the legal theories asserted in

4

the TAC.

Defendants now move to dismiss, arguing

5
6

III. LEGAL STANDARD

7

A.

8

A motion to dismiss under Federal Rule of Civil Procedure

9

Motion to Dismiss

12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

United States District Court

For the Northern District of California

10

Block, 250 F.3d 729, 732 (9th Cir. 2001).

"Dismissal can be based

11

on the lack of a cognizable legal theory or the absence of

12

sufficient facts alleged under a cognizable legal theory."

13

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

14

1988).

15

should assume their veracity and then determine whether they

16

plausibly give rise to an entitlement to relief."

17

Iqbal, 129 S. Ct. 1937, 1950 (2009).

18

court must accept as true all of the allegations contained in a

19

complaint is inapplicable to legal conclusions.

20

recitals of the elements of a cause of action, supported by mere

21

conclusory statements, do not suffice."

22

Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

23

generally "limited to the complaint, materials incorporated into

24

the complaint by reference, and matters of which the court may take

25

judicial notice."

26

540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor

27

Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

28

///

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a

Threadbare

Id. (citing Bell Atl.
The court's review is

Metzler Inv. GMBH v. Corinthian Colls., Inc.,

9

1

B.

Section 10(b)

2

Section 10(b) of the Exchange Act makes it unlawful "[t]o use

3

or employ, in connection with the purchase or sale of any security

4

registered on a national securities exchange . . . any manipulative

5

or deceptive device or contrivance in contravention of such rules

6

and regulations as the [SEC] may prescribe . . . ."

7

78j(b).

8

states that "[i]t shall be unlawful for any person . . . [t]o

9

engage in any act, practice, or course of business which operates

15 U.S.C. §

One such rule prescribed by the SEC is Rule 10b–5, which

United States District Court

For the Northern District of California

10

or would operate as a fraud or deceit upon any person, in

11

connection with the purchase or sale of any security."

12

240.10b–5(c).

13

violation of Rule 10b–5.

14

"(1) a material misrepresentation or omission of fact, (2)

15

scienter, (3) a connection with the purchase or sale of a security,

16

(4) transaction and loss causation, and (5) economic loss."

17

Daou Sys., 411 F.3d 1006, 1014 (9th Cir. 2005).

18

17 C.F.R. §

Plaintiffs must plead five elements to establish a
Specifically, Plaintiffs must demonstrate

In re

Plaintiffs must also meet the heightened pleading standards of

19

Federal Rule of Civil Procedure 9(b) and the PSLRA, 15 U.S.C. §

20

78u-4.

21

alleged to have been misleading [and] the reason or reasons why the

22

statement is misleading."

23

the complaint must "state with particularity facts giving rise to a

24

strong inference that the defendant acted with the required state

25

of mind."

26

establishing securities fraud is the knowing, intentional, or

27

deliberately reckless disclosure of false or misleading statements.

28

See Daou, 411 F.3d at 1014–15.

The PSLRA requires plaintiffs to "specify each statement

15 U.S.C. § 78u-4(b)(1).

Id. § 78u-4(b)(2).

Additionally,

The "required state of mind" for

"The stricter standard for pleading

10

1

scienter naturally results in a stricter standard for pleading

2

falsity, because falsity and scienter in private securities fraud

3

cases are generally strongly inferred from the same set of facts,

4

and the two requirements may be combined into a unitary inquiry

5

under the PSLRA."

Id. at 1015 (internal quotation marks omitted).

6
7

IV.

DISCUSSION

8

A.

Financial Forecast

9

Plaintiffs' Section 10(b) claim is predicated in part on their

United States District Court

For the Northern District of California

10

allegation that Defendants' July 28, 2010 financial forecast was

11

false.

12

$335 to $338 million and $1.225 and $1.235 billion, respectively.

13

Later, on October 5, 2010, Defendants announced that they expected

14

3Q10 revenue of $328 to $330 million, a 2.2 percent reduction from

15

the July 28 forecast, and FY10 revenue of $1.215 billion, a 1.2

16

percent reduction.

17

failed to account for certain customer discounts.

18

On July 28, Defendants forecast 3Q10 and FY10 revenue of

Defendants admitted that the July 28 guidance

Defendants argue that their July 28 forecasts are insulated by

19

the PSLRA safe harbor for forward looking statements.

20

The PSLRA defines a forward-looking statement as "a statement

21

containing a projection of revenues, income (including income

22

loss), earnings (including earnings loss) per share, capital

23

expenditures, dividends, capital structure, or other financial

24

items."

25

the safe harbor if: (A) they are "identified as forward-looking"

26

and "accompanied by meaningful cautionary statements identifying

27

important factors that could cause actual results to differ

28

materially from those in the forward-looking statement"; or (B) the

15 U.S.C. § 78u-5(i)(1).

11

MTD at 10.

Such statements may fall within

1

plaintiff fails to prove the projections were made with "actual

2

knowledge" that they were false and misleading. Id. § 78u-

3

5(c)(1)(A)-(B).

4

if the challenged statements are identified as forward-looking and

5

accompanied by meaningful cautionary language."

6

(citing In re Cutera Sec. Litig., 610 F.3d 1103, 1113 (9th Cir.

7

2010)).

"Thus, a defendant's state of mind is irrelevant

FAC Order at 10

Plaintiffs do not dispute that the July 28 forecasts

8

United States District Court

constitute forward-looking statements, but they argue that the

10
For the Northern District of California

9

PSLRA safe harbor does not apply because the forecasts were not

11

accompanied by meaningful cautionary language.

12

Specifically, they argue that Defendants' cautionary language did

13

not warn that the July 28 forecasts may fail to account for known

14

discounts and credit memos.

15

addressed and rejected in the FAC Order:

16

Id. at 12-13.

Opp'n at 12.

This same argument was

First, Equinix need not have warned of the exact risk
that caused the company to miss its forecast.
Second, the cautionary language in Equinix's SEC
filings did warn of the possibility of pricing
pressure and the dependence on magnet customers,
factors which purportedly caused Equinix to offer
discounts and settlements to its customers.
The SEC
filings also directly identified other risks that
purportedly contributed to the revision of the revenue
forecasts, including understatement of churn and lower
than expected revenues from Switch and Data.
Thus,
taken together, Equinix's cautionary language warned
of risks of a significance similar to those actually
realized.
Third, contrary to Plaintiffs' suggestion,
it does not appear that Equinix's failure to account
for customer discounts severely impacted its revenue
forecasts, since Equinix's July 28 forecasts were only
off by a few percentage points.

17
18
19
20
21
22
23
24
25
26

FAC Order at 12 (citations and quotations omitted).

27

declines to reach a different conclusion now.

28

///

12

The Court

1

Citing Cutera, Plaintiffs argue that they need not show that

2

Defendants had "actual knowledge" that their forecasts were false

3

because the actual knowledge requirement is triggered only where a

4

forward-looking statement is accompanied by meaningful cautionary

5

statements.

6

expressly states that a forward-looking statement falls under the

7

safe harbor if (1) the statement is identified as such and

8

accompanied by meaningful cautionary language, "or" (2) the

9

plaintiff fails to prove that the person making the statement had

Opp'n at 13 n.6.

That is not the law.

The PSLRA

United States District Court

For the Northern District of California

10

"actual knowledge" of its falsity.

15 U.S.C. § 78u-5(c)(1)(A)-(B).

11

The disjunctive shows that either condition may trigger the safe

12

harbor.

13

rejected Plaintiffs' conjunctive reading of the safe harbor

14

provision, reasoning that "it ignores the plain language of the

15

statute."

16

state of mind may be "irrelevant" where a forward-looking statement

17

is accompanied by cautionary language because "the statement is not

18

actionable regardless of the plaintiff's showing of scienter."

19

Contrary to Plaintiffs' suggestion, the Ninth Circuit did not hold

20

that a plaintiff need not show actual knowledge where meaningful

21

cautionary language is absent.

Cutera does not hold otherwise.

610 F.3d at 1112.

In fact, Cutera expressly

Cutera did hold that a defendant's

Id.

22

The Court previously held that Plaintiffs failed to plead

23

sufficient facts to show that Defendants had actual knowledge that

24

the July 28 forecasts were false.

25

offers no new facts on this issue.

26

theory remains the same: Defendants must have known that the July

27

28 forecasts failed to account for customer discounts because

28

Defendants approved some those discounts before they issued the

13

FAC Order at 12-13.

The TAC

Further, Plaintiffs' legal

1

forecasts.

2

even if Defendants were aware of the discounts, there is no

3

indication that they had actual knowledge that the forecast failed

4

to account for them.

5

that Defendants touted their "exceptional visibility" into

6

Equinix's financial model.

7

alleging that Defendants actually knew that they would not meet

8

their revenue targets by a few percentage points.

9

Opp'n at 17-18.

However, as the Court previously held,

FAC Order at 13.

TAC ¶ 103.

Plaintiffs have merely pled

This is a far cry from

For these reasons, the Court finds that Defendants' July 28

United States District Court

For the Northern District of California

10

financial forecasts are not actionable under the PSLRA safe harbor

11

for forward-looking statements.

12

B.

Pricing and Discounts

13

The pricing allegations in the TAC look much like the pricing

14

allegations in the FAC and SAC.

15

falsely represented that their pricing was firm when they were

16

actually providing their customers with steep discounts.

17

of the matter was allegedly revealed on October 5 when Defendants

18

admitted that they had been providing discounts of up to 10 percent

19

to certain "strategic" and "magnet" customers.

20

allege that the discounts were even steeper than 10 percent,

21

asserting that a former regional director of sales states that she

22

regularly approved discounts of between 10 and 30 percent.

23

Plaintiffs allege that Defendants

The truth

Plaintiffs again

The Court previously rejected these allegations, concluding

24

that Defendants statements about pricing remained consistent

25

throughout the class period.

26

conceded that they might offer discounts to strategic customers.

27

Plaintiffs now argue that these statements, including Smith's

28

statement that Equinix might face pricing pressure, "indicate an

As early as July 28, Defendants

14

1

expectation of the future, and do[] not intimate that the pricing

2

pressure had already resulted in discounts . . . ."

3

Defendants respond that, when viewed in context, it is clear that

4

Smith was not discussing the conditions under which Equinix was

5

offering discounts.

6

Opp'n at 10.

Reply at 8-9.

The Court agrees with Defendants.

The full text of Smith's

7

July 28 statement concerning pricing competition, which is attached

8

to the TAC, shows that Smith was referring to discounts that had

9

been offered in the past, as well as discounts that might be

United States District Court

For the Northern District of California

10

offered in the future:

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

On the competitive front it does vary by metro, by
market. I would tell you in the US the statement you
made is we're seeing a little bit of that in the LA
market. And I think because of the demand -- or the
competitive supply that we see in Phoenix and Vegas
and also in the LA market, so there are certain
markets where certain pressure -- pricing pressure and
pricing behaviors are going to change, but that's not
terribly different than what we've experienced over
several quarters.
And so in certain markets we're
going to get some pricing pressure on certain deals.
If it's a strategic deal and it's a magnetic deal for
us, we'll get more aggressive. If it's not, we're
going to let it go and whether it goes to a
competitive retail or a wholesale business, so be it.
We're maintaining the discipline on the floors and
ceilings we have on our pricing and the sales force is
staying very, very disciplined on price. So I wouldn't
tell you it's in very many markets, it's in a couple
of places and on a couple of deals where we're seeing
this as you called it pricing behavior get a little
goofy.
In terms of deal sizes, as we open up a new phase or a
new IBX in particular, we tend to follow the same
formula that we've done in the past. We'll put -- if
we have an anchor that's magnetic like or that's at -that's going to get it jump started for us in the
right vertical, we will tend to do a larger deal
that's anchor like to get the IBX jump started. But in
general, when a deal gets to a certain size, call it
250, 300, 400 KW of power, call it a quarter to a half
a megawatt of power, it tends to get more crowded in
terms of competition. And if it is a strategic deal,

15

we might hang in there for a while. If it's not, we're
going to let it go to the wholesale or to the
competitors.

1
2
3

TAC Ex. D at 10.

While Smith's statements might be cryptic, they

4

are not false or misleading.
In the SAC Order, the Court also held that Plaintiffs' CW

5
6

allegations, which assert that Defendants routinely offered

7

discounts of 10 to 30 percent during the class period, could not

8

support a claim for securities fraud.

9

Plaintiffs had failed to plead loss causation because these

The Court reasoned that

United States District Court

For the Northern District of California

10

discounts were never disclosed to the market during the class

11

period.

12

deficiency.

13

have reacted to widespread discounting of which it was not aware.

14

Plaintiffs concede the point in their opposition brief, arguing

15

that Equinix stock dropped on October 6 because Equinix revised its

16

revenue guidance.

SAC Order at 18-19.

The TAC does not cure this

Plaintiffs still do not allege how the market could

Opp'n at 24-25.

The Court finds that Plaintiffs' pricing allegations cannot

17
18

support a claim for securities fraud. For these reasons and the

19

reasons set forth in Section IV.A, Plaintiffs Section 10(b) claim

20

is DISMISSED.3

21

C.

Plaintiffs' Section 20(a) Claim

22

Absent an underlying violation of the Exchange Act, there can

23

be no control person liability under Section 20(a).

Paracor Fin.,

24

Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1161 (9th Cir.

25

1996).

Because Plaintiffs have not pled a violation of Section

26
27
28

3

Defendants also argue that Plaintiffs have failed to plead
scienter. As Plaintiffs have failed to plead other necessary
elements of a Section 10(b) claim, the Court need not and does not
address this issue.

16

1

10(b), their control person claim is also DISMISSED.

See Shurkin

2

v. Golden State Vinters, Inc., 471 F. Supp. 2d 998, 1027 (N.D. Cal.

3

2006), aff'd 303 Fed. Appx. 431 (9th Cir. 2008).

4

D.

Leave to Amend

5

Plaintiffs have requested leave to amend to satisfy the

freely given when justice so requires.

8

However, Plaintiffs have already had three opportunities to amend

9

their pleading, and the TAC merely reasserts factual allegations

10

United States District Court

pleading requirements of the PSLRA.

7

For the Northern District of California

6

Leave to amend should be

and legal theories that have already been rejected by the Court.

11

The result is that Plaintiffs and the Court are now repeating

12

themselves.

13

that they could allege in a fourth amended complaint.

14

this matter is DISMISSED WITH PREJUDICE.

Fed. R. Civ. P. 15(a)(2).

Further, Plaintiffs have not identified any new facts
Accordingly,

15
16
17

IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants

18

Equinix, Inc., Stephen M. Smith, and Keith Taylor's Motion to

19

Dismiss.

20

and the International Brotherhood of Electrical Workers Local 697

21

Pension Fund's action is DISMISSED WITH PREJUDICE.

Plaintiffs Cement Masons & Plasterers Joint Pension Trust

22
23

IT IS SO ORDERED.

24
25

Dated: June 12, 2013

26

UNITED STATES DISTRICT JUDGE

27
28

17