FILED
NOT FOR PUBLICATION MAY 03 2016
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CLIFF MOSCO; et al., No. 13-36029
Plaintiffs - Appellants, D.C. No. 2:11-cv-01340-TSZ
LOBEL FAMILY,
MEMORANDUM*
Movant - Appellant.,
And
JOE CALLAN, individually and on behalf
of all others similarly situated,
Plaintiff,
v.
MOTRICITY INC; et al.,
Defendants - Appellees,
V.
LOBEL FAMILY,
Movant - Appellant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, Senior District Judge, Presiding
Argued and Submitted April 8, 2016
Seattle, Washington
Before: HAWKINS, RAWLINSON, and CALLAHAN, Circuit Judges.
In this consolidated securities class action, Cliff Mosco, Rich Hardy and
Evan S. Lobel (“Plaintiffs”) appeal from two Rule 12(b)(6) orders dismissing their
Second and Third Amended Complaints against Defendants Motricity, Inc.
(“Motricity” or the “Company”) and certain of its officers and directors
(collectively, the “Motricity Defendants”), and the banks who underwrote its Initial
Public Offering (“IPO”) on June 17, 2010. We have jurisdiction under 28 U.S.C. §
1291 and review de novo, accepting all well-pleaded allegations as true. Lloyd v.
CVB Financial Corp., 811 F.3d 1200, 1205 (9th Cir. 2016). We affirm.
1. Counts 3 and 4 of the complaints allege that all Defendants violated
§§ 11 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k, 77o, and Item 303 of
Regulation S-K by preparing and filing a Registration Statement in connection
with Motricity’s IPO that: (1) misrepresented that Motricity’s product provided
access to the “entire” Internet; (2) failed to disclose a dramatic shift in the mobile
industry from carriers to smartphone manufacturers, and the corresponding high
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rate of smartphone adoption in the market; and (3) misrepresented the profitability
of Motricity’s contract with XL Axiata. These strict liability claims arise from the
same unified course of alleged conduct that forms the basis of Plaintiffs’ fraud
claims: Defendants engaged in a scheme to defraud investors by misrepresenting
facts and omitting adverse facts known to them about Motricity’s software product,
thus enabling some of the Company’s principal shareholders to sell over $11
million worth of their own Motricity stock at artificially inflated prices. See
Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct.
1318, 1323 (2015) (§ 11 claims require no proof that defendants act with intent to
deceive or defraud); In re Rigel Pharm., Inc. Secs. Litig., 697 F.3d 869, 885–86
(9th Cir. 2012) (complaint “sounds in fraud” when it alleges and relies on a
“unified course of fraudulent conduct” as the basis of a claim (quoting Rubke v.
Capitol Bancorp Ltd., 551 F.3d 1156, 1161 (9th Cir. 2009)).
The district court properly dismissed Plaintiffs’ § 11 and Item 303 claims
under Rule 9(b) and the Private Securities Litigation Reform Act, and also under
Rule 8. Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 604 (9th Cir.
2014). First, the Registration Statement disclosed the very trend that Plaintiffs
claim Motricity hid from the market, adequately warning investors about the
potential market shift from carriers to manufacturers. Second, the Registration
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Statement adequately informed investors that the mCore platform, though capable
of providing broader access to the Internet, was designed to allow carriers to design
and customize mobile data services and Internet access according to each carrier’s
preferences. Third, the Registration Statement made no misrepresentations or
omissions about Motricity’s contract with XL Axiata, which Motricity was entitled
to tout as an example of its expanding international business and scalable platform
without detailing the contract’s terms.
2. Counts 1 and 2 of the complaints allege that the Motricity Defendants
violated §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§
78j(b), 78t, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, by
misrepresenting that (1) the mCore product provided access to the entire internet;
(2) the mCore Marketplace products were competitive with smartphone technology
and desirable to smartphone users; and (3) the deployment of Motricity’s software
platform for various Asian carriers was “on track.”
Plaintiffs fail to show why these claims were false or made with scienter.
See Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804 (2011). The alleged
misrepresentations are forward-looking, too vague to be actionable, or constitute
puffery or fraud by hindsight, none of which are actionable under § 10(b). See
Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1058 (9th
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Cir. 2014) (forward-looking statements); Or. Pub. Emps., 774 F.3d at 606 (vague
statements of corporate optimism); Newcal Indus., Inc. v. Ikon Office Solution, 513
F.3d 1038, 1053 (9th Cir. 2008) (puffery); Ronconi v. Larkin, 253 F.3d 423, 430
n.12 (9th Cir. 2001) (fraud by hindsight). Individually, Plaintiffs’ allegations do
not create a strong inference of scienter. See N.M. State Inv. Council v. Ernst &
Young, LLP, 641 F.3d 1089, 1095 (9th Cir. 2011) (citing Zucco Partners, LLC v.
Digimarc Corp., 552 F.3d 981, 991–92 (9th Cir. 2009)). Although Plaintiffs claim
that scienter should be inferred from certain stock trades by senior executives of
the Company, as alleged in the complaints these trades are not suspicious. See,
e.g., In re Silicon Graphics Secs. Litig., 183 F.3d 970, 986 (9th Cir. 1999). Nor is
scienter established by the confidential witnesses who simply corroborated the
disclosure that Motricity’s carrier customers could use the software it provided to
limit subscriber access to the Internet. Viewed holistically, Plaintiffs’ scienter
allegations demonstrate that Motricity entered the market expecting to excel in the
face of known trends but experienced setbacks that eventually led to significant
losses. The sum of these innocent inferences far outweighs an inference of
fraudulent intent. Zucco Partners, 552 F.3d at 991–92.
AFFIRMED.
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