`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`Date: October 8, 2020
`
`
`
`
`
`Deputy Clerk:
`Rita Sanchez
`
`Court Reporter:
`Not Reported
`
`Attorneys Present for Plaintiff:
`None Present
`
`Attorneys Present for Defendant:
`None Present
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`Present: The Honorable MICHAEL W. FITZGERALD, U.S. District Judge
`
`
`
`
`
`
`
`Proceedings (In Chambers):
`
`ORDER RE: MOTION TO DISMISS
`AMENDED CLASS ACTION COMPLAINT
`[55]; PLAINTIFF’S MOTION TO STRIKE
`PORTIONS OF REQUEST FOR JUDICIAL
`NOTICE [64]
`
`
`
`Before the Court are two motions:
`
`The first is Defendants Beyond Meat, Inc. (“Beyond Meat”), Ethan Brown, and
`Mark J. Nelson’s Motion to Dismiss Amended Class Action Complaint for Violation
`of the Federal Securities Laws, (the “Motion”), filed on July 31, 2020. (Docket No.
`55). Lead Plaintiff Block Investments Corporation and named Plaintiffs Jie Ling Guo
`and Neeraj Tulsian filed an opposition on August 31, 2020. (Docket No. 59).
`Defendants filed a reply on September 15, 2020. (Docket No. 62).
`
`The second is Plaintiffs’ Motion to Strike Portions of Defendants’ Request for
`Judicial Notice (the “MTS”), filed on September 24, 2020. (Docket No. 64).
`Defendants filed an opposition on September 28, 2020. (Docket No. 66).
`
`The Court has read and considered the papers filed in connection with the
`motions and held a telephonic hearing on October 6, 2020, pursuant to General Order
`20-09 arising from the COVID-19 pandemic.
`
`The Motion is GRANTED with leave to amend. The FAC does not sufficiently
`allege the falsity of material statements or omissions.
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 1
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 2 of 18 Page ID #:2905
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`I.
`BACKGROUND
`
`Date: October 8, 2020
`
`
`
`On January 30, 2020, Plaintiff Larry Tran initiated this action with his complaint
`against Beyond Meat, Inc. (“Beyond Meat”), Ethan Brown, and Mark J. Nelson (the
`“Tran Action”). (Docket No. 1). Generally, the Tran Action concerns allegations
`arising from a lawsuit brought by a former supplier of Beyond Meat, Don Lee Farms in
`Los Angeles Superior Court, along with a lawsuit brought by one of Beyond Meat’s
`new manufacturing partners, ProPortion Foods, LLC (“ProPortion”), captioned Don
`Lee Farms v. Savage River, Inc., Case No. BC662838 (Cal. Super. Ct.) (“Don Lee
`Farms”). (Id.). Don Lee Farms included allegations that Beyond Meat had employed
`lax food safety practices, that Don Lee Farms found plastics, cardboard and a metal
`nozzle in ingredients that Beyond Meat supplied, and that a Beyond Meat truck had
`arrived at a Don Lee Farms processing facility with a load contaminated with an
`unidentified white powder. (Id.).
`
`
`Subsequent to the Tran Action, two related actions were filed against Beyond
`Meat concerning the same allegations, captioned Eric Weiner v. Ethan Brown et al.,
`CV 20-2524-MWF and Kimberly Brink et al. v. Ethan Brown et al., CV 20- 2574-
`MWF. On April 1, 2020, the Court consolidated the actions and ordered the various
`parties to “meet and confer regarding the potential need for the appointment of a lead
`plaintiff, along with lead counsel.” (Docket No. 32 at 3). The Court ordered that if the
`parties were unable to reach an agreement, “counsel must submit short (no more than
`five pages) applications for lead counsel and/or lead plaintiff.” (Id.).
`
`On May 18, 2020, the Court granted the Block Investments Motion, appointing
`Block Investments as Lead Plaintiff, Bernstein Liebhard LLP as Lead Counsel, and
`Kaplan Fox & Kilsheimer LLP as Liaison Counsel. (Docket No. 41). Plaintiffs filed
`the First Amended Complaint (“FAC”) on July 1, 2020. (Docket No. 54).
`
`The following facts are based on the FAC, which the Court assumes are true and
`
`construes any inferences arising from those facts in the light most favorable to
`Plaintiff. See, e.g., Schueneman v. Arena Pharm., Inc., 840 F.3d 698, 704 (9th Cir.
`2016) (restating generally-accepted principle that “[o]rdinarily, when we review a
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 2
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 3 of 18 Page ID #:2906
`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), we accept a
`plaintiff’s allegations as true ‘and construe them in the light most favorable’ to the
`plaintiff”) (quoting Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th
`Cir. 2009)).
`
`Date: October 8, 2020
`
`Plaintiffs assert a federal securities class action brought on behalf of all other
`persons and entities that purchased or otherwise acquired the securities of Defendant
`Beyond Meat, Inc. (“Beyond Meat” or the “Company”), between May 2, 2019 and
`January 27, 2020 (the “Class Period”). (FAC ¶ 1).
`
`Beyond Meat is a food company that manufactures and sells plant-based meat
`products using protein from peas referred to as “extrudate.” (Id. ¶ 5). Beyond Meat
`does not perform all of the steps in the manufacturing process for its products. (Id.).
`Rather, the Company produces the extrudate and other pea protein-based raw
`ingredients and contracts with a co-manufacturer who processes the ingredients into
`finished products and packages them for distribution and sale by the Company. (Id.).
`
`Defendant Ethan Brown served as Beyond Meat’s Chief Executive Officer and
`President during the Class Period, and served on the Company’s Board of Directors.
`(Id. ¶ 38). Defendant Mark J. Nelson served as Beyond Meat’s Chief Financial
`Officer, Treasurer, and Secretary during the Class Period. (Id. ¶ 39).
`
`From the moment Beyond Meat went public in May 2019, Defendants
`materially misrepresented to investors that a pending lawsuit against the Company
`brought by its former co-manufacturer, Don Lee Farms (“DLF”), lacked validity, and
`that its risks from the lawsuit were not extraordinary. (Id. ¶ 3). This lawsuit was filed
`in the California Superior Court, County of Los Angeles, Don Lee Farms v. Savage
`River, Inc. d/b/a Beyond Meat, Case No. BC662838 (the “DLF Litigation”). (Id.).
`Defendants knew or recklessly disregarded that their risk of liability was a near
`certainty. Defendants’ fraudulent actions ensured that Beyond Meat’s May 2019
`Initial Public Offering (“IPO”) went off without a hitch, becoming the largest popping
`U.S. IPO in nearly two decades, and artificially inflated Beyond Meat’s stock price
`throughout the Class Period. (Id.).
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 3
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 4 of 18 Page ID #:2907
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`
`Date: October 8, 2020
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`Unbeknownst to investors, however, years before the IPO, Defendants executed
`a scheme to get out of an exclusive supply agreement it had with DLF before the end
`of the contract term — a scheme that would ultimately form the basis of DLF’s legal
`claims against the Company. (Id. ¶ 4). In 2014, Beyond Meat and DLF entered into a
`contract whereby, DLF became Beyond Meat’s exclusive co-manufacturer. (Id. ¶ 6).
`In its role as exclusive co-manufacturer, DLF significantly contributed to Beyond
`Meat’s rise. (Id.). Prior to entering its relationship with DLF, Beyond Meat did not
`know how to mass-produce its product and had essentially been making the products
`by hand. (Id.). DLF was responsible for engineering the process to scale production of
`Beyond Meat’s plant-based meat products, allowing the Company to grow. (Id.).
`
`DLF also developed the “Batch Making Protocols” for producing several of the
`Company’s products, including the “Beyond Burger” — Beyond Meat’s most popular
`product. (Id. ¶ 7). DLF’s Batch Making Protocols detailed the method and process for
`mass-producing the Beyond Burger, including critical components like ingredient
`amounts, mixing times, and equipment layouts. (Id.). However, in late January 2016,
`prior to DLF completing development of the Beyond Burger, Beyond Meat’s
`relationship with DLF was deteriorating, in part, because DLF had lost confidence in
`Beyond Meat’s food safety protocols after discovering foreign objects in the raw
`materials provided by Beyond Meat on multiple occasions. (Id. ¶ 8).
`
`At that time, maintaining the Company’s relationship with DLF was critical, as
`DLF was still perfecting the Beyond Burger. (Id. ¶ 9). Accordingly, Beyond Meat
`conducted an independent food safety audit of the Company’s facility in an attempt to
`address DLF’s concerns. (Id.). Thereafter, Beyond Meat provided DLF with an
`independent safety audit report that identified no food safety concerns. (Id. ¶ 10).
`DLF has since alleged that Beyond Meat executives deleted significant portions of the
`safety audit report, concealing the consultant’s findings of contamination. (Id.).
`
`Satisfied by the purported clean audit, on April 11, 2016, DLF agreed to amend
`the exclusive supply agreement, extending the contract with Beyond Meat through
`April 11, 2019. (Id. ¶ 11). The amendment also more than doubled Beyond Meat’s
`minimum required purchases under the agreement to 4,000,000 pounds of product in
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 4
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 5 of 18 Page ID #:2908
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`the first year, escalating to 6,000,000 pounds in the third year. (Id.). One month later,
`in May 2016, Beyond Meat launched the Beyond Burger, which sold out almost
`immediately and became the Company’s flagship product. (Id. ¶ 12). Since its launch,
`the Beyond Burger has been the Company’s most successful product, accounting for
`approximately 60% of the Company’s revenue leading up to its IPO. (Id.).
`
`Date: October 8, 2020
`
`With the Beyond Burger launched and DLF’s Batch Making Protocol for its new
`core product in hand, Defendants no longer had to rely on DLF and began to shop for a
`less costly replacement co-manufacturer. (Id. ¶ 13). To that end, Defendants secretly
`arranged a test with CLW Foods, LLC (“CLW”) to potentially replace DLF as the
`Company’s co-manufacturer. The test was scheduled for February 3, 2017. (Id. ¶ 14).
`Before the test could take place, DLF was alerted to Defendants’ plans when a Beyond
`Meat employee accidently copied DLF on an email chain discussing CLW. (Id.).
`
`Defendant Brown attempted to address the accidental email by representing to
`DLF that the Company would pull the test at CLW in the hope that the two companies
`could put the matter behind them. (Id. ¶ 15). However, despite Brown’s assurances to
`the contrary, Beyond Meat continued to covertly negotiate with CLW. (Id.). Beyond
`Meat’s former Vice President of Operations and Supply Chain testified that by late
`March 2017, he had been negotiating with CLW for a while, including discussing
`price, capabilities and quantities, and had taken a tour of CLW’s facility. (Id. ¶ 16).
`
`Beyond Meat was looking for an alternative to DLF, in part because Beyond
`Meat executives believed that the excessive minimum purchases required under the
`parties’ agreement were too costly. (Id. ¶ 17). Rather than attempt to renegotiate the
`terms with DLF, Beyond Meat decided to find a way out of the contract. (Id.). After
`ensuring that CLW was ready to take over as co-manufacturer, Beyond Meat set in
`motion its plan to change its co-manufacturer, in violation of the Company’s exclusive
`supply agreement with DLF. (Id. ¶ 18).
`
`On April 12, 2017, Beyond Meat sent DLF a Notice of Breach alleging multiple
`material breaches of the exclusive supply agreement related to purported food safety
`concerns, including discovering Salmonella at DLF’s facility, allegations DLF claims
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 5
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 6 of 18 Page ID #:2909
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`were just a pretext to end the relationship. (Id.). On May 23, 2017, Beyond Meat sent
`a Notice of Termination to DLF stating that, due to DLF’s failure to cure the alleged
`breaches, the Company was terminating the exclusive supply agreement. (Id. ¶ 19).
`On May 25, 2017, DLF filed a lawsuit against the Company alleging breach of
`contract, misappropriation of trade secrets, and fraud, among other claims. (Id. ¶ 20).
`
`Date: October 8, 2020
`
`In November 2018, Beyond Meat announced that the Company planned to go
`public. (Id. ¶ 21). In the weeks leading up to the Company’s IPO on May 2, 2019,
`there was significant excitement about the Company. Despite never having turned a
`profit, Beyond Meat was dubbed a “unicorn” startup, as a private company with a
`valuation of over $1 billion. (Id.). Not wanting to damage the positivity in the market
`surrounding the Company heading into the IPO, Beyond Meat concealed the truth
`about the DLF Litigation from investors in the Registration Statement dated May 1,
`2019, filed with the SEC in connection with the Company’s IPO (the “Registration
`Statement”). (Id. ¶ 22). In the Registration Statement, Beyond Meat affirmatively
`denied each of the claims made against the Company by DLF and provided only
`general risk disclosures related to the DLF Litigation. (Id.). These representations
`served to assuage investors’ concerns that DLF was likely to be awarded damages in
`the DLF Litigation or be able to lay claim to any portion of Beyond Meat’s intellectual
`property, including the Beyond Burger. (Id.).
`
`On May 2, 2019, the Company completed its Initial Public Offering, issuing
`11,068,750 shares of common stock at an offering price of $25.00 per share, generating
`approximately $276,718,750 in gross proceeds. (Id. ¶ 23). By the close of the market,
`Beyond Meat shares had soared to $65.75, for a gain of 163%, and it had become the
`biggest-popping U.S. IPO in nearly two decades. (Id.).
`
`Throughout the Class Period, Defendants continued to deny the merits of DLF’s
`claims and conceal from investors that Beyond Meat’s risk of being held liable in the
`DLF Litigation was closer to a near certainty rather than the mere possibility
`represented by the Company. (Id. ¶ 24). Because of the Company’s forceful denials of
`liability, the market was unable to decipher the Company’s true risks of liability. (Id.).
`
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 6
`
`
`
`
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`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`Nevertheless, it was only a matter of time before the market discovered DLF’s claims
`were valid and the risks materialized. (Id.).
`
`Date: October 8, 2020
`
`On January 27, 2020, after the close of the markets, DLF issued a press release
`announcing that the judge in the DLF Litigation issued a Right to Attach Order, and by
`doing so, ruled that DLF “proved the probable validity of its claim that Beyond Meat
`breached its manufacturing agreement with Don Lee Farms.” (Id. ¶ 25). DLF’s press
`release also revealed that based on discovery produced in the DLF Litigation, the court
`granted its motion to amend its complaint to name Defendant Nelson and Beyond
`Meat’s Senior Quality Assurance Manager Jessica Quetsch and Director of Operations
`Anthony Miller in connection with its fraud claim, alleging that these individuals
`coordinated to intentionally doctor and omit material information from the 2016 safety
`audit report that Beyond Meat provided to DLF — the very report that induced DLF to
`extend its contract with Beyond Meat. (Id. ¶ 26).
`
`Following these revelations, for the first time, the market appreciated that DLF’s
`claims were legitimate and that Defendants had no basis for their blanket denial of
`culpability for the actions alleged in the DLF Litigation. (Id. ¶ 27). The market also
`appreciated that Beyond Meat’s warnings did not reflect the true level of risk the
`Company faced with respect to the DLF Litigation and it was likely to be subjected to
`significant penalties. (Id.). Indeed, even analysts at J.P. Morgan noted that this news
`“surely is an additional risk to the stock price.” (Id.).
`
`On this news, Beyond Meat’s stock price dropped $4.63, or over 3.7%, to close
`at $120.12 per share on January 28, 2020. (Id. ¶ 28). As a direct and proximate result
`of Defendants’ fraud, Beyond Meat investors lost hundreds of millions of dollars. (Id.
`¶ 29).
`
`Based on the above allegations, the FAC asserts two claims for relief:
`(1) violations of § 10(b) of the Securities Exchange Act of 1934 (“Section 10(b)”) and
`the SEC’s Rule 10b-5, 17 C.F.R. § 240.10b-5 promulgated thereunder (“Rule 10b-5”);
`and (2) violations of § 20(a) of the Exchange Act (“Section 20(a)”). (Id. ¶¶ 172-188).
`
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 7
`
`
`
`
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`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`II. REQUEST FOR JUDICIAL NOTICE
`
`Date: October 8, 2020
`
`Defendants make two requests for judicial notice.
`
`In the first request (the “RJN 1”), Defendants asked the Court to take judicial
`notice of several documents, including: (1) documents filed in the DLF Litigation; (2)
`Beyond Meat’s SEC Form 424B4, 10-Q Filings, and 10-K Filing; and (3) DLF’s
`January 27, 2020 press release. (Docket No. 56)). Plaintiffs do not oppose RJN 1.
`
`In the second request (the “RJN 2”), Defendants asked the Court to take judicial
`notice of several additional documents filed in the DLF Litigation, including: (1) A
`May 17, 2019 Minute Order; (2) Beyond Meat’s FAC in the DLF Litigation; (3)
`Beyond Meat’s Motion for Sanctions in DLF Litigation; (4) Beyond Meat’s Response
`to DLF’s Opposition to Proportion Summary Judgment Motion; (5) the Sahni
`Declaration; and (6) Beyond Meat’s Objection to Right to Attach Order in DLF
`Litigation. (Docket No. 64).
`
`As a general rule, “a district court may not consider any material beyond the
`pleadings in ruling on a Rule 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d
`668, 688 (9th Cir. 2001). An exception to this general rule exists for (1) materials that
`are attached to or necessarily relied upon in the complaint, and (2) matters of public
`record that are not “subject to reasonable dispute.” Id. at 688-89. This exception does
`not apply to “disputed facts stated in public records.” Id. at 690.
`
`On September 24, 2020, Plaintiffs filed the Motion to Strike Portions of RJN 2
`(the “RJN Motion”). (Docket No. 64). Defendants filed the Opposition on September
`28, 2020 (the “RJN Opp.”). (Docket No. 66).
`
`Plaintiffs principally argue that Exhibits 2 through 5 of the RJN 2 should be
`stricken because they are not cited in or necessarily relied upon in the FAC. (RJN
`Motion at 1). Plaintiffs also argue that although the RJN 2 documents were filed
`publicly, judicial notice is not appropriate because the content of the documents are
`disputed. (Id. at 3-6). Defendants argue that they include these public documents not
`
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 8
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 9 of 18 Page ID #:2912
`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`to prove the truth of the matter asserted, but rather to show that no facts have been
`established as “true” in the DLF Litigation. (RJN Opp. at 2-6). Defendants also argue
`that the documents are judicially noticeable under the incorporation by reference
`doctrine. (Id. at 7-10).
`
`Date: October 8, 2020
`
`The Court agrees with Plaintiffs that matters of public record are not judicially
`noticeable when their content is in dispute. The Court is also dubious of Defendants’
`arguments that these documents are not being offered for the truth of their content and
`that they have been incorporated by reference. However, the Court would reach the
`same conclusion here regardless of whether it considered these documents.
`
`Accordingly, the RJN 2 and the RJN Motion are both DENIED as moot. The
`unopposed RJN 1 is GRANTED, as these documents are matters of public record not
`subject to reasonable dispute.
`
`III. LEGAL STANDARD
`
`“Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a
`cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable
`legal theory.” Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013)
`
`In ruling on the Motion under Rule 12(b)(6), the Court follows Bell Atlantic
`Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter . . .
`to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting
`Twombly, 550 U.S. at 570). The Court must disregard allegations that are legal
`conclusions, even when disguised as facts. See id. at 681 (“It is the conclusory nature
`of respondent’s allegations, rather than their extravagantly fanciful nature, that
`disentitles them to the presumption of truth.”); Eclectic Properties E., LLC v. Marcus
`& Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014). “Although ‘a well-pleaded
`complaint may proceed even if it strikes a savvy judge that actual proof is improbable,’
`plaintiffs must include sufficient ‘factual enhancement’ to cross ‘the line between
`
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 9
`
`
`
`
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`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`possibility and plausibility.’” Id. at 995 (quoting Twombly, 550 U.S. at 556–57)
`(internal citations omitted).
`
`Date: October 8, 2020
`
`The Court must then determine whether, based on the allegations that remain
`and all reasonable inferences that may be drawn therefrom, the Complaint alleges a
`plausible claim for relief. See Iqbal, 556 U.S. at 679; Cafasso, U.S. ex rel. v. Gen.
`Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). “Determining whether a
`complaint states a plausible claim for relief is ‘a context-specific task that requires the
`reviewing court to draw on its judicial experience and common sense.’” Ebner v.
`Fresh, Inc., No. 13-56644, 2016 WL 5389307, at *2 (9th Cir. Sept. 27, 2016) (as
`amended) (quoting Iqbal, 556 U.S. at 679). Where the facts as pleaded in the
`Complaint indicate that there are two alternative explanations, only one of which
`would result in liability, “plaintiffs cannot offer allegations that are merely consistent
`with their favored explanation but are also consistent with the alternative explanation.
`Something more is needed, such as facts tending to exclude the possibility that the
`alternative explanation is true, in order to render plaintiffs’ allegations plausible.”
`Eclectic Properties, 751 F.3d at 996–97; see also Somers, 729 F.3d at 960.
`
`Allegations of fraud must meet a higher pleading standard. Fed. R. Civ. P. 9(b)
`(requiring the pleading party to “state with particularity the circumstances constituting
`fraud or mistake”). It is well-established that, “[a]t the pleading stage, a complaint
`alleging claims under Section 10(b) and Rule 10b-5 must not only meet the
`requirements of Rule 8, but must satisfy the heightened pleading requirements of both
`Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act
`(‘PSLRA’).” In re Rigel Pharm., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012).
`
`IV. DISCUSSION
`
`
`
`The “elements that must be pleaded to state a claim for securities fraud are
`strenuous but well established.” Curry v. Yelp Inc., 875 F.3d 1219, 1224 (9th Cir.
`2017). “To state a claim for violation of Rule 10b-5, a plaintiff must allege a material
`misrepresentation or omission of fact, scienter, a connection with the purchase or sale
`of a security, transaction and loss causation, and economic loss.” Id.
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 10
`
`
`
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`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`Date: October 8, 2020
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`Defendants raise four arguments as to why the FAC should be dismissed: (1)
`Plaintiffs failed to plead falsity of any Beyond Meat statements; (2) Plaintiffs failed to
`plead scienter adequately; (3) Plaintiffs failed to plead loss causation; and (4)
`Plaintiffs’ § 20(a) claim should be dismissed because it is based on Plaintiffs’ Rule
`10b-5 claim. (Motion at 10-25).
`
`
`A.
`
`Falsity
`
`“[A] plaintiff must plead falsity with particularity: a plaintiff must ‘specify each
`statement alleged to have been misleading, the reason or reasons why the statement is
`misleading, and, if an allegation regarding the statement or omission is made on
`information and belief, the complaint shall state with particularity all facts on which
`that belief is formed.’” Rubke v. Capitol Bancorp Ltd, 551 F.3d 1156, 1164 (9th Cir.
`2009) (quoting 15 U.S.C. § 78u-4(b)(1)).
`
`Plaintiffs point to two allegedly false statements made in Beyond Meat’s
`Registration Statement and 10-Q filings:
`1. “We deny all of [DLF’s] claims[.]” (FAC ¶¶ 119, 123, 128).
`2. “We believe we were justified in terminating the supply agreement with
`Don Lee Farms, that we did not misappropriate their alleged trade secrets,
`[and] that we are not liable for the fraud or negligent misrepresentation
`alleged in the proposed second amended complaint[.]” (Id. ¶¶ 115, 119,
`123, 128).
`
`Plaintiffs proceed under an omissions theory. The thrust of their argument is
`that these statements created a false impression that the DLF Litigation was meritless,
`when in fact, Defendants were aware of and failed to disclose specific facts showing
`that the risk of liability was “substantial.” (Opposition at 8). Defendants argue that
`these statements express an opinion, and that Plaintiffs failed to allege any facts calling
`into question the basis of the opinion which would render the statements objectively
`false or misleading. (Motion at 11-17).
`
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 11
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 12 of 18 Page ID #:2915
`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`Date: October 8, 2020
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`As Plaintiffs correctly point out, “a statement that is literally true can be
`misleading and thus actionable under the securities laws.” Brody v. Transitional
`Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002). There is no rule, however, that
`“once a disclosure is made, there is a duty to make it complete and accurate.” Id. An
`incomplete statement is not necessarily a misleading statement, and a completeness
`rule would sweep too broadly, as “[n]o matter how detailed and accurate disclosure
`statements are, there are likely to be additional details that could have been disclosed
`but were not.” Id.
`
`Statements expressing an opinion or belief can also be actionable under Section
`10(b). As the Supreme Court explained in the seminal case Omnicare, Inc. v. Laborers
`Dist. Council Const. Indus. Pension Fund, 575 U.S. 175, 179 (2015), “an investor
`cannot state a claim by alleging only that an opinion was wrong; the complaint must as
`well call into question the issuer’s basis for offering the opinion. And to do so, the
`investor cannot just say that the issuer failed to reveal its basis.” Id. at 194. Rather,
`the investor must identify specific, material facts “in the issuer’s possession at the
`time” of the statement “whose omission makes the opinion statement at issue
`misleading to a reasonable person reading the statement fairly and in context.” Id. at
`189, 194. “That is no small task for an investor.” Id. at 189.
`
`The Court agrees with Defendants that Plaintiffs have not made this showing.
`
`First, Plaintiffs failed to allege with particularity any omitted facts in
`Defendants’ possession that plausibly demonstrate how the opinion statements were
`misleading.
`
`To support their claim that Beyond Meat manufactured a reason to terminate the
`agreement with DLF, Plaintiffs merely regurgitate DLF’s unproven allegations in the
`DLF Litigation. (FAC ¶ 84 (“DLF alleges that Beyond Meat invented false food safety
`concerns . . . as a pretext for terminating” the agreement)). They provide no facts
`showing, for example, that Defendants were aware of any information that Salmonella
`was not actually present in the new DLF facility when Beyond Meat terminated its
`agreement with DLF.
`______________________________________________________________________________
` CIVIL MINUTES—GENERAL 12
`
`
`
`
`Case 2:20-cv-00963-MWF-AFM Document 71 Filed 10/08/20 Page 13 of 18 Page ID #:2916
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES—GENERAL
`
`
`
`Date: October 8, 2020
`
`
`Case No. CV 20-963-MWF (AFMx)
`Title:
`Larry Tran v. Beyond Meat, Inc. et al
`Plaintiffs also claim Beyond Meat misappropriated DLF’s trade secrets in
`violation of the agreement, but they do not provide the agreement, or plead its contents
`with any specificity. Instead, Plaintiffs again regurgitate DLF’