Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 1 of 171
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`KESSLER TOPAZ MELTZER
`& CHECK, LLP
`Jennifer L. Joost (Bar No. 296164)
`One Sansome Street, Suite 1850
`San Francisco, CA 94104
`Tel: (415) 400-3000
`Fax: (415) 400-3001
`jjoost@ktmc.com
`
`Liaison Counsel for the Proposed Class
`
`
` LABATON SUCHAROW LLP
`James W. Johnson (admitted pro hac vice)
`Michael H. Rogers (admitted pro hac vice)
`Irina Vasilchenko (admitted pro hac vice)
`Robert S. Rowley (admitted pro hac vice)
`140 Broadway
`New York, NY 10005
`Tel: (212) 907-0700
`Fax: (212) 818-0477
`jjohnson@labaton.com
`mrogers@labaton.com
`ivasilchenko@labaton.com
`rrowley@labaton.com
`
`Counsel for Lead Plaintiff
`and Lead Counsel for the Proposed Class
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
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`
`
`
`Case No. 3:22-cv-00824-WHO
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`
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`RICHARD R. WESTON, Individually and
`on Behalf of All Others Similarly Situated,
`
` Plaintiff,
`
`v.
`
`DOCUSIGN, INC., DANIEL D.
`SPRINGER, MICHAEL J. SHERIDAN,
`CYNTHIA GAYLOR, and LOREN
`ALHADEFF,
`
` Defendants.
`
` Case No.: 3:22-cv-02980-WHO
`BENJAMIN LAPIN, derivatively on behalf
`
`of DOCUSIGN, INC.,
`
`
` Plaintiff,
`
`v.
`
`DANIEL D. SPRINGER, ENRIQUE
`SALEM, PETER SOLVIK, INHI CHO
`SUH, MARY AGNES WILDEROTTER,
`TERESA BRIGGS, BLAKE J. IRVING,
`JAMES BEER, CAIN A. HAYES,
`CYNTHIA GAYLOR, MICHAEL J.
`SHERIDAN, and LOREN ALHADEFF,
`
` Defendants.
`
`and
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`AMENDED CLASS ACTION COMPLAINT
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 2 of 171
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`DOCUSIGN, INC., a Delaware
`Corporation,
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` Nominal Defendant.
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`
`PETER VOTTO, derivatively on behalf of
`DOCUSIGN INC.,
`
` Plaintiff,
`
`v.
`
`DANIEL SPRINGER, MICHAEL
`SHERIDAN, CYNTHIA GAYLOR,
`SCOTT OLRICH, ENRIQUE S ALEM,
`PETER SOLVIK, INHI CHO SUH,
`MARY AGNES WILDEROTTER,
`TERESA BRIGGS, BLAKE IRVING,
`JAMES BEER, and CAIN HAYES,
`
` Defendants,
`
`DOCUSIGN, INC.,
`
` Nominal Defendant.
`
`
`Case No.: Case No. 4:22-cv-02987-WHO
`
`AMENDED CLASS ACTION
`COMPLAINT FOR
`VIOLATIONS OF THE
`FEDERAL SECURITIES LAWS
`
`
`CLASS ACTION
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`DEMAND FOR JURY TRIAL
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`AMENDED CLASS ACTION COMPLAINT
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 3 of 171
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`I.
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`II.
`III.
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`IV.
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`TABLE OF CONTENTS
`NATURE OF THE ACTION ............................................................................................ 2
`A.
`Overview of DocuSign’s Business ........................................................................ 3
`B.
`The COVID-19 Pandemic Creates Unprecedented Demand Growth
`for eSignature ......................................................................................................... 4
`By the Summer of 2020, Defendants Are Aware of Alarming
`Internal Warning Signs That This Record-High Demand Is
`Temporary but Falsely Assure Investors That DocuSign’s Growth
`Is Sustainable ......................................................................................................... 5
`By Early 2021, Defendants Internally Know That Demand Issues
`Have Worsened but Continue to Falsely Reassure Investors That
`Demand Remains Sustainable................................................................................ 9
`Defendants’ Knowledge of Increased Competition and DocuSign’s
`Failing CLM Sales Further Undermines Their Affirmations of
`Sustainable Growth .............................................................................................. 11
`Defendants Continue to Publicly Deny Any Adverse Demand
`Trends in Late 2020 and Early 2021 .................................................................... 12
`By the Summer of 2021, Defendants Are Well Aware That the
`Record-High Demand Generated During COVID-19 Was at an
`End ....................................................................................................................... 14
`Analyst Reports Confirm That the Market Was Materially Misled
`by Defendants’ Misrepresentations...................................................................... 15
`The Relevant Truth Begins to Emerge in December 2021 .................................. 16
`I.
`JURISDICTION AND VENUE ...................................................................................... 18
`PARTIES ......................................................................................................................... 19
`A.
`Lead Plaintiffs ...................................................................................................... 19
`B.
`Defendants ........................................................................................................... 20
`C.
`Relevant Third Parties.......................................................................................... 22
`SUBSTANTIVE ALLEGATIONS OF FRAUD ............................................................. 29
`A.
`Overview of DocuSign’s Business ...................................................................... 29
`1.
`DocuSign Pioneers eSignature ................................................................. 29
`2.
`DocuSign’s Business Model Focuses on Growth over
`Profitability .............................................................................................. 30
`The COVID-19 Pandemic Forces a Massive Shift to a Remote
`Work Environment, Fueling Explosive Growth for DocuSign’s
`eSignature Product ............................................................................................... 34
`AMENDED CLASS ACTION COMPLAINT
`CASE NO. 22-CV-00824-WHO
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`C.
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`D.
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`E.
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`F.
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`G.
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`H.
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`B.
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`C.
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`D.
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`E.
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`F.
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`G.
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`2.
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`3.
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`Unbeknownst to Investors, Defendants Are Aware of Numerous
`Internal Red Flags That DocuSign’s Explosive Growth in Early
`2020 Due to the COVID-19 Pandemic Is Unsustainable .................................... 38
`New Customers Inform DocuSign That Demand for
`1.
`DocuSign’s eSignature Product Is Only Temporary Due to
`the COVID-19 Pandemic ......................................................................... 38
`Internally, Customers Tell DocuSign by June 2020 That
`(a)
`Their Need for DocuSign’s Products Is for One-Off Uses
`Related to the Pandemic and That They Will Not Renew
`After the Pandemic Subsides ....................................................... 39
`Customers Refuse to Sign Long-Term Contracts ........................ 45
`(b)
`Defendants Predicate Their Early Class Period Statements
`Regarding Customer Retention on Outdated, Pre-COVID-
`19 Information ......................................................................................... 48
`While Aware of These Red Flags Showing That
`DocuSign’s High Demand in Early 2020 Was Fleeting,
`Defendants Falsely Assure Investors That This COVID-19-
`Fueled Growth Is Sustainable .................................................................. 51
`As the COVID-19 Pandemic Recedes Beginning in Late 2020,
`Demand for DocuSign Begins to Decline, as Customers Previously
`Warned ................................................................................................................. 55
`In Late 2020, as Businesses Adapt to the COVID-19
`1.
`Pandemic and Vaccines Enter the Final Stages of Clinical
`Trials, Demand Wanes and Customers Reduce or Cancel
`Their DocuSign Subscriptions ................................................................. 55
`Increased Competition from Adobe Further Drives Down
`Demand for eSignature ............................................................................ 66
`DocuSign Struggles to Sell CLM from the Outset of the
`Class Period, Further Undermining Defendants’ Claims of
`Sustainable Growth .................................................................................. 68
`While Knowing That Demand Continued to Decline,
`Defendants Publicly Continue to Repeat Their False
`Narrative of Durable Growth in Late 2020 and Early 2021 .................... 73
`By the Summer of 2021, Defendants Are Well Aware That the
`Record Demand Generated During COVID Is at an End .................................... 78
`Despite Knowing of Alarming Internal Data to the Contrary,
`Defendants Continue to Publicly Deny Any Adverse Trends in
`Summer and Fall of 2021 ..................................................................................... 81
`The Relevant Truth Regarding DocuSign’s Unsustainable COVID-
`Fueled Growth Slowly Emerges .......................................................................... 83
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`2.
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`3.
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`4.
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 5 of 171
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`1.
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`2.
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`3.
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`DocuSign Reports the Second-Lowest Billings Growth in
`Company History, but Defendants Continue to Reassure
`Investors That Demand Remains Durable ............................................... 83
`Defendants Disclose a Second Consecutive Quarter of
`Disappointing Billings Growth, Which Declines Below
`Pre-COVID-19 Levels ............................................................................. 86
`The Relevant Truth Is Fully Revealed When DocuSign
`Releases Disappointing Growth for the Third Consecutive
`Quarter and Reduces Billings Guidance .................................................. 88
`Post-Class Period Developments ......................................................................... 90
`H.
`DEFENDANTS’ FALSE AND MISLEADING STATEMENTS .................................. 91
`A.
`June 4, 2020 – Press Release and 1Q 2021 Earnings Call ................................... 91
`B.
`June 10, 2020 – William Blair Growth Stock Conference .................................. 96
`C.
`September 3, 2020 2Q 2021 Earnings Call .......................................................... 97
`D.
`September 9, 2020 – DA Davidson Software and Internet
`Conference ........................................................................................................... 99
`September 14, 2020 Deutsche Bank Virtual Technology
`Conference ......................................................................................................... 100
`September 15, 2020 – Jefferies Software Virtual Conference ........................... 101
`December 3, 2020 – 3Q 2021 Earnings Call ..................................................... 102
`January 11, 2021 – Needham Virtual Growth Conference ................................ 103
`March 1, 2021 – Morgan Stanley Technology, Media and Telecom
`Conference ......................................................................................................... 104
`March 11, 2021 – 4Q 2021 Earnings Call ......................................................... 106
`March 24, 2021 – DocuSign Virtual Financial Analyst Day ............................. 108
`March 31, 2021 – Alhadeff Tweet ..................................................................... 110
`June 3, 2021 – 1Q 2022 Earnings Call .............................................................. 110
`June 10, 2021 – Robert W. Baird Global Consumer, Technology &
`Services Conference........................................................................................... 111
`September 2, 2021 – 2Q 2022 Earnings Call ..................................................... 113
`September 8, 2021 - Wolfe Research Inaugural TMT Conference ................... 115
`December 2, 2021 - 3Q 2022 Earnings Call and First Partial
`Corrective Disclosure/Materialization of the Risk ............................................ 115
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`E.
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`F.
`G.
`H.
`I.
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`J.
`K.
`L.
`M.
`N.
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`O.
`P.
`Q.
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 6 of 171
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`VI.
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`R.
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`S.
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`B.
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`C.
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`March 10, 2022 – 3Q 2022 Earnings Call and Second Partial
`Corrective Disclosure/Materialization of the Risk ............................................ 119
`June 9, 2022 – 4Q 2022 Earnings Call and Final Corrective
`Disclosure/ Materialization of the Risk ............................................................. 121
`LOSS CAUSATION ...................................................................................................... 123
`December 2, 2021 - First Partial Corrective
`A.
`Disclosure/Materialization of the Risk .............................................................. 125
`March 10, 2022 – Second Partial Corrective
`Disclosure/Materialization of the Risk .............................................................. 128
`June 9, 2022 – Final Corrective Disclosure/Materialization of the
`Risk .................................................................................................................... 131
`VII. ADDITIONAL INDICIA OF SCIENTER .................................................................... 133
`Defendants Enriched Themselves Through Insider Sales While
`A.
`Possessing Adverse Information Not Available to the Public ........................... 134
`Springer Sold Millions Worth of DocuSign Stock While
`1.
`Concealed Internal Metrics Showed Demand Was Rapidly
`Declining ................................................................................................ 134
`Gaylor Sold Millions Worth of DocuSign Stock Less Than
`One Month Before the Company First Announced Its
`Stunted Billings Growth ........................................................................ 138
`The Demand for DocuSign’s Products and Its Billings Growth
`Were Critical to the Company’s Core Operations ............................................. 139
`Defendants’ Close Personal Monitoring of DocuSign’s Demand
`and Billings Growth Metrics Supports That They Had Actual
`Knowledge or Were Reckless in Not Knowing About Waning
`Demand and Slowing Billings Growth .............................................................. 142
`Defendants’ Statements Themselves Support Scienter...................................... 148
`The Departures of Defendants Sheridan, Alhadeff, and Springer at
`Key Points in the Class Period Support Scienter ............................................... 150
`Corporate Scienter ............................................................................................. 152
`F.
`VIII. CONTROL PERSON ALLEGATIONS........................................................................ 153
`IX.
`CLASS ACTION ALLEGATIONS .............................................................................. 154
`X.
`APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-
`THE-MARKET DOCTRINE ........................................................................................ 156
`NO SAFE HARBOR ..................................................................................................... 158
`XI.
`XII. CAUSES OF ACTION .................................................................................................. 159
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`2.
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`B.
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`C.
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`D.
`E.
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 7 of 171
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`Court-appointed Lead Plaintiffs Deka International S.A. Luxembourg (“DIL”) and Public
`Employee Retirement System of Idaho (“PERSI”) (together “Lead Plaintiffs”), individually and
`on behalf of all persons and entities who or which, during the period from June 4, 2020 through
`June 9, 2022, inclusive (the “Class Period”), purchased the publicly traded common stock of
`DocuSign Inc. (“DocuSign” or the “Company”) and were damaged thereby (the “Class”),1 bring
`this Amended Class Action Complaint for Violations of the Federal Securities Laws against
`Defendants DocuSign and several of DocuSign’s senior executives—Chief Executive Officer
`(“CEO”) Daniel D. Springer, former Chief Financial Officer (“CFO”) Michael J. Sheridan,
`current CFO Cynthia Gaylor, and former Chief Revenue Officer (“CRO”) Loren Alhadeff
`(collectively, the “Individual Defendants”).
`Lead Plaintiffs’ claims are brought upon personal knowledge as to their own acts, and upon
`information and belief as to all other matters, based upon, among other things, a review and
`analysis of: (1) reports and documents filed by DocuSign with the Securities and Exchange
`Commission (“SEC”); (2) reports issued by analysts covering or concerning DocuSign and its
`business; (3) press releases, news articles, transcripts, videos, and other public statements issued
`by or about DocuSign, its business, and the Individual Defendants; (4) an investigation conducted
`by Lead Plaintiffs’ attorneys, including interviews with former DocuSign employees; and (5)
`other publicly available information concerning DocuSign, its business, and the allegations
`contained herein. Lead Plaintiffs believe that substantial additional evidentiary support exists
`for the allegations herein and will continue to be revealed after Lead Plaintiffs have a reasonable
`opportunity for discovery.
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`
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`1 Excluded from the Class are: (i) Defendants; (ii) members of the immediate family of any
`Defendant who is an individual; (iii) any person who was an officer or director of DocuSign
`during the Class Period; (iv) any firm, trust, corporation, or other entity in which any Defendant
`has or had a controlling interest; (v) DocuSign’s employee retirement and benefit plan(s) and
`their participants or beneficiaries, to the extent they made purchases through such plan(s); and
`(vi) the legal representatives, affiliates, heirs, successors-in-interest, or assigns of any such
`excluded person.
`
` AMENDED CLASS ACTION COMPLAINT
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 8 of 171
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`I.
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`NATURE OF THE ACTION
`1. This is a securities fraud class action brought under Sections 10(b) and 20(a) of the
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`Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder
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`on behalf of all investors that purchased DocuSign stock during the Class Period. Defendant
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`DocuSign is a software company that provides an electronic signature solution (“eSignature”),
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`its flagship product that accounts for the vast majority of its revenues. Lead Plaintiffs allege that,
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`during the Class Period, all Defendants falsely reassured investors that the massive surge in
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`customer demand in early 2020 brought on by the COVID-19 pandemic—which forced
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`companies to work remotely and turn to electronic processes like DocuSign’s eSignature
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`solution—was a “sustained rise in demand” and “not a short term thing” because, once customers
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`switch to eSignature, “they rarely go back.” Defendants thus misled investors into believing that
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`the Company’s related explosive billings growth would continue well above pre-COVID-19
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`levels even once the pandemic receded.
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`2. In reality, however, as described by numerous former employees, Defendants knew and
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`concealed from investors numerous adverse material facts indicating that this COVID-19-fueled
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`demand was unsustainable after the pandemic subsided. In particular, Defendants knew from the
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`start of the Class Period that, inter alia, much of this new business influx was for one-time
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`COVID-19 uses and that customers informed DocuSign that they would stop using DocuSign’s
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`eSignature once they returned to the office, as then further confirmed by key internal performance
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`metrics that Defendants closely tracked, such as customer usage and retention rates, which
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`declined significantly during the Class Period. As a result of Defendants’ misrepresentations,
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`DocuSign’s stock price soared to all-time highs during the Class Period, which allowed
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`Defendants, including Springer, the Company’s CEO, to sell more than $153 million worth of
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`DocuSign stock at artificially inflated prices. Investors gradually learned the truth through three
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 9 of 171
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`corrective disclosures—on December 2, 2021, March 9, 2021, and June 9, 2022—when
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`Defendants revealed that DocuSign had missed its billings growth expectations in three
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`consecutive quarters due to a substantial slowdown in business after the initial surge of COVID-
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`19-fueled demand had dissipated. On such news, DocuSign’s share price plummeted, including
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`more than 42 percent in a single day on the first disclosure, resulting in billions of dollars of
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`losses for its shareholders.
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`A.
`Overview of DocuSign’s Business
`3. In 2003, DocuSign pioneered and brought to market its eSignature solution, which for the
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`first time allowed customers to sign and send documents without the need for paper copies and
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`wet signatures. Since the Company’s founding, and continuing to today, eSignature has been
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`DocuSign’s core product as its sales are the largest single contributor to the Company’s revenues.
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`4. As the first mover in the eSignature market, DocuSign was able to grow exponentially over
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`its first fifteen years in operation. Indeed, immediately after DocuSign’s Initial Public Offering
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`(“IPO”) on in April 2018, the Company was valued at over $4.4 billion and ended its first fiscal
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`year2 as a public company with revenues totaling more than $700 million, which then grew
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`dramatically—by almost $300 million—to more than $970 million the next fiscal year.
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`5. However, even with such large and growing revenues, DocuSign was not, and has never
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`been, profitable. For each year of the Company’s operations, including to the present, DocuSign
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`has reported a net loss. As a result, both before and during the Class Period, Defendants needed
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`to convince the market that the Company’s revenues would be able to cover the cash flows
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`2 DocuSign’s fiscal year begins on February 1 and ends on January 31. The Company
`identifies each fiscal year based on the year in which it ends. For instance, DocuSign’s fiscal
`year 2019 ended on January 31, 2019.
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 10 of 171
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`necessary for it to remain viable, as well as show that the Company had a path toward
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`profitability.
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`6. Accordingly, Defendants told investors that the Company’s future financial success
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`depended on substantial sales and billings growth. “Billings” is a key performance metric, which
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`DocuSign publicly discloses, that measures the amounts invoiced to customers over a particular
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`time period. By contrast, revenue measures money actually received from customers. To grow
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`sales and billings, Defendants touted DocuSign’s “land and expand” business model, under
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`which the Company needed to first “land” with a customer, generally by selling its eSignature
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`product into one department or for one specific use, and then “expand” either through upselling
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`that customer more eSignatures or by selling other products—primarily, the Company’s new
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`contract lifecycle management (“CLM”) product that it launched in 2018, a highly complex
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`software that allowed businesses to manage and track contracts through negotiations with
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`multiple parties.
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`B.
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`The COVID-19 Pandemic Creates Unprecedented Demand Growth for
`eSignature
`7. In March 2020, the COVID-19 pandemic unexpectedly ushered in a much more rapid and
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`dramatic growth opportunity for DocuSign as the virus entered the United States and began to
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`spread rapidly. By March 11, 2020, COVID-19 was declared a global pandemic, and by April
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`7, 2020, nearly every U.S. state issued lockdown or shelter-in place-orders requiring people to
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`stay in their homes and businesses to close in order to mitigate the spread of COVID-19.
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`8. As a result, most U.S. businesses were forced to continue operations remotely with
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`employees largely working from home, thereby needing an electronic means to accomplish tasks
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`that had previously been done in person, such as signing documents. Accordingly, DocuSign’s
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`eSignature product represented a crucial alternative to manual processes during this remote work
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`AMENDED CLASS ACTION COMPLAINT
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`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 11 of 171
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`environment, particularly at the beginning of the pandemic when people were concerned that the
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`virus could spread through physical contact with contaminated surfaces, such as mail and pen
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`and paper. Indeed, studies showed that the virus could live on certain surfaces for weeks. This
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`global crisis, therefore, caused demand for DocuSign’s eSignature product to skyrocket to
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`unprecedented levels between March and June 2020. Indeed, during that time, which
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`encompassed the first quarter of the Company’s 2021 fiscal year, DocuSign’s revenues grew by
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`27% compared to the same quarter a year earlier. Similarly, over the same quarter, the
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`Company’s billings grew by a record 59%, the highest growth rate that the Company had
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`experienced since its IPO in 2018.
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`9. Billings is one of the few metrics that DocuSign provides guidance on to investors, telling
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`them where the Company expects to be in terms of billings for the next quarter and the next year.
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`Critically, at the outset of the Class Period and continuing throughout, DocuSign chose to provide
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`higher and higher billings guidance to investors. In contrast, other “work from home” technology
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`companies that saw increased demand during the COVID-19 pandemic, such as Zoom (a
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`videoconferencing software provider) and Slack (an instant messaging software provider),
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`acknowledged that there was substantial uncertainty regarding how the pandemic would shape
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`their businesses moving forward and specifically declined to raise their guidance after the
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`pandemic began. Accordingly, during the Class Period, investors were highly focused on
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`whether DocuSign’s aggressive guidance was achievable and its growth durable in a post-
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`pandemic world.
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`C.
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`By the Summer of 2020, Defendants Are Aware of Alarming Internal
`Warning Signs That This Record-High Demand Is Temporary but Falsely
`Assure Investors That DocuSign’s Growth Is Sustainable
`10. From the beginning of the Class Period, Defendants were aware that demand for
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`DocuSign’s products was unsustainable after the COVID-19 pandemic subsided. Specifically,
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`AMENDED CLASS ACTION COMPLAINT
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`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 12 of 171
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`DocuSign was experiencing multiple adverse sales conditions, which Defendants knew or
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`recklessly disregarded would cause the Company’s billings growth to decline once the temporary
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`demand driven by the COVID-19 pandemic subsided. Specifically, according to numerous
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`former employees (“Confidential Witnesses” or “CWs”), Defendants were aware during the
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`Class Period that: (i) customers informed DocuSign at the beginning of the Class Period that they
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`did not intend to (and ultimately did not) renew their contracts with DocuSign once they were
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`able to return to their offices, as subsequently reflected in low internal product usage and
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`retention metrics, including a 30% decline in customer usage by December 2020; (ii) much of
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`the eSignature sales growth that DocuSign experienced during the COVID-19 pandemic was the
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`result of one-off COVID-19-related use cases that would not recur after the pandemic ended; (iii)
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`from the beginning of the Class Period, customers were signing up for short-term, one-year
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`eSignature contracts—in contrast to the three-year contracts that DocuSign tried to push—that
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`they did not renew, contributing to the decline in retention rates that was apparent internally by
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`February 2021 (one year after the COVID-19 pandemic began); (iv) DocuSign’s sales of its new
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`CLM product were also struggling to take off, including because it was a complex software that
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`had significant integration issues with customers’ platforms; and (v) throughout the Class Period,
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`DocuSign was losing substantial eSignature business to Adobe, a cheaper competitor.
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`11. The first warnings that the unprecedented demand and growth that DocuSign experienced
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`at the beginning of the COVID-19 pandemic was not sustainable came directly from DocuSign’s
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`customers. From the start of the Class Period, customers told DocuSign sales employees that
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`they were using DocuSign only to function remotely during COVID-19 lockdowns and would
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`not renew their contracts after the pandemic subsided. For example, according to CW 6,
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`“immediately from the get-go” when she joined DocuSign, before the Class Period, customers
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`were telling her that they were purchasing the product for one-time use cases related to the
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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`Case 3:22-cv-00824-WHO Document 59 Filed 07/08/22 Page 13 of 171
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`COVID-19 pandemic. Likewise, CW 7, recalled that there were “absolutely” indications before
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`she left DocuSign in June 2020 that demand eventually would dry up, saying that many
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`customers told her they would not renew their contracts after they returned to the office.3
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`12. Such customer feedback was also confirmed by key internal metrics that DocuSign
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`closely tracked, which already showed by the start of the Class Period that customers were not
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`using the full capacity of their DocuSign subscriptions (i.e., all of the eSignatures purchased)—
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`an important indicator that customers were unlikely to renew their contracts once the pandemic
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`subsided. For example, CW 6 recalled seeing low usage rates across government and education
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`clients when she joined the Company (before the Class Period began).
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`13. In addition, as described in further detail below, based on the accounts of multiple CWs
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`who spanned many different industries (internally called “verticals”) and regions across
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`DocuSign’s business, Defendants knew from numerous customers, including large companies
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`like Door Dash and Uber, that their use for DocuSign was directly tied to the pandemic and would
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`not recur after the pandemic. Indeed, the pandemic itself created a variety of one-off uses for
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`eSignatures that were specifically related to COVID-19 health and safety mitigation measures
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`that would no longer exist once the pandemic subsided and lockdowns end. These one-time uses
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`included documents to receive federal loans through the Payroll Protection Program (“PPP”),
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`documents related to COVID-19 mask mandates and consent forms, and return-to-work COVID-
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`19 waivers.
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`14. For example, CW 4 recalled that when she joined DocuSign in summer 2020, after the
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`pandemic had already begun, she and others at DocuSign saw a “prevalence” of one-time use
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`cases by customers for DocuSign’s eSignature product that would not extend beyond the
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`3 All emphases in CW statements are added.
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`AMENDED CLASS ACTION COMPLAINT
`
`CASE NO. 22-CV-00824-WHO
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