Klein v. Micron Technology, Inc. et al

MEMORANDUM DECISION AND O RDER - 1
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
In re: MICRON TECHNOLOGY INC.
SECURITIES LITIGATION
THIS DOCUMENT RELATES TO:
All Actions.
Case No.: 1:25-cv-00191-BLW
MEMORANDUM DECISION
AND ORDER
INTRODUCTION
Before the Court is Defendant’s Motion to Dismiss the Amended Class
Action Complaint (Dkt. 60). Oral argument was held on December 1, 2025. For the
reasons explained below, the Court will dismiss the Amended Complaint but grant
Plaintiffs leave to amend.
BACKGROUND
This is a securities fraud class action on behalf of a class that consists of
persons who purchased Micron stock between March 29, 2023, and December 18,
2024—a period from the second quarter of FY 2023 (FQ2-23) to the first quarter
of FY 2025 (FQ1-25). Plaintiffs allege that Micron knowingly misrepresented
global supply and demand dynamics for microchips during this period, at the same
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time that its CEO, Sanjay Mehrotra, entered a plan to sell a large amount of stock.
Micron manufactures semiconductor memory and storage products,
including DRAM and NAND chips. Due to the long production lead-time for these
chips, Micron must make production decisions a year in advance based on highly
detailed forecasts of market demand. Like others in the industry, Micron
experienced a sharp and unexpected downturn in the year prior to the Class Period.
Micron’s revenue dropped by almost 60% beginning in the fourth quarter of 2022,
and its inventories increased by over 50%. But, by FY23 2Q—the first day of the
Class Period—Micron began predicting a gradual recovery in supply-demand
balance, and these statements grew increasingly optimistic over the next year. For
instance, in late March 2023, Mr. Mehrotra told investors that Micron remained
“confident in long-term demand” and believed that the memory and storage market
would “grow to a new record in calendar 2025.” Am. Compl. ¶ 98-99, Dkt. 59. In
June 2024, he reiterated that Micron was “well positioned to deliver a substantial
revenue record in fiscal 2025.” Id. ¶ 142. The next quarter he forecasted “record
revenue in fiscal Q1 and a substantial revenue record with significantly improved
profitability in fiscal 2025.” Id. ¶ 153. In August 2024, Micron resumed its stock
repurchase program, which had been suspended due to the 2022 downturn.
At around the same time, Mr. Mehrotra adopted a 10b5-1 plan to liquidate
nearly half of his Micron holdings. Under the plan, entered on May 15, 2023, Mr.
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Mehrotra sold approximately 44% of his stock from August 14, 2023, to June 18,
2024. This resulted in total proceeds of $77,471,537.
In large part, Micron’s confidence prove accurate. The company’s revenue
grew each quarter throughout the Class Period, and the Class Period ended with
record quarterly revenue. But this growth was uneven. DRAM sales increased, but
sales of NAND products slowed by about 5% in FQ1-25. On December 18, 2024,
due primarily to the NAND fall-off, Micron issued reduced earnings guidance for
FQ2-25, which included a 20-30% drop in adjusted earnings per share and a
roughly 2-4% drop in adjusted gross margin. As a result, Micron’s stock price fell
from $103.90 to $87.09—a reduction of approximately 16%. In another sign of
mismatched supply and demand, Micron’s quarterly total inventories increased by
9.2% during the Class Period. Still, these disappointments were not the whole
story. Even after the December 18 guidance, Micron’s stock price remained more
than 50% higher than the price at the start of the Class Period, and quarterly
revenue continued to grow.
Plaintiffs identify 32 statements by Micron that allegedly constitute material
misrepresentations or omissions. Many of these are fairly general predictions of
market conditions and revenue growth, though some specifically pertain to the
NAND market. See Am. Compl. ¶¶ 104, 110, 116, 122, 126, 128, 132, 134, 144,
146-47, 155, Dkt. 59. The Amended Complaint also includes allegations by a
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confidential witness (CW1), who worked for Micron in financial positions from
1992 to December 2023, most recently in the role of Finance Director for
Technology Development. CW1 does not claim to have directly observed fraud,
but he attests to Micron’s detailed and rigorous process for forecasting demand.
Various groups of Micron shareholders originally filed four different
securities fraud actions, which were consolidated under the present case. The
Amended Complaint names Micron, Mr. Mehrotra, and Micron Chief Financial
Officer Mark Murphy as defendants. Plaintiffs allege that Defendants’
misrepresentations and omissions violate Sections 10(b) and 20(a) of the Exchange
Act. Defendants now move to dismiss the Amended Complaint.
LEGAL STANDARD
A plaintiff bringing a private securities fraud action must plead “(1) a
material misrepresentation or omission of fact, (2) scienter, (3) a connection with
the purchase or sale of a security, (4) transaction and loss causation, and (5)
economic loss.” Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049,1055
(9th Cir. 2008). Federal Rule of Civil Procedure 8(a)(2) requires that a complaint
provide only “a short and plain statement of the claim showing that the pleader is
entitled to relief,” to “give the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). Thus, typically, a complaint attacked by a Rule 12(b)(6) motion to dismiss
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“does not need detailed factual allegations,” though it must set forth “more than
labels and conclusions.” Id. at 555. Under this standard, a complaint will survive a
motion to dismiss if it contains sufficient factual matter, accepted as true, to “state
a claim to relief that is plausible on its face.” Id. at 570.
Claims for securities fraud, however, must also meet the “formidable”
pleading requirements of the Private Securities Litigation Reform Act (PSLRA). In
re. NVIDIA Sec. Litig., 768 F.3d 1046, 1053 (9th Cir. 2014). Under the PSLRA, a
complaint must “plead with particularity both falsity and scienter.” Zucco Partners,
LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009). Moreover, the
complaint must give rise to “a strong inference that the defendant acted with the
required state of mind.” 15 U.S.C. § 78u–4(b)(2). A “strong inference,” the
Supreme Court has explained, “must be more than merely plausible or
reasonable—it must be cogent and at least as compelling as any opposing inference
of nonfraudulent intent.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 314 (2007).
In this assessment, the court must consider the complaint in its entirety,
asking “whether all of the facts alleged, taken collectively, give rise to a strong
inference of scienter, not whether any individual allegation, scrutinized in isolation,
meets that standard.” Id. at 323. The court must also take a comparative approach
that considers “plausible opposing inferences.” Id. In other words, “How likely is it
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that one conclusion, as compared to others, follows from the underlying facts?” Id.
Finally, the PSLRA requires the complaint to “specify each statement
alleged to have been misleading, the reason or reasons why the statement is
misleading, and, if an allegation regarding the statement or omission is made on
information and belief, the complaint shall state with particularity all facts on
which that belief is formed.” 15 U.S.C. § 78u–4(b)(1).
ANALYSIS
Plaintiffs’ allegations do not meet the demands of the PSLRA. First, the
allegations fail to give rise to a sufficient inference of scienter. Second, the
Amended Complaint does not sufficiently plead that the challenged statements
were false or materially misleading. Additionally, many of the statements are
protected by the PSLRA’s Safe Harbor and/or constitute non-actionable puffery.
A. Scienter
The scienter element of a securities fraud action requires a “mental state
embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder,
425 U.S. 185, 193-94 n.12 (1976). In the Ninth Circuit, the plaintiff must establish
“a strong inference of, at a minimum, deliberate recklessness” regarding the danger
of misleading buyers or sellers. In re. NVIDIA Sec. Litig., 768 F.3d 1046, 1053 (9th
Cir. 2014). Further, though the factual allegations in the complaint are accepted as
true at the motion to dismiss stage, “the court must take into account plausible
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opposing inferences.” Tellabs, 551 U.S. at 323. The inference of scienter need not
be “irrefutable,” but it must be “cogent and at least as compelling as any opposing
inference.” Id. at 324.
Plaintiffs purport to raise an inference of scienter based on (1) Mr.
Mehrotra’s sale of 43.9% of his stock, (2) CW1’s statements about Micron’s
financial practices, and (3) a retained expert’s analysis of Micron’s inventory levels
and ratios. Viewing the Amended Complaint as a whole, this is insufficient to
establish deliberate recklessness on the part of Micron.
First, Mr. Mehrotra’s stock sale is not nearly as suspicious as Plaintiffs
suggest. “Unusual trading or trading at suspicious times or in suspicious amounts
by corporate insiders has long been recognized as probative of scienter.” In re
Daou Systems, Inc., 411 F.3d 1006, 1022 (9th Cir. 2005), abrogated on other
grounds, Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011). To determine
whether stock sales give rise to an inference of scienter, courts consider factors
including “ (1) the amount and percentage of shares sold by insiders; (2) the timing
of the sales; and (3) whether the sales were consistent with the insider's prior
trading history.” Zucco, 552 F.3d 981 at 1005. The Ninth Circuit gives particular
weight to the percentage of stock sold. Nursing Home Pension Fund, Loc. 144 v.
Oracle Corp., 380 F.3d 1226, 1232 (9th Cir. 2004).
The sale was unusual in that Mr. Mehrotra had not previously made a sale at
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anywhere near that scale. But, he sold less than half his holdings, making this
factor at best neutral. See, e.g., Metzler, 540 F.3d 1049 (no scienter inference from
sale of 37% of stock); In re Dermtech, Inc. Sec. Litig., No. 23-cv-1885, 2025 WL
1618193, at* 9 (scienter inference from sale of 22.1% of stock). Further,
approximately half of the sales occurred when Micron’s stock price was below
$87.09—the price after the complained-of December 2024 guidance. In other
words, if Mr. Mehrotra was trying to capitalize on lies that he told investors, he did
a very poor job of it. Additionally, no other insiders made similar sales. This lack
of corroboration is not always fatal, but it certainly weakens Plaintiffs’ case. See
Metzler, 540 F.3d at 1067 (noting that the Ninth Circuit typically requires
“corroborative sales by other defendants” to support an inference of scienter).
Second, CW1’s statements also fail to support to an inference of scienter.
The PSLRA imposes two hurdles when a complaint uses statements by a
confidential witness to establish scienter. First, the witness “must be described with
particularity to establish their reliability and personal knowledge.” Zucco, 552 F.3d
at 995. Second, the statements of the witness “must themselves be indicative of
scienter.” Id.
CW1’s statements fall short on the second prong. The Amended Complaint
describes CW1’s job title and responsibilities, which is sufficiently particular to
establish his personal knowledge. His statements, however, are limited to Micron’s
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general financial practices, such as its “Flash Reports” and revenue forecasting
process. Am. Compl. ¶ 40, Dkt. 59. Nothing in CW1’s account indicates that
Defendants knew of the coming downturn in NAND sales or otherwise acted with
deliberate recklessness. CW1’s allegations are far too broad to create an inference
of scienter.
Third, the opinions of Plaintiff’s expert, Arcady Zaydenberg, do not support
scienter. In a securities fraud action, an expert’s statements must meet the same
standard as those of a confidential witness. Chen v. Lyft, Inc., 762 F. Supp. 3d 909,
919 (N.D. Cal. 2025). That is, “the expert’s opinion must (1) be described with
sufficient particularity to establish the expert’s reliability and personal knowledge;
and (2) themselves be indicative of scienter.” Id. Mr. Zaydenberg does not appear
to have any relevant personal knowledge—his opinion is based on SEC filings—
and the Amended Complaint provides no information about his methodology. For
these reasons, the Court cannot infer scienter from his opinion that Micron’s
inventory levels in late 2024 were “not consistent with the expectation of a
significant rise in revenue in the immediate future.” See Am. Compl. ¶ 96, Dkt. 59.
The above allegations fail individually to give rise to a strong inference of
scienter, and they also fail when considered collectively. A reasonable person
viewing these facts holistically would see a business successfully navigating, albeit
with some hiccups, a complex and turbulent market environment—not a scheme to
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defraud investors. For this reason, the Amended Complaint must be dismissed.
B. Falsity
Plaintiffs also have not adequately pled that the challenged statements were
materially false or misleading. Statements are misleading if they “give a reasonable
investor the impression of a state of affairs that differs in a material way from the
one that actually exists.” Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 987
(9th Cir. 2008). This is a context-based assessment, and “some statements,
although literally accurate, can become, through their context and manner of
presentation, devices which mislead investors.” Miller v. Thane Intern., Inc., 519
F.3d 879, 886 (9th Cir. 2008).
Because the absence of scienter provides such a clear basis for dismissal, the
analysis here will be fairly brief. The challenged statements center on what
Plaintiffs describe as Defendants’ “misleading touting of Micron’s prospects.” Dkt.
64 at 9. Essentially, Plaintiffs allege that Micron falsely predicted a market
recovery. But although Micron’s December 2024 disclosures were weaker than
what investors anticipated, due mostly to the drop in NAND sales, that
disappointment is not enough to render Micron’s statements misleading. To start,
the challenged statements were generally made in reference to a fiscal or calendar
year—not merely a quarter—and they mostly dealt with broad supply issues. From
that perspective, Micron’s optimism was accurate. Micron did in fact report record
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revenue, and overall demand for Micron’s products did continue to grow,
notwithstanding the NAND drop. Moreover, even Micron’s NAND revenue
ballooned overall during the Class Period, from $885 million in FQ2-23 to $2.24
billion in FQ1-25, with the FQ1-25 downturn representing a drop from $2.37
billion. Against this backdrop, a small downturn in the sale of a single product
during a single quarter is not enough to render the challenged statements materially
false or misleading.
Crucially, the FQ2-25 guidance issued in December 2024—the crux of
Plaintiffs’ complaints—did not actually contradict Micron’s previous statements.
The guidance still showed increasing revenue and profitability, consistent with
Micron’s statements about the improving market. The growth was merely less than
expected by analysts outside of the company. In other words, Micron’s investors
would still be getting richer, but not as much richer as these analysts had led them
to believe. Micron’s failure to meet the expectations of these outsiders is not the
basis for a securities fraud claim.
C. PSLRA Safe Harbor
Another problem for Plaintiffs is the PSLRA’s Safe Harbor for forward-
looking statements. The Safe Harbor protects forward-looking statements that
either (1) were identified as such and accompanied by “meaningful cautionary
statements,” or (2) made without actual knowledge of falsity. The line between
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these protected predictive statements and descriptions of present conditions can be
tricky to define, and defendants cannot invoke the Safe Harbor simply cause they
have “combin[ed] non-forward-looking statements about past or current facts with
forward-looking statements about projected revenues and earnings.” In re. Quality
Sys. Sec. Litig., 865 F.3d 1130, 1141 (9th Cir. 2017). Still, even with a narrow
interpretation of “forward-looking,” most of the challenged statements fall within
the Safe Harbor.
Though the Court will not analyze this issue in detail, given that the
Amended Complaint fails for independent reasons, statements 2, 3, 5, 8, 9, 10, 12,
14, 15, 16, 19, 20, 23, 24, 25, 28, and 29 appear on their face to be forward-
looking. See, e.g., Am. Compl. ¶ 100, Dkt. 59 (“[W]e believe that the memory and
storage TAM will grow to a new record in calendar 2025 and will continue to
outpace the growth of the semiconductor industry thereafter.”). It is not fully clear
from the filings how many of these were accompanied by “meaningful cautionary
statements,” but Plaintiffs have not sufficiently alleged that any of the statements
were made with actual knowledge of falsity. This leaves only 14 potentially
actionable statements, setting aside the other shortcomings already discussed.
D. Puffery
Finally, many of the challenged statements are nonactionable puffery.
“[V]ague statements of optimism like ‘good,’ ‘well-regarded,’ or other feel good
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monikers, are not actionable because professional investors, and most amateur
investors as well, know how to devalue the optimism of corporate executives.”
Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1060 (9th Cir.
2014). Again, the Court will not dissect this issue in detail, but statements 2, 3, 5,
8, 9, 12, 14, 23, and 28 are exactly the sort of vague optimism that cannot support a
securities fraud action.
In sum, the Amended Complaint fails to meet the demands of the PSLRA
because it does not raise a strong inference of scienter, and it does not adequately
allege that the challenged statements were materially false or misleading. Further,
most of the challenged statements fall within the PSLRA’s Safe Harbor and/or
constitute puffery. Accordingly, the Court will dismiss the Amended Complaint but
give Plaintiffs leave to amend to cure these deficiencies.
ORDER
THEREFORE, IT IS HEREBY ORDERED that:
1. Defendants’ Motion to Dismiss Amended Complaint (Dkt. 60) is
GRANTED. The Amended Complaint is DISMISSED WITHOUT
PREJUDICE.
2. Plaintiffs shall file a Second Amended Complaint within 30 days of the date
of this Order.
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DATED: February 3, 2026
_________________________
B. Lynn Winmill
U.S. District Court Judge
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