Jerry Mutza v. Emulex Corporation ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS APR 15 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JERRY MUTZA, Lead Plaintiff, No. 20-55339
Plaintiff-Appellant, D.C. No.
8:15-cv-00554-CJC-JCG
v.
EMULEX CORPORATION; et al., MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted April 7, 2021
Pasadena, California
Before: W. FLETCHER, WATFORD, and HURWITZ, Circuit Judges.
Avago Technologies Wireless Manufacturing, Inc. made a tender offer for all
outstanding stock of Emulex Corporation. After Emulex’s financial advisor,
Goldman Sachs, opined that the offer was fair, Emulex filed a statement advising
shareholders to tender their shares (the “Recommendation”). The requisite majority
of Emulex shareholders tendered their shares, and the merger was consummated.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
This putative class action by an Emulex shareholder alleges that Emulex and
its board of directors were negligent and violated §§ 14(e) and 20(a) of the Securities
Exchange Act of 1934 in making the Recommendation.1 The district court dismissed
for failure to state a claim, finding that § 14(e) requires scienter. Varjabedian v.
Emulex Corp., 152 F. Supp. 3d 1226, 1232-34 (C.D. Cal. 2016). We reversed,
finding that § 14(e) can be satisfied by a showing of negligence, and remanded for
the district court to evaluate the complaint under that standard. Varjabedian v.
Emulex Corp., 888 F.3d 399, 408 (9th Cir. 2018).2 On remand, the district court
dismissed the operative amended complaint for failure to state a claim. We affirm.
1. Section 14(e) “prohibit[s] only misleading and untrue statements, not
statements that are incomplete.” Brody v. Transitional Hosps. Corp., 280 F.3d 997,
1006 (9th Cir. 2002). An omission is therefore actionable only if it “affirmatively
create[s] an impression of a state of affairs that differs in a material way from the
one that actually exists.” Id. The complaint must identify “each statement alleged
to have been misleading” and describe the specific “reason or reasons why the
statement is misleading.” 15 U.S.C. § 78u-4(b)(1).
1
The complaint also asserted a § 14(d)(4) claim, which is not at issue in this appeal.
2
The Supreme Court granted certiorari, Emulex Corp. v. Varjabedian, 139 S. Ct.
782 (2019), but later dismissed the writ as improvidently granted, 139 S. Ct. 1407(2019).
2
Plaintiff’s § 14(e) claim rests entirely on the failure of the Recommendation
to include a chart, provided by Goldman in connection with its analysis of the tender
offer, that documents premiums over stock price received by shareholders in tender
offers for the stock of other semiconductor companies. The chart shows the
premium offered to Emulex shareholders (about 26% over market value) was within
industry norms but below average. That chart, however, is consistent with the
Recommendation’s summary of Goldman’s analysis; among other things, the
Recommendation included Goldman’s analysis showing that Emulex had below-
average performance. The chart is also consistent with the Recommendation’s
identification of the 26% premium as a reason to support the transaction; the
Recommendation did not compare the premium in the Avago offer to premiums
offered in other transactions or make any claims about the relative value of the
premium to other transactions. Thus, no statements in the Recommendation were
rendered misleading by the omission of the chart. Although perhaps an interested
shareholder would find the chart of interest, its omission from the Recommendation
in this case does not violate § 14(e).
2. Section 20(a) imposes control person liability, 15 U.S.C. § 78t(a), and
requires proof of an independent securities law violation. See In re NVIDIA Corp.
Sec. Litig., 768 F.3d 1046, 1052 (9th Cir. 2014). Because Plaintiff’s § 14(e) claim
fails, so does his § 20(a) claim.
3
3. The district court did not abuse its discretion in denying further leave to
amend. Plaintiff identified no additional facts he would have pleaded to remedy the
deficiencies in his operative complaint. See Zucco Partners, LLC v. Digimarc Corp.,
552 F.3d 981, 1007 (9th Cir. 2009).
AFFIRMED.
4