Stephen Lopes; v. Fitbit, Inc.; James Park

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
STEPHEN LOPES; et al.,
Plaintiffs-Appellants,
and
ANANDA PATTI,
Plaintiff,
v.
FITBIT, INC.; JAMES PARK,
Defendants-Appellees.
No. 20-16033
D.C. Nos. 4:18-cv-06665-JST
4:18-cv-06922-JST
MEMORANDUM*
Appeal from the United States District Court
for the Northern District of California
Jon S. Tigar, District Judge, Presiding
Submitted May 13, 2021**
San Francisco, California
FILED
MAY 17 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Before: THOMAS, Chief Judge, MILLER, Circuit Judge, and RESTANI,***
Judge.
Plaintiffs appeal the district court’s Rule 12(b)(6) dismissal of their
complaint alleging violations of Section 10(b) and 20(a) of the Securities Exchange
Act and SEC Rule 10b-5. 15 U.S.C. §§ 78j(b), 78t(a); 17 C.F.R. § 240.10b-5. We
have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm. Because the parties
are familiar with the history of the case, we need not recount it here. We review a
12(b)(6) dismissal de novo, taking Plaintiffs’ factual allegations as true. Oregon
Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 603 (9th Cir. 2014).
To adequately plead an action under Section 10(b) or Rule 10b-5, Plaintiffs
must allege, among other things, a “material misrepresentation or omission.” Id.
“[A] statement is misleading if it would give a reasonable investor the impression
of a state of affairs that differs in a material way from the one that actually exists.”
Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co.,
845 F.3d 1268, 1275 (9th Cir. 2017) (internal quotation marks omitted). Plaintiffs
argue that statements made by Fitbit’s CEO James Park made on the CNBC
television program Mad Money were misleading because they challenged the
*** The Honorable Jane A. Restani, Judge for the United States Court of
International Trade, sitting by designation.
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credibility and reliability of an analyst’s report that indicated that retailers had too
much inventory of a new Fitbit product.
However, the district court properly concluded that this interpretation
mischaracterizes Park’s statements. In response to a question about whether to
“trust the [report] versus what ultimately the results will be,” Park disclaimed any
comment on the report, saying “without knowing how that analyst did the [report],
I can’t really say.” He then noted several facts that are not inconsistent with the
report being credible or with his disclaimer, including that the product had recently
begun shipping, and its success on Amazon.com. Near the end of the interview,
after the host expressed some skepticism regarding analysts, Park made vague
statements about staying true to the company’s mission and looking out for
shareholders. None of these statements suggest that Park challenged the credibility
of the analyst’s report, see Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d
1049, 1064–65 (9th Cir. 2008) (stating that the court is not “required to indulge
unwarranted inferences in order to save a complaint from dismissal”), and so
Plaintiffs have not adequately pleaded a misrepresentation or omission that would
mislead a reasonable investor.
Even if the statements could have been construed as Plaintiffs argue,
Plaintiffs have failed to plead facts giving rise to a “strong inference” of scienter.
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See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007) (holding
that a strong inference is one that is “cogent and at least as compelling as any
opposing inference”). To the contrary, the actual content of the statement raises
the inference that Park intended to avoid commenting on the report, while
conveying some optimism for the product’s ultimate success. For similar reasons,
the allegations do not raise a strong inference of deliberate recklessness, as the
danger of misleading investors by implication was not “so obvious that the actor
must have been aware of it.” In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1053
(9th Cir. 2014) (quoting Hollinger v. Titan Cap. Corp., 914 F.2d 1564, 1569 (9th
Cir.1990) (en banc)).
The district court also properly dismissed the Section 20(a) claim. A
Section 20(a) claim for control person liability requires a primary violation of
securities law, City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align
Tech., Inc., 856 F.3d 605, 623 (9th Cir. 2017), and Plaintiffs failed to adequately
plead a Section 10(b) or Rule 10b-5 violation.
AFFIRMED.
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