252 F. Supp. 3d 912
N.D. Cal.2017Background
- GoPro launched the Hero4 Session camera in July 2015; Session was the company’s only new camera for FY15 and GoPro’s HERO line comprised nearly all company revenue. Plaintiff alleges internal forecasts for Session were lowered pre-launch due to weak retailer demand, but GoPro nonetheless produced to higher earlier forecasts.
- Between July 21, 2015 and January 13, 2016 (the putative class period), defendants (CEO Nicholas Woodman, CFO Jack Lazar, and President/Director Anthony Bates) made public statements and issued guidance about Session sales, channel inventory, and ASPs at earnings calls and interviews. Analysts reacted positively to some statements.
- Session experienced weak sell-through; GoPro cut Session’s price from $399 to $299 on Sept. 28, 2015, then to $199 on Dec. 4, 2015; GoPro took inventory and purchase-order-related charges and announced layoffs after disappointing results, and the stock fell sharply on successive disclosures.
- Plaintiff filed a consolidated securities-fraud complaint alleging defendants made materially false or misleading statements and omissions about Session sales, pricing/ASP stability, channel inventory, and guidance, and that defendants acted with scienter; claims asserted under §10(b) and §20(a).
- Defendants moved to dismiss under Rules 9(b) and 12(b)(6) and the PSLRA; the court considered judicially-noticeable SEC filings and call transcripts. The court granted the motion to dismiss without prejudice and allowed leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether specific public statements (about Session "momentum," "selling really well," and sales "improving") were false or misleading | Statements touted strong Session demand despite internal forecasts and supplier order cuts showing weak demand | Statements were corporate puffery, were contextualized by other disclaimers, and plaintiff fails to plead particular internal documents or facts showing contemporaneous falsity | Court: statements not adequately pleaded as false/misleading; many are puffery or are not contradicted by particularized facts |
| Whether statements about ASP/pricing stability were false or misleading | Lazar’s statements that ASPs were stable and GoPro didn’t discount were false because Session faced pricing pressure and subsequent price cuts | Statements related to company-wide ASPs and were not contradicted; public price cut was known and cautionary context undermines falsity | Court: plaintiff failed to show contemporaneous knowledge that statements were false; ASP statements non-actionable |
| Whether guidance and forward-looking statements lacked a reasonable basis and were not protected by the PSLRA safe harbor | Guidance for Q3 and Q4 relied on misleading representations (e.g., healthy channel inventory) and cautionary language was stale/insufficient | Guidance was forward-looking, accompanied by meaningful cautionary language and Form 10-K risk references; plaintiff fails to show actual knowledge of falsity | Court: guidance not shown to be knowingly false; safe-harbor/cautionary language sufficient; claims fail as pleaded |
| Whether plaintiff pleaded scienter (intent or conscious recklessness) | Core-operations theory and alleged internal forecasts/order cancellations show defendants knew of weak Session demand; later admissions confirm earlier knowledge | Plaintiff’s allegations lack particularity (who/what/when/how), no insider stock sales, company repurchased stock, and non-fraudulent explanations (miscalculation) are plausible | Court: scienter not adequately pleaded; non-fraudulent inferences are at least as compelling |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (establishes the PSLRA "strong inference" standard for scienter)
- Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148 (elements of §10(b) claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard; conclusory allegations insufficient)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (holistic evaluation of scienter allegations in Ninth Circuit)
- Oregon Pub. Employees Ret. Fund v. Apollo Group, Inc., 774 F.3d 598 (PSLRA/Rule 9(b) application in securities class actions)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (materiality standard and evaluation of omissions)
- In re Cutera, Inc. Securities Litigation, 610 F.3d 1103 (safe-harbor and adequacy of cautionary language)
- Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (who "makes" a false statement under §10b-5)