Soto v. Origin Materials, Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- [11] 12 In re ORIGIN MATERIALS, INC. No. 2:23-cv-01816 WBS JDP SECURITIES LITIGATION [13] 14 MEMORANDUM AND ORDER RE: MOTION TO DISMISS SECOND 15 ALL ACTIONS CONSOLIDATED FROM: AMENDED COMPLAINT [16] ANTONIO F. SOTO, individually 17 and on behalf of all others similarly situated, [18] Plaintiff, [19] v. [20] ORIGIN MATERIALS, INC., RICHARD 21 J. RILEY, and JOHN BISSELL, 22 Defendants. [23] 24 ----oo0oo---- 25 Lead plaintiff Todd Frega brings this putative class 26 action against defendants Origin Materials Inc., Richard Riley, 27 and John Bissell, alleging violations of Sections 10(b) and 20(a) 28 of the Securities Exchange Act, 15 U.S.C. §§ 78j(b), 78t(a). The 1 court previously dismissed plaintiff’s Corrected Amended 2 Complaint. (See Docket No. 82.) Plaintiff subsequently filed 3 the Second Amended Complaint (Docket No. 85), which defendants 4 move to dismiss (Docket No. 89).1 5 I. Factual Background2 6 Defendant Origin Materials (“Origin” or “the company”) 7 is a publicly traded company that purports to produce 8 “sustainable materials” by converting plant-based matter such as 9 wood residues into materials that can replace the petroleum-based 10 plastics typically used in consumer products. (Second Am. Compl. 11 (“SAC”) (Docket No. 85) ¶ 5.) Defendants Bissell and Riley are 12 the co-CEOs of Origin. (See id. ¶¶ 12, 14.) 13 Origin produces chloromethylfurfural (“CMF”), a 14 “building block” chemical that can be converted into other 15 products. (Id. ¶ 6.) As relevant here, CMF can be converted 16 into (1) paraxylene (“PX”), a chemical used to produce a type of 17 plastic called polyethylene terephthalate (“PET”); and (2) [18] 1 Pursuant to the parties’ stipulation, on November 25, 19 2024 the court set oral argument on defendants’ motion to dismiss the Second Amended Complaint for February 18, 2025. (Docket No. 20 88.) On February 7, 2025 -- less than two weeks prior to a hearing that had been set for months -- the parties submitted a 21 new stipulation to continue the hearing one month, to March 17, 2025, based on an unspecified “family event.” (Docket No. 95.) 22 The court approved that stipulation. On February 11, 2025, the parties submitted a third stipulation, seeking to continue the 23 hearing an additional two weeks to March 31, 2025. (Docket No. 96.) 24 The issues have been thoroughly briefed by the parties and the court has carefully considered all arguments raised. 25 Rather than further delay resolution of the matter, the court will decide the motion on the papers without oral argument 26 pursuant to Local Rule 230(g). The scheduled March 17, 2025 hearing on the motion is hereby VACATED. [27] 2 All facts recited in this Order are as alleged in the 28 Second Amended Complaint unless otherwise noted. 1 furandicarboxylic acid (“FDCA”), a chemical used to produce a 2 different type of plastic called polyethylene furanoate (“PEF”). 3 (See id.)3 4 In February 2021, Origin announced plans to build 5 Origin 2, a manufacturing plant intended to focus on, inter alia, 6 production of PX/PET, with construction to be completed by mid7 2025. (See id. ¶¶ 41-43, 60, 71-75.) 8 In November 2021, Origin retained an outside 9 engineering firm to conduct the “front-end loading” process, a 10 multiphase development process involving “progressively refining 11 the project scope, definition, and feasibility, ultimately paving 12 the way for detailed engineering and construction.” (Id. ¶¶ 51, 13 59.) 14 Origin subsequently encountered chemical engineering 15 issues related to scaling up the production of PX/PET. (See id. 16 ¶¶ 86-88.) As a result, the plans for Origin 2 changed, with the 17 plant to instead focus on the production of FDCA/PEF and 18 construction to be delayed by several years. (See id. ¶¶ 89-92, 19 112-14.) On August 9, 2023, defendants publicly announced these 20 changes. (See id. ¶¶ 151-55.) The company’s share price 21 subsequently fell. (See id. ¶¶ 162, 166-67.) 22 II. Section 10(b) 23 Section 10(b) of the Securities Exchange Act of 1934 24 makes it unlawful for any person to “‘use or employ, in 25 connection with the purchase or sale of any security registered [26] 3 The complaint frequently refers to PX and PET 27 interchangeably or as one unit. As such, the court will refer to the first product line as “PX/PET.” The court will refer to the 28 second product line as “FDCA/PEF.” 1 on a national securities exchange . . . any manipulative or 2 deceptive device or contrivance in contravention of such rules 3 and regulations as the [Securities and Exchange] Commission may 4 prescribe as necessary or appropriate in the public interest or 5 for the protection of investors.’” In re Rigel Pharms., Inc. 6 Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012) (quoting 15 U.S.C. 7 § 78j(b)). “One of those rules promulgated under the Act is 8 Securities and Exchange Commission Rule 10b–5,” id., which makes 9 it unlawful to, inter alia, (a) “employ any device, scheme, or 10 artifice to defraud,” (b) “make any untrue statement of a 11 material fact or to omit to state a material fact necessary in 12 order to make the statements made, in the light of the 13 circumstances under which they were made, not misleading,” or (c) 14 “engage in any act, practice, or course of business which 15 operates or would operate as a fraud or deceit upon any person, 16 in connection with the purchase or sale of any security.” 17 17 C.F.R. § 240 .10b-5. 18 “To survive a motion to dismiss under this regime, [the 19 plaintiff] must plead: (1) a material misrepresentation or 20 omission by the defendant (‘falsity’); (2) scienter; (3) a 21 connection between the misrepresentation or omission and the 22 purchase or sale of a security; (4) reliance upon the 23 misrepresentation or omission; (5) economic loss; and (6) loss 24 causation.” Espy v. J2 Glob., Inc., 99 F.4th 527, 535 (9th Cir. 25 2024) (quotation marks omitted). 26 “At the pleading stage, a complaint alleging claims 27 under section 10(b) and Rule 10b–5 must . . . satisfy the 28 heightened pleading requirements of both Federal Rule of Civil 1 Procedure 9(b) and the Private Securities Litigation Reform Act” 2 (“PSLRA”). Rigel Pharms., 697 F.3d at 876 . 3 Rule 9(b) provides: “In alleging fraud or mistake, a 4 party must state with particularity the circumstances 5 constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “Thus, 6 Rule 9(b) requires particularized allegations of the 7 circumstances constituting fraud, including identifying the 8 statements at issue and setting forth what is false or misleading 9 about the statement and why the statements were false or 10 misleading at the time they were made.” Rigel Pharms., 697 F.3d 11 at 876 . 12 “Under the PSLRA, ‘the complaint shall [1] specify each 13 statement alleged to have been misleading [and] the reason or 14 reasons why the statement is misleading, and [2], if an 15 allegation regarding the statement or omission is made on 16 information and belief, the complaint shall state with 17 particularity all facts on which that belief is formed.” In re 18 Genius Brands Int’l, Inc. Sec. Litig., 97 F.4th 1171, 1180 (9th 19 Cir. 2024) (quoting 15 U.S.C. § 78u-4(b)(1)(B)); see also 20 Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308 , 321 21 (2007) (same). The PSLRA also requires that the complaint 22 “‘state with particularity facts giving rise to a strong 23 inference that the defendant acted with the required state of 24 mind.’” Rigel Pharms., 697 F.3d at 882 (quoting 15 U.S.C. § 78u– 25 4(b)(2)). 26 A. Confidential Witness & Supporting Allegations 27 In pleading the alleged violations, the complaint 28 relies primarily upon statements attributed to a former Origin 1 employee referred to as Confidential Witness 1 (“CW1”). 2 To comply with the PSLRA, “[a] complaint relying on 3 confidential witness statements must describe the confidential 4 witnesses ‘with sufficient particularity to establish their 5 reliability and personal knowledge.’” Glazer Cap. Mgmt., L.P. v. 6 Forescout Techs., Inc., 63 F.4th 747, 766-67 (9th Cir. 2023) 7 (quoting Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 , 995 8 (9th Cir. 2009)). In determining whether the complaint has 9 established the reliability and personal knowledge of a 10 confidential witness, courts consider “the level of detail 11 provided by the confidential witnesses, the plausibility of the 12 allegations, the number of sources, the reliability of the 13 sources, corroborating facts, and similar indicia of 14 reliability.” Id. at 767. 15 1. Prior Order Finding Allegations of CW1 Insufficient [16] 17 The court previously addressed the sufficiency of CW1’s 18 allegations in ruling on defendants’ motion to dismiss the 19 Correct Amended Complaint. There, the court noted that the 20 Corrected Amended Complaint (“CAC” (Docket No. 61)) attributed 21 the following allegations to CW1: 22 In “late 2022” and “early 2023,” CW1 “learned from attending biweekly meetings with Origin’s R&D group” 23 that there were “unexpected chemical issues” (referred to as “fouling” occurring “at every step” of the 24 PX/PET production process), leading to delays in the development process for Origin 2. ([CAC] ¶¶ 86, 88.) 25 In December 2022, CW1 attended a meeting at which defendants Riley and Bissell provided updates on 26 Origin 2, including that the company was “considering” changing the plans and construction schedule for 27 Origin 2. (See id. ¶ 87.) 28 “CW1 further reported that in March 2023, based on 1 emails with his direct manager and his attendance at weekly meetings held by Defendants Riley and Bissell, 2 CW1 learned that Origin 2 was being broken up into two phases, was shifting to new products, and would no 3 longer produce [PX/PET].” (Id. ¶ 89.) “CW1 also learned from these weekly Friday meetings with 4 Defendants Riley and Bissell in March 2023, that [front-end loading] was being delayed for Origin 2.” 5 (Id. ¶ 90.) 6 (Order Dismissing CAC (Docket No. 82) at 6-7.) 7 Based on the facts alleged in the Corrected Amended 8 Complaint, the court concluded that “the allegations concerning 9 what CW1 ‘learned’ at meetings attended by defendants are fatally 10 vague, as they do not indicate ‘when this information was 11 conveyed to [defendants], who conveyed it, or the substance of 12 what was allegedly conveyed.’” (Order Dismissing CAC at 7 13 (quoting In re Ditech Commc’ns Corp. Sec. Litig., No. 05-cv-02406 14 JSW, 2007 WL 2990532 , at *8 (N.D. Cal. Oct. 11, 2007).) 15 The court also explained that the Corrected Amended 16 Complaint “fail[ed] to allege with specificity what defendants’ 17 role was during these meetings and whether defendants had access 18 to the same information that was communicated to CW1,” expressing 19 concern that what CW1 “learned” might not be based on reliable 20 information. (See id.) Accordingly, the court concluded that 21 “the statements attributed to CW1 -- which are foundational to 22 plaintiff’s allegations that defendants committed securities 23 violations -- do not satisfy the PSLRA’s particularity 24 requirements,” and therefore granted the motion to dismiss the 25 Corrected Amended Complaint. (Id. at 9.) 26 2. Amended CW1 Allegations 27 Plaintiff’s Second Amended Complaint contains updated 28 allegations attributed to CW1. Plaintiff’s amendment has 1 partially cured the defects previously identified by the court. 2 According to the Second Amended Complaint, CW1 was a 3 “technical development engineer who was employed at Origin prior 4 to and throughout the Class Period” and “worked on developing the 5 technology for . . . converting CMF to PX for Origin 2.” (SAC ¶ 6 85.) CW1 was part of an engineering group that compiled 7 chemistry data and sent it to the Origin 1 plant for further 8 testing. (Id.) If the tests were successful, CW1 and his team 9 would send the data to the outside engineering firm working on 10 the “front-end loading” development process for Origin 2. (Id.) 11 The Second Amended Complaint rehashes several of the 12 allegations from the prior complaint, including that in “late 13 2022” and “early 2023,” CW1 “learned from attending biweekly 14 meetings with Origin’s R&D group” that there were “unexpected 15 chemical issues” (including “fouling” occurring “at every step” 16 of the PX/PET production process), leading to delays in the 17 development process for Origin 2. (See id. ¶¶ 86, 88 .). 18 Further, in December 2022, CW1 attended an all-hands meeting 19 “helmed by” defendants Riley and Bissell, at which Riley and 20 Bissell “revealed” that the company “was already considering 21 scaling down the size of Origin 2, splitting the building of the 22 plant into two phases, and shifting the focus of Origin 2 from PX 23 to another product,” and explained that the company “would either 24 have to make less [PX/PET] at the plant or pivot the production 25 to another product due to the economics of [PX/PET].” (See id. ¶ 26 87.) 27 However, the amended complaint goes further and also 28 provides new details concerning the pivotal March 2023 meeting. 1 According to CW1, the meeting in question occurred on March 3, 2 2023 and was one of the recurring weekly meetings held via video 3 conference on Fridays from 9-10am. (See id. ¶¶ 90-91 .) These 4 weekly meetings, which typically lasted an hour or more, were led 5 by a moderator and included Bissell as a speaker. (Id. ¶ 90.) 6 Bissell was a “huge contributor” to the weekly meetings and was 7 “in charge” of them. (Id.) 8 CW1 elaborates that during the weekly meeting that took 9 place on March 3, 2023, Bissell spoke to those in attendance 10 concerning Origin 2, explaining that because of issues related to 11 the poor performance of PX/PET and the high cost of the plant, 12 Origin 2 would be “broken up into two phases, was shifting to new 13 products, and would no longer produce PX[/PET].” (Id. ¶ 91.) 14 “Accordingly, Bissell told the group [attending the meeting], ‘we 15 are going to move in this new direction.’” (Id.) Further, 16 Bissell “presented a detailed plan of action to move forward with 17 the changes at Origin 2 away from PX production and the changes 18 to plant construction.” (Id. ¶ 92.) CW1 explains that Bissell 19 was the “first person [he] heard reveal that the [c]ompany would 20 not produce PX[/PET] at Origin 2.” (Id. ¶ 91.) 21 The statements attributed to CW1 have sufficient 22 indicia of personal knowledge and reliability. CW1 was an 23 engineer working on Origin 2’s development process, and it is 24 “probab[le] that a person in the position occupied by [CW1] would 25 possess the information alleged.” See Glazer, 63 F.4th at 767 . 26 The statements explain how, when, and from whom CW1 obtained the 27 information (company meetings with Origin’s R&D group and with 28 Bissell) and provide detail concerning the information he learned 1 regarding Origin 2’s development. See In re Quality Sys., Inc. 2 Sec. Litig., 865 F.3d 1130, 1145 (9th Cir. 2017) (indicating that 3 information such as job titles, roles in company, attendance at 4 meetings with defendant, and work on project at issue served to 5 establish reliability and personal knowledge of confidential 6 witnesses). Further, CW1’s allegations are plausible given that 7 the changed plans he describes were later confirmed by the 8 company. 9 Defendants argue that CW1’s statements are unreliable 10 because they are internally inconsistent. Specifically, they 11 point out that CW1 discussed the issues with Origin 2’s 12 development in several different ways, referring to “fouling 13 issues” in manufacturing PX/PET, problems with Origin 2’s 14 “technology maturity,” and difficulties in “finaliz[ing] the 15 chemistry for Origin 2” leading to delays in the front-end 16 loading process. (See SAC ¶¶ 86, 89, 95.) These descriptions do 17 not appear inconsistent, but rather refer to the same set of 18 difficulties facing the company in Origin 2’s development 19 process. For instance, the complaint explicitly states that the 20 “fouling issues resulted in the [c]ompany being unable to 21 finalize the chemistry for Origin 2.” (Id. ¶ 86.) 22 Defendants also argue that CW1’s new allegations are 23 not credible because they contradict his allegations as stated in 24 the Corrected Amended Complaint. The Corrected Amended Complaint 25 stated that CW1 learned of the changes via “emails with his 26 direct manager and his attendance at weekly meetings held by 27 Defendants Riley and Bissell.” (CAC ¶ 89.) Defendants argue 28 that the allegations concerning the emails are missing from the 1 Second Amended Complaint. This is not so. The Second Amended 2 Complaint merely adds greater specificity concerning the March 3 2023 meeting and emails, explaining that Bissell described the 4 changed plans at the March 3, 2023 meeting and these changes were 5 reiterated in emails with CW1’s team -- which presumably included 6 his manager -- later in the month. (See SAC ¶¶ 91-93.) 7 CW1’s statements are also consistent with other 8 allegations made in the complaint regarding the company’s 9 contracts with Avantium and Pepsi. The complaint alleges that on 10 February 21, 2023, Origin entered into an agreement to license 11 Avantium’s technology, enabling Origin to convert CMF into FDCA 12 at a commercial scale. (SAC ¶¶ 94-98.) Discussing the agreement 13 during a call with analysts, Avantium’s CEO implied that Origin 14 would produce FDCA/PEF at Origin 2. (See id. ¶ 100.) The 15 Avantium agreement lends credence to CW1’s allegation that by the 16 following month, Origin had affirmatively decided to shift 17 towards FDCA/PEF production at Origin 2.4 18 The complaint further alleges that on May 9, 2023, 19 Origin finalized amendments to an existing “offtake” agreement [20] 4 Defendants argue that the complaint mischaracterizes [21] the Avantium partnership by omitting portions of the Avantium 22 CEO’s statements, which are incorporated by reference, see Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 23 2018). Specifically, defendants point to the Avantium CEO’s discussion of an offtake agreement whereby Avantium would sell 24 FDCA/PEF to Origin. (See Def.’s Ex. 16 (Docket No. 90-16) at 2.) This information does not change the analysis. That Origin [25] agreed to purchase FDCA/PEF from Avantium does not negate that Origin had also licensed technology to produce FDCA/PEF at its [26] own plants. Indeed, it appears that the offtake agreement was 27 intended not to supplant, but to “support . . . the industrial technology license agreement” whereby Origin would produce 28 FDCA/PEF. (See id.) 1 (i.e., an agreement to purchase goods from a supplier) with 2 Pepsi. (See id. ¶ 101.) The original offtake agreement 3 provided, inter alia, that Pepsi had a five-year term to purchase 4 a specified amount of PX/PET from Origin 2. (Id. ¶ 102.) It 5 allowed Pepsi to terminate the contract if Origin 2 did not begin 6 commercial operation by June 30, 2025 and required Origin to 7 provide regular progress reports concerning the construction of 8 Origin 2. (Id. ¶ 103.) If Origin obtained actual knowledge that 9 there was a substantial likelihood Origin 2 would not begin 10 production by June 30, 2025, Origin was required to notify Pepsi 11 and provide an updated estimated timeline. (Id. ¶ 104.) 12 The May 9, 2023 amendment revised the commercial 13 operation deadline to June 30, 2026. (Id. ¶ 105.) The amended 14 agreement also permitted Origin to provide Pepsi with FDCA/PEF 15 from Origin 2 (rather than only PX/PET), stating that Origin was 16 “focused on carrying out its strategic plan to accelerate 17 production of FDCA and PEF . . . .” (Id. ¶¶ 106-107.) This 18 agreement bolsters the credibility of CW1’s allegation that by 19 March 2023, the company had already decided to shift Origin 2 to 20 FDCA/PEF production and to delay Origin 2’s construction 21 schedule. 22 Based on the foregoing, the statements attributed to 23 CW1 bear sufficient indicia of reliability and personal knowledge 24 to be relied upon in analyzing whether the section 10(b) 25 requirements are satisfied. 26 B. Scienter 27 Scienter is “‘a mental state embracing intent to 28 deceive, manipulate, or defraud.’” Or. Pub. Emps. Ret. Fund v. 1 Apollo Grp. Inc., 774 F.3d 598, 607 (9th Cir. 2014) (quoting 2 Tellabs, 551 U.S. at 319 )). “A defendant who makes 3 misrepresentations or omissions ‘either intentionally or with 4 deliberate recklessness acts with scienter.’” Id. (quoting In re 5 Daou Sys., Inc., 411 F.3d 1006, 1015 (9th Cir. 2005)). 6 “Deliberate recklessness is a higher standard than mere 7 recklessness,” representing “an extreme departure from the 8 standards of ordinary care . . . which presents a danger of 9 misleading buyers or sellers that is either known to the 10 defendant or is so obvious that the actor must have been aware of 11 it.” Espy, 99 F.4th at 535–36 (internal quotation marks 12 omitted). 13 “To adequately plead scienter under the PSLRA, the 14 complaint must ‘state with particularity facts giving rise to a 15 strong inference that the defendant acted with the required state 16 of mind.’” Rigel Pharms., 697 F.3d at 882 (quoting 15 U.S.C. § 17 78u–4(b)(2)). “The inquiry . . . is whether all of the facts 18 alleged, taken collectively, give rise to a strong inference of 19 scienter, not whether any individual allegation, scrutinized in 20 isolation, meets that standard.” Tellabs, 551 U.S. at 322–23. 21 “The ‘strong inference’ ‘must be cogent and compelling, thus 22 strong in light of other [countervailing] explanations,’ not 23 merely ‘reasonable’ or ‘permissible.’” In re NVIDIA Corp. Sec. 24 Litig., 768 F.3d 1046, 1052 (9th Cir. 2014) (quoting Tellabs, 551 25 U.S. at 324) (alteration in original). 26 Plaintiff relies on the allegations already discussed 27 above to establish scienter -- namely, the statements attributed 28 to CW1, the agreement with Avantium, and the amendment to the 1 Pepsi offtake agreement. To plead scienter based on confidential 2 witness statements, the complaint “must satisfy two hurdles 3 imposed by the PSLRA.” Espy, 99 F.4th at 536 . “First, the 4 confidential witnesses whose statements are introduced to 5 establish scienter must be described with sufficient 6 particularity to establish their reliability and personal 7 knowledge. Second, those statements which are reported by 8 confidential witnesses with sufficient reliability and personal 9 knowledge must themselves be indicative of scienter.” Id. The 10 court has already completed the first step of the inquiry by 11 establishing the reliability and personal knowledge of CW1. The 12 court thus turns to the question of whether the confidential 13 witness statements are indicative of scienter on the part of each 14 defendant. 15 Based on the allegations provided, plaintiff has 16 adequately pled scienter as to Bissell and the company, but not 17 as to Riley. 18 1. Bissell and The Company 19 As relevant here, CW1 states that at the March 3, 2023 20 meeting, Bissell informed the meeting attendees that Origin 2 21 “would now be broken up into two phases, was shifting to new 22 products, and would no longer produce [PX/PET],” telling the 23 group that the company was “‘going to move in this new 24 direction.’” (See SAC ¶ 91.) Bissell also presented a “detailed 25 plan of action” by which the changes would be implemented. (Id. 26 ¶ 92.) These allegations clearly support a strong inference that 27 Bissell had knowledge of the changed plans; it need hardly be 28 said that Bissell had knowledge of what he himself said at the 1 meeting. 2 As discussed above, CW1’s allegations indicating that 3 Bissell knew of the changed plans by March 3, 2023 are consistent 4 with the February 21, 2023 Avantium agreement that would allow 5 Origin to produce FDCA/PEF, and the May 9, 2023 Pepsi amendment 6 that pushed back the deadline for production at Origin 2 and 7 would allow Origin to provide Pepsi with FDCA/PEF rather than 8 only PX/PET. While these agreements are not themselves 9 indicative of scienter, they bolster CW1’s allegations that the 10 decision to change the plans for Origin 2 had already been made 11 by March 3, 2023. 12 The “core operations” doctrine provides further support 13 concerning Bissell’s knowledge. Pursuant to this doctrine, the 14 court “may consider a senior executive’s role in a company to 15 determine whether there is a cogent and compelling inference that 16 the senior executive knew of the information at issue,” including 17 “consideration of the executive’s access to the information, and, 18 whether, given the importance of the information, it would be 19 ‘absurd’ to suggest that management was without knowledge of the 20 matter.” In re Alphabet, Inc. Sec. Litig., 1 F.4th 687, 706 (9th 21 Cir. 2021) (cleaned up, emphasis added). 22 Origin 2 was a highly important project -- Origin’s 23 first large-scale plant -- and Bissell was a co-CEO of the 24 company who regularly communicated with investors concerning the 25 company’s technology and provided updates about Origin 2’s 26 development. (See SAC ¶¶ 14, 41-45, 62-65, 69, 73, 75, 77-81, 27 87, 90-92, 113, 119, 131, 139, 145, 148, 154-59.) “[I]n 28 conjunction with [the] detailed and specific allegations about 1 [Bissell]’s exposure to factual information within the company” 2 concerning the changed plans for Origin 2, Bissell’s role in the 3 company and the importance of the information at issue contribute 4 to a strong inference of scienter. See S. Ferry LP, No. 2 v. 5 Killinger, 542 F.3d 776, 785 (9th Cir. 2008); see also Quality 6 Sys., 865 F.3d at 1145 (executives’ public representations that 7 they possessed “access to, and knowledge of” sales information 8 indicated that they possessed scienter concerning detrimental 9 changes to sales pipeline). 10 Once Bissell allegedly had knowledge of the affirmative 11 changes to the plans for Origin 2, it would have been abundantly 12 clear that any representations to the contrary (discussed below) 13 were likely to mislead consumers regarding the plant’s 14 development. “When the defendant is aware of the facts that made 15 the statement misleading, he cannot ignore the facts and plead 16 ignorance of the risk.” See S.E.C. v. Platforms Wireless Int’l 17 Corp., 617 F.3d 1072 , 1094 (9th Cir. 2010) (defendant acted with 18 deliberate recklessness in issuing press release touting 19 company’s new product when defendant knew the product did not 20 exist); see also Flynn v. Sientra, Inc., No. 15-cv-07548 SJO RAO, [21] 2016 WL 3360676 , at *12–14 (C.D. Cal. June 9, 2016) (finding 22 plaintiff pled scienter based on statements attributed to one 23 confidential witness and core operations doctrine). 24 Accordingly, plaintiff has pled that defendant Bissell 25 possessed scienter, which can be imputed to defendant Origin. 26 See Alphabet, 1 F.4th at 706 (“the ‘scienter of the senior 27 controlling officers of a corporation may be attributed to the 28 corporation itself to establish liability as a primary violator 1 of § 10(b) and Rule 10b-5 when those senior officials were acting 2 within the scope of their apparent authority’”) (quoting In re 3 ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471, 475 (9th Cir. 4 2015)). 5 2. Riley 6 In contrast, noticeably absent from the Second Amended 7 Complaint are any allegations concerning whether or when Riley 8 knew of the changes to Origin 2 during the class period. While 9 the complaint alleges that Riley discussed that the company was 10 “considering” changing the plans for Origin 2 in December of 2022 11 (SAC ¶ 87), this allegation alone does not support a strong 12 inference concerning Riley’s knowledge of the final decision to 13 change the plans communicated by Bissell at the March 3, 2023 14 meeting. Although Riley was co-CEO, the core operations doctrine 15 does not suffice to establish a strong inference of scienter in 16 the absence of allegations concerning Riley’s access to 17 information concerning the final changes. See Alphabet, 1 F.4th 18 at 706; S. Ferry, 542 F.3d at 785 . For instance, it is possible 19 that Riley was less involved in or knowledgeable about the 20 technological aspects of the company than Bissell. Accordingly, 21 plaintiff has failed to plead Riley possessed scienter and his 22 claims will be dismissed as against defendant Riley. 23 C. False or Misleading Statements 24 “In setting forth the reasons why they contend that 25 each challenged statement is misleading, securities plaintiffs 26 may rely on either an affirmative misrepresentation theory or an 27 omission theory.” Wochos v. Tesla, Inc., 985 F.3d 1180 , 1188 28 (9th Cir. 2021). “Under Rule 10b-5, an affirmative 1 misrepresentation is an ‘untrue statement of a material fact,’ 2 and a fraudulent omission is a failure to ‘state a material fact 3 necessary in order to make the statements made, in the light of 4 the circumstances under which they were made, not misleading.’” [5] Id. (quoting See 17 C.F.R. § 240 .10b-5(b)). 6 “To determine whether a statement or omission is 7 misleading, ‘our central inquiry is whether a reasonable investor 8 would have been misled about the nature of his investment.’” 9 Genius Brands, 97 F.4th at 1181 (quoting In re VeriFone Sec. 10 Litig., 11 F.3d 865, 869 (9th Cir. 1993)). “This is an objective 11 inquiry that requires us to assess ‘whether an investor who had 12 been reasonably diligent in reviewing’ the statement or omission 13 at issue ‘would have been misled.’” Id. (quoting Durning v. 14 First Bos. Corp., 815 F.2d 1265, 1268 (9th Cir. 1987)). 15 Courts typically perform a separate analysis of each 16 disclosure pursuant to the PSLRA’s requirement that plaintiffs 17 “specify each statement alleged to have been misleading.” See 18 Zhou v. Desktop Metal, Inc., 120 F.4th 278, 293 (1st Cir. 2024) 19 (“When a plaintiff alleges multiple false or misleading 20 statements, we perform our analysis statement by statement, 21 considering each statement in turn.”); Bondali v. Yum! Brands, 22 Inc., 620 F. App’x 483, 491 (6th Cir. 2015) (“[O]ther circuits, 23 like this circuit, undertake a statement-by-statement 24 analysis.”); In re Eventbrite, Inc. Sec. Litig., No. 5:18-cv25 02019-EJD, 2020 WL 2042078 , at *10 (N.D. Cal. Apr. 28, 2020) 26 (“[F]or falsity, the Court must do a statement-by-statement 27 analysis.”). 28 Plaintiff argues that defendants made several 1 statements and omissions that misled consumers concerning both 2 the construction timeline of Origin 2 and the products to be 3 produced at Origin 2. Specifically, they allege that defendants 4 continued to represent that Origin 2 would produce PX/PET and 5 construction would be completed by mid-2025, despite knowing that 6 Origin 2 would instead produce FDCA/PEF and would not be 7 completed by that date.5 8 1. Statements Prior to March 3, 2023 9 As discussed above, CW1 alleges that by March 3, 2023, 10 the company affirmatively changed course such that Origin 2 would 11 “be broken up into two phases, was shifting to new products, and 12 would no longer produce PX[/PET].” (See SAC ¶ 91.) However, 13 CW1’s statements indicate that prior to March 3, 2023, CW1 14 learned only that defendants had confronted technical 15 difficulties and delays and “consider[ed]” alternative plans for 16 Origin 2. (See id. ¶¶ 86-88 .) Although the complaint also 17 alleges that Origin entered the Avantium licensing agreement on 18 February 21, 2023, that agreement alone is insufficient to plead 19 that defendants definitively changed the plans for Origin 2 prior 20 to March 3, 2023; it is possible that in February 2023, Origin 21 had only decided to incorporate FDCA/PEF into Origin 2 alongside 22 PX/PET, rather than in lieu of it. (See id. ¶ 87 (in December 23 2022, Riley and Bissell “stated that the [c]ompany would either 24 have to make less [PX/PET] at the plant or pivot the production 25 to another product”).) [26] 27 5 Defendants dispute that the statements or omissions were false or misleading, but do not dispute that they were 28 material. 1 Defendants were under no obligation to disclose these 2 developing technical difficulties and potential future plans, as 3 their omission did not render representations about the plans for 4 Origin 2 (to produce PX/PET and be completed by mid-2025) 5 misleading. “[C]ompanies do not have an obligation to offer an 6 instantaneous update of every internal development, especially 7 when it involves the oft-tortuous path of product development,” 8 but rather must “disclose a negative internal development only if 9 its omission would make other statements materially misleading.” 10 See Weston Fam. P’ship LLLP v. Twitter, Inc., 29 F.4th 611 , 620 11 (9th Cir. 2022). 12 It appears from the complaint that the company at first 13 attempted to work through the technical issues and continue the 14 development process based on the original plan for Origin 2. CW1 15 and his team were “falling behind” in their work for Origin 2’s 16 front-end loading development process in late 2022 and engineers 17 “started developing solutions for the issues” in early 2023. 18 (SAC ¶¶ 86, 88.) As a result of the technological difficulties, 19 in December 2022, “CW1 was instructed that the [c]ompany was far 20 off from completing [the front-end loading process] for Origin 21 2.” (Id. ¶ 87.) These allegations indicate that the company was 22 still working towards completing the in-progress development 23 process despite the problems. By contrast, CW1 learned for the 24 first time on March 3, 2023 that the plans for Origin 2 had 25 changed entirely. (See id. ¶ 91.) 26 While CW1 states that “the plan announced on March 3, 27 2023 was likely formulated months in advance because it was well 28 thought out by the time it was conveyed by Bissell . . . at the 1 March 3, 2023 meeting” (see id. ¶ 92), this is pure conjecture. 2 Based on the complaint, the court has no way of inferring how 3 long the plans had been formulated prior to Bissell’s 4 announcement at the March 3, 2023 meeting. Although the company 5 was “considering” alternative plans for Origin 2 prior to that 6 meeting (see SAC ¶ 87), “[t]he existence of a contingency plan 7 does not evince an intent to execute that plan.” See In re Intel 8 Corp. Sec. Litig., No. 5:20-cv-05194 EJD, 2023 WL 2767779 , at *19 9 (N.D. Cal. Mar. 31, 2023), aff’d, No. 23-15695, 2024 WL 1693340 10 (9th Cir. Apr. 19, 2024). 11 Accordingly, the complaint fails to plead that any 12 statements or omissions concerning the plans for Origin 2 made 13 prior to March 3, 2023 -- namely, the Press Release, Earnings 14 Call, PowerPoint, and Form 10-K dated February 23, 2023 (see SAC 15 ¶ 115-20) -- were false or misleading. See In re Stac Elecs. 16 Sec. Litig., 89 F.3d 1399, 1404 (9th Cir. 1996) (“the statement 17 or omission must be shown to have been false or misleading when 18 made”); Weston, 29 F.4th at 622 (“without more, temporal 19 proximity alone does not satisfy the particularity requirements 20 of Rule 9(b)”); Glazer, 63 F.4th 777 (plaintiffs failed to plead 21 that company partnerships terminated “prior to the date on which 22 [defendant] made the alleged statements [to the contrary], and 23 therefore failed to plead falsity”). Accordingly, plaintiff’s 24 claims will be dismissed insofar as they are premised on 25 statements made prior to March 3, 2023. 26 2. March 7, 2023 PowerPoint 27 A PowerPoint presentation posted to the company’s 28 website on March 7, 2023 stated that Origin 2 was “expected” to 1 use sustainable materials “to make PET,” and that construction 2 was “expected to start by mid-2023,” with the plant “expected to 3 be operational mid-2025.” (SAC ¶ 127.) 4 As explained above, CW1 alleges that by March 3, 2023, 5 defendants had affirmatively made the decision to change the 6 plans for Origin 2, which would no longer produce PX/PET and 7 would not be completed by mid-2025. Assuming the truth of that 8 allegation, the statements to the contrary in the March 7 9 PowerPoint presentation were false because they “affirmatively 10 created an impression of a state of affairs that differed in a 11 material way from the one that actually existed.” See Quality 12 Sys., 865 F.3d at 1144 (quoting Brody v. Transitional Hosps. 13 Corp., 280 F.3d 997, 1006 (9th Cir. 2002)) (alterations adopted); 14 see also id. at 1143 (“reassuring investors that ‘everything 15 [was] going fine’ with FDA approval when the company knew FDA 16 approval would never come was materially misleading,” as was a 17 statement that a company “‘anticipate[d] a continuation of its 18 accelerated expansion schedule’ when the expansion had already 19 failed”) (citations omitted). 20 That the representations concerning Origin 2 were 21 couched in terms of subjective “expectations” makes no 22 difference. Even if defendants “sincerely believed” that Origin 23 2 would be completed as originally planned, that expectation did 24 not “fairly align with the information in [defendants’] 25 possession at the time” -- i.e., that Origin would not be 26 proceeding as planned, but would instead produce FDCA/PEF and 27 would not be completed in 2025. See Glazer, 63 F.4th at 779 ; see 28 also Omnicare, Inc. v. Laborers Dist. Council Const. Indus. 1 Pension Fund, 575 U.S. 175, 185 (2015) (opinion statements can 2 “contain embedded statements of fact,” which “may be read to 3 affirm not only the speaker’s state of mind . . . but also an 4 underlying fact”). Based on the allegations of the complaint, 5 these statements were not merely projections made amidst 6 uncertainty concerning Origin 2’s development, but rather 7 directly contradicted the new, concrete plans for the plant. 8 Accordingly, plaintiff has pled that the representations in the 9 March 7, 2023 PowerPoint were false or misleading.6 10 3. May 10, 2023 Press Release 11 According to a press release dated May 10, 2023: “For 12 Origin 2, the Company continues to make progress on front-end 13 design, construction planning, and financing.” (SAC ¶ 129.) 14 “‘[V]ague statements of optimism’ are generally not 15 actionable because investors ‘know how to devalue the optimism of 16 corporate executives.’” Glazer, 63 F.4th at 770 (quoting In re 17 Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 2010)). A 18 “pure statement of opinion” is also “generally not actionable.” 19 Wochos, 985 F.3d at 1196 (citing Omnicare, 575 U.S. at 187 ). 20 A statement that Origin “continue[d] to make progress” 21 in the development process for Origin 2 (SAC ¶ 129) is merely an 22 optimistic opinion and is not actionable unless the company had [23] 6 Defendants represent that this presentation was 24 accompanied by the company’s cautionary language. However, there is nothing before the court, whether in the complaint or provided [25] as an exhibit, indicating that the March 7, 2023 PowerPoint was accompanied by cautionary language. Regardless, as discussed in [26] further detail below, plaintiff has sufficiently alleged that the 27 cautionary language itself was misleading, so its inclusion would not activate the PSLRA’s “safe harbor” protection. See 15 U.S.C. 28 § 78u-5(c)(1); Glazer, 63 F.4th at 781 . 1 been “making no progress at all.” See Wochos, 985 F.3d at 1195 - 2 96 (statement that company was “making great progress” towards 3 achieving manufacturing goal was not actionable, even if company 4 was aware of problems that could prevent company from meeting 5 that goal). Plaintiffs have pled “no facts that would establish 6 falsity in that sense.” See id. As the complaint alleges, the 7 development process for Origin 2 was still ongoing (albeit with 8 setbacks and changes), and thus it cannot be said that no 9 “progress” was occurring. See id.; see also Weston, 29 F.4th at 10 620 (statements that company was “continuing [its] work” on 11 “ongoing” project did not suggest that project was “on track,” 12 but rather provided a “vaguely optimistic assessment” that was 13 not false or misleading); Macomb Cnty. Emps.’ Ret. Sys. v. Align 14 Tech., Inc., 39 F.4th 1092, 1099 (9th Cir. 2022) (statements that 15 sales market was a “huge market opportunity” and “growing 16 significantly for us” were not false or misleading but were 17 merely “feel-good descriptions from [defendant’s] executives” 18 because the market was still growing, “albeit at a diminished 19 rate”). The complaint therefore fails to plead that this 20 statement concerning “progress” was false or misleading. 21 Plaintiff also points to a statement in the press 22 release that Origin had “made progress developing new products 23 and applications that may be incorporated into the design of the 24 plant, including FDCA, PEF, and biofuels.” (SAC ¶ 129.) 25 However, as plaintiff alleges, Origin 2 did, in fact, shift 26 towards producing FDCA/PEF. (See id. ¶ 152.) The statement at 27 issue suggested to consumers that Origin 2 may incorporate 28 FDCA/PEF production, and the company later confirmed this plan. 1 (See id.) Thus, based on plaintiff’s allegations, this statement 2 was neither false nor misleading. 3 4. May 10, 2023 1Q’23 Earnings Call 4 During an investor earnings call on May 10, 2023, 5 defendant Bissel stated that the company “continue[d] to advance 6 for design, construction, planning, and financing.” (SAC ¶ 131.) 7 Bissell also stated that he was “proud of how our team continues 8 to execute against our Origin 1 and Origin 2 milestones.” (Id.) 9 For the reasons given above, these are merely statements of 10 optimism and opinion that are not actionable as securities 11 violations. See Glazer, 63 F.4th at 770 ; Wochos, 985 F.3d at 12 1195-96; see also In re Atossa Genetics Inc. Sec. Litig., 868 13 F.3d 784 , 799–800 (9th Cir. 2017) (company’s statement that it 14 was “reasonably confident” was not actionable). 15 During the call, Bissell also represented that the 16 company “continue[d] to make progress developing new products and 17 applications, which may be incorporated into the design of the 18 plant such as FDCA, which can be converted to [P]EF . . . .” 19 (SAC ¶ 131.) As explained above, plaintiffs have not pled that 20 this representation is false or misleading, as Origin did 21 ultimately incorporate FDCA/PEF into the plant design. 22 5. May 10, 2023 1Q’23 Form 10-Q 23 Origin’s Form 10-Q dated May 10, 2023 stated that “[w]e 24 continue to make progress on front-end design, construction 25 planning, and financing.” (SAC ¶ 132.) For the reasons given 26 above, this general statement concerning “progress” in Origin 2’s 27 development is not actionable. See Glazer, 63 F.4th at 770 ; 28 Wochos, 985 F.3d at 1195-96 . 1 Form 10-Q also provided Origin’s standard cautionary 2 language, including the following: (1) “Construction of our 3 plants may not be completed in the expected timeframe or in a 4 cost effective manner”; (2) “There is a risk that significant 5 unanticipated costs or delays could arise due to, among other 6 things, . . . unforeseen technical issues or increases in plant 7 and equipment costs . . .”; (3) “[W]e may not be able to resolve 8 all of the difficulties that may arise in a timely or cost9 effective manner, or at all”; (4) “If we experience delays or 10 increased costs, our estimates and assumptions are incorrect, or 11 other unforeseen events occur, our business, ability to supply 12 customers, financial condition, results of operations and cash 13 flows could be adversely impacted”; and (5) “[W]e may not be 14 successful or efficient in developing or implementing new 15 production processes” due to risks including “difficulties in 16 designing, developing, implementing, and scaling up new process 17 technologies, development and production timing delays . . . .” 18 (SAC ¶ 136 (emphasis added).) 19 The complaint plausibly alleges that the cautionary 20 language referring to purely hypothetical engineering 21 difficulties and construction delays was misleading, given that 22 defendants allegedly knew such problems had already manifested 23 with respect to Origin 2. As the Ninth Circuit has explained, 24 “[r]isk disclosures that ‘speak entirely of as-yet-unrealized 25 risks and contingencies’ and do not ‘alert the reader that some 26 of these risks may already have come to fruition’ can mislead 27 reasonable investors.” Alphabet, 1 F.4th at 703 (quoting Berson 28 v. Applied Signal Tech., Inc., 527 F.3d 982 , 985–87 (9th Cir. 1 2008)) (alterations adopted); see also In re Facebook, Inc. Sec. 2 Litig., 87 F.4th 934, 948–49 (9th Cir. 2023) (plaintiff pled 3 falsity of risk disclosure stating that “our users’ data may be 4 improperly accessed, used, or disclosed” where company knew that 5 user data had already been accessed by third party) (emphasis in 6 original). “Defendants cannot rely on boilerplate language 7 describing hypothetical risks to avoid liability for the failure 8 to disclose that the company already had information” indicating 9 that the risk spoken of had already occurred. Glazer, 63 F.4th 10 at 779. Accordingly, plaintiff has pled that Origin’s cautionary 11 language was misleading. 12 6. May 10, 2023 Fireside Chat7 13 Also on May 10, 2023, Bissell participated in a virtual 14 “fireside chat” that was disseminated to investors on the 15 company’s website. (SAC ¶ 138.) During the discussion, Bissell 16 discussed and promoted Origin’s process for producing PET, and 17 stated that Origin’s PET is “identical to PET that’s made for 18 [sic] fossil materials” and is a “next-generation PET that has 19 better performance in a whole bunch of areas.” (Id. ¶ 139.) 20 Plaintiff argues that these statements were false or 21 misleading because they gave the impression that Origin 2 would 22 still produce PX/PET. However, the statements at issue were not 23 specific to Origin 2. The complaint does not suggest that the 24 company entirely abandoned PX/PET, only that Origin 2 would no [26] 7 The court disregards the statements during the May 10, 2023 Fireside Chat attributed to Riley, and statements attributed 27 to Riley in subsequent Fireside Chats, given the court’s determination that the complaint did not raise a strong inference 28 of scienter as to Riley. 1 longer produce that material. Indeed, the complaint indicates 2 that PX/PET was also intended to be a “primary product” at both 3 Origin 1 and Origin 3. (See SAC ¶ 60.) The complaint therefore 4 fails to plead that these statements concerning the company’s 5 production of PX/PET are false or misleading. 6 7. May 12, 2023 PowerPoint 7 A PowerPoint presentation posted to the company’s 8 website on May 12, 2023 stated that Origin 2 was “expected” to 9 use sustainable materials “to make PET,” and that construction 10 was “expected to start by mid-2023,” with the plant “expected to 11 be operational mid-2025.” (SAC ¶ 141.) This language is 12 identical to the language in the March 7, 2023 PowerPoint already 13 discussed. As the court concluded above, plaintiff has 14 adequately alleged that this language was false or misleading. 15 8. May 22, 2023 Fireside Chat8 16 In a May 22, 2023 virtual “fireside chat” posted on the 17 company’s website, Bissell discussed the PET market and PET 18 recycling process, stating, inter alia, that “mechanically 19 recycled PET . . . is just not quite the same as new material 20 that we can make” and that Origin’s PET has a “lower carbon 21 footprint.” (SAC ¶ 145.) As explained above, the complaint does 22 not allege that the company was ceasing to produce PX/PET 23 altogether, only that Origin 2 would not produce PX/PET. Because 24 these statements do not represent that Origin 2 would produce 25 PX/PET, they are not false or misleading. 26 9. June 8, 2023 Fireside Chat9 [27] 8 As discussed above, the court disregards the statements 28 during the May 22, 2023 Fireside Chat attributed to Riley. 1 In a June 8, 2023 virtual “fireside chat” posted on the 2 company’s website, Bissell discussed the PX/PET production 3 process in general and the benefits of PX/PET, stating that “for 4 us, going into PET was very intentional.” (SAC ¶ 148.) 5 As explained above, the complaint does not allege that 6 the company was ceasing to produce PX/PET altogether, only that 7 Origin 2 would not produce PX/PET. Because Bissell’s discussion 8 of PX/PET during this fireside chat does not represent that 9 Origin 2 would produce PX/PET, it was not false or misleading. 10 Based on the foregoing, the court concludes that 11 plaintiff has pled falsity only as to the statements concerning 12 Origin 2’s timeline and production of PX/PET in the March 7, 2023 13 PowerPoint; the cautionary language in the May 10, 2023 1Q’23 14 Form 10-Q; and the statements concerning Origin 2’s timeline and 15 production of PX/PET in the May 12, 2023 PowerPoint. 16 D. Loss Causation 17 “Plaintiffs in securities fraud actions must allege 18 loss causation” -- i.e., that the alleged securities violations 19 caused the plaintiffs to suffer an economic loss. See Genius 20 Brands, 97 F.4th at 1183 . “In a fraud-on-the-market case like 21 this one, loss causation ‘begins with the allegation that the 22 defendant’s misstatements (or other fraudulent conduct) 23 artificially inflated the price at which the plaintiff purchased 24 her shares.’” Id. (quoting In re BofI Holding, Inc. Sec. Litig., [25] 977 F.3d 781 , 789 (9th Cir. 2020)). “Next, a plaintiff must 26 allege that ‘the truth became known.’” Id. (quoting Dura [27] 9 As discussed above, the court disregards the statements 28 during the June 8, 2023 Fireside Chat attributed to Riley. 1 Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005)). “Finally, a 2 plaintiff must allege that the revelation caused the fraud3 induced inflation in the stock’s price to be reduced or 4 eliminated.” Id. (quotation marks omitted). “At that point, the 5 plaintiff has suffered an economic loss caused by the 6 misstatements because she is no longer able to recoup in the 7 marketplace the inflationary component of the price she 8 originally paid.” BofI, 977 F.3d at 789. 9 “The most common way for plaintiffs to prove that ‘the 10 truth became known’ is to identify one or more corrective 11 disclosures.” Genius Brands, 97 F.4th at 1184 (quoting BofI, 977 12 F.3d at 790). A corrective disclosure occurs when “‘information 13 correcting the misstatement or omission that is the basis for the 14 action is disseminated to the market.’” BofI, 977 F.3d at 790. 15 (quoting 15 U.S.C. § 78u-4(e)(1)). 16 “The plaintiff need not show ‘that a misrepresentation 17 was the sole reason’ for a price decline, but rather that it was 18 ‘one substantial cause.’” Genius Brands, 97 F.4th at 1183 19 (quoting Daou, 411 F.3d at 1025 ). “In the end, loss causation is 20 simply a variant of proximate cause, and the ultimate issue is 21 whether the defendant’s misstatement, as opposed to some other 22 fact, foreseeably caused the plaintiff’s loss.” Id. (cleaned 23 up). “Plaintiffs need only show a causal connection between the 24 fraud and the loss.” Id. (cleaned up). 25 Here, plaintiff alleges that Origin’s August 9, 2023 26 press release constituted a corrective disclosure because it 27 revealed, inter alia, that Origin 2’s construction was being 28 delayed -- with “Phase 1 [of construction] start-up projected for 1 late 2026 to 2027 and Phase 2 start-up projected for 2028” -- and 2 that Origin 2 would “focus on the production of FDCA[/PEF]” 3 rather than PX/PET. (See SAC ¶¶ 151-52.) As the above 4 discussion indicates, this press release directly contradicts the 5 previous representations that Origin 2 would make PX/PET and that 6 the plant was expected to begin construction by mid-2023 and 7 begin operations mid-2025. (See id. ¶¶ 127, 141.) The complaint 8 further explains that “[a]nalysts were shocked by the substantial 9 Origin 2 delays and changes,” with one analyst noting that “with 10 Origin 2 delayed and significantly more expensive than indicated 11 earlier,” the company’s “investment case is broken.” (Id. ¶ 12 164.) Another analyst referred to the “decision to shift planned 13 Origin 2 production” as a “major curveball.” (Id. ¶ 165.) 14 Over the course of the day following the announcement, 15 Origin’s “share price fell $2.87 per share, or 66.5%, to close at 16 $1.46 per share on August 10, 2023.” (Id. ¶ 162.) The share 17 price continued to fall in the following weeks, closing at $0.99 18 per share on October 31, 2023. (Id. ¶ 167.) Plaintiff alleges 19 that these drops in share price immediately following the 20 corrective disclosure indicate that Origin’s stock price had been 21 “artificially inflated due to [d]efendants’ false and misleading 22 public statements,” and the decline in stock price was “a direct 23 result of [d]efendants’ misrepresentations and omissions being 24 revealed to the market.” (Id. ¶¶ 213, 215.) 25 Here, plaintiff has adequately pled loss causation. He 26 “identif[ied] a specific economic loss: the [immediate] drop in 27 value on [August 10, 2023], that followed the [August 9, 2023] 28 press release” -- which directly contradicted information 1 previously disseminated by defendants -- and he “allege[d] that 2 this loss was caused by [defendants’] misrepresentations.” See 3 In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056 (9th Cir. 4 2008); see also BofI, 977 F.3d at 791 (plaintiffs pled loss 5 causation by alleging drop in stock price of more than 30% 6 occurred “immediately after” corrective disclosure). 7 Accordingly, the complaint will not be dismissed on this ground. 8 III. Section 20(a) 9 Section 20(a) of the Securities Exchange Act “makes 10 certain ‘controlling’ individuals also liable for violations of 11 section 10(b) and its underlying regulations.” Zucco, 552 F.3d 12 at 990 . “Controlling persons liability under Section 20(a) . . . 13 is derivative, such that there is no individual liability where 14 there is no primary violation of securities law.” Genius Brands, [15] 97 F.4th at 1180 . 16 Defendants argue only that because plaintiff fails to 17 plead a claim under section 10(b), his claim under section 20(a) 18 also fails. (See Docket No. 89 at 48 n.10.) As discussed above, 19 plaintiff has adequately pled a violation of section 10(b). 20 Accordingly, the claim under section 20(a) will not be dismissed. 21 IT IS THEREFORE ORDERED that defendants’ motion to 22 dismiss (Docket No. 89) be, and the same hereby is, GRANTED on 23 all claims against defendant Richard Riley. 24 IT IS FURTHER ORDERED that on the claims against 25 defendants John Bissell and Origin Materials, Inc. the motion to 26 dismiss is GRANTED as to the following: 27 • All statements dated February 23, 2023; 28 • May 10, 2023 Press Release; eee RE OE IE EEE NONE EEE I EO 1 e May 10, 2023 10'23 Earnings Call; 2 e Statements about “progress” in May 10, 2023 10’23 Form 10-Q; 3 e May 10, 2023 Fireside Chat; 4 e May 22, 2023 Fireside Chat; and 5 e June 8, 2023 Fireside Chat; 6 | And is DENIED as to the following: 7 e March 7, 2023 PowerPoint; 8 e Cautionary language in May 10, 2023 19’23 Form 10-0; and 9 e May 12, 2023 PowerPoint. 10 Plaintiff has twenty days from the date of this Order 11 to file an amended complaint, if he can do so consistent with 12 | this Order. dh ble (hi. 13 | Dated: February 12, 2025 Pi he Vi (eh 14 UNITED STATES DISTRICT JUDGE