Primo v. Pacific Biosciences of California, Inc.
940 F. Supp. 2d 1105
N.D. Cal.2013Background
- Putative securities class action against PacBio, officer/director, and underwriter defendants for alleged §11, §12(a)(2), §15, and §10(b)/§20(a) violations based on IPO materials and post-IPO disclosures.
- Plaintiffs allege PacBio RS technology had undisclosed defects and misrepresentations regarding accuracy, upgrades, and future applications.
- IPO occurred October 27, 2010, raising $230 million; PacBio disclosed technology and performance expectations in offering materials.
- Aug. 4–5, 2011 disclosures and JP Morgan downgrade allegedly revealed limitations; stock price dropped.
- September 20, 2011 layoff announcement further affected stock and R&D functions; class period through September 20, 2011.
- Court grants motions to dismiss 1AC with leave to amend; standing and pleading standards applied to multiple claims, with some claims to be repleaded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Puzzle pleading improper under Rule 8 | Powell/1AC failure to connect omissions to specific statements | Defendants say 1AC is a puzzle pleading. | Granted; puzzle pleading improper. |
| §11 misrepresentation/omission in registration statement | Misstatements/omissions material and actionable | No misstatement/omission plead sufficiently. | Granted; §11 claim dismissed with leave to amend. |
| §12(a)(2) standing and misrepresentation/omission in prospectus | Powell has aftermarket standing; Primo lacks standing | Aftermarket standing uncertain; proper privity required | Granted; §12(a)(2) claim dismissed; leave to amend with standing showings. |
| §10(b)/Rule 10b-5 pleading and scienter | Allegations sufficient against PacBio and officers | Insufficient scienter and misleading statements | Granted; §10(b) claim dismissed against officer Defendants (except Martin) and PacBio; leave to amend. |
| Control person liability §15/§20(a) against officers/directors | Alleged controlling persons; underlying primary violation present | No sufficiently pled primary violation | Granted; §15 and §20(a) claims dismissed with leave to re-assert if primary violations pled. |
Key Cases Cited
- In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996) (§11/section pleading standard; materiality and omissions)
- Gustafson v. Alloyd Co., Inc., 513 U.S. 564 (U.S. 1995) (Section 12(2) liability requires privity with offering)
- Twombly, Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (Pleading standards; plausibility required)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (Plausibility/applications of Rule 8; Rule 9(b) where appropriate)
- Rubke v. Capitol Bancorp, Ltd. Sec. Litig., 551 F.3d 1156 (9th Cir. 2009) (Separate Securities Act pleadings; Rule 9(b) distinctions)
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (Section 12 liability; seller definition and privity)