Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 1 of 32
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`Jordan Eth (CA SBN 121617)
`JEth@mofo.com
`Mark R.S. Foster (CA SBN 223682)
`MFoster@mofo.com
`MORRISON & FOERSTER LLP
`425 Market Street
`San Francisco, CA 94105
`Telephone: (415) 268-7126
`Facsimile: (415) 268-7522
`
`William Savitt (pro hac vice)
`John F. Lynch (pro hac vice)
`Noah B. Yavitz (pro hac vice)
`John R. Rady (pro hac vice)
`WACHTELL, LIPTON, ROSEN & KATZ
`51 West 52nd Street
`New York, NY 10019
`Telephone: (212) 403-1000
`Facsimile: (212) 403-2000
`
`Attorneys for defendants Bayer
`Aktiengesellschaft, Werner Baumann,
`Werner Wenning, Liam Condon,
`Johannes Dietsch, and Wolfgang Nickl
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`SHEET METAL WORKERS’ NATIONAL
` Case No.: 3:20-cv-04737-RS
`PENSION FUND and INTERNATIONAL
`
`DEFENDANTS’ NOTICE OF MOTION
`BROTHERHOOD OF TEAMSTERS LOCAL
`AND MOTION TO DISMISS THE
`NO. 710 PENSION FUND, individually and as
`AMENDED CLASS ACTION
`Lead Plaintiffs on behalf of all others similarly
`COMPLAINT; MEMORANDUM OF
`situated, and
`POINTS AND AUTHORITIES IN
`
`SUPPORT THEREOF
`INTERNATIONAL UNION OF OPERATING
`ENGINEERS PENSION FUND OF EASTERN
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`PENNSYLVANIA AND DELAWARE,
`CLASS ACTION
`individually and as Named Plaintiff, on behalf of
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`all others similarly situated,
`Date: July 22, 2021
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`Time: 1:30 p.m.
`Plaintiffs,
`Judge: Richard Seeborg
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`Courtroom: 3 — 17th Floor
`v.
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`
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`BAYER AKTIENGESELLSCHAFT, WERNER
`BAUMANN, WERNER WENNING, LIAM
`CONDON, JOHANNES DIETSCH, and
`WOLFGANG NICKL,
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`Defendants.
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`DEFS.’ P&A IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT
`CASE NO.: 3:20-CV-04737-RS
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 2 of 32
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`NOTICE OF MOTION AND MOTION
`TO PLAINTIFFS AND THEIR ATTORNEYS OF RECORD:
`PLEASE TAKE NOTICE that on July 22, 2021, at 1:30 p.m., or at such other time as the
`matter may be heard, in the courtroom of the Honorable Richard Seeborg, located at 450 Golden
`Gate Avenue, San Francisco, California, Courtroom 3, 17th Floor, attorneys for defendants Bayer
`Aktiengesellschaft, Werner Baumann, Werner Wenning, Liam Condon, Johannes Dietsch, and
`Wolfgang Nickl will, and hereby do, move to dismiss plaintiffs’ amended class action complaint
`(the “Complaint”) (Dkt. No. 47) pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil
`Procedure, as well as the Private Securities Litigation Reform Act of 1995.
`The motion is based upon this notice and the accompanying memorandum of points and
`authorities, the accompanying declaration of John F. Lynch and the exhibits submitted therewith,
`the accompanying request for consideration and judicial notice, the reply brief that will be filed, the
`papers on file in the action, the argument of counsel, and such other matters as may be considered
`by the Court before it takes the motion under submission.
`ISSUES TO BE DECIDED
`Whether plaintiffs’ claim under Section 10(b) of the Securities Exchange Act of
`1.
`1934 should be dismissed for failure to plead falsity, scienter, and loss causation.
`2.
`Whether plaintiffs’ claim under Section 20(a) of the Exchange Act should be
`dismissed because the Section 10(b) claim fails.
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`DEFS.’ P&A IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 3 of 32
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`Dated: March 22, 2021
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`By:
`
`/s/ Jordan Eth
`Jordan Eth (CA SBN 121617)
`JEth@mofo.com
`Mark R.S. Foster (CA SBN 223682)
`MFoster@mofo.com
`MORRISON & FOERSTER LLP
`425 Market Street
`San Francisco, CA 94105
`Telephone: (415) 268-7126
`Facsimile: (415) 268-7522
`William D. Savitt (pro hac vice)
`John F. Lynch (pro hac vice)
`Noah B. Yavitz (pro hac vice)
`John R. Rady (pro hac vice)
`WACHTELL, LIPTON, ROSEN & KATZ
`51 West 52nd Street
`New York, NY 10019
`Telephone: (212) 403-1000
`Facsimile: (212) 403-2000
`Attorneys for defendants Bayer Aktiengesellschaft,
`Werner Baumann, Werner Wenning, Liam
`Condon, Johannes Dietsch, and Wolfgang Nickl
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 4 of 32
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`TABLE OF CONTENTS
`INTRODUCTION .......................................................................................................................... 1
`STATEMENT OF FACTS ............................................................................................................. 2
`ARGUMENT .................................................................................................................................. 5
`I. THE COMPLAINT FAILS TO PLEAD FALSITY WITH PARTICULARITY. .................... 5
`A. The Complaint Does Not Allege with Particularity that Defendants Made False
`Statements About Due Diligence on Monsanto. ................................................................. 6
`B. The Complaint Does Not Allege with Particularity that Defendants Made False
`Statements About Evidence of Glyphosate Safety............................................................ 11
`C. The Complaint Does Not Allege with Particularity that Defendants Made False
`Statements Relating to Bayer’s Accounting for Glyphosate Legal Risks......................... 14
`II. THE COMPLAINT FAILS TO PLEAD A STRONG INFERENCE OF SCIENTER. ......... 16
`III. THE COMPLAINT FAILS TO PLEAD LOSS CAUSATION. ............................................ 21
`IV. THE COMPLAINT FAILS TO PLEAD A VIOLATION OF SECTION 20(A). .................. 24
`CONCLUSION ............................................................................................................................. 24
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 5 of 32
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`TABLE OF AUTHORITIES
`
`Cases
`
`Page(s)
`
`Basic, Inc. v. Levinson,
`485 U.S. 224 (1988) ............................................................................................................. 11 n.5
`
`Bonanno v. Cellular Biomedicine Grp., Inc.,
` 2016 WL 4585753 (N.D. Cal. Sept. 2, 2016) ........................................................................... 22
`
`Brown v. Brewer,
`2010 WL 2472182 (N.D. Cal. 2010) ........................................................................................... 7
`
`Bruce v. Suntech Power Holdings Co.,
`2013 WL 6843610 (N.D. Cal. Dec. 26, 2013) ....................................................................... 5, 10
`
`City of Austin Police Ret. Sys. v. Kinross Gold Corp.,
` 957 F. Supp. 2d 277 (S.D.N.Y. Mar. 22, 2013) ............................................................ 10 n.4, 18
`
`City of Dearborn Heights v. Align Tech., Inc.,
`65 F. Supp. 3d 840 (N.D. Cal. 2014),
`aff’d, 856 F.3d 605 (9th Cir. 2017) ...................................................................................... 16 n.8
`
`City of Dearborn Heights v. Align Tech., Inc.,
`856 F.3d 605 (9th Cir. 2017).......................................................................................... 10, 15, 16
`
`Curry v. Yelp Inc.,
`875 F.3d 1219 (9th Cir. 2017).................................................................................................... 18
`
`DSAM Glob. Value Fund v. Altris Software, Inc.,
`288 F.3d 385 (9th Cir. 2002)...................................................................................................... 19
`
`Dura Pharms., Inc. v. Broudo,
`544 U.S. 336 (2005) ............................................................................................................. 21, 24
`
`Feola v. Cameron,
`2015 WL 12644566 (C.D. Cal. Nov. 24, 2015) ......................................................................... 20
`
`Gavaldon v. Standard Chartered Bank Int’l (Am.) Ltd.,
`2020 WL 835311 (S.D. Cal. Feb. 20, 2020) ........................................................................ 10 n.4
`
`Grigsby v. BofI Holding, Inc.,
`979 F.3d 1198 (9th Cir. 2020)................................................................................ 21, 22 n.10, 23
`
`GSC Partners CDO Fund v. Washington,
`368 F.3d 228 (3d Cir. 2004) .................................................................................................. 20-21
`
`In re Bank of America Corp.,
`2012 WL 1353523 (S.D.N.Y. Apr. 12, 2012) ....................................................................... 10-11
`
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 6 of 32
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`In re Cutera Sec. Litig.,
`610 F.3d 1103 (9th Cir. 2010).................................................................................................... 23
`
`In re Daou Sys., Inc. Sec. Litig.,
`411 F.3d 1006 (9th Cir. 2005)................................................................................................ 5, 16
`
`In re Hansen Nat. Corp. Sec. Litig.,
`527 F. Supp. 2d 1142 (C.D. Cal. 2007) ..................................................................................... 19
`
`In re HP Sec. Litig.,
`2013 WL 6185529 (N.D. Cal. Nov. 26, 2013) ........................................................................... 21
`
`In re Huffy Corp. Sec. Litig.,
`577 F. Supp. 2d 968 (S.D. Ohio 2008) ...................................................................................... 17
`
`In re Levi Strauss & Co. Sec. Litig.,
`527 F. Supp. 2d 965 (N.D. Cal. 2007) ................................................................................. 15 n.7
`
`In re Medicis Pharm. Corp. Sec. Litig.,
`2010 WL 3154863 (D. Ariz. Aug. 9, 2010) ............................................................................... 19
`
`In re Nvidia Corp. Sec. Litig.,
`2010 WL 4117561 (N.D. Cal. Oct. 19, 2010) ............................................................................ 15
`
`In re Omnicom Grp., Inc. Sec. Litig.,
`597 F.3d 501 (2d Cir. 2010) ....................................................................................................... 22
`
`In re Sanofi Sec. Litig.,
`87 F. Supp. 3d 510 (S.D.N.Y. 2015) .......................................................................................... 13
`
`In re Sanofi-Aventis Sec. Litig.,
`774 F. Supp. 2d 549 (S.D.N.Y. 2011) ........................................................................................ 13
`
`In re Silicon Graphics Inc. Sec. Litig.,
`183 F.3d 970 (9th Cir. 1999)........................................................................................................ 1
`
`In re Sunpower Corp. Sec. Litig.,
`2018 WL 1863055 (N.D. Cal. Apr. 18, 2018) ........................................................................... 21
`
`Inchen Huang v. Higgins,
`2019 WL 1245136 (N.D. Cal. Mar. 18, 2019) ........................................................................... 23
`
`Lake v. Zogenix, Inc.,
`2020 WL 3820424 (N.D. Cal. Jan. 27, 2020) ........................................................................ 5, 17
`
`Lentell v. Merrill Lynch & Co.,
`396 F.3d 161 (2d Cir. 2005) ....................................................................................................... 23
`
`Lloyd v. CVB Fin. Corp.,
` 811 F.3d 1200 (9th Cir. 2016)............................................................................................. 19, 21
`
`DEFS.’ P&A IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 7 of 32
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`
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`Luna v. Marvell Tech. Grp. Ltd.,
`2016 WL 5930655 (N.D. Cal. Oct. 12, 2016) ................................................................ 15, 20, 23
`
`May v. KushCo Holdings, Inc.,
`2020 WL 6587533 (C.D. Cal. Sept. 25, 2020) ........................................................................... 19
`
`Metzler Inv. GmbH v. Corinthian Colls., Inc.,
`540 F.3d 1049 (9th Cir. 2008)................................................................................................... 5-6
`
`Nathanson v. Polycom, Inc.,
`87 F. Supp. 3d 966 (N.D. Cal. 2015) ........................................................................................... 7
`
`Nguyen v. Endologix, Inc.,
`962 F.3d 405 (9th Cir. 2020).......................................................................................... 16, 18, 20
`
`Omnicare, Inc. v. Laborers Dist. Council,
`575 U.S. 175 (2015) ................................................................................................. 10, 14 n.6, 16
`
`Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co.,
`845 F.3d 1268 (9th Cir. 2017).................................................................................................... 13
`
`Salim v. Mobile Telesystems PJSC,
`2021 WL 796088 (E.D.N.Y. Mar. 1, 2021) ......................................................................... 15, 16
`
`Santa Fe Industries v. Green,
`430 U.S. 462 (1977) ..................................................................................................................... 7
`
`Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
`551 U.S. 308 (2007) ................................................................................................................... 17
`
`Thor Power Tool Co. v. C.I.R.,
`439 U.S. 522 (1979) ................................................................................................................... 15
`
`Wochos v. Tesla, Inc.,
`985 F.3d 1180 (9th Cir. 2021)................................................................................................ 8, 21
`
`Xiaojiao Lu v. Align Tech., Inc.,
`417 F. Supp. 3d 1266 (N.D. Cal. 2019) ....................................................................................... 9
`
`Yaron v. Intersect ENT, Inc.,
`2020 WL 6750568 (N.D. Cal. June 19, 2020) ........................................................................... 23
`
`Yourish v. California Amplifier,
`191 F.3d 983 (9th Cir. 1999)...................................................................................................... 19
`
`Zucco Partners, LLC v. Digimarc Corp.,
`552 F.3d 981 (9th Cir. 2009)................................................................................................ 17, 19
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`DEFS.’ P&A IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 8 of 32
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`Rules and Statutes
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`15 U.S.C. § 78j(b) ............................................................................................................................ 4
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`15 U.S.C. § 78t(a) ............................................................................................................................ 4
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`15 U.S.C. § 78u–4(b)(1) ................................................................................................................... 5
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`15 U.S.C. § 78u–4(b)(2) ............................................................................................................. 5, 16
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`17 C.F.R. § 240.10b-5 ...................................................................................................................... 4
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`28 U.S.C. § 1658(b)(1) ........................................................................................................... 22 n.10
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`Fed. R. Civ. P. 9(b) .............................................................................................................. 5, 16, 21
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`Case 3:20-cv-04737-RS Document 61 Filed 03/22/21 Page 9 of 32
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`INTRODUCTION
`This case is a textbook example of an attempt to plead securities fraud by hindsight. Bayer
`acquired Monsanto in a transaction that was signed in 2016 and completed in 2018. Soon after the
`closing, Monsanto began to lose California jury trials in personal-injury cases involving glyphosate,
`an ingredient in Monsanto’s Roundup products. Bayer’s stock price dropped. Plaintiffs then
`dredged up dozens of disclosures that Bayer and its senior officials made over a period of almost
`four years — statements beginning in May 2016, weeks before the deal was signed, continuing
`through the first jury verdict in August 2018, and extending through April 2020, as Bayer discussed
`Monsanto’s glyphosate litigation in financial reports. The Complaint alleges that all these
`statements were later revealed as fraudulent by adverse litigation outcomes, which supposedly
`showed investors that defendants had deceived them about three different things: alleged lapses in
`Bayer’s due diligence on Monsanto, the safety of glyphosate, and Bayer’s accounting for
`glyphosate risks.
`Congress enacted the Private Securities Litigation Reform Act to “put an end to the practice
`of pleading ‘fraud by hindsight.’” In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 988 (9th
`Cir. 1999). The statute requires securities-fraud complaints to detail contemporaneous statements
`or conditions showing why alleged misrepresentations were false when they were made. Plaintiffs
`have not done this. The crux of their theory of falsity — their allegations that defendants’
`disclosures about due diligence and glyphosate were false when made — reduces to the fact that
`juries later found Monsanto liable to personal-injury plaintiffs. That does not suffice under the
`PSLRA, and it is not the only defect in plaintiffs’ pleading of falsity. The claim that defendants
`misled the market about the quality of Bayer’s due diligence on Monsanto reflects an effort to
`bootstrap alleged mismanagement into securities fraud, which is impermissible, and many of the
`statements they challenge concerning due diligence, glyphosate safety, and accounting for litigation
`risks are statements of opinion, which are subject to an even higher pleading standard that the
`Complaint does not meet. See Point I, infra.
`The Complaint also fails the heightened standard that the PSLRA established for the
`pleading of scienter, which requires particularized facts that give rise to a strong inference that
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`defendants either knew their statements were false or were deliberately reckless as to truth or
`falsity. The Complaint contains no such facts at all — no claim of any motive to lie, no suspicious
`sales of stock, no statements or documents reflecting intentional recklessness on the part of any
`defendant as to the truth of statements concerning due diligence on Monsanto, glyphosate risks, or
`anything else. At bottom, plaintiffs’ scienter case amounts to little more than conclusory
`allegations of knowledge or recklessness appended to their hindsight claims of faulty diligence and
`misjudgment of medical evidence. See Point II, infra.
`Nor does the Complaint adequately allege loss causation, which requires particularized
`pleading that the allegedly misleading statements, as opposed to something else, caused plaintiffs’
`alleged losses. Plaintiffs do not come close to alleging with particularity that the stock drops that
`followed the adverse litigation results were caused by the correction of defendants’ allegedly false
`statements about due diligence and glyphosate risks — rather than the market’s surprise at the
`outcomes of an unpredictable trial process. See Point III, infra.
`Defendants respectfully submit that the Complaint should be dismissed with prejudice.
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`STATEMENT OF FACTS1
`Bayer is a German corporation that develops and sells agricultural, pharmaceutical, and
`healthcare products. ¶ 49. In May 2016, it made a $62 billion all-cash offer to acquire Monsanto,
`an agrochemical company based in St. Louis. ¶¶ 56, 62. On September 14, 2016, after four months
`of spirited negotiation, the parties signed a merger agreement. ¶ 97; see ¶¶ 87-89, 91-96. The
`acquisition closed on June 7, 2018. ¶ 111. During this lengthy process, Bayer’s advisors
`conducted due diligence on Monsanto’s operations, which included a review of legal and
`reputational risks posed by the merger. ¶ 81. Among the topics of this diligence was litigation
`against Monsanto alleging that the chemical glyphosate causes cancer. ¶¶ 80-81.
`
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`1 These facts are drawn from the Complaint, Dkt. No. 47, and documents subject to the
`accompanying request for consideration and judicial notice. Defendants dispute the allegations in
`the Complaint but assume they are true for purposes of this motion. All references to “¶ __” are to
`paragraphs in the Complaint. All references to “Ex. __” are to exhibits attached to the declaration
`of John F. Lynch.
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`Glyphosate is the active ingredient in Roundup, a Monsanto herbicide. Regulators in the
`United States and Europe have approved glyphosate (and Roundup) for general use, ¶ 80, and there
`is an extensive body of research supporting its safety, ¶ 176. Nevertheless, in March 2015 the
`International Agency for Research on Cancer (“IARC”) released a monograph concluding that
`glyphosate is “probably carcinogenic to humans.” ¶ 80. The publication prompted dozens of
`plaintiffs to file highly publicized lawsuits. Id. That litigation led to the public release, in March
`and August 2017, of a large volume of internal Monsanto documents analyzing glyphosate,
`eliciting heavy press scrutiny and still more lawsuits. ¶¶ 102, 104, 106, 109.
`After the Monsanto merger closed in June 2018, several developments caused the
`glyphosate litigation to expand further in scope and severity. On August 10, 2018, just months
`after the closing, a California Superior Court jury in the first case to reach trial ruled in favor of the
`plaintiff, Dewayne Johnson, awarding him $39 million in compensatory damages and $250 million
`in punitive damages. ¶¶ 18, 117, 348. On October 22, 2018, the court in the Johnson case reduced
`the punitive damages award to $39 million, but rejected Monsanto’s requests for a new trial and for
`judgment notwithstanding the verdict. ¶¶ 24, 136, 350. Next, on March 19, 2019, a second jury
`verdict was handed down, awarding $80 million in damages to Edwin Hardeman, who claimed
`Roundup caused his cancer. ¶¶ 25, 351.
`These trial successes prompted a boom in new lawsuits, with the volume of glyphosate
`claims soaring to roughly 125,000, much of it consolidated into multi-district litigation in the
`Northern District of California before Judge Vince Chhabria. ¶ 333. Although Bayer continued
`(and continues) to maintain that glyphosate is safe and non-carcinogenic, on June 24, 2020, the
`company announced that it had agreed to pay up to $10.9 billion to settle and establish a
`mechanism to resolve current and future Roundup cases, with the goal of “return[ing] the
`conversation about the safety and utility of glyphosate-based herbicides to the scientific and
`regulatory arena and mov[ing] it away from the jury trial setting.” ¶ 190. On July 6, 2020, Judge
`Chhabria issued an order indicating that he was unlikely to approve the proposed settlement of
`future Roundup claims, prompting the parties to withdraw that part of the settlement. ¶¶ 30-31,
`186-90, 354-55.
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`DEFS.’ P&A IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT
`CASE NO.: 3:20-CV-04737-RS
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`During this post-merger period, the price of Bayer’s American depositary receipts, or
`ADRs, suffered a significant decline. ¶ 33. Shortly after the proposed settlement of future
`glyphosate claims was withdrawn, on July 15, 2020, plaintiffs City of Grand Rapids General
`Retirement System and City of Grand Rapids Police & Fire Retirement System filed a complaint.
`Dkt. No. 1. Their complaint alleged securities fraud by Bayer, along with current officers Werner
`Baumann, Wolfgang Nickl, and Liam Condon, former CFO Johannes Dietsch, and former chair of
`the Bayer Supervisory Board Werner Wenning. As subsequently amended, plaintiffs’ complaint2
`alleges that defendants violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule
`10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, as well as a claim under Section 20(a) of the
`Exchange Act, § 78t(a), for control person liability against each of the individual defendants. Dkt.
`No. 47. The Complaint alleges that over a four-year class period running from May 2016 to July
`2020, defendants made dozens of false or misleading statements falling into three categories:
`1. statements that allegedly misrepresented the extent and effectiveness of Bayer’s due
`diligence, see ¶¶ 219-20, 224-29, 232-35, 238-41, 244-47;
`2. statements that allegedly misrepresented the state of the scientific evidence on
`glyphosate, see ¶¶ 250, 252-66; and
`3. alleged accounting misstatements made after the Monsanto acquisition closed, during
`which period Bayer disclosed the glyphosate litigation as a contingent liability but did
`not reserve for potential damages, see ¶¶ 210-13, 268-313, 321-25.
`Plaintiffs contend that through these alleged misrepresentations, defendants “falsely led
`investors to believe that Bayer’s extensive due diligence confirmed there was no material risk
`from” glyphosate litigation and that “unequivocal scientific and regulatory evidence” favored
`Monsanto’s position in that litigation. ¶¶ 346, 349. They allege that this inaccurate impression was
`dispelled by a news report about the glyphosate litigation, the adverse jury verdicts in the Johnson
`and Hardeman trials, the denial of Bayer’s post-trial motions in the Johnson case, the
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`2 Sheet Metal Workers’ National Pension Fund and International Brotherhood of Teamsters Local
`No. 710 Pension Fund were appointed as lead plaintiffs on October 21, 2020. Dkt. No. 44.
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`announcement of the glyphosate litigation settlement, and the news that Judge Chhabria would not
`approve the part of that settlement directed to future claims, causing a significant decline in Bayer’s
`share price during the two years after its acquisition of Monsanto. ¶¶ 347-48, 350-51, 354.
`Defendants now move to dismiss the Complaint.
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`ARGUMENT
`To state a claim for securities fraud under Section 10(b) and Rule 10b-5, plaintiffs must
`allege “(1) a material misrepresentation or omission of fact [i.e., falsity], (2) scienter, (3) a
`connection with the purchase or sale of a security, (4) transaction and loss causation, and (5)
`economic loss.” Lake v. Zogenix, Inc., 2020 WL 3820424 (N.D. Cal. Jan. 27, 2020) (alteration in
`original) (quoting In re Daou Sys., Inc. Sec. Litig., 411 F.3d 1006, 1014 (9th Cir. 2005)).
`Ordinary notice-pleading standards do not apply. Under Fed. R. Civ. P. 9(b), a complaint
`must plead fraud “with particularity,” and under the PSLRA must detail each misleading statement.
`15 U.S.C. § 78u–4(b)(1). Furthermore, under a PSLRA provision designed to weed out spurious
`allegations of “fraud by hindsight,” Bruce v. Suntech Power Holdings Co., 2013 WL 6843610, at
`*5 (N.D. Cal. Dec. 26, 2013), a plaintiff must plead “with particularity facts giving rise to a strong
`inference that the defendant acted with” scienter. 15 U.S.C § 78u–4(b)(2)(A).
`The Complaint fails this standard on multiple independent grounds. Plaintiffs do not
`adequately allege any material misrepresentations, do not allege particularized facts giving rise to a
`strong inference of scienter, and do not allege defendants’ supposed misrepresentations caused their
`loss. The Complaint should be dismissed with prejudice.
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`I.
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`THE COMPLAINT FAILS TO PLEAD FALSITY WITH PARTICULARITY.
`To plead falsity under the PSLRA’s heightened pleading standards, a complaint must allege
`particularized information showing that the disputed statements were materially false at the time
`they were made. 15 U.S.C. § 78u–4(b)(1); Fed. R. Civ. P. 9(b). This requires plaintiffs to specify
`in their pleadings “each statement alleged to have been misleading” and the “reason or reasons why
`the statement is misleading.” 15 U.S.C. § 78u–4(b)(1) (emphasis added). A complaint must set out
`“specific contemporaneous statements or conditions” that demonstrate the “false or misleading
`nature of the statements when made.” Metzler Inv. GmbH v. Corinthian Colls., Inc., 540 F.3d
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`1049, 1066 (9th Cir. 2008) (internal quotation omitted). Securities-fraud plaintiffs cannot satisfy
`these stringent pleading standards with a “litany of alleged false statements, unaccompanied by the
`pleading of specific facts indicating why those statements were false.” Id.
`That kind of litany is all the Complaint pleads, however, running through years’ worth of
`statements by Bayer executives and financial reports. None are ever materially contradicted by any
`well-pleaded fact from the time the statement was made. Instead, in keeping with plaintiffs’ fraud-
`by-hindsight approach, the Complaint alleges that virtually all were later revealed as false when
`California state-court juries concluded that glyphosate caused individuals’ cancer. ¶¶ 347-54. This
`is so for each category of statements that plaintiffs claim is false: (A) statements that plaintiffs
`characterize as exaggerating Bayer’s due diligence on glyphosate litigation risks; (B) statements
`describing the evidence or lack thereof connecting glyphosate or Roundup to cancer; and (C)
`statements about Bayer’s accounting for the risk of glyphosate litigation losses.
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`A.
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`The Complaint Does Not Allege with Particularity that Defendants Made False
`Statements About Due Diligence on Monsanto.
`The statements that plaintiffs challenge as misrepresenting the quality of Bayer’s due
`diligence on Monsanto begin on May 23, 2016, when news emerged of a potential transaction with
`Monsanto, ¶ 219, and continue through a conference call that Bayer executives had with investors
`on August 23, 2018, soon after the jury rendered its verdict in the Johnson case. ¶ 234. After
`reciting these statements at length, plaintiffs characterize them as giving investors a “false
`