Pension Trust Fund for Operating Engineers v. Yahoo! Inc.

FILED
NOT FOR PUBLICATION MAY 15 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: YAHOO! INC. SECURITIES No. 12-17080
LITIGATION,
D.C. No. 3:11-cv-02732-CRB
PENSION TRUST FUND FOR
OPERATING ENGINEERS, on behalf of MEMORANDUM*
itself and all others similarly situated,
Appellant - Appellant,
v.
YAHOO! INC.; CAROL A. BARTZ;
JERRY YANG; TIMOTHY R. MORSE,
Defendants - Appellees.
Appeal from the United States District Court
for the Northern District of California
Charles R. Breyer, Senior District Judge, Presiding
Argued and Submitted December 10, 2014
San Francisco, California
Before: KOZINSKI, RAWLINSON, and MURGUIA, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Appellant Pension Trust Fund for Operating Engineers appeals the district
court’s dismissal of its class action securities fraud complaint alleging violations of
§§ 10(b) and 20(a) of the Securities Exchange Act of 1934. 15 U.S.C. §§ 78j(b) &
78t(a). The district court held that appellees Yahoo! Inc. and three of its principal
officers had no duty to disclose the allegedly omitted information at the time the
class period statements were made, and that, even if certain allegedly false pre-
class period statements gave rise to a duty to correct, disclosure was made within a
reasonable time period. We have jurisdiction under 28 U.S.C. § 1291. Reviewing
de novo, Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir.
2009), we affirm.
The complaint fails to identify any actionable misrepresentation or omission.
See 15 U.S.C. § 78u-4(b)(1) (requiring particularity); Fed. R. Civ. P. 9(b) (same);
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 157 (2008)
(stating the elements of a claim under § 10(b) of the Securities Exchange Act of
1934 and Securities and Exchange Commission Rule 10b–5). Specifically, the
complaint fails to identify any affirmative misrepresentation or omission.
“Silence, absent a duty to disclose, is not misleading under Rule 10b–5.”
Basic Inc. v. Levinson, 485 U.S. 224, 239 n.17 (1988). Section 10(b) and Rule
10b–5 do not create an affirmative duty to disclose all material information.
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Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1321 (2011); see also
Chiarella v. United States, 445 U.S. 222, 235 (1980) (“[A] duty to disclose under
§ 10(b) does not arise from the mere possession of [material] nonpublic market
information.”). Rather, disclosure is required “only when necessary to make . . .
statements made, in the light of the circumstances under which they were made,
not misleading.” Matrixx, 131 S. Ct. at 1321 (quoting 17 C.F.R. § 240.10b–5(b)).
The first alleged class period misrepresentation reported the public market
value of Alibaba.com and noted that the figures “do not include estimates of the
value of Alibaba’s privately held businesses.” This statement “neither stated nor
implied anything regarding” Alipay’s value or the fact of its restructuring. Brody
v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002). The second
alleged class period misrepresentation, which appeared roughly three weeks later
in Yahoo’s 10-Q, disclosed Alipay’s restructuring, reporting that “100 percent of
its outstanding shares” had been transferred to “a Chinese domestic company
which is majority owned by Alibaba Group’s chief executive officer.” Appellees
did not disclose additional details about the restructuring, such as the amount of
consideration received for the share transfer or the termination of the variable
interest entity contract. However, the information disclosed was “entirely
consistent with the more detailed explanation” of the restructuring. Id. at 1007.
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Considered in context and in the light most favorable to the appellant, see
Matrixx, 131 S. Ct. at 1321; Zucco, 552 F.3d at 989, these class period statements
did not “affirmatively create an impression of a state of affairs that differ[ed] in a
material way from the one that actually exist[ed].” Brody, 280 F.3d at 1006.
Therefore, the statements did not constitute material misrepresentations and are not
actionable under the securities laws.
Appellant argues that several of appellees’ pre-class period statements
specifically mentioning Alipay gave rise to a duty to correct. Neither the Supreme
Court nor the Ninth Circuit has recognized a duty to correct. See Stransky v.
Cummins Engine Co., Inc., 51 F.3d 1329, 1331 n.1 (7th Cir. 1995). However, the
Seventh Circuit has recognized such a duty and held that it applies “when a
company makes a historical statement that, at the time made, the company believed
to be true, but as revealed by subsequently discovered information actually was
not. The company then must correct the prior statement within a reasonable time.”
See id. at 1331.
Even if any of the pre-class period statements were materially false or
misleading at the time they were made, and even if we were to recognize a duty to
correct, which we do not, appellees have not violated such a duty because they
corrected the prior statements “within a reasonable time.” Id. Appellees corrected
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their allegedly false and misleading pre-class period statements on May 10,
2011—six weeks after appellees discovered, on March 31, 2011, information
tending to show the falsity of the prior statements. See Higginbotham v. Baxter
Int’l Inc., 495 F.3d 753, 760–61 (7th Cir. 2007). Especially because appellees’
May 10 disclosure was made in a periodic quarterly filing, and because appellees
were engaged in ongoing discussions regarding Alipay’s restructuring, six weeks
was a reasonable time for appellees to correct their pre-class period statements.
See id. at 760–61.
Having failed to plead a violation of § 10(b), appellant’s § 20(a) claim also
fails. Zucco, 552 F.3d at 990.
Because it is clear that the complaint could not be saved by amendment, see
Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003), the
district court did not abuse its discretion in denying appellant leave to amend.
AFFIRMED.
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