Vanessa Simmonds v. Credit Suisse Securities

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE SECURITIES (USA)
LLC; JPMORGAN CHASE & CO., a
Delaware corporation, successor in
interest to Hambrecht & Quist and
Chase Securities Inc.; BANK OF No. 09-35262
AMERICA CORPORATION, a Delaware
corporation, successor in interest
 D.C. No. 2:07-cv-
01549-JLR
to Fleetboston Robertson Stephens,
Inc.; ONVIA INC., a Delaware
corporation formerly known as
Onvia.com Inc.; ROBERTSON
STEPHENS, INC.; J.P. MORGAN
SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


821
822 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
DEUTSCHE BANK SECURITIES INC.;
FOUNDRY NETWORKS INC., Nominal No. 09-35280
Defendant, a Delaware
corporation; MERRILL LYNCH
 D.C. Nos.
2:07-cv-01566-JLR
PIERCE FENNER & SMITH 2:07-cv-01549-JLR
INCORPORATED; J.P. MORGAN
SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MERRILL LYNCH & CO. INC.,
Defendant,
and No. 09-35282
FINISAR CORPORATION, Nominal  D.C. Nos.
2:07-cv-01567-JLR
Defendant, a Delaware
corporation; MERRILL LYNCH 2:07-cv-01549-JLR
PIERCE FENNER & SMITH
INCORPORATED; J.P. MORGAN
SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 823

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35285
INCORPORATED; LEHMAN BROTHERS,
INC.; BANK OF AMERICA  D.C. Nos.
2:07-cv-01568-JLR
CORPORATION; ROBERTSON
STEPHENS, INC.; AVANEX 2:07-cv-01549-JLR
CORPORATION,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global
bank headquartered in Zurich,
Switzerland formerly known as
Credit Suisse First Boston No. 09-35286
Corporation; BANK OF AMERICA
CORPORATION, a Delaware  D.C. Nos.
2:07-cv-01576-JLR
corporation, successor in interest
2:07-cv-01549-JLR
to BancBoston Robertson
Stephens, Inc.; TIVO INC., Nominal
Defendant, a Delaware
corporation; ROBERTSON STEPHENS,
INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

824 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO., a New
York limited partnership; BANK OF
AMERICA CORPORATION, a Delaware
corporation, successor in interest
to FleetBoston Robertson No. 09-35288
Stephens, Inc.; ROBERTSON
STEPHENS INC., a Massachusetts
 D.C. Nos.
2:07-cv-01569-JLR
corporation, 2:07-cv-01549-JLR
Defendants-Appellees,
and
TURNSTONE SYSTEMS, INC., a
Delaware corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 825

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO., “Goldman
Sachs”; CREDIT SUISSE SECURITIES
(USA) LLC, “Credit Suisse”
formerly known as Credit Suisse No. 09-35289
First Boston Corporation; BANK OF
AMERICA CORPORATION, a Delaware
 D.C. Nos.
2:07-cv-01577-JLR
corporation, successor in interest 2:07-cv-01549-JLR
to BancBoston Robertson
Stephens, Inc.; ROBERTSON
STEPHENS, INC.; JUNIPER NETWORKS
INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

826 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35290
INCORPORATED; DEUTSCHE BANK
SECURITIES, INC.; MERRILL LYNCH,
 D.C. Nos.
2:07-cv-01570-JLR
PIERCE, FENNER & SMITH 2:07-cv-01549-JLR
INCORPORATED; ARIBA INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
No. 09-35292
MORGAN STANLEY & CO.,
INCORPORATED; CITIGROUP GLOBAL  D.C. Nos.
2:07-cv-01571-JLR
MARKETS, INC.; AKAMAI 2:07-cv-01549-JLR
TECHNOLOGIES, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 827

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS GROUP INC., a
Delaware corporation; JPMORGAN
CHASE & CO., a Delaware
corporation, successor in interest
to Hambrecht & Quist LLC, No. 09-35293

Defendants, D.C. Nos.
and 2:07-cv-01578-JLR
2:07-cv-01549-JLR
KANA SOFTWARE INC., Nominal
Defendant, a Delaware corporation
formerly known as Kana
Communications Inc.; GOLDMAN
SACHS & CO.; J.P. MORGAN
SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

828 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY, a Delaware
corporation, successor in interest
to Morgan Stanley Dean Witter,
Defendant,
and
SILICON LABORATORIES INC., No. 09-35297
Nominal Defendant, a Delaware
corporation; MORGAN STANLEY &  D.C. Nos.
2:07-cv-01590-JLR
CO. INCORPORATED; LEHMAN 2:07-cv-01549-JLR
BROTHERS INC.; CITIGROUP GLOBAL
MARKETS, INC.,
Defendants-Appellees,
JAMES W. GIDDENS,
TRUSTEE FOR THE
LIQUIDATION OF THE BUSINESS OF
LEHMAN BROTHERS INC.,
Trustee-Appellee.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 829

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS GROUP INC., a
Delaware corporation,
Defendant,
and
BANK OF AMERICA CORPORATION, a No. 09-35300
Delaware corporation, successor in
interest to BancBoston Robertson  D.C. Nos.
2:07-cv-01593-JLR
Stephens, Inc.; PALM INC., 2:07-cv-01549-JLR
Nominal Defendant, a Delaware
corporation; GOLDMAN SACHS &
CO.; MORGAN STANLEY & CO.
INCORPORATED; MERRILL LYNCH
PIERCE FENNER & SMITH
INCORPORATED; ROBERTSON
STEPHENS, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

830 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS GROUP INC.,
Defendant,
and No. 09-35301
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in  D.C. Nos.
2:07-cv-01594-JLR
interest to BancBoston Robertson 2:07-cv-01549-JLR
Stephens, Inc.; MAXYGEN INC.,
Nominal Defendant, a Delaware
corporation; GOLDMAN SACHS &
CO.; ROBERTSON STEPHENS, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 831

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global
bank headquartered in Zurich,
Switzerland FKA Credit Suisse
First Boston Corporation; BANK OF No. 09-35302
AMERICA CORPORATION, a Delaware
corporation, successor in interest
 D.C. No.
2:07-cv-01575-JLR
to BancBoston Robertson
Stephens, Inc.; SILICON IMAGE,
INC., Nominal Defendant, a
Delaware corporation; ROBERTSON
STEPHENS, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

832 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS GROUP INC., a
Delaware corporation, No. 09-35303

Defendant, D.C. Nos.
and 2:07-cv-01595-JLR
2:07-cv-01549-JLR
STREET.COM INC.; GOLDMAN SACHS
& CO.; J.P. MORGAN SECURITIES
INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to BancBoston Robertson No. 09-35306
Stephens, Inc.; CRITICAL PATH,  D.C. No.
INC., Nominal Defendant, a 2:07-cv-01582-JLR
California corporation; ROBERTSON
STEPHENS, INC.; J.P. MORGAN
SECURITIES, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 833

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35307
interest to BancBoston Robertson
Stephens, Inc.; CONCUR
 D.C. Nos.
2:07-cv-01585-JLR
TECHNOLOGIES, INC., a Delaware 2:07-cv-01549-JLR
corporation; ROBERTSON STEPHENS,
INC.; J.P. MORGAN SECURITIES, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global
bank headquartered in Zurich,
Switzerland; SOURCEFORGE, INC.,
Nominal Defendant, a Delaware No. 09-35308
corporation, FKA VA Linux
Systems, Inc.; LEHMAN BROTHERS,  D.C. No.
INC., 2:07-cv-01583-JLR
Defendants-Appellees,
JAMES W. GIDDENS, Trustee for the
Liquidation of the Business of
Lehman Brothers, Inc.,
Trustee-Appellee.
In Re: SECTION 16(b) LITIGATION

834 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v. No. 09-35309
GOLDMAN SACHS & CO.; J.P.
MORGAN SECURITIES, INC.; RED
 D.C. Nos.
2:07-cv-01587-JLR
HAT, INC., a Delaware corporation, 2:07-cv-01549-JLR
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global No. 09-35310
bank headquartered in Zurich,
Switzerland; SELECTICA, INC.,
 D.C. No.
2:07-cv-01584-JLR
Nominal Defendant, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 835

VANESSA SIMMONDS 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP SECURITIES
(USA) LLC, a Delaware limited
liability company; BANK OF No. 09-35312

AMERICA CORPORATION, a Delaware D.C. Nos.
corporation; ROBERTSON STEPHENS, 2:07-cv-01579-JLR
INC., a Massachusetts corporation, 2:07-cv-01549-JLR
Defendants-Appellees,
and
INTERWOVEN, INC.,
Defendant.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35313
INCORPORATED; J.P. MORGAN
SECURITIES, INC.; VIGNETTE
 D.C. Nos.
2:07-cv-01588-JLR
CORPORATION, a Delaware 2:07-cv-01549-JLR
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

836 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35314
INCORPORATED; J.P. MORGAN
SECURITIES, INC.; LEHMAN  D.C. Nos.
2:07-cv-01589-JLR
BROTHERS, INC.; SYCAMORE 2:07-cv-01549-JLR
NETWORKS, INC., a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP SECURITIES
(USA) LLC, a Delaware limited
liability company; BANK OF
AMERICA CORPORATION, a Delaware
No. 09-35315

corporation; ROBERTSON STEPHENS,
INC.; J.P. MORGAN SECURITIES INC., D.C. No.
a Delaware corporation, 2:07-cv-01580-JLR
Defendants-Appellees,
and
OPENWAVE SYSTEMS, INC., a
California corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 837

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP SECURITIES
(USA) LLC, a Delaware limited
liability company; BANK OF
AMERICA CORPORATION, a Delaware No. 09-35316
corporation; ROBERTSON STEPHENS,
INC.,
 D.C. Nos.
2:07-cv-01581-JLR
Defendants-Appellees, 2:07-cv-01549-JLR
and
INFORMATICA CORPORATION, a
Delaware corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

838 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP SECURITIES
(USA) LLC, a Delaware limited
liability company; BANK OF
AMERICA CORPORATION, a Delaware
corporation; ROBERTSON STEPHENS,
INC., a Massachusetts corporation; No. 09-35317

MERRILL LYNCH, PIERCE, FENNER & D.C. Nos.
SMITH INCORPORATED, a Delaware 2:07-cv-01572-JLR
corporation; CITIGROUP GLOBAL 2:07-cv-01549-JLR
MARKETS INC., a New York
corporation,
Defendants-Appellees,
and
INTERSIL CORPORATION, a Delaware
corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 839

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS GROUP INC.,
Defendant,
and
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to Fleetboston Robertson
Stephens, Inc.; SONUS NETWORKS No. 09-35318
INC., a Delaware corporation;  D.C. Nos.
2:07-cv-01597-JLR
GOLDMAN SACHS & CO.; LEHMAN
BROTHERS INC.; ROBERTSON 2:07-cv-01549-JLR
STEPHENS, INC.; J.P. MORGAN
SECURITIES INC.,
Defendants-Appellees,
JAMES W. GIDDENS,
TRUSTEE FOR THE
LIQUIDATION OF THE BUSINESS OF
LEHMAN BROTHERS INC.,
Trustee-Appellee.
In Re: SECTION 16(b) LITIGATION

840 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO.,
INCORPORATED; J.P. MORGAN
SECURITIES, INC., a Delaware
No. 09-35320

corporation; LEHMAN BROTHERS,
INC., a Delaware corporation, D.C. No.
Defendants-Appellees, 2:07-cv-01573-JLR
and
AVICI SYSTEMS, INC., a Delaware
corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 841

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to BancBoston Robertson No. 09-35321
Stephens, Inc.; PRICELINE.COM INC.,
a Delaware corporation; MORGAN
 D.C. Nos.
2:07-cv-01598-JLR
STANLEY & CO. INCORPORATED; 2:07-cv-01549-JLR
MERRILL LYNCH PIERCE FENNER &
SMITH INCORPORATED; ROBERTSON
STEPHENS, INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO.; LEHMAN No. 09-35322
BROTHERS, INC.; J.P. MORGAN
SECURITIES, INC.; MARVELL
 D.C. Nos.
2:07-cv-01632-JLR
TECHNOLOGY GROUP, LTD., a 2:07-cv-01549-JLR
Bermuda corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

842 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35323
INCORPORATED; MERRILL LYNCH
PIERCE FENNER & SMITH  D.C. Nos.
2:07-cv-01631-JLR
INCORPORATED; PEROT SYSTEMS 2:07-cv-01549-JLR
CORPORATION, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 843

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global
bank headquartered in Zurich,
Switzerland; DEUTSCHE BANK AG,
a global bank headquartered in
Frankfurt, Germany; LEHMAN
BROTHERS HOLDINGS, INC., a
Delaware corporation; AIRSPAN
No. 09-35324

NETWORKS, INC., Nominal
Defendant, a Washington D.C. No.
corporation; DEUTSCHE BANK 2:07-cv-01638-JLR
SECURITIES, INC.; LEHMAN
BROTHERS, INC.,
Defendants-Appellees,
and
JAMES W. GIDDENS, Trustee for the
Liquidation of the Business of
Lehman Brothers, Inc.,
Trustee-Appellee.
In Re: SECTION 16(b) LITIGATION

844 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO.; BANK OF
AMERICA CORPORATION, a Delaware No. 09-35325
corporation, successor in interest
BancBoston Robertson Stephens
 D.C. Nos.
2:07-cv-01630-JLR
Inc.; ROBERTSON STEPHENS, INC.; 2:07-cv-01549-JLR
INSWEB CORPORATION, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO., No. 09-35326
INCORPORATED; DEUTSCHE BANK
SECURITIES, INC.; ASIAINFO
 D.C. Nos.
2:07-cv-01633-JLR
HOLDINGS, INC., a Delaware 2:07-cv-01549-JLR
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 845

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to BancBoston Robertson No. 09-35328
Stephens, Inc. and FleetBoston
Roberton Stephens, Inc.;
 D.C. Nos.
2:07-cv-01634-JLR
ROBERTSON STEPHENS, INC.; J.P. 2:07-cv-01549-JLR
MORGAN SECURITIES, INC.; KEYNOTE
SYSTEMS, INC., a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to BancBoston Robertson No. 09-35327
Stephens, Inc.; ROBERTSON  D.C. No.
STEPHENS, INC.; J.P. MORGAN 2:07-cv-01652-JLR
SECURITIES INC.; DIGIMARC
CORPORATION, Nominal Defendant,
a Delaware corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

846 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO.; BEAR No. 09-35331
STEARNS & CO., INC.; DEUTSCHE
BANK SECURITIES, INC.; TIBCO
 D.C. Nos.
2:07-cv-01635-JLR
SOFTWARE, INC., a Delaware 2:07-cv-11549-JLR
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MARTHA STEWART LIVING No. 09-35333
OMNIMEDIA INC., a Delaware
corporation; MORGAN STANLEY &  D.C. Nos.
2:07-cv-01605-JLR
CO. INCORPORATED; MERRILL LYNCH 2:07-cv-01549-JLR
PIERCE FENNER & SMITH
INCORPORATED,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 847

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CREDIT SUISSE GROUP, a global No. 09-35334
bank headquartered in Zurich,
Switzerland; AUDIBLE INC., a
 D.C. Nos.
2:07-cv-01623-JLR
Delaware corporation; J.P. 2:07-cv-01549-JLR
MORGAN SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
GOLDMAN SACHS & CO., a New
York limited partnership; MERRILL
LYNCH PIERCE FENNER & SMITH
INCORPORATED, a Delaware
corporation; BANK OF AMERICA No. 09-35335
CORPORATION, a Delaware
corporation, ROBERTSON STEPHENS,
 D.C. Nos.
2:07-cv-01637-JLR
INC., a Massachusetts corporation, 2:07-cv-01549-JLR
Defendants-Appellees,
and
SABA SOFTWARE, INC., a Delaware
corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION

848 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO.
INCORPORATED, a Delaware
corporation; DEUTSCHE BANK
SECURITIES INC., a Delaware No. 09-35337

corporation; CITIGROUP GLOBAL D.C. Nos.
MARKETS, INC., a New York 2:07-cv-01636-JLR
corporation, 2:07-cv-01549-JLR
Defendants-Appellees,
and
TRANSMETA CORPORATION, a
Delaware corporation,
Defendant.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
CAPSTONE TURBINE CORPORATION, a No. 09-35339
Delaware corporation; GOLDMAN
SACHS & CO.; MERRILL LYNCH  D.C. Nos.
2:07-cv-01624-JLR
PIERCE FENNER & SMITH 2:07-cv-01549-JLR
INCORPORATED; MORGAN STANLEY &
CO. INCORPORATED,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 849

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
No. 09-35344
MORGAN STANLEY & CO.
INCORPORATED; BROCADE  D.C. Nos.
2:07-cv-01626-JLR
COMMUNICATIONS SYSTEMS INC., a 2:07-cv-01549-JLR
Delaware corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35345
interest to Robertson Stephens,
Inc.; J.P. MORGAN SECURITIES INC.;
 D.C. Nos.
2:07-cv-01667-JLR
ROBERTSON STEPHENS, INC.; OPLINK 2:07-cv-01549-JLR
COMMUNICATIONS, INC., a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

850 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35346
interest to BancBoston Robertson
Stephens, Inc.; ROBERTSON
 D.C. No.
2:07-cv-01666-JLR
STEPHENS, INC.; J.P. MORGAN
SECURITIES INC.; NAVASITE, INC., a
Delaware corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO.
INCORPORATED, a Delaware No. 09-35347
corporation; DEUTSCHE BANK
SECURITIES, INC., a Delaware
 D.C. No.
2:07-cv-01655-JLR
corporation; ASPECT MEDICAL
SYSTEMS, INC., Nominal Defendant,
a Delaware corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 851

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in
interest to BancBoston Robertson No. 09-35348
Stephens, Inc.; ROBERTSON  D.C. No.
STEPHENS, INC.; BEAR STEARNS & 2:07-cv-01654-JLR
CO., INC.; PACKETEER, INC.,
Nominal Defendant, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35349
interest to Fleetboston Robertson
Stephens, Inc.; ROBERTSON
 D.C. Nos.
2:07-cv-01668-JLR
STEPHENS, INC.; OMNIVISION 2:07-cv-01549-JLR
TECHNOLOGIES, INC., a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

852 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
No. 09-35350
CREDIT SUISSE SECURITIES (USA),
LLC; OCCAM NETWORKS, INC., a  D.C. Nos.
2:07-cv-01669-JLR
Delaware corporation, FKA 2:07-cv-01549-JLR
Accelerated Networks, Inc.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
J.P. MORGAN SECURITIES INC.; BEAR
STEARNS & CO., INC.; BANK OF
AMERICA CORPORATION, a Delaware No. 09-35351
corporation, successor in interest
to Bancboston Robertson
 D.C. Nos.
2:07-cv-01670-JLR
Stephens, Inc.; ROBERTSON 2:07-cv-01549-JLR
STEPHENS, INC.; IMMERSION
CORPORATION, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 853

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
MORGAN STANLEY & CO.
INCORPORATED, a Delaware
corporation; CREDIT SUISSE No. 09-35352
SECURITIES (USA), LLC; J.P.  D.C. No.
MORGAN SECURITIES, INC.; INTERNAP 2:07-cv-01653-JLR
NETWORK SERVICES CORPORATION,
Nominal Defendant, a Delaware
corporation,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
No. 09-35355
MICROTUNE INC., a Delaware
corporation; GOLDMAN SACHS &
 D.C. No.
2:07-cv-01627-JLR
CO.; J.P. MORGAN SECURITIES INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

854 SIMMONDS v. CREDIT SUISSE SECURITIES

VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35357
interest to BancBoston Robertson
Stephens, Inc.; MORGAN STANLEY
 D.C. Nos.
2:07-cv-01628-JLR
& CO. INCORPORATED; ROBERTSON 2:07-cv-01549-JLR
STEPHENS, INC.; EXTREME NETWORKS
INC.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION


VANESSA SIMMONDS, 
Plaintiff-Appellant,
v.
BANK OF AMERICA CORPORATION, a
Delaware corporation, successor in No. 09-35358
interest to Robertson Stephens,
Inc.; J.P. MORGAN SECURITIES INC.;  D.C. Nos.
2:07-cv-01629-JLR
ROBERTSON STEPHENS, INC.; COSINE 2:07-cv-01549-JLR
COMMUNICATIONS INC., a Delaware
corporation; GOLDMAN SACHS &
CO.,
Defendants-Appellees.
In Re: SECTION 16(b) LITIGATION

 SIMMONDS v. CREDIT SUISSE SECURITIES 855

VANESSA SIMMONDS, 
Plaintiff-Appellee,
v.
CREDIT SUISSE SECURITIES (USA) No. 09-35363
LLC; CREDIT SUISSE SECURITIES D.C. Nos.
(USA) LLC; J.P. MORGAN 2:07-cv-01549-JLR
SECURITIES INC.; BANK OF AMERICA  2:07-cv-01549-JLR
CORPORATION, a Delaware ORDER AND
corporation, successor in interest AMENDED
to Fleetboston Robertson Stephens, OPINION
Inc.; ROBERTSON STEPHENS, INC.,
Defendants-Appellants.
In Re: SECTION 16(b) LITIGATION

Appeal from the United States District Court
for the Western District of Washington
James L. Robart, District Judge, Presiding

Argued and Submitted October 5, 2010
Seattle, Washington

Filed December 2, 2010
Amended January 18, 2011

Before: Sidney R. Thomas and Milan D. Smith, Jr.,
Circuit Judges, and Michael R. Hogan, District Judge.*

Opinion by Judge Milan D. Smith, Jr.;
Concurrence by Judge Milan D. Smith, Jr.

*The Honorable Michael R. Hogan, United States District Judge for the
District of Oregon, sitting by designation.
860 SIMMONDS v. CREDIT SUISSE SECURITIES

COUNSEL

Jeffrey I. Tilden and Mark A. Wilner, Gordon Tilden Thomas
& Cordell L.L.P., Seattle, Washington; Ian S. Birk, Keller
Rohrback L.L.P., Seattle, Washington; David M. Simmonds,
Redmond, Washington, for the plaintiff-appellant-cross-
appellee.

David H. Kistenbroker and Joni S. Jacobsen, Katten Muchin
Rosenman LLP, Chicago, Illinois; Michael L. Charlson,
Hogan & Hartson, Palo Alto, California; John C. Tang,
Latham & Watkins LLP, Menlo Park, California; John V.
Erickson, Collette Erickson Farmer & O’Neill LLP, San Fran-
cisco, California; L. Rex Sears, Workman Nydegger, Salt
Lake City, Utah, for the defendants-appellees.

Andrew B. Clubok, Kirkland & Ellis, LLP, Washington,
D.C.; Christopher B. Wells, Lane Powell PC, Seattle, Wash-
ington; Gandolfo V. DiBlasi, Sullivan & Cromwell LLP, New
York, New York; Joel M. Mitnick, Sidley Austin LLP, New
York, New York; David W. Ichel, Simpson, Thacher & Bart-
lett LLP, New York, New York; Andrew J. Frackman,
O’Melveny & Myers LLP, New York, New York; Robert B.
 SIMMONDS v. CREDIT SUISSE SECURITIES 861
McCaw, Wilmer Cutler Pickering Hale and Dorr LLP, New
York, New York, for the defendants-appellees-cross-
appellants.

ORDER

The Opinion filed on December 2, 2010 is amended to
appear as set forth below in the Amended Opinion filed con-
currently with this Order.

On slip opinion page 19110, footnote 5, lines 5 and 6,
“Digimarc Corporation;” is deleted.

On slip opinion page 19110, footnote 5, line 8, “Openwave
Systems Inc.;” is deleted.

On slip opinion page 19124, lines 16 through 27, the text
beginning with “If Simmonds lacked access to necessary
information” through the end of the paragraph is deleted and
replaced with the following: “Delaware law does not allow
shareholders to forego pre-suit investigations in an attempt to
shift information-gathering costs onto the corporation, and
this rule is not clearly incompatible with Section 16 and the
Exchange Act.”

On slip opinion page 19124, line 28, through page 19125,
line 11, the paragraph is deleted in its entirety.

With this amendment, the panel has unanimously voted to
deny Appellees’ petition for panel rehearing. Judges Thomas
and M. Smith have voted to deny Appellant’s petition for
rehearing en banc, and Judge Hogan has so recommended.
Judge Thomas has voted to deny Appellees’ petition for
rehearing en banc, and Judge Hogan has so recommended.
Judge M. Smith has voted to grant Appellees’ petition for
rehearing en banc.
862 SIMMONDS v. CREDIT SUISSE SECURITIES
The full court has been advised of the petitions for rehear-
ing en banc, and no judge of the court has requested a vote
on them. Fed. R. App. P. 35.

The petition for rehearing and petitions for rehearing en
banc are DENIED. No further petitions for rehearing may be
filed.

OPINION

M. SMITH, Circuit Judge:

Plaintiff-Appellant Vanessa Simmonds appeals the district
court’s dismissal of fifty-four related derivative complaints
brought under Section 16(b) of the Securities Exchange Act
of 1934 (Exchange Act), 15 U.S.C. § 78p(b). Simmonds’s
complaints allege that the Defendant-Appellee investment
banks (collectively, Underwriters) violated Section 16(b) by
engaging in prohibited “short-swing” transactions in connec-
tion with the Initial Public Offerings (IPOs) of the fifty-four
Defendant-Appellee corporations (collectively, Issuing Com-
panies) between 1999 and 2000. Simmonds seeks disgorge-
ment of the Underwriters’ alleged short-swing trading profits.

We affirm the district court’s conclusion (rendered in the
thirty cases in which the issue was raised) that Simmonds
failed to present an adequate demand letter to the Issuing
Companies prior to filing her lawsuits, and we remand these
cases to the district court to dismiss the complaints with preju-
dice. We reverse the district court’s conclusion that the
remaining twenty-four cases are barred by Section 16(b)’s
two-year statute of limitations, and we remand these cases to
the district court so that all defendants, including the Under-
writers, have a full opportunity to contest the adequacy of
Simmonds’s demand letters with respect to the remaining
twenty four cases.
 SIMMONDS v. CREDIT SUISSE SECURITIES 863
FACTUAL AND PROCEDURAL BACKGROUND

In her First Amended Complaints (Complaints), Simmonds
alleges that while the Underwriters were acting as lead under-
writers on the Issuing Companies’ IPOs, they coordinated
their activities with the Issuing Companies’ officers, directors,
and principal shareholders (collectively, Insiders) in order to
obtain financial benefits from post-IPO increases in the Issu-
ing Companies’ stock prices.1 Simmonds alleges that the
Insiders entered “lock-up agreements” with the Underwriters
that prevented the Insiders from offering or selling their stock
for 180 days following the IPO. The purpose of the lock-up
agreements was to “collectively hold[ ] . . . and refrain[ ] from
selling” the Insiders’ shares, and the Underwriters and Insid-
ers intended to receive financial benefits by selling these
shares into an inflated market after the lock-up agreements
expired. In order to create this inflated market, the Underwrit-
ers and Insiders allegedly agreed to release the IPO to the
general public at a discount to the price that “they knew to be
the likely aftermarket price range . . . based on clear indica-
tions of IPO and aftermarket demand.” The Underwriters also
allegedly inflated the post-IPO share prices by engaging in a
practice known as “laddering”—in exchange for giving their
customers access to IPO allocations, the Underwriters
required their customers (including the Issuing Companies’
Insiders) to purchase shares “at progressively higher prices”
following the IPO.2 Finally, Simmonds asserts that the Under-
writers engaged in “improper research-related activities that
were designed to inflate the market price” of the shares.3
1
The appeals have been stayed as to Defendant Lehman Brothers, Inc.
pending resolution of its bankruptcy proceedings.
2
“Laddering . . . is a practice that involves requiring IPO purchasers to
commit to purchase additional shares in the after-market. Laddering not
only provides improper consideration for the allocation of IPO shares, but
also creates additional demand in the aftermarket, designed to insure rising
prices once the shares are publicly traded.” 2 Thomas Lee Hazen, Law of
Securities Regulation § 6.0 (6th ed. Supp. 2010) (hereinafter Hazen).
3
Some of the Complaints include specific factual details regarding the
Underwriters’ publication of favorable ratings on the Issuing Companies’
stock. In addition, some of the Complaints describe the Underwriters’ par-
ticipation in secondary stock offerings.
864 SIMMONDS v. CREDIT SUISSE SECURITIES
According to Simmonds, these allegations establish that the
Underwriters and Insiders acted as a group and coordinated
their conduct with respect to acquiring the Issuing Compa-
nies’ stock, holding the stock, and disposing of the stock “so
as to share in the profits gained in the aftermarket following
the IPO.”

Simmonds alleges that the Underwriters had three types of
“direct or indirect pecuniary interest[s]” in the Issuing Com-
panies’ stock that allowed the Underwriters to “profit[ ] from
purchases and sales, or sales and purchases” of that stock.
(The Complaints define these transactions as the operative
“Short-Swing Transactions” for purposes of these lawsuits.)
First, the Underwriters “shar[ed] in the profits of customers to
whom they made IPO allocations” of the Issuing Companies’
stock. Second, the Underwriters “allocat[ed] shares of [the
Issuing Companies’] stock to executives and other high-level
insiders of other companies, both private and public, from
which [the Underwriters] expected to receive new or addi-
tional investment banking business in return.” Finally, the
Underwriters “creat[ed] the opportunity for other members of
the [g]roup to derive personal financial benefits from the sale
of the [the Issuing Companies’] stock into an inflated market,
in an effort by [the Underwriters] to obtain future investment
banking business from [the Issuing Companies].”4

In her Complaints, Simmonds seeks to compel the Under-
writers to disgorge the profits they received from these
“Short-Swing Transactions.” Simmonds alleges that prior to
filing the Complaints, she submitted demand letters insisting
that the Issuing Companies seek this relief directly (as is their
right under Section 16(b)). When more than sixty days had
4
The final two activities are commonly known as “spinning,” which is
“[t]he giving of shares or preferred opportunities to buy shares in an initial
public offering to key investment-banking clients in order to solicit or
retain profitable business in the future.” Black’s Law Dictionary 1531 (9th
ed. 2009).
 SIMMONDS v. CREDIT SUISSE SECURITIES 865
lapsed after she sent the demand letters, Simmonds filed the
Complaints at issue in this appeal.

The Underwriters jointly filed a motion to dismiss Sim-
monds’s Complaints under Fed. R. Civ. P. 12(b)(6). The
Underwriters contended that Simmonds’s claims were time-
barred, that Simmonds’s Complaints failed to state a cause of
action under Section 16(b), and that the Underwriters are pro-
tected by various exemptions from Section 16(b). Thirty of
the Issuing Companies (collectively, Moving Issuers) filed a
separate motion to dismiss under Fed. R. Civ. P. 12(b)(1) and
Fed. R. Civ. P. 12(b)(6).5 The Moving Issuers argued that
Simmonds’s claims were time-barred and that Simmonds
lacked standing because she failed to submit adequate demand
letters to the Issuing Companies prior to filing suit.

The district court granted the Moving Issuers’ Fed. R. Civ.
P. 12(b)(1) motions to dismiss based on the inadequacy of
Simmonds’s demand letters, and granted the Underwriters’
Fed. R. Civ. P. 12(b)(6) motions to dismiss based on the two-
year statute of limitations. In re Section 16(b) Litig., 602 F.
Supp. 2d 1202, 1211-18 (W.D. Wash. 2009). The court did
not address the Underwriters’ remaining arguments regarding
the merits of Simmonds’s allegations and the scope of the
Underwriters’ exemptions from Section 16(b). See id. at 1205,
1219. The court dismissed without prejudice the thirty actions
resolved by the Moving Issuers’ Fed. R. Civ. P. 12(b)(1)
5
The Moving Issuers—all of which are Delaware corporations—are
Akamai Technologies, Inc.; Ariba, Inc.; AsiaInfo Holdings, Inc.; Aspect
Medical Systems, Inc.; Audible, Inc.; Avici Systems, Inc. (now named
Soapstone Networks, Inc.); Capstone Turbine Corporation; Cosine Com-
munications, Inc.; Finisar Corporation; Internap Networks Service Corpo-
ration; Intersil Corporation; Martha Stewart Living Omnimedia, Inc.;
Maxygen, Inc.; NaviSite Inc.; Occam Networks, Inc.; Onvia, Inc.; Oplink
Communication, Inc.; Packeteer Inc.; Perot Systems Corporation; Price-
line.com, Inc.; RedHat, Inc.; Saba Software, Inc.; Selectica, Inc.; Silicon
Laboratories, Inc.; Sonus Networks, Inc.; Sycamore Networks, Inc.; The-
Street.com, Inc.; TiVo, Inc.; and Vignette Corporation.
866 SIMMONDS v. CREDIT SUISSE SECURITIES
motions. Id. at 1218. The court dismissed the remaining
twenty-four cases with prejudice in light of its ruling on the
statute of limitations. Id.

Simmonds filed a timely appeal, and the thirty Moving
Issuers filed timely cross-appeals requesting that the district
court’s dismissals of their cases be entered with prejudice
rather than without prejudice. We granted the parties’ joint
motion to consolidate the cases on appeal pursuant to Fed. R.
App. P. 3(b)(2).

JURISDICTION AND STANDARD OF REVIEW

Ordinarily, “[a] dismissal of a complaint without prejudice
is not a final order.” Martinez v. Gomez, 137 F.3d 1124, 1125
(9th Cir. 1998). However, the district court’s orders in these
cases are final and appealable because “leave to amend was
not specifically allowed and [Simmonds] cannot amend [her]
complaint to defeat the statute of limitations bar” as construed
by the district court. Id. at 1125-26. Accordingly, we have
jurisdiction pursuant to 28 U.S.C. § 1291.

We review the district court’s dismissal for failure to com-
ply with the demand requirement for abuse of discretion. Pot-
ter v. Hughes, 546 F.3d 1051, 1056, 1058 (9th Cir. 2008).6
We review the district court’s dismissal on statute of limita-
tions grounds de novo. Lukovsky v. City & Cnty. of S.F., 535
6
The Moving Issuers challenged Simmonds’s compliance with the
demand requirement in a motion to dismiss for lack of subject matter juris-
diction under Fed. R. Civ. P. 12(b)(1). The demand requirement is an ele-
ment of prudential statutory standing rather than constitutional Article III
standing. Potter, 546 F.3d at 1055-56. While Article III standing may be
raised in a Fed. R. Civ. P. 12(b)(1) motion, questions of statutory standing
must be raised in a Fed. R. Civ. P. 12(b)(6) motion. Cetacean Cmty. v.
Bush, 386 F.3d 1169, 1174-75 (9th Cir. 2004). We construe the Moving
Issuers’ Fed. R. Civ. P. 12(b)(1) motion as a Fed. R. Civ. P. 12(b)(6)
motion. See, e.g., Supermail Cargo, Inc. v. United States, 68 F.3d 1204,
1206 n.2 (9th Cir. 1995).
 SIMMONDS v. CREDIT SUISSE SECURITIES 867
F.3d 1044, 1047 (9th Cir. 2008). We refrain from reviewing
issues not addressed by the district court. Golden Gate Hotel
Ass’n v. City & Cnty. of S.F., 18 F.3d 1482, 1487 (9th Cir.
1994) (“As a general rule, a federal appellate court does not
consider an issue not passed upon below.” (internal quotation
marks omitted)).

DISCUSSION

[1] “Congress enacted Section 16(b) as part of the
Exchange Act to prevent corporate insiders from exploiting
their access to information not generally available to others.”
Dreiling v. Am. Online Inc., 578 F.3d 995, 1001 (9th Cir.
2009) (internal quotation marks and alterations omitted). Sec-
tion 16(b) requires corporate insiders to disgorge any trading
profits they obtain in any “short-swing” transaction, which is
defined as “a coupled purchase-and-sale, or sale-and pur-
chase, completed within six months.” Dreiling v. Am. Express
Co., 458 F.3d 942, 947 (9th Cir. 2006) (citing 15 U.S.C.
§ 78p(b)). There are four basic elements of a Section 16(b)
claim: “(1) a purchase and (2) a sale of securities (3) by an
officer or director of the issuer or by a shareholder who owns
more than ten percent of any one class of the issuer’s securi-
ties (4) within a six-month period.” Gwozdzinsky v.
Zell/Chilmark Fund, L.P., 156 F.3d 305, 308 (2d Cir. 1998).

The purpose of the rule is not to punish specific instances
of wrongdoing or remedy harms suffered by particular indi-
viduals. Rather, the law is “aimed at protecting the public” by
preventing corporate insiders from exploiting inside informa-
tion at the expense of ordinary investors. Kern County Land
Co. v. Occidental Petroleum Corp., 411 U.S. 582, 592 (1973).
In order to fulfill this purpose, Section 16(b) “is a blunt instru-
ment, at once both over- and under-inclusive.” Dreiling v.
Am. Express, 458 F.3d at 947. It “is over-inclusive in that it
imposes strict liability regardless of motive, including trades
not actually based on inside information,” and “[i]t is under-
inclusive in that there is no liability for trades made on inside
868 SIMMONDS v. CREDIT SUISSE SECURITIES
information if more than six months transpire between pur-
chase and sale.” Id.

This appeal focuses on a pair of procedural prerequisites to
filing a Section 16(b) lawsuit: the demand requirement, and
the statute of limitations. Shareholders may only file a Section
16(b) suit after requesting that the issuing company take
appropriate action against its insiders. If sixty days pass after
a shareholder demand has been made without the issuing
company resolving the matter (either informally or via law-
suit), shareholders may file suit on the issuing company’s
behalf. However, shareholders must file their suit within two
years of the transactions at issue, subject to the tolling rules
described in greater detail infra.

A. Demand Requirement

[2] Section 16(b) provides in relevant part that all insider
short-swing trading profits “shall inure to and be recoverable
by the issuer,” and “[s]uit to recover such profit may be insti-
tuted at law or in equity in any court of competent jurisdiction
by the issuer, or by the owner of any security of the issuer in
the name and in behalf of the issuer if the issuer shall fail or
refuse to bring such suit within sixty days after request or
shall fail diligently to prosecute the same thereafter . . . .” 15
U.S.C. § 78p(b). The issuing company’s right to recover the
insider’s trading profits “is simply an application of an old
principle in the law that if you are an agent and you profit by
insider information concerning the affairs of your principal,
your profits go to your principal.” Stock Exchange Regula-
tion: Hearing Before the H. Comm. on Interstate and Foreign
Commerce, 73d Cong. 133 (1934) (statement of Thomas Cor-
coran, Counsel, Reconstruction Fin. Corp.).7
7
Certain courts and commentators have suggested that Section 16(b)
actions are not true derivative actions. E.g., Dottenheim v. Murchison, 227
F.2d 737, 738 (5th Cir. 1956); Schaffer v. CC Investments, LDC, 286 F.
Supp. 2d 279, 281-82 (S.D.N.Y. 2003); 4 Hazen, supra, § 13.2 n.41; Peter
 SIMMONDS v. CREDIT SUISSE SECURITIES 869
[3] Section 16(b) does not set forth any additional details
regarding the nature and scope of this statutory demand
requirement. In light of this Congressional silence, we turn to
state law for guidance. The Supreme Court has explained that
“where a gap in the federal securities laws must be bridged by
a rule that bears on the allocation of governing powers within
the corporation, federal courts should incorporate state law
into federal common law unless the particular state law in
question is inconsistent with the policies underlying the fed-
eral statute.” Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90,
108 (1991). Applying this broad principle in the context of the
Investment Company Act of 1940, the Kamen Court held that
“the contours of the demand requirement” (in that case, the
standards governing demand futility) must be determined by
the law of the state of incorporation. Id. at 101.

[4] Here, the adequacy of Simmonds’s Section 16(b)
demand letters is disputed in the thirty cases involving the
Moving Issuers, all of which are Delaware corporations.8 In

J. Romeo & Alan L. Dye, Section 16 Treatise and Reporting Guide,
§ 9:03[1][a] (3d ed. 2008) (hereinafter Romeo & Dye.) We refrain from
examining this question more closely because it is not relevant to the
issues at hand. We note that derivative and quasi-derivative actions are
generally governed by the procedural requirements of Fed. R. Civ. P. 23.1.
See Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 533-34 (1984). How-
ever, two of our sister circuits have suggested that Rule 23.1 does not
apply in Section 16(b) actions. Portnoy v. Kawecki Berylco Indus., Inc.,
607 F.2d 765, 767 n.3 (7th Cir. 1979); Dottenheim, 227 F.2d at 738. We
refrain from deciding this question because it is not relevant to our analy-
sis.
8
Our analysis of Simmonds’s demand letters is limited to the thirty
cases in which the Moving Issuers contested the adequacy of Simmonds’s
demand. Although we have no reason to doubt Simmonds’s assertion that
she submitted “similar demands” to the twenty-four issuing companies
that did not join the Motion to Dismiss, these letters are not currently part
of the record and must be examined by the district court in the first
instance. Accordingly, our analysis does not involve the twenty cases
involving Delaware issuers who did not join the Moving Issuers’ Motion
to Dismiss, the two cases involving California issuers (Critical Path, Inc.,
and Openwave Systems, Inc.), or the cases involving a Washington issuer
(Airspan Networks, Inc.) and a Bermuda issuer (Marvell Technology
Group, Ltd.).
870 SIMMONDS v. CREDIT SUISSE SECURITIES
light of the principles articulated in Kamen, these thirty
demand letters must be analyzed in accordance with Delaware
law, unless there is a conflict between Delaware law and fed-
eral law that “would frustrate specific objectives” of Section
16 and the Exchange Act. Kamen, 500 U.S. at 98 (citation,
internal quotation marks, and alterations omitted). Our task
under Kamen is the same as in any case decided under state
law after Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). We
must “ ‘approximate state law as closely as possible in order
to make sure that the vindication of the state right is without
discrimination because of the federal forum.’ ” Orkin v. Tay-
lor, 487 F.3d 734, 741 (9th Cir. 2007) (quoting Ticknor v.
Choice Hotels Int’l, Inc., 265 F.3d 931, 939 (9th Cir. 2001)).
Accordingly, we must follow the Delaware Supreme Court’s
pronouncements, or, if the Delaware Supreme Court has not
addressed the question, “we must predict how the Court will
decide the issue, based on decisions of Delaware courts, deci-
sions from other jurisdictions, treatises and restatements.”
Matsuura v. Alston & Bird, 166 F.3d 1006, 1008 n.3 (9th Cir.
1999) (per curiam). In other contexts, we have relied on the
Delaware Court of Chancery’s decisions as accurate state-
ments of Delaware law, id. at 1008, and we note that there are
particularly compelling reasons for following the Delaware
Court of Chancery’s decisions because it is widely recognized
as the nation’s leading authority on corporate law issues, see,
e.g., William H. Rehnquist, The Prominence of the Delaware
Court of Chancery in the State-Federal Joint Venture of Pro-
viding Justice, 48 Bus. Law. 351 (1992).

The Delaware Supreme Court has explained that the
demand requirement exists “first to insure that a stockholder
exhausts his intracorporate remedies, and then to provide a
safeguard against strike suits.” Aronson v. Lewis, 473 A.2d
805, 811-12 (Del. 1984), overruled en banc on other grounds
by Brehm v. Eisner, 746 A.2d 244, 253 & n.13 (Del. 2000).
“The purpose of pre-suit demand is to assure that the stock-
holder affords the corporation the opportunity to address an
alleged wrong without litigation, to decide whether to invest
 SIMMONDS v. CREDIT SUISSE SECURITIES 871
the resources of the corporation in litigation, and to control
any litigation which does occur.” Spiegel v. Buntrock, 571
A.2d 767, 773 (Del. 1990).9 These justifications are not
unique to Delaware. The Supreme Court has repeatedly high-
lighted these points, Kamen, 500 U.S. at 101; Daily Income
Fund, 464 U.S. at 533, as have our sister circuits,10 and lead-
ing commentators have approved.11 As we have previously
stated, the demand rule “is not merely a technical or unimpor-
tant requirement.” Potter, 546 F.3d at 1058. Rather, it flows
from “the general rule of American law . . . that the board of
directors controls a corporation.” Id. Indeed, the policies ani-
mating shareholder demands are particularly relevant in the
Section 16(b) context. “Anecdotal evidence suggests that well
over 90 percent of all Section 16(b) claims are settled pri-
vately, without any lawsuit being filed.” Romeo & Dye,
supra, § 9.01[7][c] (footnote omitted). This figure would
almost certainty be lower if Section 16(b) did not contain a
9
Another justification for the demand requirement is that the demand
allows the corporation to exercise its business judgment and decide not to
pursue the claim. See Aronson, 473 A.2d at 812 (noting that business judg-
ment rule permits “independent disinterested directors to dismiss the
action as inimical to the corporation’s best interests”). This justification is
inapplicable in Section 16(b) litigation because “[a]ny stockholder has a
right to institute suit if the corporation fails to do so, regardless of the
good faith or reasonable business judgment of the board of directors.” Pel-
legrino v. Nesbit, 203 F.2d 463, 467 (9th Cir. 1953).
10
E.g., Grossman v. Johnson, 674 F.2d 115, 125 (1st Cir. 1982); Lewis
v. Graves, 701 F.2d 245, 247-48 (2d Cir. 1983); Shaev v. Saper, 320 F.3d
373, 377 (3d Cir. 2003); Hoffman v. Kramer, 362 F.3d 308, 317 n.4 (5th
Cir. 2004); In re Ferro Corp. Derivative Litig., 511 F.3d 611, 618 (6th Cir.
2008); Boland v. Engle, 113 F.3d 706, 712 (7th Cir. 1997); Allright Mis-
souri, Inc. v. Billeter, 829 F.2d 631, 638 (8th Cir. 1987); Stepak v. Addi-
son, 20 F.3d 398, 402 (11th Cir. 1994); Gaubert v. Fed. Home Loan Bank
Bd., 863 F.2d 59, 65 (D.C. Cir. 1988).
11
13 William Meade Fletcher, Fletcher Cyclopedia of the Law of Cor-
porations § 5963 (Supp. 2010); American Law Institute, Principles of
Corporate Governance § 7:03 cmt. c. (1992 & Supp. 2010); Daniel R. Fis-
chel, Comment, The Demand and Standing Requirements in Stockholder
Derivative Actions, 44 U. Chi. L. Rev. 168, 171-72 (1976).
872 SIMMONDS v. CREDIT SUISSE SECURITIES
demand requirement, as shareholder demands allow boards to
investigate the allegations and resolve matters without resort-
ing to costly and burdensome litigation.

[5] To give effect to these general policies, the Delaware
Chancery has required that demand letters “specifically state:
(i) the identity of the alleged wrongdoers, (ii) the wrongdoing
they allegedly perpetrated and the resultant injury to the cor-
poration, and (iii) the legal action the shareholder wants the
board to take on the corporation’s behalf.” Yaw v. Talley, Civ.
A. No. 12882, 1994 WL 89019, at *7 (Del. Ch. Mar. 2, 1994)
(unpublished opinion), reprinted in 20 Del. J. Corp. L. 454.12
Furthermore, “the party asserting that a demand was made . . .
bear[s] the burden of proof . . . .” Id. These requirements flow
directly from the underlying justifications for the demand
requirement: “[i]t is essential that the communication contain
these three elements to enable the board to perform its duty
to make a good faith investigation of claims of alleged wrong-
doing, and, where appropriate, to rectify the misconduct.” Id.
We believe that this is a correct statement of Delaware law as
it would be decided by the Delaware Supreme Court. This
standard was announced by a vice chancellor who was later
elevated to the state supreme court, see Gatz v. Ponsoldt, No.
Civ. A. 174-N, 2004 WL 3029868, at *5 (Del. Ch. Nov. 5,
2004) (unpublished opinion), and, more importantly, this stan-
dard has been uniformly followed in subsequent Chancery deci-
sions.13 Accordingly, under Kamen and our general Erie
jurisprudence, we apply this legal standard (and the Delaware
courts’ applications of it) except where it “frustrate[s] specific
12
Delaware rules of court allow citation to unpublished chancery deci-
sions. 1 David A. Drexler, et al., Delaware Corporation Law and Practice
§ 2.05 (2009).
13
FLI Deep Marine LLC v. McKim, No. Civ. A. 4138-VCN, 2009 WL
1204363, at *1 n.6 (Del. Ch. Apr. 21, 2009) (unpublished opinion);
Khanna v. McMinn, No. Civ. A. 20545-NC, 2006 WL 1388744, at *13
(Del. Ch. May 9, 2006) (unpublished opinion); Gatz, 2004 WL 3029868,
at *5.
 SIMMONDS v. CREDIT SUISSE SECURITIES 873
objectives” of Simmonds’s federal cause of action. See
Kamen, 500 U.S. at 98.14

Here, the thirty demand letters at issue in the Moving Issu-
ers’ motion (all of which were identical in all material
respects) stated the following pertinent facts.15 “[T]he Compa-
ny’s IPO underwriters, in addition to certain of its officers,
directors and principal shareholders, as identified in the IPO
prospectus . . . coordinated their efforts for the purpose of
acquiring, holding, and/or disposing of securities of the Com-
pany,” obtained beneficial ownership of shares amounting to
more than 10% of the company’s outstanding common stock
in the year following the IPO, “engaged in purchases and
sales of Company within periods of less than six months dur-
ing” that year, and failed to report those transactions as
required by Section 16(a). Simmonds “demand[ed] that the
14
The federal district court in Delaware has articulated a similar stan-
dard regarding the demand requirement: “At a minimum, a demand must
identify the alleged wrongdoers, describe the factual basis of the wrongful
acts and the harm caused to the corporation, and request remedial relief.
In most instances, the shareholder need not specify his legal theory, every
fact in support of that theory, or the precise quantum of damages.” Allison
v. Gen. Motors Corp., 604 F. Supp. 1106, 1117 (D. Del.), aff’d mem., 782
F.2d 1026 (3d Cir. 1985). Many federal courts, including the district court
in this case, have relied on Allison or its federal progeny when addressing
the adequacy of a demand under Delaware law. See, e.g., Richelson v.
Yost, __ F. Supp. 2d __, No. 10-1342, 2010 WL 3563108, at *8 (E.D. Pa.
Sept. 9, 2010); Dreiling v. Am. Express Co., 351 F. Supp. 2d 1077, 1085
(W.D. Wash. 2004), rev’d on other grounds, 458 F.3d 942 (9th Cir. 2006);
Levner v. Saud, 903 F. Supp. 452, 456 (S.D.N.Y. 1994), aff’d sub nom.
Levner v. Prince Alwaleed, 61 F.3d 8, 9 (2d Cir. 1995); Rubin v. Posner,
701 F. Supp. 1041, 1045 (D. Del. 1988). We believe, however, that the
better approach is to rely on Delaware state courts to the greatest extent
possible. Under Kamen, we give preference to the state courts’ approach.
15
The demand letters were identified in the Complaints, and the thirty
letters sent to the Moving Issuers were submitted to the district court as
part of their Motion to Dismiss. Because the parties did not dispute the
authenticity of these documents, we may consider them without convert-
ing the motion to dismiss into a motion for summary judgment. See Knie-
vel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005).
874 SIMMONDS v. CREDIT SUISSE SECURITIES
board of directors prosecute a claim against” those persons
“for violations of § 16(b) of the Securities Exchange Act of
1934,” in order to “compel[ ] [them] to disgorge the profits
they made through purchases and sales of Company stock.”

In response to twenty-five of the thirty Moving Issuers’
requests for additional information, Simmonds explained that
“the challenged transactions involved the activities of the lead
underwriters, the other IPO underwriters, and the officers,
directors and principal shareholders of the Company . . .
related to improper IPO allocation (so-called ‘laddering’ and
‘spinning’) and research and stock rating activities during the
Relevant Period. As you are aware, information regarding
these activities is readily available at court, law firm and SEC
websites.”16

[6] Simmonds’s initial demand letters satisfied the first
part of the Delaware test for demand adequacy, which
requires the shareholder to state “the identity of the alleged
wrongdoers.” Yaw, 1994 WL 89019, at *7. In FLI Deep
Marine v. McKim, the plaintiff’s demand letter stated that
16
These follow-up letters were not mentioned in the Complaints or sub-
mitted by any of the Defendants in connection with the various motions
to dismiss. Rather, they were submitted by Simmonds in opposition to the
Moving Issuers’ Motion to Dismiss. Ordinarily such extrinsic evidence
may not be considered at this stage of the litigation. See Knievel, 393 F.3d
at 1076. The district court determined, however, that these documents
could be considered as part of the defendants’ challenge to subject matter
jurisdiction under Fed. R. Civ. P. 12(b)(1). See In re Section 16(b) Litig.,
602 F. Supp. 2d 1202, 1210 (W.D. Wash. 2009) (“A jurisdictional chal-
lenge under [Rule 12(b)(1)] may be made on the face of the pleadings or
by presenting extrinsic evidence.” (citing Warren v. Fox Family World-
wide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003)). Because we are proceed-
ing under Fed. R. Civ. P. 12(b)(6) rather than Fed. R. Civ. P. 12(b)(1), we
do not have the benefit of going beyond the pleadings as the district court
did. However, we may consider Simmonds’s follow-up letters to support
our conclusion that Simmonds’s thirty Complaints involving the Moving
Issuers must be dismissed with prejudice. See Broam v. Bogan, 320 F.3d
1023, 1026 n.2 (9th Cir. 2003).
 SIMMONDS v. CREDIT SUISSE SECURITIES 875
“ ‘certain employees, officers and directors of [the company]
and others’ ” had diverted and misappropriated the company’s
assets. FLI Deep Marine, 2009 WL 1204363, at *1 (quoting
demand letter). The Court of Chancery stated that this letter
was sufficient to satisfy the first prong of Yaw. Id. at *1 n.6.
Simmonds’s demand letters identify the alleged wrongdoers
with a similar level of precision as in the FLI Deep Marine
plaintiff’s demand letter. Specifically, Simmonds’s letters
identified “the Company’s IPO underwriters, in addition to
certain of its officers, directors and principal shareholders, as
identified in the IPO prospectus.” Although the Moving Issu-
ers contend that their respective prospectuses listed between
eleven and fifty-one underwriters, officers, and directors, and
we acknowledge that this is a close question, we follow the
Court of Chancery’s approach in FLI Deep Marine.17 Because
Simmonds’s demand letters identified a closed set of alleged
wrongdoers, we agree with the district court that “the demand
letters in this case sufficiently identify the alleged wrongdo-
ers.” In re Section 16(b) Litig., 602 F. Supp. 2d at 1212.

[7] Simmonds’s letters failed, however, to satisfy the sec-
ond and third prongs of the Delaware test for demand ade-
quacy, which require the shareholder to identify the
“wrongdoing . . . allegedly perpetrated” and “the legal action
the shareholder wants the board to take on the corporation’s
behalf.” Yaw, 1994 WL 89019, at *7.18 Simply put, Sim-
17
The Court of Chancery’s approach is in tension with the Third Cir-
cuit’s holding in Shlensky v. Dorsey, 574 F.2d 131, 140-41 (3d Cir. 1978),
in which the court held that demand letters were inadequate where they
alleged that the “responsible individuals” should be held accountable.
18
Although the Delaware courts require the demand to describe “the
resultant injury to the corporation,” Yaw, 1994 WL 89019, at *7, this
requirement “frustrate[s] specific objectives” of Section 16(b) by adding
an additional element to the Section 16(b) cause of action. See Kamen, 500
U.S. at 98. Section 16(b) exists to remedy harms suffered by the general
investing public, not harms suffered by issuing corporations. See Kern
County, 411 U.S. at 591-92; Champion Home Builders Co. v. Jeffress, 490
F.2d 611, 619 (6th Cir. 1974) (“the absence of corporate damage is not a
factor in assessing § 16(b) liability”). Accordingly, a shareholder’s
demand letter need not identify any corporate injury in order to satisfy the
demand requirement of Section 16(b).
876 SIMMONDS v. CREDIT SUISSE SECURITIES
monds’s demand letters presented factual theories that vary
significantly from the facts alleged in the Complaints. Her
demand letters claimed that the Underwriters directly bought
and sold the Issuing Companies’ shares, and accordingly
requested that the Issuing Companies seek disgorgement of
the Underwriters’ trading profits. In contrast, her Complaints
do not allege that the Underwriters directly participated in
buying and selling the Issuing Companies’ stock, and instead
seek disgorgement of the profits the Underwriters received
through their investment banking operations.19

[8] According to the Complaints, the Underwriters violated
Section 16(b) when they profited indirectly through their cus-
tomers’ purchases and sales of the Issuing Companies’ shares.
Specifically, the Complaints allege that the Underwriters
engaged in “Short-Swing Transactions” when (1) their exist-
ing customers purchased and sold the issuing company’s
stock, (2) they obtained new banking customers in exchange
for giving other companies’ insiders favorable consideration
in the issuing company’s IPO, and (3) they obtained addi-
tional banking business from the issuing company in
exchange for helping the issuing company’s insiders profit
from their own company’s IPO. The Complaints assert that
these “Short-Swing Transactions” violated Section 16(b), and
request disgorgement of profits obtained through these
“Short-Swing Transactions.” None of these alleged transac-
tions is referenced in any way in the original demand letters
submitted to the Moving Issuers. The garden-variety Section
19
In Simmonds v. Morgan Stanley & Co., Inc., No. 09-35352, Sim-
monds alleges that Morgan Stanley and J.P. Morgan (the successor-in-
interest to Hambrecht & Quist LLC) respectively sold $46.5 million and
$34.6 million in shares of Internap Network Services Corporation as part
of a secondary offering. Although Simmonds identified these transactions
in her Complaint, she failed to allege that these transactions violated Sec-
tion 16(b) and she failed to seek disgorgement of any profits obtained
from these transactions. Accordingly, her demand letter to Internap Net-
work Services Corporation (which is one of the Moving Issuers), was
defective for the same reasons as in the other cases.
 SIMMONDS v. CREDIT SUISSE SECURITIES 877
16(b) claim made out in these demand letters bears no resem-
blance to the elaborate scheme described in Simmonds’s
Complaints.

[9] Even if we consider Simmonds’s follow-up letters to
twenty-five of the Moving Issuers, she failed to identify the
wrongful acts “clearly and specifically.” Yaw, 1994 WL
89019, at *8. The follow-up letters noted that the “challenged
transactions . . . [are] related to improper IPO allocation (so-
called ‘laddering’ and ‘spinning’) and research and stock rat-
ing activities.” Simmonds’s conclusory references to “ladder-
ing,” “spinning,” and “research and stock rating,” were vague
and ambiguous, as was her open ended reference to “court,
law firm and SEC websites,” and completely failed to provide
sufficiently detailed information to permit the boards to con-
duct a good faith inquiry into the alleged wrongdoing.

[10] Moreover, because the demand letters and the Com-
plaints contain distinct factual assertions, the demand letters
also failed to set forth “the legal action the shareholder wants
the board to take on the corporation’s behalf.” Yaw, 1994 WL
89019, at *7. The demand letters requested that the Moving
Issuers “compel[ ]” the Underwriters and other group mem-
bers to “disgorge the profits they made through purchases and
sales of [the issuing company’s] stock.” The Complaints, on
the other hand, do not mention the Underwriters’ direct trad-
ing profits, and instead seek disgorgement of the profits the
Underwriters received through their investment banking oper-
ations.

[11] The Court of Chancery has noted that demand letters
must be sufficiently specific to “enable the board to perform
its duty to make a good faith investigation of claims of
alleged wrongdoing[ ] and . . . to rectify the misconduct” at
issue in a subsequent lawsuit. Yaw, 1994 WL 89019, at *7.
The court further noted that “to require a board to investigate
claims asserted ambiguously . . . would not be an efficient use
of corporate resources, because the board would lack the
878 SIMMONDS v. CREDIT SUISSE SECURITIES
information necessary to make a good faith inquiry.” Id. Sim-
monds’s demand letters were particularly inadequate because
they described a different course of conduct than the one she
described in her Complaints. And clearly, Simmonds’s
demand letters could have led directors to investigate facts
(the Underwriters’ purchases and sales of Issuing Company
stock) that were only marginally related to the issues ulti-
mately raised in the Complaints (the Underwriters’ custom-
ers’ purchases and sales of Issuing Company stock, and
associated profit-sharing agreements between the Underwrit-
ers and their customers).

We are not persuaded by Simmonds’s argument that the
Moving Issuers subjectively understood what she meant in her
demand letters. Delaware case law sets forth an objective
standard for assessing the adequacy of a demand and does not
inquire whether the board of directors had independent
knowledge of relevant information. To the extent that Sim-
monds’s argument has been addressed by any courts, it has
been soundly rejected. For example, the Third Circuit has
rejected a shareholder’s argument that a conclusory demand
was adequate because “the directors were in a better position
than the shareholders to make the investigation necessary to
uncover wrongdoers.” Shlensky, 574 F.2d at 141. In the
related context of demand refusal, the Delaware Supreme
Court rejected the argument that “[t]he board has better access
to the relevant facts” and plaintiffs should therefore be
relieved of their burden to show that the board’s refusal was
improper. Levine v. Smith, 591 A.2d 194, 209 (Del. 1991)
(internal quotation marks omitted), overruled en banc on other
grounds by Brehm, 746 A.2d at 253 & n.13.

Simmonds’s argument is an end-run around Delaware’s
requirement that shareholders make reasonably specific
demands, and were we to adopt Simmonds’s proposed
approach, Delaware’s demand standard would be eviscerated.
Plaintiffs in derivative actions often seek relief for a corporate
insider’s wrongdoing. If the demand requirements were
 SIMMONDS v. CREDIT SUISSE SECURITIES 879
relaxed on account of insiders’ subjective knowledge, then
shareholders would never have to “clearly and specifically”
describe their assertions in a demand letter. See Yaw, 1994
WL 89019, at *8. To the extent that Simmonds believed that
relevant information was “readily available at court, law firm
and SEC websites” as she claimed in her follow-up letters, it
was her burden under Delaware law to distill the relevant
facts and present them to the board. Delaware law does not
allow shareholders to forego pre-suit investigations in an
attempt to shift information-gathering costs onto the corpora-
tion, and this rule is not clearly incompatible with Section 16
and the Exchange Act.

As an alternative to her argument that her demand letters
were adequate, Simmonds contends that the demand require-
ment should be excused as futile. However, Delaware courts
have repeatedly held that a shareholder concedes that a
demand is not futile by submitting a demand to the board.
“Delaware law could hardly be clearer” in holding that share-
holders may not invoke the futility exception after submitting
a demand to the board. FLI Deep Marine, 2009 WL 1204363,
at *3; see also id. at *3 n.17 (collecting cases).

[12] We hold that the thirty demand letters in the record
fail to satisfy the demand requirement under Delaware law.
Accordingly, we affirm the district court’s order granting the
Moving Issuers’ motions to dismiss the thirty cases to which
they are parties.

B. Statute of Limitations

[13] The district court dismissed the cases involving the
remaining twenty-four issuers (that is, the Issuing Companies
that did not join the Moving Issuers’ Motion to Dismiss) on
account of the statute of limitations. Section 16(b) provides
that “ no . . . suit shall be brought more than two years after
the date such profit was realized” from the alleged short-
swing transactions. 15 U.S.C. § 78p(b). We have previously
880 SIMMONDS v. CREDIT SUISSE SECURITIES
issued a thorough decision interpreting this provision, Whitta-
ker v. Whittaker Corp., 639 F.2d 516 (9th Cir. 1981), and we
are bound by our prior holding.

In Whittaker, a corporate insider engaged in prohibited
short-swing transactions between December 1965 and
December 1970. The corporation sought disgorgement in Jan-
uary 1971 without filing a lawsuit. The insider paid the full
amount requested, but later filed suit against the corporation
seeking to recover some of the money he had paid. Id. at
518-19. In the lawsuit, he argued that Section 16(b)’s statute
of limitations barred the corporation from retaining any
amounts that he had obtained from short-swing transactions
prior to January 1969 (that is, two years prior to the time that
the corporation requested that he disgorge his profits). Id. at
519. The district court agreed with the insider, and “found that
various corporate officers had information which put the Cor-
poration on notice throughout the relevant trading period”
between 1965 and 1970. Id. at 527. Based on this factual find-
ing, the district court allowed the corporation to recover the
insider’s profits only for the two years prior to the disgorge-
ment request. Id. at 519, 527; see also Whittaker v. Whittaker
Corp., No. 75-2546, 1977 WL 1006, at *9-10 (C.D. Cal. Mar.
22, 1977) (setting forth factual findings in greater detail).

On appeal, we explained that there were three competing
approaches to Section 16(b)’s statute of limitations: (1) a
“strict” approach under which the statute is treated as a statute
of repose—that is, a firm bar that is not subject to tolling; (2)
a “notice” or “discovery” approach like the one that had been
applied by the district court, “under which the time period is
tolled until the Corporation had sufficient information to put
it on notice of its potential § 16(b) claim”; and (3) a “disclo-
sure” approach “under which the time period is tolled until the
insider discloses the transactions at issue in his mandatory
§ 16(a) reports.” Whittaker, 639 F.2d at 527. After thoroughly
analyzing the merits of the competing interpretations, id. at
527-30, we held unequivocally that “the disclosure interpreta-
 SIMMONDS v. CREDIT SUISSE SECURITIES 881
tion is the correct construction of § 16.” Id. at 527. Under this
approach, “an insider’s failure to disclose covered transac-
tions in the required § 16(a) reports tolls the two year limita-
tions period for suits under § 16(b) to recover profits
connected with such a non-disclosed transaction. The two-
year period for § 16(b) begins to run when the transactions are
disclosed in the insider’s § 16(a) report.” Id. at 530. Accord-
ingly, we reversed the district court’s use of the “notice”
approach and held that the corporation could recover all of the
insider’s short-swing profits, even those obtained long after
the corporation was on notice of the insider’s trading. Id.

[14] In this case, the Defendants advance various argu-
ments in an attempt to distinguish Whittaker. All of these
arguments are variations on a single theme—Simmonds knew
or should have known of the alleged wrongful conduct many
years before she filed her Complaints. But despite the Defen-
dants’ arguments, the central holding of our opinion in
Whittaker—both in our legal analysis and our application of
the law to the facts of that case—is that the Section 16(b) stat-
ute of limitations is tolled until the insider discloses his trans-
actions in a Section 16(a) filing, regardless of whether the
plaintiff knew or should have known of the conduct at issue.
We recently restated this holding in Roth v. Reyes, 567 F.3d
1077 (9th Cir. 2009), in which we concluded that the statute
of limitations begins to run when the insider files a Section
16(a) report even if the contents of the filing inaccurately
claim an exemption that does not actually apply. Id. at 1083.
We explained that the basic act of filing a Section 16(a) report
satisfies Whittaker’s disclosure requirement and “supports the
goals of disclosure and transparency” underlying Section 16.
Id. at 1083.

The Defendants advance four specific points in support of
their general theory that Whittaker can be distinguished. First,
they argue that Whittaker does not apply because Simmonds
knew or should have known of the relevant facts sometime
around 2001. By that time, much of the information described
882 SIMMONDS v. CREDIT SUISSE SECURITIES
in the Complaints had been publicly disclosed in court filings,
news reports, and the Issuing Companies’ IPO registration fil-
ings. The Defendants contend that “[w]hen a party is aware
of the necessary facts to bring a claim, there is no excuse for
any delay beyond the statute of limitations period, let alone a
delay of six years.” However, this theory was plainly rejected
in Whittaker. Our Whittaker decision reversed the district
court’s conclusion that the statute of limitations began to run
at the time that “various corporate officers had information
which put the Corporation on notice” of the insider’s short-
swing trades. Whittaker, 639 F.2d at 527. The Defendants’
“notice” argument is an unpersuasive attempt to revive a the-
ory that we considered and rejected nearly thirty years ago.

Second, the Defendants argue that the Section 16(b) limita-
tions period should not be tolled indefinitely unless the defen-
dant actively “conceal[s] the facts necessary to trigger a
Section 16(b) lawsuit.”20 This theory overlooks the footnote in
Whittaker in which we explained that “[t]he failure to disclose
in § 16(a) reports, whether intentional or inadvertent, is
deemed concealment, thus triggering the traditional equitable
tolling doctrine of fraudulent concealment.” Id. at 527 n.9.
That conclusion was further bolstered by our emphasis on cre-
ating a rule that can be “mechanically calculated from objec-
tive facts,” id. at 529, which would be undermined if courts
were required to conduct case-specific inquiries into the insid-
ers’ state of mind about their failure to file Section 16(a)
reports.

Third, the Defendants contend that Whittaker does not
apply in this case because the Underwriters are exempt from
Section 16(a) reporting requirements under the SEC’s under-
20
This approach was advocated by Judge Jacobs of the Second Circuit
in Litzler v. CC Investments, L.D.C., 362 F.3d 203, 208 n.5 (2d Cir. 2004)
(Jacobs, J., concurring) (“The author of this opinion . . . would have pre-
ferred to say that the statute of limitations in Section 16(b) is equitably
tolled only when the failure to file is intentional or unreasonable.”).
 SIMMONDS v. CREDIT SUISSE SECURITIES 883
writing and market-making exemptions. However, this argu-
ment finds no support in Whittaker’s bright-line rule. See
Whittaker, 639 F.2d at 527 & n.9, 530. In any event, were we
to follow the Defendants down this line of argument, we
would soon find ourselves deciding the substantive merits of
the parties’ dispute. The question of whether or not the
Underwriters are exempt from filing Section 16(a) reports is
identical to the question of whether they may be held liable
under Section 16(b). We refrain from adopting an approach
that “would merge the tolling doctrine with the substantive
wrong . . . .” Santa Maria v. Pac. Bell, 202 F.3d 1170, 1177
(9th Cir. 2000).

Finally, the Defendants argue that Whittaker does not apply
because it involved a corporation that was seeking disgorge-
ment, rather than an outside shareholder as in the instant case.
They assert that we should adopt different lines of analysis
depending on whether the plaintiff is an issuing company or
is an outside shareholder such as Simmonds. However, our
decision in Whittaker created a blanket rule that applies in all
Section 16(b) actions. A key component of our reasoning was
that Section 16(a) notices allow the company’s shareholders
—who “are likely to be outsiders, minority holders”—to
obtain the information necessary to bring a Section 16(b)
action. Whittaker, 639 F.2d at 528. Nothing in Whittaker’s
logic or reasoning would allow us to distinguish between issu-
ing companies and outside shareholders, and we refrain from
adopting such a strained interpretation of our precedent.

[15] In short, the fundamental holding of Whittaker is that
Section 16(b)’s two-year statute of limitations begins to run
from the time that the defendant files a Section 16(a) disclo-
sure statement. Because Simmonds alleges that the Defen-
dants did not file any Section 16(a) reports, we conclude that
Simmonds’s claims are not time-barred. Accordingly, the dis-
trict court’s decision on this ground is reversed.
884 SIMMONDS v. CREDIT SUISSE SECURITIES
C. Cross-Appeal

In their cross-appeal, the Underwriters contend that the dis-
trict court erred by dismissing the thirty cases involving the
Moving Issuers without prejudice on account of Simmonds’s
inadequate demand. They argue that these dismissals should
have been with prejudice because Simmonds’s claims are
time-barred. Although we disagree that Simmonds’s claims
are time-barred, we agree that the district court should have
dismissed the thirty Complaints against the Moving Issuers
with prejudice on account of her failure to satisfy the Section
16(b) demand requirement in those cases.

[16] We have previously held that a complaint may be dis-
missed with prejudice on account of the plaintiff’s failure to
satisfy the demand requirement, In re Silicon Graphics Inc.
Sec. Litig., 183 F.3d 970, 990-91 (9th Cir. 1999), abrogated
on other grounds, Tellabs, Inc. v. Makor Issues & Rights, 551
U.S. 308, 322-24 (2007), and various other circuits have
reached the same conclusion.21 Although the district court dis-
missed Simmonds’s thirty Complaints against the Moving
Issuers “without prejudice,” our decision to convert the dis-
missal is not unprecedented. In a derivative action in which
the shareholder failed to show demand futility, the First Cir-
cuit sua sponte converted the district court’s dismissal from
“without prejudice” to “with prejudice.” In re Kauffman Mut.
Fund Actions, 479 F.2d 257, 267 (1st Cir. 1973). The court
explained that the plaintiff was barred from relitigating the
issues decided in that action, and accordingly the dismissal
21
E.g., Kanter v. Barella, 489 F.3d 170, 175 (3d Cir. 2007) (dismissal
with prejudice and without leave to amend); Starrels v. First Nat’l Bank
of Chicago, 870 F.2d 1168, 1169, 1172 (7th Cir. 1989) (dismissal with
prejudice and without leave to amend); Gaubert v. Fed. Home Loan Bank
Bd., 863 F.2d 59, 62, 69 (D.C. Cir. 1988) (dismissal with prejudice and
without leave to amend); Shlensky, 574 F.2d at 141-42 (dismissal without
leave to amend); In re Kauffman Mut. Fund Actions, 479 F.2d 257, 267
(1st Cir. 1973) (dismissal with prejudice).
 SIMMONDS v. CREDIT SUISSE SECURITIES 885
should have been entered with prejudice rather than without.
Id.

[17] We agree with the First Circuit’s approach in Kauff-
man. Simmonds is barred from relitigating issues relating to
the adequacy of the demand letters she sent to the thirty Mov-
ing Issuers and the follow-up letters she sent to twenty-five of
the Moving Issuers. As with any issue litigated fully on mer-
its, shareholders may not endlessly relitigate the adequacy of
their pre-suit demand. Accordingly, we vacate the district
court’s order dismissing without prejudice the thirty cases
involving the Moving Issuers, and the district court is
instructed to dismiss these thirty cases with prejudice.

[18] In the twenty-four cases that were improperly dis-
missed as time-barred and in which the Issuing Companies
did not join the Moving Issuers’ Motion to Dismiss, the dis-
trict court is directed to permit the Underwriters and Issuing
Companies to seek dismissal on account of Simmonds’s fail-
ure to comply with the demand requirement.22 We note that
22
Contrary to the district court’s suggestion, see In re Section 16(b)
Litig., 602 F. Supp. 2d at 1211, the Underwriters should be permitted to
file motions challenging Simmonds’s compliance with the demand
requirement. See Shlensky v. Dorsey, 574 F.2d 131, 142 (3d Cir. 1978) (“it
is well settled . . . that defendants other than the corporation whose rights
the shareholder plaintiffs are seeking to vindicate may successfully raise
the defense of failure to comply with Rule 23.1” and the demand require-
ment); accord Hawes v. City of Oakland, 104 U.S. 451, 461-62 (1881)
(complaint dismissed on motion by third party defendant); Brody v. Chem.
Bank, 517 F.2d 932, 933 (2d Cir. 1975) (per curiam) (complaint dismissed
sua sponte).
The Delaware Supreme Court has thoroughly and persuasively
explained why third parties have standing to raise defenses based on the
shareholder’s failure to comply with demand requirement. Kaplan v. Peat,
Marwick, Mitchell & Co., 540 A.2d 726, 730 (Del. 1988). “The standing
of a third party to assert demand related defenses must be determined, not
on the basis of whether such status benefits the interests of the third party,
but whether according such status furthers the nature and purpose of the
demand requirement.” Id. The court explained (as we discussed supra)
886 SIMMONDS v. CREDIT SUISSE SECURITIES
our discussion in this opinion will almost certainly resolve the
twenty remaining cases involving issuers incorporated in Del-
aware. (We express no opinion regarding the four cases
involving non-Delaware issuers.) However, as Simmonds’
demands letters to those companies are not in the record, we
leave it to the district court to address those cases in the first
instance.23 We note that four of the cases involve issuers

that “[t]he purpose of pre-suit demand is to assure that the stockholder
affords the corporation the opportunity to address an alleged wrong with-
out litigation and to control any litigation which does occur.” Id. Accord-
ingly, the court concluded that third party defendants may challenge the
sufficiency of a shareholder’s demand. Id.
We agree with the reasoning of the Delaware Supreme Court in Kaplan,
and disagree with the district courts that have held that this result is at
odds with the purposes of Section 16(b). See In re Section 16(b) Litig., 602
F. Supp. 2d at 1211 (collecting cases). In light of our general discussion
of the demand requirement, we conclude that the Section 16(b) demand
requirement—like the demand requirement in all derivative actions—
exists for the purpose of allowing corporations to investigate their insid-
ers’ wrongdoing, resolve disputes without resorting to litigation, and con-
trol any litigation that may take place. See Kaplan, 540 A.2d at 730. In
addition, we note that the demand requirement of Section 16(b) is a
required statutory precondition to a shareholder’s lawsuit. See 15 U.S.C.
§ 78p(b). As the Delaware Supreme Court explained in Kaplan, third par-
ties are permitted to raise demand-related defenses because a sharehold-
er’s “right to bring a derivative action does not come into existence until
the plaintiff shareholder has made a demand on the corporation to institute
such an action.” Id. We see no reason why such reasoning does not apply
in the Section 16(b) context.
Accordingly, in the twenty-four cases being remanded, the district court
should follow the general rule under both Delaware law and federal law:
any defendant in a Section 16(b) action may challenge the adequacy of the
shareholder’s pre-suit demand.
23
Because consolidated appeals “do not merge into one” for all pur-
poses, Fed. R. App. P. 3 advisory committee’s note (1998 amend.), the
district court should be careful about invoking the “law of the case” doc-
trine in the remanded cases involving the twenty issuers incorporated in
Delaware that did not join the Moving Issuers’ Motion to Dismiss, see
generally, Joan Steinman, Law of the Case: A Judicial Puzzle in Consoli-
 SIMMONDS v. CREDIT SUISSE SECURITIES 887
incorporated in jurisdictions other than Delaware (two issuers
are incorporated in California, one in Washington, and one in
Bermuda). We direct the district court to analyze the ade-
quacy of those demand letters in accordance with the choice-
of-law principles articulated in Kamen—namely, the court
should apply the demand requirements of California, Wash-
ington, and Bermuda law, unless those requirements “would
frustrate specific objectives” of Section 16 and the Exchange
Act. Kamen, 500 U.S. at 98 (citation, internal quotation
marks, and alterations omitted).

CONCLUSION

We AFFIRM the district court’s conclusion that Sim-
monds’s demand letters to the thirty Moving Issuers were
inadequate under Delaware law, REVERSE the district
court’s conclusion that all of Simmonds’s claims are time-
barred, and VACATE the district court’s dismissal orders as
to the thirty Moving Issuers with instructions that the district
court dismiss these thirty cases with prejudice on account of
Simmonds’s failure to satisfy Delaware’s demand require-
ment. We REMAND the remaining twenty-four cases (that is,
the cases involving the twenty-four Issuing Companies that
did not join the Moving Issuers’ Motion to Dismiss) with
instructions for the district court to allow the Underwriters
and Issuing Companies to file an appropriate motion to chal-
lenge the adequacy of Simmonds’s demand letters under Del-

dated and Transferred Cases and in Multidistrict Ligitation, 135 U. Pa. L.
Rev. 595, 623-25 (1987) (hereinafter Steinman); cf. State HMO Manage-
ment, Inc. v. Tingley Systems, Inc., 181 F.3d 174, 180 (1st Cir. 1999)
(treating consolidated cases “as a single action for res judicata purposes”).
However, if Simmonds’s demand letters to those twenty Delaware-
incorporated issuers are substantially similar to the thirty demand letters
examined in this opinion, the district court is bound by stare decisis to
apply our holding that demand letters such as the thirty letters we have
examined are inadequate as a matter of Delaware law. See Steinman,
supra, at 624-25.
888 SIMMONDS v. CREDIT SUISSE SECURITIES
aware, California, Washington, and Bermuda law, unless that
law conflicts with Section 16(b). Costs are awarded to the
Appellees.

AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, AND REMANDED IN PART.

M. SMITH, Circuit Judge, specially concurring:

The statutory text of Section 16(b) provides that “no such
suit shall be brought more than two years after the date such
profit was realized.” 15 U.S.C. § 78p(b). In my view, “no
suit” means no suit, and “two years after the date such profit
was realized” means two years after the insider’s final profit-
able transaction, regardless of when—or even if—a Section
16(a) report is filed. The text of the statute sets a firm bar
against Section 16(b) suits filed more than two years after the
transaction is completed. Accordingly, I agree with the
Supreme Court’s dictum that Section 16(b) “sets a 2-year . . .
period of repose.” Lampf, Pleva, Lipkind, Prupis & Petigrow
v. Gilbertson, 501 U.S. 350, 360 n.5 (1991).

This straightforward textual reading is further confirmed by
comparing the language of Section 16(b) with the language of
the other statutes of limitations in our securities laws. See
Lampf, 501 U.S. at 360-61 & nn.5-7. The Court in Lampf
explained that language such as Section 16(b)’s “no such suit
shall be brought” creates periods of repose that are not subject
to tolling. Id. at 360-61, 363. In addition, the general securi-
ties fraud statute of limitations added by the Sarbanes-Oxley
Act of 2002, 116 Stat. 801, provides that securities fraud suits
“may be brought not later than . . . 5 years after such viola-
tion.” 28 U.S.C. § 1658(b)(2). The Supreme Court recently
noted that this provision “giv[es] defendants total repose after
five years.” Merck & Co., Inc. v. Reynolds, 130 S. Ct. 1784,
1797 (2010) (emphasis added). There is little meaningful dis-
 SIMMONDS v. CREDIT SUISSE SECURITIES 889
tinction between the language of 28 U.S.C. § 1658(b)(2) and
Section 16(b)—one provides that suits “may be brought not
later than . . . 5 years after such violation,” and the other pro-
vides that “no such suit shall be brought more than two years
after the date such profit was realized.” To me, this nearly
identical language should “giv[e] defendants total repose”
under both statutes. See Merck, 130 S. Ct. at 1797.

There are numerous reasons why Congress would elect to
create a firm two-year period of repose for Section 16(b)
actions. Although there is no direct evidence of Congress’s
intent, the legislative history has left behind an intriguing
clue. When the Senate and House of Representatives passed
their respective bills that later became the Exchange Act, the
House of Representatives’s verison did not even provide for
a private right of action under Section 16(b), whereas the Sen-
ate’s version provided a right of action but omitted a statute
of limitations. Romeo & Dye, supra, § 1.02[3][b][vi]. It is
reasonable to infer that the House negotiators, in reaching a
compromise with the Senate over the inclusion of a private
right of action, might have bargained to include a stringent
statute of limitations to circumscribe that right of recovery.

Admittedly, the legislative history is inconclusive, but a
restrictive statute of limitations is eminently logical. Section
16(b) imposes an inflexible penalty on corporate insiders even
if they are not at fault and third parties are unharmed. As Sec-
tion 16(b)’s critics have noted, its disgorgement provision “is
little more than a trap for the unwary.” Id. § 9.01[11][a]. It
makes no sense to allow individuals to be hauled into court
years—or even decades—after they unintentionally violate
Section 16. Our holding in Whittaker creates the possibility
that “a claim that affects long-settled transactions might hang
forever over honest persons.” Litzler v. CC Investments,
L.D.C., 362 F.3d 203, 208 n.5 (2d Cir. 2004) (Jacobs, J., con-
curring). Whittaker could lead to the anomalous situation in
which a corporate officer who mistakenly calculates the six-
month short-swing period can be compelled to disgorge his
890 SIMMONDS v. CREDIT SUISSE SECURITIES
trading profits decades after the fact, whereas a culpable offi-
cer who engages in fraudulent insider trading becomes
immune from civil suit after five years as long as his trades
were spaced more than six months apart. I fail to see the logic
behind such a result, and I fear that Whittaker failed to foresee
such anomalies.

I note that Whittaker was motivated by the well-intentioned
concern that corporate insiders could avoid Section 16(b) lia-
bility if they flout Section 16(a)’s reporting requirements.
However, I do not believe that this concern warrants the cre-
ation of never-ending liability for corporate directors, officers,
and shareholders. The Exchange Act is a comprehensive stat-
ute that was designed to address various types of wrongdoing.
It is inappropriate for us to use Section 16(b), which prohibits
certain types of insider trading, to enforce the policies of Sec-
tion 16(a), which requires disclosure of insider trading. The
Exchange Act creates more than adequate enforcement mech-
anisms for enforcing Section 16(a)’s disclosure requirements.
If the insiders do not file their reports, they may be held pro-
fessionally, civilly, or criminally liable for failing to do so.
See, e.g., 15 U.S.C. § 78ff(a) (criminal penalties); In re Gold,
Exchange Act Release No. 34-51585, 85 S.E.C. Docket 724
(Apr. 20, 2005) (professional and civil penalties). And if the
insiders withhold their Section 16(a) reports in order to profit
from inside information, they may be subjected to Rule 10b-
5 securities fraud actions. See, e.g., In re Daou Sys., Inc., 411
F.3d 1006, 1022-24 (9th Cir. 2005).

Ultimately, I believe that Whittaker’s cure is worse than the
disease it intended to address. I would have preferred to adopt
any one of the three alternatives to Whittaker: the statute of
repose approach, Lampf, 501 U.S. at 360 n.5, the actual notice
approach, Litzler, 362 F.3d at 208, or the hybrid approach that
tolls the statute in cases of “fraud or concealment,” id. at 208
n.5 (Jacobs, J., concurring). Of these three approaches, the
statutory text and statutory structure clearly point toward the
repose approach. Were it not for Whittaker, I would hold that
 SIMMONDS v. CREDIT SUISSE SECURITIES 891
Section 16(b) suits may not be brought more than two years
after the short-swing trades take place.

Despite these concerns, I am compelled to follow Whitta-
ker. See Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003)
(en banc). Accordingly, I concur with the panel’s decision.