Anton Bielousov v. GoPro, Inc. et al

Filing 74

ORDER denying 57 Motion to Dismiss by Judge Claudia Wilken. Joint Case Management Statement due by 8/1/2017. Initial Case Management Conference set for 8/8/2017 at 2:30 pm. Amended Pleadings due by 8/9/2017. (dtmS, COURT STAFF) (Filed on 7/26/2017)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
Northern District of California

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ANTON BIELOUSOV, Individually
and on Behalf of All others
Similarly Situated,

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Plaintiff,
v.

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GOPRO, INC. and NICHOLAS D.
WOODMAN,

No. 16-cv-06654-CW
ORDER DENYING MOTION TO
DISMISS FIRST AMENDED
COMPLAINT
(Docket Nos. 57, 58, 64)

Defendants.

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Defendants GoPro, Inc., Nicholas Woodman, Brian McGee, and

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Anthony Bates move to dismiss Lead Plaintiff Troy Larkin’s

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Amended Class Action Complaint (1AC).1

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motion and Defendants filed a reply.

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June 27, 2017.

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argument, the Court denies the motion to dismiss.2

Plaintiff opposed the
The Court held a hearing on

Having considered the parties’ papers and

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The caption of the 1AC lists only two Defendants: GoPro and
Woodman. The title of a complaint “must name all the parties.”
Fed. R. Civ. P. 10(a). The allegations in the body of the 1AC
make it plain that McGee and Bates also are intended as
Defendants, however. 1AC ¶¶ 28-31. Plaintiff must file a second
amended complaint naming all Defendants he intends to sue.
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The Court notes that Plaintiff has withdrawn his claims
based on statements alleged to have been made on November 3,
2016. Opp. at 4 n.8. The Court does not consider the withdrawn
claims in this order.

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United States District Court
Northern District of California

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BACKGROUND
The following facts are alleged in the 1AC.
GoPro is a publicly traded Delaware corporation
headquartered in San Mateo, California.

1AC ¶ 28.

It makes and

sells mountable and wearable cameras, drones and accessories.
Id. ¶¶ 2, 28, 32.

Nicholas Woodman is GoPro’s founder and chief

executive officer.

Id. ¶ 29.

Brian McGee is the company’s chief

financial officer.

Id. ¶ 30.

Anthony Bates is a director of the

company and previously served as its president.

Id. ¶ 31.

On September 19, 2016, GoPro unveiled two new HERO5 model
cameras and the Karma® quadcopter drone, which was GoPro’s entry
into the drone market.

Id. ¶¶ 3-4; 64-66; 94.

GoPro stated that

the Karma drone would be available on October 23, 2016, globally,
at select retailers and announced pricing for the drone.
¶¶ 4, 70, 94.

Id.

McGee told investors that the drone would take

GoPro to “new heights” and that the company was on track to meet
February 3, 2016 revenue guidance of $1.35-1.5 billion revenue
for 2016.

Id. ¶ 6; see also id. ¶¶ 56, 70, 96-101.

Plaintiff alleges, however, that these and other statements
by Defendants were false and misleading.
severe shortage of Karma drones.

GoPro was suffering a

Id. ¶¶ 7-8, 18, 71-76, 80.

There also was a shortage of HERO5 cameras.

Id. ¶¶ 81-84.

Those

drones that were available had an obvious battery latch design
defect that led to a product recall on November 8, 2016.
¶¶ 10, 18, 67-69, 78-80, 88-89.

Id.

As this information became

public, GoPro’s share price fell from a class period high of
$17.68 per share on October 5, 2016 to close at $10.41 per share
on November 9, 2016.

Id. ¶¶ 9, 11, 16, 19-21, 90-93, 160-163.

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Plaintiff alleges that Defendants knew of the product
shortages due to GoPro’s use of a cloud-based NetSuite enterprise

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resource planning system that gave them real-time access to

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supply chain information.

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They were motivated to use the NetSuite system because of

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previous inventory issues.

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should have been aware of the design defect because it would have

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been obvious during adequate product testing and Woodman himself

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United States District Court
Northern District of California

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had used the drone extensively.

Id. ¶¶ 11-13, 22, 33-47, 61, 63, 135.

Id. ¶¶ 13, 50-53.

They also were or

Id. ¶¶ 11, 14, 22, 60.

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Additionally, GoPro scoured the Internet for videos captured via

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the company's devices, and thus Defendants likely were aware of

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user videos of crashing drones that were posted on YouTube.

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¶¶ 14, 48-49, 78-79, 137.

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Id.

On November 16, 2016, Plaintiff Anton Bielousov filed the

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original complaint in this action.

On February 6, 2017, the

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Court appointed Troy Larkin as lead plaintiff for a putative

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class of purchasers of GoPro stock.

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Plaintiff Larkin filed the 1AC, alleging that Defendants made

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various false or misleading statements between September 19, 2016

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and November 8, 2016 about GoPro’s HERO5 camera and Karma drone

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and misled investors regarding its ability to meet its previous

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revenue guidance.

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the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C.

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§§ 78a-78lll.

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violations of § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),

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and Rule 10b-5, 17 C.F.R. § 240.10b-5.

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against the individual Defendants only as control persons of

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GoPro, for violations of § 20(a) of the Exchange Act, 15 U.S.C.

On March 14, 2017, Lead

Plaintiff asserts two claims for violations of

The first claim is against all Defendants for

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The second claim is

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§ 78t(a).

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LEGAL STANDARD
A complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

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state a claim, dismissal is appropriate only when the complaint

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does not give the defendant fair notice of a legally cognizable

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claim and the grounds on which it rests.

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United States District Court
Northern District of California

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Fed. R.

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

On a motion under Rule 12(b)(6) for failure to

Bell Atl. Corp. v.

In considering whether the

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complaint is sufficient to state a claim, the Court takes all

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material allegations as true and construes them in the light most

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favorable to the plaintiff.

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Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008).

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principle is inapplicable to legal conclusions; “[t]hreadbare

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

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conclusory statements,” are not taken as true.

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Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at

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555).

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Metzler Inv. GMBH v. Corinthian
However, this

Ashcroft v.

“In addition to the pleading requirements of Rule 8, there

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are more demanding pleading requirements for certain causes of

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action, especially securities fraud.”

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Sec. Litig, 697 F.3d 869, 876 (9th Cir. 2012).

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provides that in “alleging fraud or mistake, a party must state

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with particularity the circumstances constituting fraud or

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mistake.”

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“specific enough to give defendants notice of the particular

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misconduct which is alleged to constitute the fraud charged so

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that they can defend against the charge and not just deny that

Fed. R. Civ. P. 9(b).

In re Rigel Pharm., Inc.,
Rule 9(b)

The allegations must be

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they have done anything wrong.”

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727, 731 (9th Cir. 1985).

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nature of the alleged fraudulent activities are sufficient,

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provided the plaintiff sets forth “what is false or misleading

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about a statement, and why it is false.”

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Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994), superseded by

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statute on other grounds, Private Securities Litigation Reform

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Act of 1995 (PSLRA), Pub. L. No. 104-67.

United States District Court
Northern District of California

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Semegen v. Weidner, 780 F.2d

Statements of the time, place and

In re GlenFed, Inc.,

In 1995, Congress enacted the PSLRA, which amends the

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Exchange Act.

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particularity both the facts constituting the alleged violation,

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and the facts evidencing scienter, i.e., the defendant's

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intention to deceive, manipulate, or defraud.”

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Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007) (internal

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quotation marks omitted).

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Under the PSLRA, a plaintiff must “state with

Tellabs, Inc. v.

The PSLRA requires that the complaint “specify each

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statement alleged to have been misleading, the reason or reasons

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why the statement is misleading, and, if an allegation regarding

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the statement or omission is made on information and belief, the

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complaint shall state with particularity all facts on which that

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belief is formed.”

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plaintiff must provide, in great detail, all the relevant facts

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forming the basis of her belief.”

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Sec. Litig., 183 F.3d 970, 985 (9th Cir. 1999), abrogated on

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other grounds by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776,

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784 (9th Cir. 2008).

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plaintiff’s personal knowledge are allegations that are made on

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information and belief.

15 U.S.C. § 78u-4(b)(1).

“This means that a

In re Silicon Graphics Inc.

Factual allegations that are not based on a

See id. at 985, 998 n.21.
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Thus, for

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example, if a plaintiff’s sole basis for an allegation is a

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statement from a non-plaintiff witness, that allegation is made

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on information and belief, and the plaintiff must plead all facts

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on which that belief is based.

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does not mean, however, that a plaintiff must, for each

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allegation plead on information and belief, state every fact

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possessed that is in any way related to the allegation.

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999 & n.24.

United States District Court
Northern District of California

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See id. at 985, 998 n.21.

This

Id. at

Although Rule 9(b) does not require that scienter be plead

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with particularity, see Concha v. London, 62 F.3d 1493, 1503 (9th

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Cir. 1995), the PSLRA does.

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PSLRA provides that “the complaint shall, with respect to each

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act or omission alleged to violate this chapter, state with

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particularity facts giving rise to a strong inference that the

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defendant acted with the required state of mind.”

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§ 78u-4(b)(2).

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refers to the scienter requirement applicable to the underlying

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securities fraud claim brought by the plaintiff.”

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Graphics, 183 F.3d at 975.

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See 15 U.S.C. § 78u-4(b)(2).

The

15 U.S.C.

The “‘required state of mind’ in § 78u–4(b)(2)

Silicon

Section 10(b) of the Exchange Act makes it unlawful for any

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person to “use or employ, in connection with the purchase or sale

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of any security . . . any manipulative or deceptive device or

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contrivance in contravention of such rules and regulations as the

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[SEC] may prescribe.”

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provides that it is “unlawful for any person, directly or

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indirectly, . . . to make any untrue statement of a material fact

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or to omit to state a material fact necessary in order to make

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the statements made, in the light of the circumstances under

15 U.S.C. § 78j(b).

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Rule 10b-5(b)

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which they were made, not misleading[.]”

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5(b).

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particularity “facts giving rise to a strong inference that the

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defendant acted with,” at a minimum, deliberate recklessness.

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See 15 U.S.C. § 78u-4(b)(2); Silicon Graphics, 183 F.3d at 977.

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17 C.F.R. § 240.10b-

The PSLRA thus requires that a plaintiff plead with

Facts that establish a motive and opportunity, or
circumstantial evidence of “simple recklessness,” are not

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sufficient to create a strong inference of deliberate

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United States District Court
Northern District of California

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recklessness.

See Silicon Graphics, 183 F.3d at 979.

In order

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to satisfy the heightened pleading requirement of the PSLRA for

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scienter, a plaintiff “must state specific facts indicating no

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less than a degree of recklessness that strongly suggests actual

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intent.”

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merely reasonable or permissible--it must be cogent and at least

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as compelling as any opposing inference that a reasonable person

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could draw from the facts alleged.

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pleading scienter, a plaintiff “has to provide a narrative of

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fraud--facts which, if true, substantiate an explanation at least

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as plausible as a nonfraudulent alternative.”

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Partners, LP v. Stratos, 828 F.3d 1023, 1035 (9th Cir. 2016).

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When analyzing the sufficiency of a plaintiff’s scienter

Id.

The necessary strong inference must be more than

Tellabs, 551 U.S. at 324.

In

ESG Capital

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allegations, the Court first determines “whether any of the

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allegations, standing alone, are sufficient to create a strong

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inference of scienter.”

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LLP, 641 F.3d 1089, 1095 (9th Cir. 2011).

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allegation is sufficient, the Court conducts “a ‘holistic’ review

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of the same allegations to determine whether the insufficient

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allegations combine to create a strong inference of intentional

N.M. State Inv. Council v. Ernst & Young

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If no individual

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conduct or deliberate recklessness.”

Id.; see also Tellabs,

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551 U.S. at 326 (“When the allegations are accepted as true and

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taken collectively, would a reasonable person deem the inference

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of scienter at least as strong as any opposing inference?”).

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REQUESTS FOR JUDICIAL NOTICE

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The Court’s review is limited to the complaint, materials
incorporated into the complaint by reference and matters of which

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the Court may take judicial notice.

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United States District Court
Northern District of California

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Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008).

Metzler Inv. GMBH v.

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Federal Rule of Evidence 201 allows a court to take judicial

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notice of a fact “not subject to reasonable dispute because it

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. . . can be accurately and readily determined from sources whose

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accuracy cannot reasonably be questioned.”

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notice is not appropriate, courts may also properly consider

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documents “whose contents are alleged in a complaint and whose

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authenticity no party questions, but which are not physically

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attached to the pleading.”

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(9th Cir. 1994).

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Even where judicial

Branch v. Tunnell, 14 F.3d 449, 454

Both sides filed requests for judicial notice.

The Court

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grants Plaintiff’s unopposed request for judicial notice of

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various dictionary definitions.

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Defendants’ request for judicial notice, which Plaintiff opposes

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in part, of certain Securities and Exchange Commission (SEC)

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filings, press releases, investor forums, news reports, and

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earnings call transcripts.

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relied upon in the 1AC, the Court considers them as incorporated

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by reference.

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Court takes judicial notice of the fact that the statements in

The Court also grants

To the extent these documents are

With regard to the other public documents, the

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those documents were made on the dates specified, but not of the

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truth of the matters asserted therein.

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DISCUSSION

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I.

Section 10(b)
A.

Materially False or Misleading Statements
1.

“On Track” Statement

Plaintiff alleges that on September 19, 2016, McGee held a
conference call with investors about the new Karma drone and

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United States District Court
Northern District of California

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HERO5 cameras at which he represented that GoPro was still “on

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track” to make its previously-issued revenue guidance.

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Plaintiff alleges that McGee’s statements were false and

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misleading when made because GoPro was not then “on track” to

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reach the revenue guidance and McGee either did not believe his

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stated opinion or his opinion was misleading because he had not

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checked GoPro’s real-time inventory and supply monitoring systems

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prior to speaking.

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1AC ¶ 96.

Id. ¶ 97.

Defendants move to dismiss Plaintiff’s claims based on this

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statement, arguing that it falls within the protection of the

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PSLRA’s “safe harbor” protecting forward-looking statements.

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15 U.S.C. § 78u-5(c)(1).

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actionable if it is immaterial, made without actual knowledge

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that it is false or misleading or is “identified as a forward-

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looking statement, and is accompanied by meaningful cautionary

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statements identifying important factors that could cause actual

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results to differ materially from those in the forward-looking

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statement.”

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1103, 1108, 1111-13 (9th Cir. 2010) (holding that subsections of

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safe harbor provision are disjunctive, not conjunctive, and

A forward-looking statement is not

Id.; see also In re Cutera Sec. Litig., 610 F.3d

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noting that an “earnings projection is by definition a forward-

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looking statement”).

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In support of their contention that McGee’s statement was
forward-looking, Defendants point out that at the outset of the

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September 19, 2016 call, GoPro stated that its financial

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projections were forward-looking statements based on current

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assumptions that did not guarantee future performance, and

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pointed investors to the discussion of risk factors in the

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United States District Court
Northern District of California

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company’s SEC filings.

See Declaration of Vincent Barredo, Ex.

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C, at 2.

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track” to meet a previously-made projection cannot “meaningfully

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be distinguished from the future projection of which [it was] a

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part.”

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2016 WL 4370030, at *7 (C.D. Cal. Aug. 15, 2016) (quoting Inst’l

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Inv’rs Grp. v. Avaya, Inc., 564 F.3d 242, 255 (3d Cir. 2009));

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see also Police Ret. Sys. of St. Louis v. Intuitive Surgical,

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Inc., No. 10-CV-03451-LHK, 2012 WL 1868874, at *10 (N.D. Cal. May

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22, 2012) (statement that company was “on track to grow 55% this

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year” provided “indication of a forward-looking projection”).

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Courts have held that language that a company is “on

Xu v. Chinacache Int’l Holdings Ltd., No. 15-cv-7952-CAS,

Plaintiff responds that McGee’s statement did not fall under

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the safe harbor provision because he included the phrase “we

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believe,” and therefore his words were a factual statement of his

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present opinion, not a forward-looking statement of revenue

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guidance.

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Indus. Pension Fund, 135 S. Ct. 1318, 1326 (2015) (“every such

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statement explicitly affirms one fact: that the speaker actually

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holds the stated belief”); see also City of Dearborn Heights Act

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345 Police & Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605,

See Omnicare, Inc. v. Laborers Dist. Council Const.

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610 (9th Cir. 2017) (holding that Omnicare standards apply to

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§ 10(b) and Rule 10b-5 claims).

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statement was either false (if McGee checked database information

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regarding supply shortages) or misleading (if he failed to check

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but investors would reasonably have expected him to do so).

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Under Omnicare, McGee was representing his and GoPro’s

As such, Plaintiff contends, the

existing state of mind when he stated, “In addition, we talked

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about our revenue guidance for 2016, its $1.35 billion to $1.5

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United States District Court
Northern District of California

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billion.

We believe we’re still on track to make that as well.”

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This statement of present opinion is not forward-looking, and

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therefore is not covered by the PSLRA safe harbor provision.

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2.

Statements Regarding Karma’s Availability

Plaintiff alleges that Defendants made various statements

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during the class period regarding the availability on October 23,

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2016 of the Karma drone.

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Defendants contend that these statements were neither false nor

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misleading because the drone was, in fact, available for sale on

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that date, and Plaintiff alleges that at least 2,500 drones were

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sold within the first two weeks after the launch date.

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1AC ¶¶ 94, 98, 104, 106, 111.

The first statement alleged to be false or misleading was in
a press release announcing the new products.

GoPro stated:

Karma will be available October 23rd in the following
bundles: [1] Karma without a GoPro camera for $799.99
MSRP; [2] Karma bundled with HERO5 Black for $1099.99
MSRP; [and] [3] Karma bundled with HERO5 Session for
$999.99 MSRP (available in early 2017).

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1AC ¶ 94 (alterations in original) (emphasis omitted).

Plaintiff

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alleges that this statement was false or misleading because GoPro

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had at most 2500 drones, an insufficient supply to make Karma

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“readily available” for sale.

The press release does not,
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however, say “readily available.”

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plead that this statement is false or misleading.

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true of the similar statement made by Woodman in an October 3,

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2016 interview.

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GoPro’s October 23, 2016 statement on its Twitter account,

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“#GoProKarma is here,” which did not say that any specific

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quantity of drones were “here” or readily available for sale.

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Id. ¶ 106.

United States District Court
Northern District of California

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Id. ¶ 104.

Plaintiff has not adequately
The same is

This analysis also applies to

Plaintiff also alleges, however, that during the September

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19, 2016 conference call, Woodman stated, “Karma is initially

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going to be distributed through select retailers around the

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world, and then rolling out from there.”

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statement presents a different question because Woodman referred

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to availability at multiple retailers around the world.

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Plaintiff alleges that in fact, Karma was only distributed in the

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United States online and at a single retailer, Best Buy--and Best

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Buy did not have sufficient supply for Karma to be truly

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available even there.

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adequately alleged that Woodman’s statement was false or

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misleading.

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Id. ¶¶ 71, 80.

Id. ¶ 98.

This

Accordingly, Plaintiff has

Likewise, Plaintiff alleges that on November 4, 2016, GoPro

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filed a Form 10-Q with the SEC for the third quarter of 2016,

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signed by Woodman and McGee, which included the statement, “We

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began shipping our Karma drone and accessories after quarter-end,

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which became available online beginning October 23, 2016 and now

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available at major U.S. retailers.”

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statement, again, GoPro referred to more than one retailer,

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although only in the United States rather than around the world.
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Id. ¶ 111.

In this

On November 8, 2017, only four days later, Defendants recalled

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“approximately 2,500 Karma drones purchased by consumers since

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October 23,” 2016.

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reported that this was “not only a surprise to us, but another

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ding on management’s credibility having just announced both the

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HERO5 and Karma drone at full production.”

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has adequately alleged that GoPro’s SEC filing stating that Karma

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was “now available to major U.S. retailers” was false or

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United States District Court
Northern District of California

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misleading when made because in reality the drone was available

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Id. ¶ 121.

On the same day, an analyst

Id. ¶ 123.

Plaintiff

only at Best Buy, in very limited quantity.
3.

Statements Regarding Karma’s Capabilities

In the complaint, Plaintiff alleges that Defendants made

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statements that Karma was capable of flight time of eighteen

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minutes and could capture “amazingly smooth” aerial footage,

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which were materially false or misleading because the drone’s

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flight time and recording capabilities were severely limited by a

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design defect in Karma’s battery latch that caused it to lose

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power mid-flight and crash.

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Plaintiff alleges that Defendants must have been aware that the

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design defect prevented the drone from flying and capturing

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smooth footage because adequate quality control testing would

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have detected it, Woodman himself had used the drone extensively,

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and in the usual course of business GoPro would have viewed user

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videos of crashing drones on the Internet.

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48-49, 60, 78-79, 137.

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1AC ¶¶ 67-69, 78-80, 114-119.

Id. ¶¶ 11, 14, 22,

Defendants argue that the optimistic statements regarding

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Karma’s flight time and smooth footage are not inherently

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incompatible with the drone’s actual performance, especially in
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light of the cautionary statements issued by GoPro regarding

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risks related to quality controls and product defects.

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Additionally, Defendants argue that the challenged statements are

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mere “puffery” that is not actionable.

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are not mere corporate optimism, but objectively verifiable

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promises of flight time and video quality.

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that these statements were false or misleading in light of the

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experiences of users whose drones crashed before the eighteen-

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United States District Court
Northern District of California

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minute mark.

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B.

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Defendants argue that Plaintiff fails to plead scienter

The statements, however,

Plaintiff has alleged

Scienter

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because the 1AC lacks any mention of specific data or reports,

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any non-speculative description of the information that GoPro’s

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internal reporting system showed, or any allegation of who

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actually accessed that information.

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clear that allegations of negative internal reports, lacking

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specifics, are insufficient to plead scienter.

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v. Pathogenesis Corp., 284 F.3d 1027, 1036 (9th Cir. 2002)

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(finding insufficient plaintiffs’ allegations of “what they think

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the data shows”); see also In re Leapfrog Enterprise, Inc.

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Securities Litigation, 200 F. Supp. 3d 987, 1004 (N.D. Cal. 2016)

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(finding insufficient allegations that the defendant “maintained

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weekly POS reports regarding LeapPad sales that showed the

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previous week’s sales, as well as year-to-date sales and the

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inventory levels being held by retailers.”); In re Autodesk, Inc.

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Securities Litigation, 132 F. Supp. 2d 833, 844 (N.D. Cal. 2000)

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(plaintiff “must do more than allege that these key officers had

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the requisite knowledge by virtue of their ‘hands on’ positions,
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The Ninth Circuit has made

See, e.g. Lipton

1

because that would eliminate the necessity for specially pleading

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scienter, as any corporate officer could be said to possess the

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requisite knowledge by virtue of his or her position.”)

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Here, too, however, Plaintiff alleges not only that
Defendants had access to a NetSuite enterprise resource planning

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system with real-time reporting capabilities, but also that

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Defendants were motivated to use that system due to prior

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inventory problems.

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United States District Court
Northern District of California

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Defendants Woodman and McGee, boasted that GoPro closely tracked

Moreover, GoPro’s executives, including

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its inventory and knew how much inventory was in the channel.

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See, e.g., 1AC ¶¶ 61, 63, 135.

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at most 2,500 drones for sale globally on October 23, 2016.

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¶¶ 95, 105, 107, 112.

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its inventory, it is plausible to infer that Defendants knew that

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2,500 drones would be insufficient to make Karma globally

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available at multiple retailers on the launch date.

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inference of scienter is particularly strong, because Defendants,

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despite the low number of drones alleged to be available, were

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priming the market for the sale of 100,000 to 150,000 drones

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during the fourth quarter of 2016.

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Plaintiff alleges that GoPro had
Id.

In light of the company’s ability to track

The

Id. ¶¶ 55, 71.

These allegations are bolstered by allegations of

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circumstantial evidence.

These include the timing of corrective

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statements and updates to risk factors as well as the resignation

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of Bates as GoPro’s president.

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Sarbanes-Oxley Act certifications filed with the SEC support

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their scienter, because those certifications required them to

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access sufficient reporting information to certify that the

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information provided did not omit any material facts to make the

Most notably, Woodman and McGee’s

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report not misleading.

1AC ¶ 149.

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C.

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Finally, Defendants argue that Plaintiff has not plead loss

Loss Causation

causation.

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stage, “allege that the decline in the defendant’s stock price

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was proximately caused by a revelation of fraudulent activity

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rather than by changing market conditions, changing investor

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expectations, or other unrelated factors.”

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United States District Court
Northern District of California

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A securities fraud plaintiff must, at the pleading

Corp., 762 F.3d 880, 887 (9th Cir. 2014); see also 15 U.S.C.

Loos v. Immersion

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§ 78u–4(b)(4) (“the plaintiff shall have the burden of proving

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that the act or omission of the defendant alleged to violate this

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chapter caused the loss for which the plaintiff seeks to recover

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damages”).

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reacted to the “fraud, as opposed to merely reacting to reports

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of the defendant’s poor financial health generally.”

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88 (quoting Metzler Inv. GMBH v. Corinthian Colleges, Inc.,

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540 F.3d 1049, 1063 (9th Cir. 2008)).

Plaintiff must allege that the market learned of and

Id. at 887-

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Plaintiff alleges that GoPro’s stock dropped in response to

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reports that supplies of cameras and drones were insufficient to

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meet demand, that only 2500 drones had been sold and that the

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drone had a battery latch defect that led to a recall--all facts

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that belied Defendants’ earlier statements.

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that analysts specifically identified the news release regarding

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the small number of recalled drones to be “another ding on

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management’s credibility” in light of management’s recent

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inaccurate statements.

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“alleged that a material misrepresentation or omission kept the

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share price artificially inflated and that as a result of a

1AC ¶ 123.

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He further alleges

Accordingly, Plaintiff has

1

corrective disclosure, the share price fell.”

Greenberg v.

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Cooper Companies, Inc., No. 11-cv-05697 YGR, 2013 WL 2403648, at

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*14 (N.D. Cal. May 31, 2013).

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II.

Section 20(a)
In the second claim in the 1AC, Plaintiff alleges that the

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individual Defendants violated § 20(a) of the Exchange Act as

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control persons of GoPro.

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of a corporation who has violated the securities laws will be

9
United States District Court
Northern District of California

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jointly and severally liable to the plaintiff, as long as the

Under § 20(a), “a defendant employee

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plaintiff demonstrates ‘a primary violation of federal securities

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law’ and that ‘the defendant exercised actual power or control

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over the primary violator.’”

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Corp., 552 F.3d 981, 990 (9th Cir. 2009) (quoting No. 84

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Employer-Teamster Joint Council Pension Tr. Fund v. Am. W.

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Holding Corp., 320 F.3d 920, 945 (9th Cir. 2003)).

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argue that if Plaintiff fails to plead a predicate violation of

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§ 10(b), his control person claim also fails.

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above, however, Plaintiff has sufficiently alleged a primary

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violation of federal securities law under § 10(b) and Rule 10b-5.

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Accordingly, Plaintiff’s § 20(a) claim may proceed.

Zucco Partners, LLC v. Digimarc

Defendants

As discussed

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CONCLUSION

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For the foregoing reasons, the Court DENIES Defendants’

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motion to dismiss (Docket No. 57).
Within fourteen days after the date of this order, Plaintiff

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must file a second amended complaint naming all Defendants he

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///

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///

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///
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intends to sue.

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provided by Federal Rule of Civil Procedure 15.

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No other amendments are permitted except as

IT IS SO ORDERED.

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Dated: July 26, 2017
CLAUDIA WILKEN
United States District Judge

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United States District Court
Northern District of California

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