In re Cloudera, Inc. Securities Litigation

[3] 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA [6] IN RE CLOUDERA, INC. 7 SECURITIES LITIGATION Case No. 19-cv-03221-MMC [8] 9 This Document Relates To: O AMRD ENER D ED DIS CM OIS MS PIN LAG I NS TE COND 10 ALL ACTIONS Re: Dkt. No. 234 [12] 13 Before the Court is defendants Cloudera, Inc. (“Cloudera” or “the Company”), Intel 14 Corporation (“Intel”), Thomas J. Reilly (“Reilly”), Jim Frankola (“Frankola”), Michael A. 15 Olson (“Olson”), Ping Li (“Li”), Martin I. Cole (“Cole”), Kimberly L. Hammonds 16 (“Hammonds”),1 Rosemary Schooler (“Schooler”), Steve J. Sordello (“Sordello”), Michael 17 A. Stankey (“Stankey”), Priya Jain (“Jain”), Robert Bearden (“Bearden”), Paul Cormier 18 (“Cormier”), Peter Fenton (“Fenton”), and Kevin Klausmeyer’s (“Klausmeyer”) Motion, 19 filed August 5, 2021, to “Dismiss Consolidated Second Amended Class Action Complaint 20 (‘SAC’).” Plaintiffs Mariusz J. Klin and the Mariusz J. Klin MD PA 401K Profit Sharing 21 Plan, Robert Boguslawski, and Arthur P. Hoffman have filed opposition, to which 22 defendants have replied. In addition, plaintiffs have filed, on four occasions, statements 23 of recent decision, the last on September 9, 2022. The Court, having read and 24 considered the papers filed in support of and in opposition to the motion, rules as 25 follows.2 [26] 1 On August 16, 2022, defendants’ counsel filed a statement of death, giving notice [27] that Hammonds had passed away. 1 BACKGROUND3 2 In 2005, Cloudera co-founder Doug Cutting created a “data storage and 3 processing platform” called Hadoop, which “was considered revolutionary” and “quickly 4 became an important technological tool for analyzing enormous amounts of unstructured 5 data.” (See SAC ¶¶ 21-22.) In 2008, Cutting, Olson, and others founded Cloudera, and 6 in 2009, the Company released its own version of Hadoop, which peaked in popularity by 7 2015 as “user demand shifted to cloud.” (See SAC ¶¶ 21, 23.) According to plaintiffs, 8 “[u]nlike on-premise Hadoop platforms, cloud services provide on-demand, elastic, 9 scalable and adaptable service models where processing and storage resources can be 10 accessed from any location via the internet.” (See SAC ¶ 25.) 11 In April 2017, Cloudera announced an initial public offering (“IPO”), and the 12 Company’s share price closed on April 28, 2017, the first day of trading, at $18.10. (See 13 SAC ¶ 34.) Plaintiffs allege that between April 28, 2017, and June 5, 2019 (the “Class 14 Period”), “the Company repeatedly and misleadingly assured investors that it possessed 15 an ‘original cloud native architecture’ and ‘cloud-native platform.’” (See SAC ¶ 36.) 16 Specifically, in 2018, Cloudera released Altus, which, according to plaintiffs, it 17 “misleadingly touted . . . as a cloud offering,” even though “it lacked any of the key 18 features of effective cloud computing.” (See SAC ¶ 42.) 19 On September 27, 2017, Cloudera announced a secondary public offering 20 (“SPO”), which closed on October 2, 2017, and in which Li, “Cloudera’s earliest venture 21 capital backer,” Accel, Li’s venture capital firm, and Olson, Cloudera’s co-founder and 22 Chief Strategy Officer, “together sold over $112 million of Cloudera stock” at $15.79 per 23 share. (See SAC ¶¶ 44, 45, 109.) 24 Over a year later, on October 3, 2018, Cloudera announced it was merging with 25 Hortonworks, Inc. (the “Merger”) (see SAC ¶ 55), and, that same day, Reilly, at that time [26] the above-titled action previously was assigned, took the matter under submission. [27] 1 Cloudera’s Chief Executive Officer and Chairman of its Board of Directors, along with 2 Frankola, Cloudera’s Chief Financial Officer, hosted an investor conference call, in which 3 they promoted the Merger as one that would “unlock powerful synergies” (see SAC ¶ 50). 4 According to plaintiffs, however, “the Merger was consummated not to create ‘synergies,’ 5 but because the Company’s highest-ranking insiders knew that Cloudera was then facing 6 competitive industry forces so severe that they were simply incapable of achieving 7 organic growth,” (see SAC ¶ 49), specifically, “the Company’s customers were then 8 already moving their workloads to actual cloud providers like Amazon, Google and 9 Microsoft” (see ¶ SAC 51). 10 In addition, plaintiffs allege, Reilly, Frankola, Olson, and Li (collectively, “Insider 11 Defendants”), along with Cole, Hammonds, Schooler, Sordello, Stankey, Jain, Bearden, 12 Cormier, Fenton, and Klausmeyer (collectively, “Director Defendants”), “planned and 13 participated in the preparation of the statements contained in the Merger Registration 14 Statement” (see SAC ¶¶ 116, 137), effective November 20, 2018 (see SAC ¶ 10 n.7), 15 which contained material misrepresentations and omissions. Plaintiffs further allege that 16 Intel, “a semiconductor technology company[,] . . . held approximately 17.6% of 17 Cloudera’s outstanding common stock as of March 31, 2018,” (see SAC ¶ 90), and is 18 “thus strictly liable . . . for the materially inaccurate statements contained in the Merger 19 Registration Statement and the failure of the Merger Registration Statement to be 20 complete and accurate” (see SAC ¶ 92). 21 On January 3, 2019, the Merger closed. (See SAC ¶ 51.) Thereafter, in March 22 2019, Cloudera announced it was developing a product called Cloudera Data Platform 23 (“CDP”) (see SAC ¶¶ 9, 59), which it later released “for the public cloud in September 24 2019 and for the private cloud in August 2020” (see SAC ¶ 24).4 According to plaintiffs, [26] 4 Plaintiffs explain that “[a] company seeking to use cloud computing services can elect between a private cloud (where cloud services are exclusive to the company) and/or [27] a public cloud (where cloud services are owned and managed by a provider who also 1 “CDP was the Company’s first ever cloud-native product.” (See SAC ¶ 20.) 2 On June 5, 2019, the last day of the Class Period, Cloudera disclosed what 3 plaintiffs describe as “profoundly negative first quarter results for the period ended April 4 30, 2019, and drastically reduced fiscal year 2020 guidance,” and further announced the 5 departures of Reilly and Olson from the Company. (See SAC ¶ 61.) Also on June 5, 6 2019, during the Company’s earnings call, Reilly stated that “the announcement of [the] 7 [M]erger in October 2018 created uncertainty,” and that “[d]uring this period of 8 uncertainty, [Cloudera] saw increased competition from the public cloud vendors.” (See 9 SAC ¶ 65.) “The following day, on June 6, 2019, the Company’s share price closed at 10 $5.21 per share, a single day drop of approximately 40.8% on unusually massive volume 11 of 57.9 million shares traded.” (See SAC ¶ 61.) 12 Based on the above allegations, plaintiffs assert the following five Claims for 13 Relief: (1) a claim alleging, as against Cloudera, Intel, the Director Defendants, and the 14 Insider Defendants, violations of § 11 of the Securities Act of 1933 (“Securities Act”) 15 (Count I), (2) a claim alleging, as against Cloudera, violations of § 12(a)(2) of the 16 Securities Act (Count II), (3) a claim alleging, as against Intel, the Director Defendants, 17 and the Insider Defendants, violations of § 15 of the Securities Act (Count III), (4) a claim 18 alleging, as against Cloudera and the Insider Defendants, violations of § 10(b) of the 19 Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated 20 thereunder (Count IV), and (5) a claim alleging, as against the Insider Defendants, 21 violations of § 20(a) of the Exchange Act (Count V). 22 LEGAL STANDARD 23 Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be 24 based on the lack of a cognizable legal theory or the absence of sufficient facts alleged 25 under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696 , 26 699 (9th Cir. 1990). In analyzing a motion to dismiss, a district court must accept as true 27 all material allegations in the complaint and construe them in the light most favorable to 1 “To survive a motion to dismiss, a complaint must contain sufficient factual material, 2 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, [3] 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 4 “Factual allegations must be enough to raise a right to relief above the speculative 5 level[.]” Twombly, 550 U.S. at 555 . Courts “are not bound to accept as true a legal 6 conclusion couched as a factual allegation.” See Iqbal, 556 U.S. at 678 (internal 7 quotation and citation omitted). 8 Generally, a district court, in ruling on a Rule 12(b)(6) motion, may not consider 9 any material beyond the complaint. See Hal Roach Studios, Inc. v. Richard Feiner & Co., 10 Inc., 896 F.2d 1542 , 1555 n.19 (9th Cir. 1990). Documents whose contents are alleged 11 in the complaint, and whose authenticity no party questions, but which are not physically 12 attached to the pleading, however, may be considered. See Branch v. Tunnell, 14 F.3d 13 449, 454 (9th Cir. 1994). In addition, a district court may consider matters that are 14 subject to judicial notice, i.e., facts “not subject to reasonable dispute,” and the court 15 “must take judicial notice” of such facts “if a party requests it and the court is supplied 16 with the necessary information.” See Fed. R. Evid. 201(b)-(c). 17 DISCUSSION 18 At the outset, defendants request the Court “consider documents incorporated by 19 reference in the SAC and take judicial notice of certain documents,” altogether, thirty20 seven exhibits submitted in connection with their motion to dismiss. (See Decl. of Ryan 21 M. Keats, Dkt. No. 234-3; Defs.’ Req. for Consideration of Documents Incorporated into 22 Compl. and for Judicial Notice (“RJN”), Dkt. No. 235.) Plaintiffs oppose defendants’ 23 request as to Exhibits 2, 10, 19, 24, 26, 28, 31, and 36, and further oppose the request to 24 the extent any exhibit is offered for the truth of the matters stated therein. (See Pls.’ 25 Resp. to Defs.’ Req. for Consideration of Documents Incorporated into Compl. and for 26 Judicial Notice (“Pls.’ Resp.”) at 8:19-22, Dkt. No. 242.) 27 As to the opposed exhibits, although defendants request the Court take judicial 1 2017,” and Exhibit 24, a “Form 8-K as filed with the SEC on December 6, 2018,” (see 2 RJN at 6:25-26), neither is mentioned in their motion to dismiss, and defendants fail to 3 otherwise identify the facts therein on which they seek to rely. Accordingly, the Court 4 denies defendants’ request with respect to Exhibits 10 and 24. See Synopsys, Inc. v. 5 InnoGrit, Corp., 2019 WL 4848387 , at *6 (N.D. Cal. Oct. 1, 2019) (noting court “may deny 6 a request to take judicial notice of facts that are irrelevant to the . . . motion”) (collecting 7 cases). 8 Next, although defendants request judicial notice of Exhibit 36, “a chart listing 9 Cloudera’s stock prices from April 28, 2017[,] through January 31, 2020, which was 10 obtained from the Yahoo! Finance website” (see RJN at 7:8-9), to establish “Cloudera’s 11 stock price rose in the months following [a] sale” of stock by Olson (see Defs.’ Mot. to 12 Dismiss SAC (“Defs.’ Mot.”) at 15:1-2, Dkt. No. 234), the Court agrees with plaintiffs’ 13 argument that “such characterization is subject to reasonable dispute when viewed in 14 context” (see Pls.’ Resp. at 8:5). Accordingly, the Court takes judicial notice of Exhibit 36 15 only to the extent it establishes Cloudera’s historical stock prices. See Lee v. City of Los 16 Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (holding “a court may not take judicial notice 17 of a fact that is ‘subject to reasonable dispute’” (citing Fed. R. Evid. 201(b))); see also 18 ScripsAmerica, Inc. v. Ironridge Glob. LLC, 119 F. Supp. 3d 1213, 1232 (C.D. Cal. 2015) 19 (noting “[b]ecause publically traded companies[’] historical stock prices can be readily 20 ascertained and those prices are not subject to reasonable dispute, courts routinely take 21 judicial notice of them”).5 22 As to the unopposed exhibits, many are documents that are referenced and 23 quoted in the SAC, namely, SEC filings or transcripts of investor conference calls, and 24 plaintiffs do not dispute their authenticity. Accordingly, the Court grants defendants’ 25 request as to those exhibits, specifically, Exhibits 1, 3-9, 12-18, 20-23, 25, 27, 29, and 30. [27] 5 As to the remaining opposed exhibits, the Court has not relied on them in 1 Further, as to Exhibit 34, a “Voting and Standstill Agreement dated March 28, 2017[,] 2 between Intel Corporation and Cloudera, Inc.” (see RJN at 6:27-28), the Court grants 3 defendants’ unopposed request for judicial notice of the fact that said agreement 4 “prohibited Intel from increasing its holding above 20%” (see Defs.’ Mot. at 21 n.14), and, 5 as to Exhibit 37, “a copy of [the New York Stock Exchange’s (“NYSE”)] Listed Company 6 Manual sections 303A.01 and 303A.02, as accessed from the NYSE’s website on August 7 3, 2021,” (see RJN at 7:25-8:1), the Court grants defendants’ unopposed request for 8 judicial notice that said manual establishes what “[t]hose rules provide” (see Defs.’ Mot. 9 at 23:10). None of the above-noticed facts in Exhibits 34 and 37 is subject to reasonable 10 dispute. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) 11 (noting “[a] fact is ‘not subject to reasonable dispute’ if it is ‘generally known,’ or ‘can be 12 accurately and readily determined from sources whose accuracy cannot reasonably be 13 questioned’” (citing Fed. R. Evid. 201(b)(1)–(2))). 14 The Court next turns to plaintiffs’ claims. In the SAC, plaintiffs challenge forty-two 15 statements, comprising thirty-two under the Exchange Act (see SAC Ex. A) and ten under 16 the Securities Act (see SAC Ex. B).6 The Court considers first plaintiffs’ Exchange Act 17 claims, then proceeds to their Securities Act claims. 18 A. Count IV – § 10(b) of the Exchange Act and Rule 10b-5 19 Section 10(b) of the Exchange Act makes it unlawful “[t]o use or employ, in 20 connection with the purchase or sale of any security . . . any manipulative or deceptive 21 device or contrivance in contravention of such rules and regulations as the Commission 22 may prescribe.” See 15 U.S.C. § 78j(b). Additionally, Rule 10b–5, promulgated pursuant 23 to § 10(b), makes it unlawful, inter alia, “[t]o make any untrue statement of a material fact 24 or to omit to state a material fact necessary in order to make the statements made, in the 25 light of the circumstances under which they were made, not misleading.” See 17 C.F.R. [27] 6 As noted later herein, seven of these statements are challenged under both Acts. 1 § 240.10b–5(b). 2 To plead a claim under § 10(b) and Rule 10b-5, a plaintiff must allege “(1) a 3 material misrepresentation or omission; (2) scienter; (3) a connection between the 4 misrepresentation or omission and the purchase or sale of a security; (4) reliance; (5) 5 economic loss; and (6) loss causation.” See Oregon Pub. Emps. Ret. Fund v. Apollo 6 Grp. Inc., 774 F.3d 598, 603 (9th Cir. 2014). Claims brought under § 10(b) and Rule 10b7 5 must also meet the particularity requirements of Rule 9(b) of the Federal Rules of Civil 8 Procedure, see Fed. R. Civ. P. 9(b) (providing, “[i]n alleging fraud . . . , a party must state 9 with particularity the circumstances constituting fraud . . .”); Semegen v. Weidner, 780 10 F.2d 727, 731 (9th Cir. 1985) (applying Rule 9(b) to claim made under § 10(b) and Rule 11 10b-5) and, in addition to alleging Rule 9(b)’s requirements as to the “time, place and 12 nature of the alleged fraudulent activities,” a plaintiff must “plead evidentiary facts” 13 sufficient to establish any allegedly false statement “was untrue or misleading when 14 made,” see Fecht v. Price Co., 70 F.3d 1078, 1082 (9th Cir. 1995) (emphasis omitted) 15 (internal quotations and citations omitted). 16 Further, such plaintiff must meet the heightened pleading requirements of the 17 Private Securities Litigation Reform Act of 1995 (“PSLRA”), which requires the plaintiff to 18 “specify each statement alleged to have been misleading [and] the reason or reasons 19 why the statement is misleading,” see 15 U.S.C. § 78u-4(b)(1), and “state with 20 particularity facts giving rise to a strong inference that the defendant acted with the 21 required state of mind,” see § 78u-4(b)(2). 22 By order filed May 25, 2021, Judge Koh dismissed all forty-one statements alleged 23 in the Consolidated Amended Complaint (“CAC”) to have been made in violation of 24 § 10(b) and Rule 10b-5, finding they were “either (1) forward-looking statements 25 accompanied by meaningful cautionary language, and therefore immunized under the 26 PSLRA’s Safe Harbor provision; (2) not actionable as statements of corporate optimism; 27 or (3) because [p]laintiffs ha[d] failed to adequately allege that the statements were false 1 (“May 25 Order”) at 18:14-17, Dkt. No. 220.) 2 In the SAC, plaintiffs, as noted, now allege Cloudera and the Insider Defendants 3 made thirty-two false and misleading statements in violation of § 10(b) and Rule 10b-5. 4 (See SAC Ex. A.) In the instant motion, defendants argue “none of the challenged 5 statements were false or misleading at the time they were made or [they] are inactionable 6 as a matter of law.” (See Defs.’ Mot. at 5:20-22.) As set forth below, the Court agrees.7 7 1. General Statements of Fact 8 “The PSLRA has exacting requirements for pleading falsity.” See Metzler Inv. 9 GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1070 (9th Cir. 2008) (internal 10 quotation and citation omitted). To satisfy those “exacting requirements,” a plaintiff must 11 plead “specific facts indicating why” the statements at issue were false. See id. 12 Consistent therewith, a plaintiff must allege “specific contemporaneous statements or 13 conditions that demonstrate the . . . false or misleading nature of the statements when 14 made.” See Ronconi v. Larkin, 253 F.3d 423, 432 (9th Cir. 2001) (internal quotation and 15 citation omitted); see also Norfolk Cnty. Ret. Sys. v. Solazyme, Inc., 2016 WL 7475555 , 16 at *3 (N.D. Cal. Dec. 29, 2016) (dismissing claim brought under § 10(b) and Rule 10b-5; 17 finding complaint’s “allegations omit[ted] contemporaneous facts that would establish a 18 contradiction between the alleged materially misleading statements and reality”). 19 By the May 25 Order, Judge Koh found plaintiffs had “failed to adequately plead 20 falsity” as to thirty-two of the forty-one statements then alleged to be in violation of 21 § 10(b) and Rule 10b-5, twenty-seven of which “concern[ed] Cloudera’s cloud product 22 offerings.” (See May 25 Order at 19:14-20.) 23 a. Statements Regarding Cloud Products 24 In the SAC, plaintiffs now allege thirty-two statements were false and misleading in [25] 7 In light thereof, the Court does not address herein the question of whether [26] plaintiffs have sufficiently alleged facts that raise a “strong inference” that defendants acted with scienter, i.e., were “deliberately reckless” or engaged in “conscious [27] misconduct.” See DSAM Glob. Value Fund v. Altris Software, Inc., 288 F.3d 385 , 388–89 1 violation of § 10(b) and Rule 10b-5, twenty-four of which concern Cloudera’s cloud 2 products. Of those twenty-four statements, twenty were previously dismissed by Judge 3 Koh and four, specifically, Statements 4, 12, 19, and 22, are new. The Court discusses 4 below the twenty-four statements in chronological order, setting forth their content, along 5 with the context, exactly as plaintiffs allege in the SAC, but omitting any emphases added 6 by plaintiffs. 7 April 28, 2017, IPO Prospectus Statement 1 (by Cloudera and the Insider Defendants) 8 “Building on the approach of web-scale consumer internet companies, we have collaborated with the global open source community to innovate and [9] deliver our cloud-native platform.” [10] Statement 2 (by Cloudera and the Insider Defendants) 11 A key element of its strategy was “extending our original cloud-native architecture.” [12] 13 June 8, 2017, Earnings Call Statement 3 (by Reilly) 14 “Cloudera offers a leading cloud native software platform for machine learning and advanced analytics.”8 [15] September 7, 2017, Earnings Call [16] Statement 4 (by Reilly) 17 “Having a cloud-native platform fits nicely with enterprises’ desire to shift data and workloads to the cloud . . .” [18] Statement 5 (by Reilly) 19 “The second quarter also saw growth in the adoption of Cloudera Altus, our Platform-as-a-Service offering that enables data engineering and data [20] science workloads to run natively and easily in the public cloud.” [21] September 28, 2017, SPO Prospectus 22 Statement 6 (by Cloudera and the Insider Defendants) “Building on the approach of web-scale consumer internet companies, we 23 have collaborated with the global open source community to innovate and deliver our cloud-native platform.” [25] 8 Although plaintiffs allege Reilly stated “Cloudera offers the leading cloud native [26] software platform for machine learning and advanced analytics” (see SAC ¶ 163 (emphasis added)), the Court notes the earnings call transcript reflects he stated [27] “Cloudera offers a leading cloud native software platform . . .” (see Defs.’ Mot. Ex. 3 at 5 Statement 7 (by Cloudera and the Insider Defendants) [1] A key element of its strategy included “extending our original cloud-native 2 architecture . . . .” 3 Statement 8a (by Cloudera and the Insider Defendants) “Cloudera Altus is our platform-as-a-service (PaaS) offering. Altus is a 4 cloud service . . . .” [5] December 7, 2017, Earnings Call 6 Statement 9 (by Reilly) Defendant Reilly touted the Company’s “cloud-native data platform[.]”9 [7] Statement 10 (by Olson) 8 “Cloudera Altus Analytic DB is the first data warehouse cloud service that brings the warehouse to the data through a unique cloud-scale architecture [9] that eliminates complex and costly data movement.” [10] April 3, 2018, Earnings Call 11 Statement 11 (by Olson) The Company’s Altus offering “delivers the speed, convenience, elasticity 12 and ease-of-use expected in native public cloud services.” [13] Statement 12 (by Olson) 14 “Altus is uniquely multicloud[.]” 15 April 4, 2018, Annual Report Statement 8b (by Cloudera and the Insider Defendants) 16 “Altus is a cloud service that . . . enable[s] customers to address a new set of elastic and transient workloads that would otherwise be impractical to run [17] in the datacenter[.]” [18] Statement 17a (by Cloudera and the Insider Defendants) 19 The “Key elements” of Cloudera's strategy include that the Company's “original architecture was designed for the cloud. Our software platform [20] runs natively on public cloud infrastructure . . .” [21] Statement 18a (by Cloudera and the Insider Defendants) 22 Cloudera's offerings provided “[c]loud and on-premises deployment at scale and across hybrid cloud environments[.]” [23] June 6, 2018, Earnings Call [24] Statement 19 (by Cloudera and Reilly) 25 Defendant Reilly again boasted that a client was “taking advantage of our cloud-native architecture to improve agility to respond to ever-changing data [27] 9 The Court notes plaintiffs omit the word “data” from Statement 9 (see Defs.’ Mot. volume and business needs.” [1] 2 September 5, 2018, Press Release Statement 20 (by Reilly and Frankola) 3 Cloudera had introduced Cloudera Data Warehouse which it represented as “a modern data warehouse for self-service analytics, built with a hybrid 4 cloud-native architecture that handles 50 PB data workloads and enables hybrid compute, storage, and control for workload portability across public [5] clouds and enterprise data centers.” [6] September 5, 2018, Earnings Call 7 Statement 21 (by Cloudera and Olson) “Cloudera Data Warehouse is a modern data warehouse for self-service 8 analytics. Let me define modern data warehouse and why it's important in this world of exploding data and the Internet of Things. It's a cloud-native [9] architecture.” [10] Statement 22 (by Cloudera and Olson) 11 “We operate natively on those stores.” 12 Statement 23 (by Cloudera and Reilly) “With a modern architecture for on-premises deployments and being cloud13 native for public cloud infrastructure and Platform-as-a-Service 14 implementations, we believe we have the right set of solutions for the next phase of the data warehouse industry.” [15] October 3, 2018, Merger Conference Call 16 Statement 24 (by Cloudera and Reilly) “Our underlying platform, both what Hortonworks is delivering and ours is [17] cloud-native technology, and it flourishes in cloud compute environments so 18 we're very excited about accelerating our capabilities there.” 19 October 3, 2018, Merger Registration Statement (or incorporated therein) [20] Statement 8c (by Cloudera and the Insider Defendants) Same as Statement 8b [21] 22 Statement 17b (by Cloudera and the Insider Defendants) Same as Statement 17a [23] Statement 18b (by Cloudera and the Insider Defendants) [24] Same as Statement 18a [25] Statement 25 (by Cloudera and the Insider Defendants) 26 Cloudera could “leverage the latest advances in infrastructure including the public cloud for ‘big data’ applications.” [27] . . . flourishes in cloud compute environments so we’re very excited.” [1] 2 December 5, 2018, Earnings Call Statement 30 (by Cloudera and Reilly) 3 “Customers are coming to our platform, all of them are evaluating cloud, and it’s our hybrid cloud capabilities are winning . . . And so it is – we are 4 uniquely positioned to run where our customers want to run and give them a lot of flexibility.” [5] 6 December 6, 2018, Barclays Conference Statement 31 (by Cloudera and Reilly) 7 “. . . We're called Cloudera because when we started, we started with the original Hadoop project, we offered it as a cloud service on Amazon Web 8 Services in 2008 and software, okay? That's why we're called Cloudera . . . The market has now moved to us because we offer a hybrid capability, right, [9] so we run on-prem, bare metal, we run increasingly on private cloud, which 10 we think customers are really driving and we're hybrid and multi-cloud, okay? . . . . And we already have hybrid capabilities that they have to 11 develop, they've never really innovated in their space. And then, we're going to have multi-cloud. So we're taking it to them, momentum has 12 shifted in our favor and increasingly will go that way.” 13 (See SAC Ex. A at 1-28, 39-59, 76-83.) 14 Plaintiffs allege the above-referenced twenty-four statements were false and 15 misleading when made because, at the time, Cloudera’s “products were not ‘cloud16 native’” (see, e.g., SAC Ex. A at 1) and “were not ‘cloud-native architecture’” (see, e.g., 17 SAC Ex. A at 15). Plaintiffs allege “Cloudera did not possess a ‘cloud-native’ offering 18 until the Company released CDP for the public cloud in September 2019 and for the 19 private cloud in August 2020.” (See SAC ¶ 18.) 20 By the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent based 21 on the twenty-seven statements that concerned Cloudera’s cloud products as alleged in 22 the CAC, finding its “allegations . . . deficient because [p]laintiffs d[id] not explain what it 23 meant to have ‘cloud-native’ products or ‘cloud-native architecture’ at the time Cloudera 24 Defendants[10] made the challenged statements,” and “[w]ithout a contemporaneous 25 definition or explanation for what ‘cloud-native’ technology meant when Cloudera [26] 10 In said order, Judge Koh refers to Cloudera, along with the Insider Defendants [27] and Director Defendants, collectively, as “Cloudera Defendants.” (See May 25 Order at 1 Defendants made the challenged statements, the Court ha[d] no basis to find that 2 [p]laintiffs ha[d] adequately pled that Cloudera Defendants’ statements were false.” (See 3 May 25 Order at 20:26-21:6.) In particular, Judge Koh found plaintiffs’ reliance on a 4 “post-Class Period definition of ‘cloud native’ or ‘cloud architecture’” taken from “an article 5 published by Cloudera’s Chief Product Officer Arun Murthy [(“Murthy”)] on February 6, 6 2020, seven months after the close of the Class Period and one to two years after most 7 of the challenged statements were made,” specifically, plaintiffs’ characterization of the 8 article as stating that “‘cloud native’ and ‘cloud architecture’ mean that an offering has 9 specific material attributes such as the use of containers and Kubernetes, seamless 10 scalability, security and elasticity,” was “insufficient to demonstrate that ‘cloud native’ or 11 ‘cloud-native architecture’ was understood to include those particular attributes when 12 Cloudera Defendants made the challenged statements during the Class Period.” (See id. 13 at 21:9-14 (quoting CAC ¶ 192), 21:20-23.) To the extent plaintiffs rely on the same post14 Class Period definition taken from the Murthy article (see SAC ¶ 300), this Court, as 15 discussed below, finds the same problem persists. 16 First, as defendants point out, the Murthy article never uses the term “cloud native” 17 or “cloud architecture.” See Wochos v. Tesla, Inc., 985 F.3d 1180, 1193 (9th Cir. 2021) 18 (citing 15 U.S.C. § 78u-4(b)(1)) (alterations omitted) (holding “[w]here . . . a plaintiff 19 claims that the words used in a statement have some special or nuanced meaning . . . , 20 the plaintiff must plead facts that will support [such] crucial premise in order to satisfy the 21 PSLRA's requirement that a private securities plaintiff adequately plead ‘the reason or 22 reasons why a statement is misleading’”). Second, even if the article could be read in the 23 manner described by plaintiffs, their reliance thereon is unavailing for the reason that, as 24 Judge Koh found, any such statement is too remote in time from any of the challenged 25 statements. See Ronconi, 253 F.3d at 432 (requiring “contemporaneous statements” that 26 demonstrate falsity “when made”). 27 Similarly unavailing are plaintiffs’ new allegations, without any supporting facts, 1 “that such offerings or capabilities had specific material attributes such as the use of 2 containers, ease-of-use, seamless scalability, security and elasticity” (see SAC ¶ 36),11 12 3 and that those terms “had the same meaning in 2017 . . . as [they] do[] presently” (see 4 SAC ¶¶ 14-15). Such conclusory allegations do not constitute the requisite 5 “contemporaneous,” see Ronconi, 253 F.3d at 432 , facts sufficient to establish “cloud6 native” or “cloud architecture” had “the distinctive . . . meaning that [p]laintiffs claim,” see 7 Wochos, 985 F.3d at 1194 (noting challenged “statement would not be false unless the 8 term [therein] actually mean[t]” what plaintiffs alleged). Indeed, plaintiffs plead no 9 evidentiary facts to support such additional assertion, whether from a knowledgeable 10 witness, any of the above-referenced documents that used the term “cloud-native” or 11 “cloud architecture,” or any other source.13 See City of Roseville Employees' Ret. Sys. v. 12 Sterling Fin. Corp., 963 F. Supp. 2d 1092, 1121 (E.D. Wash. 2013), aff'd, 691 F. App'x 13 393 (9th Cir. 2017) (finding plaintiff’s asserted definition, “[a]bsent any support,” [14] 11 Plaintiffs rely on similar definitions to define “run natively and easily in the public [15] cloud” (see SAC ¶ 169 (explaining phrase “meant to a reasonable investor that such an offering has specific material attributes such as the use of containers, seamless [16] scalability, security and elasticity”)), “cloud-scale architecture” (see SAC ¶ 186 (same)), “native public cloud” (see SAC ¶ 194 (same)), “cloud service” (see SAC ¶ 211 (same)), [17] “multi-cloud” (see SAC ¶ 194 (explaining “[a] multi-cloud offering features cloud-based architecture . . . .”)), and “hybrid cloud” (see SAC ¶ 249 (explaining “[a] hybrid cloud [18] offering is a cloud-native offering”)). [19] 12 In their opposition, plaintiffs appear to rely on a slightly different definition, namely that “the term cloud-native has an industry-specific meaning understood by [20] reasonable investors to mean a software offering that ‘provide[s] on-demand, elastic, scalable and adaptable service models where processing and storage resources can be [21] accessed from any location via the internet[.]’” (See Pls.’ Opp’n at 7:15-17.) Irrespective of whether this definition is intended to supplement or supplant the definition discussed [22] above, it exemplifies the same deficiency, namely, a lack of supporting facts. Cf. Spitzberg v. Houston Am. Energy Corp., 758 F.3d 676, 689 (5th Cir. 2014) (finding where [23] term was contained in “a definitional system of ‘common reference’ for participants in the international petroleum industry,” plaintiffs plausibly alleged term had “widely accepted” [24] meaning in said industry); In re Terayon Commc'ns Sys., Inc., 2002 WL 989480 , at *1, *4 (N.D. Cal. Mar. 29, 2002) (finding “industry standard” was “term of art” in cable industry [25] where “cable industry consortium [was] charged with enforcing . . . industry standard known as . . . ‘DOCSIS’”). [26] 13 Without an adequately alleged definition of “cloud-native” or “cloud architecture,” [27] plaintiffs’ new allegations as to “consumption-based pricing” (see SAC ¶ 18) and “cloud 1 insufficient to establish term had “specific and well-understood meaning by investors”). 2 Cf. In re QuantumScape Sec. Class Action Litig., 580 F. Supp. 3d 714 , 732 (N.D. Cal. 3 2022) (finding report sufficient to support allegations of falsity as to attributes of 4 defendant’s product where nine former employees of defendant and four experts were 5 “interviewed . . . about [defendant’s] testing”). 6 Accordingly, to the extent plaintiffs’ claims are based on any of the above7 referenced twenty-four statements, such claims are subject to dismissal. 8 b. Other Statements for Which Plaintiffs Have Failed to Plead Falsity [9] 10 In the SAC, plaintiffs again challenge the below three statements, which they 11 allege were made during Cloudera’s April 3, 2018, earnings call after the Company 12 “announced its fourth quarter and fiscal year 2018 results for the periods ended January 13 31, 2018,” and “revenue guidance for the first fiscal quarter of 2019” (see SAC ¶ 191), 14 both of which were below Cloudera’s previous projections. According to plaintiffs, Reilly, 15 during the call, “suggested that the Company’s weak guidance and results were due to 16 ‘mistakes from where [they] directed [their] sales resources’ and being ‘over-rotated’” 17 (see SAC ¶ 193), “as opposed to the market’s shift to cloud offerings which the Company 18 then lacked” (see SAC ¶ 201). 19 April 3, 2018, Earnings Call Statement 13 (by Reilly) 20 “And expansion is the larger part of our business, because new customers start small, our expansion deals are more sizable. So we were just over21 rotated.” 22 Statement 15 (by Reilly) “So – and we're seeing the move to the cloud take shape unlike it did 2 [23] years ago. So I see nothing that gives me concern about the market.” [24] Statement 16 (by Reilly) 25 “No changes in the competitive landscape nor end market demand.” 26 (See SAC Ex. A at 31, 34-37.) 27 By the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent based 1 because Cloudera was not ‘over-rotated’ in its customer sales, but rather . . . had weak 2 products that could not compete against competitors’ offerings,” was not factually 3 supported, in that “[t]he only specific allegation that [p]laintiffs provide[d] to support the 4 falsity of [Statement 13] [wa]s that in September of 2019 Cloudera was forced to launch 5 its new cloud product CDP in order to compete with other cloud providers.” (See May 25 6 Order at 25:20-24.) In particular, Judge Koh found “the fact that Cloudera later launched 7 a new cloud product to compete with competitors d[id] not establish that its previous 8 product was weak or inadequate.” (See id. at 25:25-26.) 9 In the SAC, plaintiffs again allege Statement 13 was false when made because 10 “the Company’s disappointing guidance was not due to Cloudera being ‘over-rotated,’[14] 11 but rather stemmed from Cloudera’s products’ weak competitive position.” (See SAC ¶ 12 202.) In support thereof, plaintiffs again rely on Cloudera’s subsequent launch of CDP 13 (see SAC ¶ 202), which allegation, as Judge Koh previously found, “does not 14 demonstrate the falsity of [Statement 13]” (see May 25 Order at 26:3), and, plaintiffs’ 15 continued allegations that Cloudera “lacked any cloud-native architecture” and “did not 16 compete in the cloud market” (see SAC ¶ 202) are, as discussed earlier herein, see 17 supra Section A.1.a, inadequate to establish falsity. 18 Likewise unavailing are plaintiffs’ newly added allegations that “Altus could not 19 ‘deliver the speed, convenience, elasticity and ease of use expected in native public 20 cloud services’ because as Defendant Cole admitted in September 2019, Altus was not 21 ‘easy to use’ and lacked ‘pure public cloud capability.’” (See SAC ¶ 202.) Although the 22 Ninth Circuit has held falsity can be established “by means of a later statement by the 23 defendant” where the later statement is “similar to ‘I knew it all along,’” see Yourish v. 24 Cal. Amplifier, 191 F.3d 983 , 996 (9th Cir. 1999), plaintiffs here have not provided the 25 complete sentence(s) to which they cite, nor do they explain the meaning of “pure,” and, 26 in any event, even if Cole had said in September 2019 that Altus was not easy to use, [27] 1 there is no indication that Reilly had any knowledge or concerns regarding that aspect of 2 the product nearly one and a half years earlier. Accordingly, neither of Cole’s alleged 3 “admissions” can reasonably be said to resemble an “‘I knew it all along’ admission.” See 4 id.; see also In re Siebel Sys., Inc. Sec. Litig., 2005 WL 3555718 , at *4 (N.D. Cal. Dec. 5 28, 2005) (finding defendant’s post-class-period statement that a product had “kinks” did 6 not make earlier positive statement about product false; noting “[i]f that were the case, 7 the federal securities laws would prevent software companies from making any positive 8 statements about new software”). 9 Next, by the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent 10 based on Statement 15, finding plaintiffs’ allegation that the statement “was false 11 because Cloudera lacked cloud-native services and Cloudera could not provide public 12 cloud services comparable to its competitors” lacked factual support, in that, as 13 discussed above, plaintiffs “ha[d] failed to adequately plead falsity with respect to 14 Cloudera’s lack of cloud-native products” and, further, had “fail[ed] to allege any 15 contemporaneous factual allegations to support” their allegation “that ‘Cloudera’s 16 competitors’ cloud technologies were vastly outperforming the Company’s Hadoop17 focused platform.’” (See May 25 Order at 26:13-20.) 18 In the SAC, plaintiffs again allege Statement 15 was false “because . . . Cloudera 19 lacked any cloud-native architecture and . . . Cloudera’s Hadoop-based products could 20 not provide performance comparable to its competitors’ cloud offerings” (see SAC ¶ 202), 21 which allegations remain insufficient, in that plaintiffs have cured neither of the 22 deficiencies identified earlier by Judge Koh. 23 Although plaintiffs now allege that at the time Reilly made Statement 15, “Cloudera 24 had put in place cloud specialists, who solely focused on competing on the cloud,” and 25 that Reilly “later acknowledged [on] September 9, 2018[,] . . . that the Company 26 incentivized its sales force to pursue cloud workloads in an attempt to prevent cloud 27 vendors from ‘chipping away’ at their customers” (see SAC ¶ 200), neither allegation sets 1 materially misleading statement[] and reality,” see Norfolk, 2016 WL 7475555 , at *3.15 2 Further, although plaintiffs now assert “[d]efendants later admitted their lack of 3 cloud-native products drove customers elsewhere” (see Pls.’ Opp’n at 13 (citing SAC 4 ¶¶ 276, 299)), such assertion is not supported by the record. In particular, plaintiffs 5 allege that on June 5, 2019, Reilly stated “basically, here’s the backdrop[;] [w]e saw the 6 need to get more resources, more scale so that we can deliver a competitive cloud 7 offering and replatform into cloud architecture, and that’s why we did the [M]erger” (see 8 SAC ¶ 276), and that on December 13, 2019, Murthy stated “what we’ve been working on 9 for the last nine months after the merger of Cloudera and Hortonworks[] has been sort of 10 a reimagination of everything we have done[;] [i]t’s a reimagination of the entire stack to 11 make it really cloud native” (see SAC ¶ 299). Neither of those statements, however, 12 constitutes an admission that Cloudera’s “lack of cloud-native products drove customers 13 elsewhere” or otherwise contradicts Reilly’s statement, made more than a year earlier, 14 that he had no ”concern[s] about the market.” Similarly, Reilly’s statements, in June 15 2019, that Cloudera “saw increased competition” and was “at a competitive 16 disadvantage” during a period that “began with ‘the announcement of [the] [M]erger in 17 October 2018’” (see Pls.’ Opp’n at 13:22-27), do not serve to establish such 18 circumstances existed in April 2018, when Statement 15 was made, nor does plaintiffs’ 19 reliance on the same allegations discussed above in connection with Statement 13 20 provide any better support for Statement 15. 21 Lastly, by the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent 22 based on Statement 16, finding, contrary to plaintiffs’ allegation, two later statements by 23 defendant (see May 25 Order at 27:6-8 (citing CAC ¶¶ 95, 122)) failed to demonstrate its 24 falsity (see id. at 27:12-13 (noting neither statement “resembled an ‘I knew it all along’ [26] 15 Indeed, Reilly’s statement that Cloudera “incentivized its sales force to pursue cloud workloads” is consistent with defendants’ earlier statements that they had a cloud [27] product to sell, and consequently, as defendants point out, “undermines rather than 1 admission”) (citing Yourish, 191 F.3d 983 at 996)). 2 In response to the instant motion, plaintiffs no longer rely on those two statements, 3 and, instead, rely on the same allegations discussed above in connection with 4 Statements 13 and 15, which allegations fare no better at this juncture. 5 Accordingly, to the extent plaintiffs’ claims are based on Statement 13, 15, or 16, 6 such claims are subject to dismissal. 7 2. Corporate Puffery and Optimism 8 “Statements of mere corporate puffery, ‘vague statements of optimism like “good,” 9 “well-regarded,” or other feel good monikers,’ are not actionable because ‘professional 10 investors, and most amateur investors as well, know how to devalue the optimism of 11 corporate executives.’” Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 12 1051, 1060 (9th Cir. 2014) (quoting In re Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 13 2010)). 14 “The distinguishing characteristics of puffery are vague, highly subjective claims as 15 opposed to specific, detailed factual assertions.” City of Sunrise Firefighters’ Pension 16 Fund v. Oracle Corp., 2019 WL 6877195 , at *9 (N.D. Cal. Dec. 17, 2019) (internal 17 quotation and citation omitted). Consequently, courts have characterized as non18 actionable puffery such statements as “[w]e continue to see tremendous growth across 19 our cloud business,” “[c]ustomer adoption of our cloud products and services continues to 20 be very strong,” and “what we have called our on-premise business remains robust.” See [21] id. (alterations in original). 22 In the SAC, plaintiffs again challenge the below two statements. 23 April 3, 2018, Earnings Call Statement 14 (by Reilly) [24] “[T]he cloud is turning out to be a tremendous tailwind for us.” [25] March 13, 2019, Earnings Call 26 Statement 32 (by Cloudera and Reilly) “[W]e feel very strong that market is moving in our direction around the 27 hybrid multi-cloud, and then our functionality is best-in-class.” 1 By the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent based 2 on Statements 14 and 32, finding, as discussed earlier herein, plaintiffs had failed to 3 show falsity based on Cloudera’s lack of cloud products, and that the balance of the 4 statements constituted “non-actionable corporate puffery.” (See May 25 Order at 29:265 30:1.) 6 In the SAC, plaintiffs again plead the above statements were false, alleging 7 “Cloudera did not offer a cloud offering because its platform was not cloud-native or 8 based in cloud-architecture” (see SAC ¶ 259), which allegation, as discussed above, is 9 unaccompanied by supporting facts. Consequently, although there may be 10 circumstances where, as plaintiffs argue, “[c]ontext is key” (see Pls.’ Opp’n at 10:22), the 11 cases on which plaintiffs rely are readily distinguishable, as all involved an essentially 12 indisputable actuality, known to the defendants at the time the challenged statements 13 were made, that was diametrically opposed to that described in the challenged 14 statements. See, e.g., In re Petrobras Sec. Litig., 116 F. Supp. 3d 368, 372 , 381 15 (S.D.N.Y. 2015) (finding, in context of defendants’ “multi-year, multi-billion dollar bribery 16 and kickback scheme,” statements that defendant company “undertook to ‘conduct its 17 business with transparency and integrity’ and to ‘refuse any corrupt and bribery 18 practices’” was not “mere puffery”); see also Mulderrig v. Amyris, Inc., 492 F. Supp. 3d 19 999, 1019-21 (N.D. Cal. 2020); In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130 , 1143 20 (9th Cir. 2017); In re Rocket Fuel, Inc. Sec. Litig., 2015 U.S. Dist. LEXIS 171552 , at *1621 19 (N.D. Cal. 2015); and Arkansas Tchr. Ret. Sys. v. Bankrate, Inc., 18 F. Supp. 3d 482 , 22 485 (S.D.N.Y. 2014). 23 Here, in contrast, as defendants point out, “the context . . . is that [p]laintiffs have 24 failed to plead that ‘cloud native’ had any verifiable or established definition” (see Defs.’ 25 Reply at 7:14-16), and, as Judge Koh found, Statements 14 and 32 “echo statements . . . 26 courts . . . have previously found to be non-actionable statements of corporate puffery” 27 (see May 25 Order at 29:16-17); see also In re Pivotal Sec. Litig., 2020 WL 4193384 , at 1 providing a ‘cutting-edge,’ ‘leading,’ and ‘turnkey cloud-native platform’” not actionable; 2 characterizing statements as “vague assessments that ‘represent the “feel good” speak 3 that characterizes “non-actionable puffing”’”). 4 Accordingly, to the extent plaintiffs’ claims are based on Statement 14 or 32, such 5 claims are subject to dismissal. 6 3. Forward-Looking Statements 7 A forward-looking statement is “any statement regarding (1) financial projections, 8 (2) plans and objectives of management for future operations, (3) future economic 9 performance, or (4) the assumptions ‘underlying or related to’ any of these issues.” No. 10 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 11 F.3d 920, 936 (9th Cir. 2003) (citing 15 U.S.C. § 78u-5(i)). Under the PSLRA, a person 12 may not be held liable for a forward-looking statement, provided the statement is (1) 13 “identified as a forward-looking statement and accompanied by meaningful cautionary 14 statements identifying important factors that could cause actual results to differ materially 15 from those in the forward-looking statement” or (2) “immaterial.” See 15 U.S.C. § 78u16 5(c)(1)(A). On the other hand, if such statement is neither immaterial nor identified as 17 forward-looking and unaccompanied by meaningful cautionary language, such statement 18 falls outside the safe harbor if the plaintiff can show it “was made with actual knowledge 19 by [the speaker] that the statement was false or misleading.” See § 78u-5(c)(1)(B). “The 20 fact that [a] prediction proves to be wrong in hindsight,” however, “does not render the 21 statement untrue when made.” See In re VeriFone Sec. Litig., 11 F.3d 865, 871 (9th Cir. 22 1993). 23 In the SAC, plaintiffs again challenge the below three statements. 24 October 3, 2018, Merger Registration Statement (or incorporated therein) 25 Statement 26 (by Cloudera and the Insider Defendants) The Merger would “create a major cross-selling opportunity in the near [26] term[.]” [27] Statement 27 (by Reilly) 1 Statement 28 (by Cloudera and the Insider Defendants) The Merger would “improve Cloudera's . . . existing ability to expand 2 customer relationships and increase the penetration of new customer accounts,” such that Cloudera would “use the initial sale as a foothold to [3] increase revenue per customer by increasing the amount of data and 4 number of use cases each customer runs through our platform.” 5 (See SAC Ex. A at 66, 70, 73.) 6 By the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent based 7 on Statement 28, and also dismissed those claims to the extent based on statements 8 identical in substance to Statements 26 and 27,16 finding they constituted non-actionable 9 forward-looking statements protected under the PSLRA’s safe harbor. (See May 25 10 Order at 31:3-5.) Specifically, Judge Koh, noting those statements “all concern[ed] future 11 operational expectations or future economic performance and opportunities after the 12 [M]erger” (see id. at 31:8-9), found them to be “forward-looking on their face” (see id. at 13 31:17), and further found they were accompanied by “comprehensive language 14 identifying the[m] [as] forward-looking statements” (see id. at 31:26-32:1) as well as 15 “‘meaningful cautionary statements’ as required by the PSLRA” (see id. at 31:23-24). 16 In opposition to the instant motion, plaintiffs, citing Berson v. Applied Signal Tech., 17 Inc., 527 F.3d 982, 986 (9th Cir. 2008), now argue that “nothing in Cloudera’s alleged 18 cautionary language ‘alerts the reader that some of these risks may have already come 19 to fruition.’” (See Pls.’ Opp’n at 12 n.13.) Berson, however, did not involve a forward20 looking statement, see Berson, 527 F.3d at 990 (finding challenged statement “doesn’t 21 look forward”), and, as the Ninth Circuit has made clear, “if a forward-looking statement is 22 identified as such and accompanied by meaningful cautionary statements, then the state 23 of mind of the individual making the statement is irrelevant, and the statement is not 24 actionable regardless of the plaintiff's showing of scienter,” see Cutera, 610 F.3d at 1112 . [26] 16 Statement 26 is essentially the same as the CAC’s Statement 30, “The Merger would ‘increase cross-sell opportunities,’” and, Statement 27 is essentially the same as [27] the CAC’s Statement 31, “The Merger would ‘enlarge addressable market.’” (See CAC 1 Accordingly, to the extent plaintiffs’ claims are based on Statement 26, 27, or 28, 2 such claims are subject to dismissal. 3 B. Count V – § 20(a) of the Exchange Act 4 As noted, plaintiffs assert, as against the Insider Defendants, violations of § 20(a) 5 of the Exchange Act. 6 Under § 20(a) of the Exchange Act, any person who controls a person liable for 7 violating § 10(b) is jointly or severally liable for the violation. See 15 U.S.C. § 78t(a). 8 “[T]o prevail on . . . claims for violations of § 20(a),” however, “plaintiffs must first allege a 9 violation of § 10(b) or Rule 10b-5.” See Lipton v. Pathogenesis Corp., 284 F.3d 1027 , 10 1035 n.15 (9th Cir. 2002). 11 Here, as discussed above, plaintiffs have failed to state a claim under § 10(b) or 12 Rule 10b-5, and, consequently, such failure precludes plaintiffs from stating a claim under 13 § 20(a). 14 C. Counts I & II – §§ 11 and 12(a)(2) of the Securities Act 15 As noted, plaintiffs assert, as against Cloudera, Intel, the Director Defendants, and 16 the Insider Defendants, violations of § 11 of the Securities Act (Count I), and, as against 17 Cloudera, violations of § 12(a)(2) of the Securities Act (Count II). 18 Section 11 creates a private remedy for a purchaser of a security if “any part of [a] 19 registration statement, when such part became effective, contained an untrue statement 20 of a material fact or omitted to state a material fact required to be stated therein or 21 necessary to make the statements therein not misleading.” 15 U.S.C. § 77k(a). 22 Similarly, § 12 allows a purchaser of a security to sue “[a]ny person who . . . offers 23 or sells a security . . . by means of a prospectus or oral communication, which includes 24 an untrue statement of a material fact or omits to state a material fact necessary in order 25 to make the statements, in the light of the circumstances under which they were made, 26 not misleading.” 15 U.S.C.A. § 77l(a)(2). 27 To plead a claim under § 11, a plaintiff “must demonstrate (1) that the registration 1 misrepresentation was material, that is, it would have misled a reasonable investor about 2 the nature of his or her investment.” See In re Daou Sys., Inc., 411 F.3d 1006, 1027 (9th 3 Cir. 2005) (internal quotation and citation omitted). “The same standard applies for 4 pleading a violation of Section 12(a)(2).” See Pivotal, 2020 WL 4193384 , at *5. 5 Further, although neither § 11 nor § 12 contains an element of fraud, a plaintiff 6 nonetheless is “subject to Rule 9(b)'s particularity mandate if his complaint ‘sounds in 7 fraud.’” See Daou, 411 F.3d 1006 , 1027 (9th Cir. 2005); see also In re Charles Schwab 8 Corp. Sec. Litig., 257 F.R.D. 534, 548 (N.D. Cal. 2009) (noting although “[a]s with Section 9 11, fraud is not an element of a Section 12(a)(2) claim[,] . . . Section 12(a)(2) claim must 10 satisfy Rule 9(b) . . . to the extent that the factual allegations sound in fraud”). 11 By the May 25 Order, Judge Koh, noting “[p]laintiffs’ Securities Act and Exchange 12 Act allegations are almost identical,” found “the heightened pleading standards of Rule 13 9(b) appl[ied] to [p]laintiffs’ Securities Act claims.” (See May 25 Order at 36:7-10.) 14 Plaintiffs, in the SAC, again “make only a nominal effort to disclaim allegations of 15 fraud” (see May 25 Order at 35:23-24) with respect to their Securities Act claims (see 16 CAC ¶ 193 (alleging Securities Act claims “are not based on any allegations of knowing 17 or reckless misconduct and do not allege, and do not sound in, fraud”); SAC ¶ 312 18 (same)). In their opposition, plaintiffs make no argument as to why Rule 9(b) does not 19 apply, and as before, plaintiffs’ Securities Act and Exchange Act allegations remain, in 20 essence, identical. Consequently, the heightened pleading standards of Rule 9(b) apply 21 to plaintiffs’ Securities Act claims. See Rubke v. Capitol Bancorp Ltd, 551 F.3d 1156 , 22 1161 (9th Cir. 2009) (citing Daou, 411 F.3d at 1028 ) (holding where “complaint employs 23 the exact same factual allegations to allege violations of section 11 as it uses to allege 24 fraudulent conduct under section 10(b) of the Exchange Act, we can assume that it 25 sounds in fraud”). 26 By the May 25 Order, Judge Koh dismissed plaintiffs’ Securities Act claims, which 27 were based on fourteen statements alleged in the CAC, finding either that plaintiffs had 1 looking statements protected under the PSLRA’s safe harbor. (See May 25 Order at 2 39:17, 41:23-24.) 3 In the SAC, plaintiffs now allege defendants made ten false and misleading 4 statements in violation of §§ 11 and 12(a)(2) of the Securities Act. In the instant motion, 5 defendants argue the statements should again be dismissed for the same reasons Judge 6 Koh previously found. (See Defs.’ Mot. at 10:25-11:9.) As set forth below, the Court 7 agrees.17 8 1. General Statements of Fact 9 a. Statements Regarding Cloud Products 10 In the SAC, plaintiffs again challenge the below five statements. 11 October 3, 2018, Merger Registration Statement (or incorporated therein) [12] Statement 33 (by all defendants) 13 The Company's product offerings’ “original architecture was designed for the cloud.” [14] 15 Statement 34 (by all defendants) The Company's product offerings “run[] natively on public cloud 16 infrastructure[.]” 17 Statement 35 (by all defendants) Cloudera's offerings provided “[c]loud and on-premises deployment at scale [18] and across hybrid cloud environments[.]” [19] Statement 36 (by all defendants) 20 Cloudera's product “Altus is a cloud service . . . that enable[s] customers to address a new set of elastic and transient workloads that would otherwise 21 be impractical to run in the datacenter,” highlighting its purportedly “ongoing performance in the areas of cloud,” and ability to provide “[c]loud . . . [22] deployment at scale.” [24] 17 Although plaintiffs, citing In re Cloudera Secs. Litig., 2020 Cal. Super. LEXIS 98 (Santa Clara Super. Ct. July 1, 2020), assert “a California Superior Court has already [25] determined that [d]efendants’ statements about their Class Period technological capabilities were actionable” (see Pls.’ Opp’n at 2:8-10), the “Superior Court applied a [26] pleading standard that requires far less than the standards applicable here” (see Defs.’ Reply at 7:9-10); see also In re Cloudera Secs. Litig., 2020 Cal. Super. LEXIS 98 , at *15 [27] (explaining “the facts alleged in the pleading are deemed to be true, however improbable 1 Statement 40 (by all defendants) Cloudera characterized “Altus” as a “cloud” offering and asserted the [2] “complementary product[]” would create “[p]owerful [s]ynergies” for 3 “[r]evenue.” 4 (See SAC Ex. B at 1-3, 7.) Statements 33 and 34 are portions of Statement 17; 5 Statement 35 is the same as Statement 18; and Statement 36, with the exception of the 6 phrase “ongoing performance in the areas of cloud,” constitutes a combination of 7 Statements 8b, 8c, and 18a. 8 In support of their Securities Act claims, plaintiffs proffer essentially the same 9 allegations of falsity as they offered in support of their Exchange Act claims (see, e.g., 10 SAC ¶ 336 (alleging “Cloudera had no cloud offering”), ¶ 338 (alleging “Daniel Sturman 11 who was responsible for developing Altus, left Cloudera shortly after the Merger given the 12 Company’s cloud washed offerings”), ¶ 342 (alleging “Company’s platforms . . . were 13 technologically obsolete such that Cloudera’s . . . customers . . . were canceling and/or 14 delaying renewals while their in-house engineering teams independently learned to 15 perform the same or superior functions and services that Cloudera sold without paying 16 Cloudera”)),18 and, the Court, having found such allegations inadequate, likewise finds so 17 here. 18 Statement 40, although not alleged earlier in the SAC, is the same as Statement 19 53 in the CAC (see CAC ¶ 205), which by the May 25 Order, Judge Koh found insufficient 20 to support plaintiffs’ claims. In particular, Judge Koh found plaintiffs’ allegation that the 21 statement was false because Altus was “not a ‘viable cloud product’” was unavailing, as 22 plaintiffs “acknowledge[d] that Altus was a cloud product and d[id] not explain specifically 23 why it was not viable.” (See May 25 Order at 37:16-18.) In the SAC, plaintiffs, striking [25] 18 Although this allegation (see SAC ¶ 342) is arguably more specific than a similar allegation offered earlier with respect to plaintiffs’ Exchange Act claims (see SAC ¶ 189 [26] (alleging “Cloudera’s own customers in critical markets were so dissatisfied with Cloudera’s products, service and cost, they were building out their own data [27] management solutions superior to what Cloudera offered”)), plaintiffs again fail to provide 1 the word “viable,” now allege Statement 40 was false and misleading “because Altus was 2 not a ‘cloud product’” (see SAC ¶ 348), which allegation, as discussed earlier herein, see 3 supra Section A.1.a, is inadequate to establish falsity of the challenged statement. 4 Accordingly, to the extent plaintiffs’ claims are based on Statement 33, 34, 35, 36, 5 or 40, such claims are subject to dismissal. 6 b. Risk Disclosures 7 In the SAC, plaintiffs again challenge the below two statements. [8] Statement 41 (by all defendants) 9 The Merger Registration Statement provided investors with generalized “possible” “Risk Factors” related to the Merger, stating that “if” a “risk” occurred it “could” or 10 “may” possibly negatively impact the Company. 11 Statement 42 (by all defendants) While Microsoft, Google and Amazon had a vast commercial advantage in cloud [12] computing, and the scale to render Cloudera's mundane Altus offering effectively 13 irrelevant at the time of the Merger, the Company's relevant SEC filing “Risk Factors” meagerly suggested that the Company “could lose market share to our 14 competitors, which could adversely affect our business, financial condition and results of operations.” [15] (See SAC Ex. B at 8, 10.) [16] By the May 25 Order, Judge Koh dismissed plaintiffs’ claims to the extent based [17] on these two statements, finding plaintiffs failed to plead sufficient factual allegations to [18] support their allegation that “the risks warned of had, in fact, already materialized at the [19] time of the Merger.” (See May 25 Order at 40:9-10.) In particular, as to Statement 42, [20] Judge Koh found plaintiffs’ allegation that the risks referenced therein “had already come [21] to pass because Cloudera’s ‘market share in cloud was virtually nonexistent at the time of [22] the Merger’ . . . lack[ed] merit,” in that “Cloudera Defendants did not claim to have a [23] particular share of the market” but rather “simply acknowledged . . . they could lose [24] market share to competitors going forward” (see id. at 40:16-21); further, as to both [25] statements, Judge Koh found plaintiffs relied on “the same inadequate allegations [26] regarding Cloudera’s lack of a viable cloud product, which the Court ha[d] already found [27] 1 In opposition to the instant motion, plaintiffs offer no new allegations or arguments 2 in support of their assertion that the above-referenced statements were false when made. 3 Accordingly, to the extent plaintiffs’ claims are based on Statement 41 or 42, such 4 claims are subject to dismissal. 5 2. Forward-Looking Statements 6 In the SAC, plaintiffs again challenge the below three statements. [7] Statement 37 (by all defendants) 8 The Merger would “create a major cross-selling opportunity in the near term.” [9] Statement 38 (by all defendants) 10 The Merger would “expand[] our addressable market[.]” [11] Statement 39 (by all defendants) 12 The Merger would “improve Cloudera's . . . existing ability to expand customer relationships and increase the penetration of new customer 13 accounts,” such that Cloudera would “use the initial sale as a foothold to increase revenue per customer by increasing the amount of data and 14 number of use cases each customer runs through our platform.” 15 (See SAC Ex. B at 4-6.) Statement 37 is the same as Statement 26; Statement 38 is the 16 same as Statement 27; and Statement 39 is the same as Statement 28. 17 By the May 25 Order, Judge Koh dismissed plaintiffs’ Securities Act claims to the 18 extent based on these statements for the same reasons as she dismissed their Exchange 19 Act claims, and as discussed above, this Court likewise has dismissed the Exchange Act 20 claims. See supra Section A.3. 21 In opposition to the instant motion, plaintiffs offer no new allegations or arguments 22 in support of their assertion that the above-referenced statements were false when made 23 nor as to why they were not forward-looking statements protected under the PSLRA’s 24 safe harbor. 25 Accordingly, to the extent plaintiffs’ claims are based on Statement 37, 38, or 39, 26 such claims are subject to dismissal. 27 D. Count III – § 15 of the Securities Act 1 Insider Defendants, violations of § 15 of the Securities Act. 2 Under § 15 of the Securities Act, any person who controls a person liable for 3 || violating § 11 or § 12 is jointly or severally liable for the violation. See 15 U.S.C. 4 || § 77o(a). “To state a claim against a control person under Section 15 of the Securities 5 || Act, [plaintiffs must plausibly allege (1) an underlying violation of Section 11 or 12, and 6 (2) control.” See Pivotal, 2020 WL 4193384 , at *9. 7 Here, as discussed above, plaintiffs have failed to state a claim under § 11 or § 12, 8 || and, consequently, such failure precludes plaintiffs from stating a claim under § 15. 9 CONCLUSION 10 For the reasons set forth above, defendants’ motion to dismiss the SAC is hereby 11 GRANTED, and the SAC is hereby DISMISSED without further leave to amend. (See 12 || May 25 Order at 43:15-17 (warning “failure to cure the deficiencies identified in this Order 13 || and in [dJefendants’ motions to dismiss, will result in dismissal of [p]laintiffs’ deficient || claims with prejudice’).)"? [15] Q 16 IT IS SO ORDERED. Cc [17] 18 || Dated: October 25, 2022 AKINE M. CHESNEY 19 United States District Judge [25] 26 '9 As to defendant Hammonds, although, under Rule 25 of the Federal Rules of Civil Procedure, a motion for substitution may be made within 90 days after service of “a statement noting the death,” see Fed. R. Civ. P. 25(a)(1), in the instant case, such 27 wags wee tes \ ve substitution would be futile, as plaintiffs’ claims against any successor-in-interest would 2g || be dismissed on the grounds set forth herein.