Case 3:19-cv-06361-RS Document 95 Filed 08/07/20 Page 1 of 16
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`BOSTON RETIREMENT SYSTEM, et al.,1
`Plaintiffs,
`
`v.
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`UBER TECHNOLOGIES, INC., et al.,
`Defendants.
`
`Case No. 19-cv-06361-RS
`
`
`ORDER DENYING
`MOTION TO DISMISS
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`I. INTRODUCTION
`Lead plaintiff Boston Retirement System (“BRS”) brings this putative class action against
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`defendants Uber Technologies, Inc. (“Uber”), several of its current and former executives, and the
`underwriters of its initial public offering (“IPO”). BRS alleges defendants made false or
`misleading statements and omissions in connection with Uber’s IPO in violation of Sections 11,
`12(a)(2), and 15 of the Securities Act of 1933 (“Securities Act”). Defendants now move to dismiss
`the complaint under Rule 12(b)(6). Pursuant to Civil Local Rule 7-1(b), the motion is suitable for
`disposition without oral argument, and the hearing set for August 13, 2020 is vacated. For the
`reasons set forth below, the motion is denied.
`II. BACKGROUND2
`
`
`1 This case was originally filed as Benjamin Stirratt v. Uber Technologies, Inc. Boston Retirement
`System was subsequently appointed lead plaintiff. The Clerk shall change the caption of the case
`on ECF.
`2 The factual background is based on the allegations in the complaint (which must be taken as true
`for purposes of this motion), documents incorporated by reference, and documents of which
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`Case 3:19-cv-06361-RS Document 95 Filed 08/07/20 Page 2 of 16
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`Uber is a transportation company which provides on demand rides and food delivery. The
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`company was founded in San Francisco in 2009 and has since expanded globally. On May 10,
`2019, Uber conducted its IPO, in which it sold 180,000,000 shares of common share stock to the
`public. The IPO was priced at $45 per share and generated nearly $8 billion in proceeds for Uber.
`The IPO was conducted pursuant to several documents filed by defendants with the U.S.
`Securities and Exchange Commission (“SEC”), including an April 11, 2019 Registration
`Statement on Form S-1, which, after amendment, was declared effective by the SEC on May 5,
`2019. See ECF No. 86-1 (“RS”).
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`BRS purchased Uber’s common stock in the IPO, and from an underwriter of the IPO,
`pursuant to the offering documents, including the RS. At the time BRS purchased this stock, only
`Uber shares offered in the IPO were available in the market. Uber’s share price subsequently
`declined from $45 to an all-time low of $25.99 on November 14, 2019. This action was brought,
`alleging violations of Sections 11, 12(a)(2), and 15 of the Securities Act. In January 2020, BRS
`was appointed lead plaintiff. The named defendants are Uber, several of its past and present
`executives, and the underwriters of its IPO.3
`III. INCORPORATION BY REFERENCE AND JUDICIAL NOTICE
`A. Legal Standard
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`
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`judicial notice may be taken. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); see
`generally Part III, infra.
`3 The full list of defendants is: Uber, Dara Khosrowshahi, Nelson Chai, Glen Ceremony, Ronald
`Sugar, Ursula Burns, Garrett Camp, Matt Cohler, Ryan Graves, Arianna Huffington, Travis
`Kalanick, Wan Ling Martello, H.E. Yasir Al- Rumayyan, John Thain, David Trujillo, Morgan
`Stanley & Co. LLC, Goldman Sachs & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith
`Incorporated, Barclays Capital Inc., Citigroup Global Markets, Inc., Allen & Company LLC, RBC
`Capital Markets, LLC, SunTrust Robinson Humphrey, Inc., Deutsche Bank Securities Inc., HSBC
`Securities (USA) Inc., SMBC Nikko Securities America, Inc., Mizuho Securities USA LLC,
`Needham & Company, LLC, Loop Capital Markets LLC, Siebert Cisneros Shank & Co., L.L.C.,
`Academy Securities, Inc., BTIG, LLC, Canaccord Genuity LLC, CastleOak Securities, L.P.,
`Cowen and Company, LLC, Evercore Group L.L.C., JMP Securities LLC, Macquarie Capital
`(USA) Inc., Mischler Financial Group, Inc., Oppenheimer & Co. Inc., Raymond James &
`Associates, Inc., William Blair & Company, L.L.C., The Williams Capital Group, L.P., and TPG
`Capital BD, LLC. Defendants bring the present motion to dismiss jointly.
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`2
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`ORDER
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`Case 3:19-cv-06361-RS Document 95 Filed 08/07/20 Page 3 of 16
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`Generally, district courts may not consider material outside the pleadings when assessing
`the sufficiency of a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Lee v.
`City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). However, “[t]here are two exceptions to
`this rule: the incorporation-by-reference doctrine, and judicial notice under Federal Rule of
`Evidence 201.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018); see also
`Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (noting documents
`incorporated by reference and “matters of which a court may take judicial notice” are properly
`considered when ruling on a motion to dismiss).
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`“Incorporation-by-reference is a judicially created doctrine that treats certain documents as
`though they are part of the complaint itself.” Khoja, 899 F.3d at 1002. A defendant may seek to
`incorporate a document into the complaint “if the plaintiff refers extensively to the document or
`the document forms the basis of the plaintiff’s claim.” Ritchie, 342 F.3d at 907 (emphasis added).
`“The doctrine prevents plaintiffs from selecting only portions of documents that support their
`claims, while omitting portions of those very documents that weaken—or doom—their claims.”
`Khoja, 899 F.3d at 1002. In general, “a court may assume an incorporated document’s contents are
`true for purposes of a motion to dismiss under Rule 12(b)(6) . . . [but] it is improper to assume the
`truth of an incorporated document if such assumptions only serve to dispute facts stated in a well-
`pleaded complaint.” Id. at 1003 (internal quotations and citations omitted).
`“Judicial notice under Rule 201 permits a court to notice an adjudicative fact if it is ‘not
`subject to reasonable dispute.’” Id. at 999 (citing Fed. R. Evid. 201(b)). “A fact is ‘not subject to
`reasonable dispute’ if it is ‘generally known,’ or ‘can be accurately and readily determined from
`sources whose accuracy cannot reasonably be questioned.’” Id. (quoting Fed. R. Evid. 201(b)(1)–
`(2)). “Accordingly, a court may take judicial notice of matters of public record without converting
`a motion to dismiss into a motion for summary judgment . . . [b]ut a court cannot take judicial
`notice of disputed facts contained in such public records.” Id. (internal quotations and citation
`omitted). If either party requests judicial notice and “supplie[s] the necessary information,”
`judicial notice “must” be taken. Fed. R. Evid. 201(c)(2).
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`ORDER
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`Case 3:19-cv-06361-RS Document 95 Filed 08/07/20 Page 4 of 16
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`B. Discussion
`In support of their motion to dismiss, defendants seek incorporation by reference and/or
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`judicial notice of 29 documents, termed “exhibits” for ease of reference. Exhibit A is the amended
`RS for Uber’s IPO, as filed with the SEC on Form S-1/A on April 26, 2019. BRS agrees that the
`complaint refers extensively to, and in fact depends on, the amended RS; thus, incorporation by
`reference of the RS is appropriate.
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`Exhibits B and C are Uber’s press releases announcing its financial results for the first and
`second quarters of 2019. These were filed with the SEC on May 30 and August 8, 2019,
`respectively. BRS argues incorporation by reference is inappropriate because the complaint
`“barely mentions” Uber’s financial results; the company’s earnings results, it points out, are
`mentioned in fewer than ten of the hundreds of paragraphs of the complaint. That argument,
`however, would allow BRS to do precisely what incorporation by reference attempts to avoid:
`selective use of documents. The complaint refers to Uber’s financial results “extensively” in that
`one of its three main theories is that the company misrepresented its financial position to investors
`in violation of the Securities Act. Put differently, that theory “depends on” Uber’s 2019 financial
`results, which BRS alleges paint a very different financial picture than the RS. Notably, BRS does
`not dispute the accuracy of the contents of Exhibits B and C; on the contrary, their contents, i.e.,
`Uber’s Q1 and Q2 2019 financial results, bolster BRS’s claims. Incorporation by reference of
`Exhibits B and C is thus appropriate.4
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`The remaining 26 exhibits are news articles written in various publications about Uber
`between 2014 and 2019. BRS argues they should not be incorporated by reference because they
`are referenced nowhere in the complaint, and judicial notice should not be taken because they are
`offered for the sole purpose of raising a “truth-on-the-market” defense, which is inappropriate at
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`4 Alternatively, because “SEC filings are publicly-filed documents whose accuracy cannot
`reasonably be questioned,” judicial notice may be taken at least in order to “determin[e] what
`representations [Uber] made to the market.” In re Pivotal Sec. Litig., No. 19-cv-03589, 2020 WL
`4193384, at *5 (N.D. Cal. July 21, 2020).
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`4
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`ORDER
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`Case 3:19-cv-06361-RS Document 95 Filed 08/07/20 Page 5 of 16
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`the motion to dismiss stage. However, both arguments miss the mark. Defendants do not propose
`incorporation by reference, and whether they may offer a “truth-on-the-market” defense in a
`motion to dismiss, or whether the defense would succeed, goes to the substance of the motion, see
`section IV.B.2, infra, not the admissibility of evidence. Defendants have “supplied the necessary
`information”—notably, BRS does not dispute that the articles were published on the dates and in
`the publications that defendants represent they were—and judicial notice must therefore be taken.
`However, “[j]ust because [a] document itself is susceptible to judicial notice does not mean that
`every assertion of fact within that document is judicially noticeable for its truth.” Khoja, 899 F.3d
`at 999. Thus “judicial notice of these documents” will be taken “not for the truth of the matter
`asserted, but ‘for the purpose of showing that particular information was available to the stock
`market.’” In re Apple Inc. Sec. Litig., No. 19-cv-02033, 2020 WL 2857397, at *6 (N.D. Cal. June
`2, 2020) (quoting Helitrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 n.18 (9th Cir. 1999)).
`IV. MOTION TO DISMISS
`
`A. Legal Standard
`A complaint must contain “a short and plain statement of the claim showing that the
`pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations are not
`required,” a complaint must include sufficient facts to “state a claim to relief that is plausible on its
`face.” Iqbal, 556 U.S. at 678 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
`claim is facially plausible “when the pleaded factual content allows the court to draw the
`reasonable inference that the defendant is liable for the misconduct alleged.” Id.
`A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil
`Procedure tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus.
`v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995). Dismissal under Rule 12(b)(6) may be based
`either on the “lack of a cognizable legal theory” or on “the absence of sufficient facts alleged
`under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th
`Cir.1988). When evaluating such a motion, the court must accept all material allegations in the
`complaint as true, even if doubtful, and construe them in the light most favorable to the non-
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`ORDER
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`movant. Twombly, 550 U.S. at 570. “[C]onclusory allegations of law and unwarranted inferences,”
`however, “are insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v.
`Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also Iqbal, 556 U.S. at
`678 (citing Twombly, 550 U.S. at 555 (“threadbare recitals of the elements of the cause of action,
`supported by mere conclusory statements,” are not taken as true)).
`Complaints in securities cases must also meet the pleading standards set forth by the
`Private Securities Litigation Reform Act (“PSLRA”). The PSLRA mandates that “securities fraud
`complaints ‘specify’ each misleading statement; that they set forth the facts ‘on which [a] belief’
`that a statement is misleading was ‘formed’; and that they ‘state with particularity facts giving rise
`to a strong inference that the defendant acted with the required state of mind.’” Dura Pharm., Inc.
`v. Broudo, 544 U.S. 336, 345 (2005) (alterations in original) (quoting 15 U.S.C. §§ 78u–4(b)(1)–
`(2)). Furthermore, securities claims which are “grounded in fraud” must meet the pleading
`requirements of Rule 9(b). In re Rigel Pharm., Inc. Sec. Litig., 697 F.3d 869, 886 (9th Cir. 2012).
`“To satisfy Rule 9(b), a pleading must identify the who, what, when, where, and how of the
`misconduct charged, as well as what is false or misleading about [the purportedly fraudulent]
`statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d
`1047, 1055 (9th Cir. 2011) (internal quotations and citations omitted).
`B. Discussion
`BRS asserts claims under Sections 11 and 12(a)(2) of the Securities Act, as well as a
`derivative claim under Section 15. To state a claim under Section 11, a plaintiff must allege
`plausibly that a registration statement “contained an untrue statement of material fact” or “omitted
`to state a material fact . . . necessary to make the statements therein not misleading.” 15 U.S.C. §
`77k(a). An “untrue statement of material fact” must be both (1) false and (2) material to investors.
`See Rigel Pharm, 697 F.3d at 880 n.8. Not all relevant or material omitted facts are actionable
`omissions. Id. (citing Matrixx Initiatives v. Siracusano, 563 U.S. 27, 38 (2011)); Brody v.
`Transitional Hospitals Corp., 280 F.3d 997, 1006 (9th Cir. 2002). Rather, to be actionable an
`omission “must affirmatively create an impression of a state of affairs that differs in a material
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`ORDER
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`way from the one that actually exists” to be actionable. Brody, 280 F.3d at 1006. Section 11
`imposes strict liability. In re Daou Sys., Inc., 411 F.3d 1006, 1028 (9th Cir. 2005).
`Section 12(a)(2) applies the same standard. See 15 U.S.C. § 77l (imposing liability where a
`prospectus or communication “includes an untrue statement of a material fact” or “omits to state a
`material fact necessary in order to make the statements, in the light of the circumstances under
`which they were made, not misleading”). It creates said liability for any person who offers or sells
`a security through a prospectus or an oral communication creating a material misstatement or
`omission. Section 15 creates liability for anyone who “controls” a defendant who is themselves
`liable under Section 11 or 12(a)(2).
`As a threshold matter, the parties disagree as to whether the heightened Rule 9(b) pleading
`standard applies. Rule 9(b) only applies to Section 11 claims which are “grounded in fraud.” In re
`Stac Elecs. Sec. Litig., 89 F.3d 1399, 1404–05 (9th Cir. 1996). Each cause of action in the
`complaint explicitly disclaims a fraud theory. See, e.g., Amended Complaint (“Complaint’), ECF
`No. 80, at 108 (“This cause of action does not sound in fraud.”). While defendants are correct that
`“a disclaimer alone is insufficient to re-characterize a complaint whose gravamen is plainly fraud,
`here [BRS has] made an effort to plead a non-fraudulent basis for Section 11 liability.”
`Knollenberg v. Harmonic, Inc., 152 F. App’x 674, 684 (9th Cir. 2005) (citing Stac Elecs., 89 F.3d
`at 1405 n.2). In particular, the complaint states the claims against Uber are based on a strict
`liability theory and against all other defendants on negligence. See Complaint at 108. BRS will be
`held to this representation, and the heightened Rule 9(b) standard thus will not apply—with one
`exception. The complaint “expressly disclaims any allegations of scienter or fraudulent intent . . .
`except that any challenged statements of opinion or belief made in connection with the IPO are
`alleged to have been materially misstated statements of opinion or belief when made.” Id.
`Challenged statements of opinion, see section IV.B.3, infra, must be pled with particularity.
`1. Puzzle Pleading
`Defendants’ first argument in favor of dismissal is that BRS has engaged in impermissible
`“puzzle pleading.” “In the securities fraud context, the term ‘puzzle pleading’ refers to a pleading
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`ORDER
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`that requires a defendant and the court to ‘match up’ the statements that form the basis of the
`plaintiff’s claims with the reasons why those statements are misleading.” In re Cisco Sys. Inc. Sec.
`Litig., No. 11-cv-01568, 2013 WL 1402788, at *5 (N.D. Cal. Mar. 29, 2013); see also In re Splash
`Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059, 1073 (N.D. Cal. 2001) (finding structure of
`complaint rendered it “exceedingly difficult to discern precisely which statements are alleged to be
`misleading”). “[A] securities fraud complaint that employs a true puzzle-style pleading format will
`recite lengthy statements attributed to the defendants, followed by a generalized list of reasons that
`the statements may have been false or misleading or a generalized list of omissions that were
`required to make the statements not misleading.” Tarapara v. K12 Inc., No. 16-cv-04069, 2017
`WL 3727112, at *9 (N.D. Cal. Aug. 30, 2017).
`The complaint in the present case may be “long, confusing, and meandering,” such that “it
`is difficult to locate the main points within it.” Id. However, it “is not so deficient that
`[d]efendants are incapable of figuring out what statements are alleged to be false.” Park v. GoPro,
`Inc., No. 18-cv-00193, 2019 WL 1231175, at *8 (N.D. Cal. Mar. 15, 2019). BRS has
`“emphasize[d] the portions of [the RS] that [it] allege[s] to be false or misleading.” Id.
`“Furthermore, [BRS] set forth the reasons why [it] believe[s] each statement to be false or
`misleading . . . .” Id. While the complaint might be “repetitive” and “hard to follow, it is not so
`deficient as to amount to puzzle pleading.” Id. See also In re GlenFed, Inc., Sec. Litig., 42 F.3d
`1541 (9th Cir. 1994) (finding that a 113-page complaint, which “ramble[d] through long stretches
`of material quotes from defendants’ public statement,” suffered from “poor draftsmanship,” and
`was “cumbersome almost to the point of abusiveness,” nevertheless did not engage in puzzle
`pleading). BRS has not engaged in impermissible puzzle pleading.
`2. Omissions
`Defendants’ next argument favoring dismissal is that they did not omit any material fact
`necessary to render the RS not misleading, because the facts BRS alleges were omitted were in
`fact disclosed. BRS alleges defendants omitted material facts about the legality (or lack thereof) of
`Uber’s business model, its passenger safety record, and its financial condition.
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`ORDER
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`Defendants argue each of these three categories of facts was adequately disclosed in the
`RS. With regard to the business model, the RS stated Uber was “subject to national, state, local, or
`municipal laws and regulations that are ambiguous in their application or enforcement or that we
`believe are invalid or inapplicable.” RS at 62. It provided examples of such laws, for example the
`California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court
`regarding the differences between employees and independent contractors. Id. at 35. With regard
`to passenger safety, the RS disclosed that “numerous incidents and allegations worldwide” of
`sexual assault, abuse, and kidnapping had been reported—though not the details of any of those
`instances. Id. at 40. The RS also stated the company planned to release a “transparency report”
`about these instances sometime in 2019 which could result in “negative media coverage and
`increased regulatory scrutiny.” Id. at 38. Finally, with regard to the company’s financial position,
`the RS disclosed that Uber expected its operating expenses to increase, largely as a result of
`promotional spending, and that it would incur losses “in the near term” as a result. Id. at 34.
`“[W]here a company's filings contain abundant and specific disclosures regarding the risks
`facing the company, as opposed to terse, generic statements, the investing public is on notice of
`these risks and cannot be heard to complain that the risks were masked as mere contingencies.”
`Plevy v. Haggerty, 38 F. Supp. 2d 816, 832 (C.D. Cal. 1998) (collecting cases). Here, defendants
`are correct that their disclosures were neither “terse” nor “generic.” However, the point remains:
`given the facts BRS has plausibly alleged, the RS was “misleading; in other words, it . . .
`affirmatively create[d] an impression of a state of affairs that differs in a material way from the
`one that actually exist[ed].” Brody, 280 F.3d at 1006.
`In particular, the RS begins with a letter from Uber’s CEO, defendant Dara Khosrowshahi,
`which acknowledges Uber “didn’t get everything right” and made “missteps” in its past. RS at vi.
`However, Khosrowshahi proclaims, “we’ve changed.” Id. He goes on to explain the changes Uber
`has made to fulfill the unique responsibilities that come with being a public company. Id. The RS
`touts Khosrowshahi’s installation as CEO as the beginning of a “new path forward” for Uber. Id.
`at 116. See also id. at 160 (“It’s a new day at Uber.”). The “Risk Factors” portion of the RS goes
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`ORDER
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`on to list numerous potential scenarios that, should they materialize, might affect Uber’s
`prospects, but does not suggest that any of those scenarios already exist.
`Thus, the RS affirmatively created an impression of an optimistic state affairs: no matter
`what trouble Uber had faced in the past, Khosrowshahi was leading the company down a new
`path. The RS represented that, while Uber’s future was not blemish-free, the company had turned
`over a new leaf. Unfortunately, given the facts BRS has plausibly alleged, this state of affairs
`differs in a material way from the one that actually existed. For example, BRS has alleged
`plausibly that Uber was continuing, well into 2019, to use a “playbook” to launch in new markets
`in ways it knew were undoubtedly illegal. In fact, BRS alleges Uber viewed paying fines for
`violating local laws, or bribes for avoiding those fines, as a cost of doing business. The laws were
`not, as the RS represented, “ambiguous” or “inapplicable,” and Uber knew that. Similarly, BRS
`plausibly alleges that Uber intentionally delayed layoffs and restructuring it knew were inevitable
`given its financial position at the time of its IPO, in order to mislead the markets. In particular,
`mere weeks after its IPO, Uber announced it was dissolving its CMO and COO positions “with the
`IPO behind us.” In other words, the “Risk Factors” in the RS were not mere possibilities; many
`had already “come to fruition.” Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167, 1181 (9th
`Cir. 2009) (internal citation omitted), aff’d, 563 U.S. 27. Thus, what was disclosed in the RS was
`not enough to render what was not disclosed, not misleading.
`Defendants next argue that the facts which BRS alleges were improperly omitted were
`adequately disclosed in the press coverage about Uber leading up to its IPO, 26 examples of which
`it presents as exhibits. See Part III, supra. That is, there had been enough unfavorable press
`coverage about Uber before its IPO, that the market was on notice about the risks of investing in
`it. This “truth-on-the-market” defense is unavailing for at least three reasons.
`First, a truth-on-the-market defense is typically raised in the context of Section 10(b) of the
`Securities Exchange Act of 1934, not Section 11 of the Securities Act. See, e.g., Provenz v. Miller,
`102 F.3d 1478, 1492 (9th Cir. 1996). While Section 11 is limited to liability for misrepresentations
`and omissions in registration statements, 15 U.S.C. § 77k(a), Section 10(b) sweeps more broadly,
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`ORDER
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`to all securities fraud, 15 U.S.C. § 78j. A truth-on-the-market defense is based on the theory that,
`if an alleged misstatement or omission of fact is already known to the market, then the fact will
`already be reflected in the stock price, and the market has not been misled. Provenz, 102 F.3d at
`1492. Thus, the defense is less applicable to registration statements, IPOs, and Section 11 claims,
`where the stock price has been set privately; the public market has necessarily not had the
`opportunity to factor in information it may have into the share price.
`Second, even assuming the defense is available for Section 11 claims, it is not available at
`the motion to dismiss stage. In re Thoratec Corp. Sec. Litig., No. 04-cv-03168, 2006 WL
`1305226, at *4 (N.D. Cal. May 11, 2006) (citing Asher v. Baxter Int’l Inc., 377 F.3d 727, 734 (7th
`Cir. 2004)). This is because, “as the Supreme Court and Ninth Circuit have explained, the truth-
`on-the-market defense is a method of refuting an alleged misrepresentation’s materiality.”
`Connecticut Ret. Plans & Tr. Funds v. Amgen Inc., 660 F.3d 1170, 1177 (9th Cir. 2011), aff'd, 568
`U.S. 455 (internal citations omitted). Materiality is a “mixed question of law and fact,” TSC
`Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976), and “[p]roof of that sort is a matter for
`trial,” Basic Inc. v. Levinson, 485 U.S. 224, 249 (1988). See also Provenz, 102 F.3d at 1493
`(stating summary judgment on truth-on-the-market defense is only warranted if defendants show
`“no rational jury could find that the market was misled,” which is a “heavy burden of proof”);
`Ganino v. Citizens Utilities Co., 228 F.3d 154, 167 (2d Cir. 2000) (“The truth-on-the-market
`defense is intensely fact-specific and is rarely an appropriate basis for dismissing a § 10(b)
`complaint for failure to plead materiality.”).
`Finally, even if the truth-on-the-market defense were available at this juncture, defendants
`have not met their heavy burden of demonstrating it is appropriate on these facts. “[I]nvestors are
`not generally required to look beyond a given document to discover what is true and what is not.”
`Miller v. Thane Int’l, Inc., 519 F.3d 879, 887 (9th Cir. 2008). The volume of the judicially noticed
`articles might demonstrate that the alleged misstatements and omissions were known to the
`market, or it might demonstrate that investors like BRS would have had to follow all press
`coverage about Uber quite closely to be on notice of all the alleged facts. At the present juncture,
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`ORDER
`CASE NO. 19-cv-06361-RS
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`the plausible allegations must be construed in the light most favorable to BRS; viewing the facts
`this way requires the latter inference. Furthermore, there is no legal basis for defendants’
`contention that the form of the information—news articles, as opposed to SEC filings—determines
`whether it was “known” to the market as a matter of law. Thus, for at least these reasons, the
`judicially noticed articles do not defeat BRS’s plausible allegations at this juncture.
`Defendants’ final argument on this point is that they had no duty to disclose more
`information than they did. They are correct that they had no duty to disclose every legal challenge,
`passenger safety complaint, or financial detail—that is, there is no “freestanding completeness
`requirement.” Brody, 280 F.3d at 1006. However, BRS has plausibly alleged that at least three
`independent bases which compelled defendants to disclose more than they did. First, as discussed
`above, the information defendants did disclose “create[d] an impression of a state of affairs that
`differ[ed] in a material way from the one that actually exist[ed].” Id. Under the facts as alleged by
`BRS, defendants had an affirmative duty to correct that impression. Second and third, Items 105
`and 303 of SEC Security Regulation S–K impose their own duties to disclose, respectively, “the
`most significant factors that make an investment in the registrant or offering speculative or risky”
`and “any known trends or uncertainties that have had or that the registrant reasonably expects will
`have a material favorable or unfavorable impact on net sales or revenues or income from
`continuing operations.” 17 C.F.R. §§ 229.105, 229.303(3)(a)(ii). See also Pirani v. Slack Techs.,
`Inc., No. 19-cv-05857, 2020 WL 1929241, at *12 (N.D. Cal. Apr. 21, 2020). For the same reasons
`BRS has plausibly alleged a claim under Sections 11 and 12(a)(2), it has plausibly alleged a
`violation of Regulation S–K, see Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir.
`1998), which imposes independent duties. Thus, the alleged omissions were required disclosures
`which were not adequately disclosed by defendants.
`3. Non-Actionable Statements
`Defendants’ final argument favoring dismissal is that the misstatements BRS alleges are
`not actionable for a variety of reasons. As discussed below, each argument is unavailing.
`First, the alleged misstatements, considered in context, are not mere corporate puffery. “In
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`ORDER
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`the Ninth Circuit, vague, generalized assertions of corporate optimism or statements of mere
`puffing are not actionable material misrepresentations under federal securities laws because no
`reasonable investor would rely on such statements.” In re Restoration Robotics, Inc. Sec. Litig.,
`417 F. Supp. 3d 1242, 1255 (N.D. Cal. 2019) (internal quotations and citations omitted). On the
`other hand, “general statements of optimism, when taken in context, may form a bas