Newett v. Leapfrog Enterprises, Inc. et al

Filing 93

ORDER by Judge Edward M. Chen Denying 90 Plaintiffs' Motion for Leave to File a Motion for Reconsideration. (emcsec, COURT STAFF) (Filed on 8/31/2016)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7
8
9

IN RE LEAPFROG ENTERPRISE, INC.
SECURITIES LITIGATION,
___________________________________/
This Document Relates to:

10

All Actions.

ORDER DENYING PLAINTIFFS’
MOTION FOR LEAVE TO FILE A
MOTION FOR RECONSIDERATION
Docket No. 90

12
For the Northern District of California

United States District Court

11

Case No. 15-cv-00347-EMC

On August 2, 2016, this Court dismissed Plaintiffs’ claims with leave to amend. See

13
14

Docket No. 88 (“Order”). Plaintiffs now ask the Court for leave to file a motion for

15

reconsideration of the Order. See Docket No. 90 (“Motion”). Defendants LeapFrog Enterprises,

16

Inc. (“LeapFrog”), John Barbour, and Raymond Arthur oppose Plaintiffs’ Motion. See Docket

17

No. 92.
The Court DENIES Plaintiffs’ Motion.

18
19

A.

Legal Standard

20

Local Rule 7-9(a) requires a party to seek leave before filing a motion for reconsideration.

21

The moving party must demonstrate that (1) a material difference in fact and law exists from that

22

which was presented to the Court; (2) new law or material facts have emerged; or (3) the Court

23

manifestly failed to consider material facts or dispositive legal arguments. Civ. L.R. 7-9(b).

24

A party may not repeat arguments already presented. Civ. L.R. 7-9(c). Furthermore, a

25

motion for reconsideration is an “extraordinary remedy, to be used sparingly in the interests of

26

finality and conservation of judicial resources.” Kona Enters. v. Estate of Bishop, 229 F.3d 877,

27

890 (9th Cir. 2000). “[A] motion for reconsideration should not be granted, absent highly unusual

28

circumstances, unless the district court is presented with newly discovered evidence, committed

1

clear error, or if there is an intervening change in the controlling law.” 389 Orange St. Partners v.

2

Arnold, 179 F.3d 656, 665 (9th Cir. 1999) (discussing Fed. R. Civ. Proc. 59(e)).

3

B.

4

Discussion
Reconsideration would not comport with “conservation of judicial resources.” Plaintiffs’

5

request for leave to file a motion for reconsideration appears to reach only the Court’s findings on

6

material falsity. See Mot. at 2. The motion does not seek reconsideration of the Court’s finding

7

that Plaintiffs failed to plead scienter with regard to the accounting allegations. Further, the Court

8

dismissed with leave to amend non-accounting allegations. Plaintiffs have not suggested they will

9

not file a Second Amended Complaint. When they do, there is little doubt defendants will again

10

move to dismiss.
The issues Plaintiffs seek to revisit in the instant motion can be raised in the next round of

12
For the Northern District of California

United States District Court

11

briefing on the motion to dismiss the amended complaint. It is more effective to hear all issues on

13

one motion rather than on a piecemeal basis. Upon the next amendment to the complaint, the

14

Court advises the plaintiffs to address the defects noted in its Order even if it believes the Order

15

did not apply the correct legal standard. Should the Court dismiss the next amended complaint,

16

the Court will likely not permit a further amendment. Plaintiffs must give it their best shot.

17

For example, whether the Court credits Plaintiffs’ legal argument made in the current

18

motion (and which expectedly will be repeated in the next round), it notes that the First Amended

19

Complaint (“FAC”) does not contain specific allegations which explain why a one-quarter stock

20

drop establishes LeapFrog’s future cash flows would decrease, thus resulting in long-lived asset

21

impairment. Nor does the FAC contain specific allegations why that drop was considered

22

“sustained” under applicable accounting rules or case law, and was so significant that it required

23

goodwill impairment even in the absence of most other impairment factors. If Plaintiffs continue

24

to rely on stock price as the most significant factor requiring impairment, Plaintiffs should do their

25

best to articulate the nexus between stock price and the other factors in the goodwill analysis, and

26

between stock price and future cash flows in the long-lived asset analysis.

27
28

As another example, the allegations in the FAC does not sufficiently explain when
LeapFrog learned of the information Plaintiffs contend should have affected its 2Q15 reporting.
2

1

Was such information obtained after the close of the quarter on September 30, 2014, but prior to

2

the filing of that quarter’s 10-Q? See, e.g., FAC ¶ 141 (representing what Defendants knew on

3

November 3, 2014). If so, should post-quarter information affect reporting for the closed quarter?

4

Finally, the Court recognizes that the bulk of its Order discussed material falsity. In the

5

interests of streamlining future pleading, the Court cautions Plaintiffs that its focus on material

6

falsity does not imply Plaintiffs successfully pled other elements. Plaintiffs must plead

7

“allegations respecting all the material elements necessary to sustain recovery under some viable

8

legal theory.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (2007) (emphasis added) (internal

9

citations omitted).

10

This order disposes of Docket No. 90.

12
For the Northern District of California

United States District Court

11

IT IS SO ORDERED.

13
14
15
16

Dated: August 31, 2016
______________________________________
EDWARD M. CHEN
United States District Judge

17
18
19
20
21

22
23
24
25
26
27
28

3