Alpine 4 Holdings Incorporated v. Finn Management GP LLC
2:21-cv-01494
D. Ariz.
Apr 21, 2022

Background

  • Alpine 4 (Delaware corp., headquartered in Arizona) and four shareholders sued Grizzly Research, Finn Management GP LLC, and Fin Capital Management LLC for securities fraud, tortious interference, and defamation after Grizzly published an investigative report and video about Alpine 4 on March 10, 2021.
  • Plaintiffs allege Grizzly made materially false statements (e.g., acquisitions were defunct or scams) and helped trigger heavy short-selling and a drop in Alpine 4’s stock price.
  • Grizzly moved to dismiss for lack of personal jurisdiction and for failure to state a claim; Plaintiffs sought limited jurisdictional discovery.
  • The court found Section 27 of the Securities Exchange Act provides nationwide service and that Grizzly’s Delaware organization sufficed for minimum contacts with the United States, so personal jurisdiction was proper; jurisdictional discovery was denied as moot.
  • The court dismissed securities fraud and tortious interference claims for failure to plead critical elements (scienter, connection to purchase/sale, loss causation, and interference causing breach), declined supplemental jurisdiction over defamation, granted leave to amend, and set a deadline for an amended complaint.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Personal jurisdiction Grizzly’s U.S. activities (publishing report) subject it to jurisdiction nationwide under §27 Grizzly argued lack of personal jurisdiction Court: §27 confers jurisdiction if defendant has minimum contacts with the U.S.; Grizzly (Delaware LLC) satisfied that; PJ proper; discovery moot
Securities fraud — scienter Alleged Grizzly intentionally drove down stock price; statements show intent Grizzly argued PSLRA/Rule 9(b) not satisfied; scienter not pled Court: Plaintiffs’ scienter allegations are conclusory and fail PSLRA’s “strong inference” requirement; scienter not pled
Securities fraud — "in connection with" purchase/sale Grizzly published to spur short-selling and profit, implying transactional connection Grizzly argued no alleged purchases/sales by Grizzly and plaintiffs didn’t plead their transactions Court: Plaintiffs failed to plead transactions or causal link; claim not "in connection with" plaintiffs’ purchases/sales
Securities fraud — loss causation Plaintiffs attribute stock losses to Grizzly’s report Grizzly noted most price decline occurred before Mar. 10 report Court: Stock lost most value before Grizzly’s report and price stabilized after; cannot plausibly infer Grizzly caused plaintiffs’ losses
Tortious interference Grizzly’s false statements disrupted plaintiffs’ expectancy to sell at higher price Grizzly argued plaintiffs lacked a specific business expectancy and did not plead causation or improper interference Court: Plaintiffs’ asserted expectancy was too general; no breach/termination alleged; damages and impropriety not shown; claim dismissed

Key Cases Cited

  • Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797 (9th Cir. 2004) (prima facie personal-jurisdiction pleading standard)
  • Sec. Inv. Prot. Corp. v. Vigman, 764 F.2d 1309 (9th Cir. 1985) (§27 nationwide service of process/minimum contacts with the U.S.)
  • Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174 (9th Cir. 2004) (state of organization can support U.S. contacts)
  • Picot v. Weston, 780 F.3d 1206 (9th Cir. 2015) (pendent personal jurisdiction principles)
  • Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
  • Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim)
  • Nguyen v. Endologix, Inc., 962 F.3d 405 (9th Cir. 2020) (scienter requires intent or deliberate recklessness; PSLRA strong-inference test)
  • Stoyas v. Toshiba Corp., 896 F.3d 933 (9th Cir. 2018) (fraud must "touch" the purchase or sale to be in connection with it)
  • Cohen v. Stratosphere Corp., 115 F.3d 695 (9th Cir. 1997) (limitations on who may sue under §10(b); plaintiff must be purchaser or seller)
  • Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (rule limiting §10(b) standing to actual purchasers/sellers)
  • Lloyd v. CVB Fin. Corp., 811 F.3d 1200 (9th Cir. 2016) (elements of a §10(b) claim)
  • Lopez v. Smith, 203 F.3d 1122 (9th Cir. 2000) (leave to amend should be freely given)
  • Graves v. Arpaio, 623 F.3d 1043 (9th Cir. 2010) (arguments raised first in a reply brief are waived)
Read the full case