Hussey v. Ruckus Wireless, Inc. et al

Filing 108

ORDER by Judge Edward M. Chen Denying 100 Plaintiff's Motion to Alter or Amend Judgment. (emcsec, COURT STAFF) (Filed on 9/18/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MIGUEL HUSSEY, et al.,
Plaintiffs,

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ORDER DENYING PLAINTIFF’S
MOTION TO ALTER OR AMEND
JUDGMENT

v.
RUCKUS WIRELESS, INC., et al.,

Docket No. 100

Defendants.

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For the Northern District of California

United States District Court

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Case No. 16-cv-02991-EMC

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This securities fraud action relates to the acquisition of Ruckus Wireless Inc. by Brocade

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Communications Systems, Inc. The case closed after the Court granted Defendants‟ motion to

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dismiss the second amended complaint (“SAC”) and entered final judgment. See Docket Nos. 96-

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97 (order and final judgment). Currently pending before the Court is Lead Plaintiff‟s motion to

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alter or amend the judgment pursuant to Federal Rules of Civil Procedure 59(e) and 60. Lead

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Plaintiff contends that relief is warranted because the Court made manifest errors of law or fact.

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The Court held a hearing on Lead Plaintiff‟s motion on September 14, 2017. At the

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hearing, the Court DENIED the motion. This order memorializes the Court‟s rulings, and

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provides additional analysis as necessary.

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As an initial matter, the Court notes that, in evaluating Lead Plaintiff‟s motion, it does not

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consider the new evidence and/or allegations that Lead Plaintiff previously did not submit for the

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Court‟s consideration (e.g., the expert declarations from Mr. Morris). Lead Plaintiff has not

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asserted that it is moving for relief based on newly discovered evidence (in all likelihood because

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it could not meet the criteria that the new evidence could not have been discovered earlier through

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due diligence). See Dixon v. Wallowa County, 336 F.3d 1013, 1022 (9th Cir. 2003). Nor has Lead

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Plaintiff cited any authority to support its claim that, for a Rule 59(e) or 60 motion, a party is

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entitled to submit “clarifying” evidence never previously submitted where the basis is a manifest

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error of law or fact. Cf. Interstate Fire & Cas. Co. v. Catholic Diocese of El Paso, 622 F. App‟x

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418, 420 (5th Cir. 2015) (stating that “[a] [R]ule 59(e) motion not based on newly discovered

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evidence must „clearly establish‟ a „manifest error of law or fact‟; [a] district court‟s determination

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that it has made no manifest error of fact will not be disturbed absent a „clearly erroneous

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assessment of the evidence‟”) (emphasis added). Any such claim should be based on the record

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that was presented to the court.
At the hearing, Lead Plaintiff argued that, even without, e.g., the expert declarations, its

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motion should be granted. Lead Plaintiff focused in particular on the Court‟s statement that Lead

Stanley did a Brocade stock standalone valuation as part of its overall valuation of the merger

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For the Northern District of California

Plaintiff had failed to plead falsity because, even though “Lead Plaintiff assumes that Morgan

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United States District Court

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consideration, there is no factual basis for that assumption.”1 Docket No. 96 (Order at 8). Lead

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Plaintiff argued that the 14D-9 shows that Morgan Stanley did do a Brocade stock standalone

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valuation – in particular, a discounted cash flow (“DCF”) analysis of Brocade alone. But as this

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Court found, the 14D-9 reflects that any consideration by Morgan Stanley of Brocade‟s financial

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forecasts was in the context of its a DCF analysis for the post-merger company; there is nothing in

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the 14D-9 stating that Morgan Stanley did a DCF analysis of pre-merger Brocade. See 14D-9, at

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38 (stating that “Morgan Stanley utilized estimates from the Parent Forecasts . . . and the

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Synergies for purposes of its discounted cash flow analysis of the combined Parent and

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Company”; also stating that the value of the offer consideration was defined in part on “the

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discounted cash flow value per share of Parent Common Stock, after giving effect to the Merger

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and incorporating the value of certain synergy forecasts”) (emphasis added). Thus, the Court

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finds no manifest error in this regard.
Moreover, the Court reaffirms its finding that Lead Plaintiff had conceded it did not

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contest the accuracy of the DCF analysis. Even absent that concession, Lead Plaintiff has not

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pointed to any defect in the inputs and methodology of the DCF.

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This statement also affected the Court‟s analysis of scienter.
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Furthermore, as Defendants emphasized at the hearing, even if the Court had erred with

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regard to either of the above issues, its order provided another independent ground for dismissal,

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namely, that Lead Plaintiff had failed to adequately plead falsity because it failed to “show[] how

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the standalone share value of Brocade stock, which allegedly was omitted from the DCF analysis,

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was material to the overall multifaceted financial analysis” performed by Morgan Stanley. Docket

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No. 96 (Order at 7) (noting that the DCF analysis was just “one of several models of financial

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analysis which informed Morgan Stanley‟s opinion as to . . . fairness”) (emphasis added). In its

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papers, Lead Plaintiff argued that there were problems with the other financial models but it never

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made that argument prior to the Court‟s order dismissing the SAC. See Docket No. 96 (Order at 7

models”). At the hearing, Lead Plaintiff tendered a different argument – more specifically, that

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For the Northern District of California

n.5) (noting that Lead Plaintiff “does not challenge the accuracy or completeness of the other

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United States District Court

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the DCF analysis was particularly important because it was the only income-driven analysis while

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the other financial models took a market approach. But as above, Lead Plaintiff failed to make

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this argument prior to the Court‟s order dismissing the SAC. Thus, the Court concludes that there

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was no manifest error here as well.

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Finally, for clarity, the Court reaffirms all other bases on which it dismissed the SAC,
including failure to adequately allege scienter.

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Lead Plaintiff‟s motion to alter or amend the judgment is therefore denied.

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This order disposes of Docket No. 100.

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IT IS SO ORDERED.

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Dated: September 18, 2017
______________________________________
EDWARD M. CHEN
United States District Judge

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