Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 1 of 18
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`COTCHETT, PITRE & MCCARTHY, LLP
`Joseph W. Cotchett (SBN 36324)
` jcotchett@cpmlegal.com
`Mark C. Molumphy (SBN 168009)
` mmolumphy@cpmlegal.com
`Anne Marie Murphy (SBN 202540)
` ammurphy@cpmlegal.com
`Tyson C. Redenbarger (SBN 294424)
` tredenbarger@cpmlegal.com
`San Francisco Airport Office Center
`840 Malcolm Road, Suite 200
`Burlingame, California 94010
`Telephone: (650) 697-6000
`BOTTINI & BOTTINI, INC.
`Francis A. Bottini, Jr. (SBN 175783)
` fbottini@bottinilaw.com
`Anne B. Beste (SBN 326881)
` abeste@bottinilaw.com
`Albert Y. Chang (SBN 296065)
` achang@bottinilaw.com
`Yury A. Kolesnikov (SBN 271173)
` ykolesnikov@bottinilaw.com
`Nicholas H. Woltering (SBN 337193)
` nwoltering@bottinilaw.com
`7817 Ivanhoe Avenue, Suite 102
`La Jolla, California 92037
`Telephone: (858) 914-2001
`Counsel for Plaintiff William Heresniak
`
`
`
`
`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
`
`
`WILLIAM HERESNIAK, on behalf of himself
`and all others similarly situated,
`
`
`Plaintiff,
`
`Case No. 3:22-cv-3074-CRB
`
`Class Action
`
`PLAINTIFF’S NOTICE OF MOTION
`AND MOTION FOR LEAVE TO
`AMEND THE COMPLAINT;
`MEMORANDUM OF POINTS AND
`AUTHORITIES IN SUPPORT
`THEREOF
`
`Judge: Hon. Charles R. Breyer
`Courtroom: 6, 17th Floor
`Hearing Date: February 3, 2023
`Time: 10:00 a.m.
`
`vs.
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`ELON R. MUSK, X HOLDINGS I, INC., X
`HOLDING II, INC., and TWITTER, INC.,
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`Defendants.
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 2 of 18
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`NOTICE OF MOTION AND MOTION
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`TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD:
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`PLEASE TAKE NOTICE that on February 3, 2023, at 10:00 a.m., or as soon thereafter as
`counsel may be heard, plaintiff William Heresniak will, and hereby does, move the United States
`District Court for the Northern District of California, before the Honorable Charles R. Breyer, in
`Courtroom 6 of the San Francisco Courthouse, located at 450 Golden Gate Avenue, San Francisco,
`California 94102, for an order under Rule 15(a)(2) of the Federal Rules of Civil Procedure, granting
`leave to amend the complaint. Plaintiff further prays for such other and further relief as the Court
`deems just and proper.
`This motion is supported by the accompanying Memorandum of Points and Authorities, the
`Declaration of Tyson C. Redenbarger (with exhibits), the accompanying proposed order, and all
`papers and proceedings in this action.
`Dated: December 9, 2022
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`Respectfully submitted,
`COTCHETT, PITRE & MCCARTHY, LLP
`
` s/ Tyson C. Redenbarger
` Tyson C. Redenbarger
`Joseph W. Cotchett (SBN 36324)
`Mark C. Molumphy (SBN 168009)
`Anne Marie Murphy (SBN 202540)
`Tyson C. Redenbarger (SBN 294424)
`840 Malcolm Road, Suite 200
`Burlingame, California 94010
`Telephone: (650) 697-6000
`Email: jcotchett@cpmlegal.com
` mmolumphy@cpmlegal.com
` ammurphy@cpmlegal.com
` tredenbarger@cpmlegal.com
`BOTTINI & BOTTINI, INC.
`
` s/ Francis A. Bottini, Jr.
` Francis A. Bottini, Jr.
`Francis A. Bottini, Jr. (SBN 175783)
`Anne B. Beste (SBN 326881)
`Albert Y. Chang (SBN 296065)
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 3 of 18
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`Yury A. Kolesnikov (SBN 271173)
`Nicholas H. Woltering (SBN 337193)
`7817 Ivanhoe Avenue, Suite 102
`La Jolla, California 92037
`Telephone: (858) 914-2001
`Facsimile: (858) 914-2002
`Email: fbottini@bottinilaw.com
` abeste@bottinilaw.com
` achang@bottinilaw.com
`
`
` ykolesnikov@bottinilaw.com
` nwoltering@bottinilaw.com
`Counsel for Plaintiff William Heresniak
`
`s/ Tyson C. Redenbarger
`Tyson C. Redenbarger
`
`Attestation Pursuant to Civil Local Rule 5-1(h)(3)
`I, Tyson C. Redenbarger, attest that concurrence in the filing of this document has been
`obtained from the other signatory.
`I declare under penalty of perjury that the foregoing is true and correct. Executed on
`December 9, 2022, at Burlingame, California.
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 4 of 18
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`MEMORANDUM OF POINTS AND AUTHORITIES
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`Table of Contents
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`STATEMENT OF ISSUES TO BE DECIDED ..............................................................................1
`INTRODUCTION ...........................................................................................................................1
`BACKGROUND .............................................................................................................................3
`I.
`Plaintiff’s Claims .....................................................................................................3
`
`A.
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`B.
`
`C.
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`D.
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`E.
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`Musk’s Failure to Disclose His Stake in Twitter in March While He
`Stockpiled Twitter Stock to Position Himself for a Buyout ........................3
`
`The Announcement of the Proposed Buyout in April .................................4
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`Musk’s Efforts to Drive Down Twitter’s Stock Price Between May and
`July ...............................................................................................................5
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`Musk’s Attempts to Terminate the Buyout Agreement in July Leading
`to the Delaware Litigation ...........................................................................6
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`Musk’s Eventual Closing of the Buyout in October, After Substantial
`Delays ..........................................................................................................7
`
`II.
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`Procedural History of This Action ...........................................................................8
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`SUMMARY OF ARGUMENT .......................................................................................................9
`ARGUMENT .................................................................................................................................10
`CONCLUSION ..............................................................................................................................12
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`Case No. 3:22-cv-3074-CRB
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 5 of 18
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`Table of Authorities
`
`Cases
`Clarke v. Upton,
`703 F. Supp. 2d 1037 (E.D. Cal. 2010)....................................................................................11
`Creative Compounds, LLC v. Boldt,
`No. 10cv1411 WQH (RBB),
`2011 U.S. Dist. LEXIS 37930 (S.D. Cal. Mar. 29, 2011) .................................................11, 12
`DCD Programs, Ltd. v. Leighton,
`833 F.2d 183 (9th Cir. 1987) .....................................................................................................9
`dpiX LLC v. Yieldboost Tech, Inc.,
`No. 14-cv-5382-JST,
`2015 U.S. Dist. LEXIS 117267 (N.D. Cal. Sept. 2, 2015) ......................................................10
`Eminence Capital, LLC v. Aspeon, Inc.,
`316 F.3d 1048 (9th Cir. 2003) ...................................................................................................9
`FCE Benefit Adm’rs, Inc. v. Indian Harbor Ins. Co.,
`No. 21-cv-0186-CRB,
`2021 U.S. Dist. LEXIS 219310 (N.D. Cal. Nov. 12, 2021).................................................9, 10
`Foman v. Davis,
`371 U.S. 178 (1962) .............................................................................................................9, 10
`Forum Ins. Co. v. Zeitman,
`No. 91 Civ. 7980 (LLS),
`1995 U.S. Dist. LEXIS 13229 (S.D.N.Y. Sept. 12, 1995) .......................................................11
`Miller v. Rykoff-Sexton, Inc.,
`845 F.2d 209 (9th Cir. 1988) ...................................................................................................11
`Nunes v. Ashcroft,
`375 F.3d 805 (9th Cir. 2003) ...................................................................................................11
`Oracle Am., Inc. v. NEC Corp. of Am.,
`No. 21-cv-5270-CRB,
`2021 U.S. Dist. LEXIS 209502 (N.D. Cal. Oct. 29, 2021) ......................................................12
`Weiss v. Am. Acad. of Ophthalmology, Inc.,
`No. 20-cv-8124-CRB,
`2021 U.S. Dist. LEXIS 8495 (N.D. Cal. Jan. 15, 2021) ..........................................................12
`Rules
`FED. R. CIV. P. 15 ................................................................................................................... passim
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 6 of 18
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`STATEMENT OF ISSUES TO BE DECIDED
`On behalf of himself and other similarly situated shareholders of Twitter, Inc. (“Twitter”),
`plaintiff William Heresniak (“Plaintiff”) commenced this action in May 2022 against defendant Elon
`R. Musk and his companies (together, the “Musk Defendants”),1 as well as Twitter, seeking damages
`and injunctive relief for Defendants’ misconduct arising from Musk’s acquisition of Twitter (the
`“Buyout”), which was announced in April 2022 and eventually closed in October 2022. Since the
`commencement of this action, changing events, including the litigation between Twitter and Musk in
`Delaware, gave rise to new bases for Plaintiff’s claims and necessitated amendments to Plaintiff’s
`complaint.
`Federal Rule of Civil Procedure 15(a)(2) provides that “[t]he court should freely give leave
`[to amend] when justice so requires. At this initial stage of the litigation, where Defendants have not
`responded to any discovery requests, and briefing on the motions to dismiss has not been completed,
`should Plaintiff be given leave to amend his complaint to include the new facts and to revise the relief
`sought, as necessitated by the changing events?
`INTRODUCTION
`This shareholder class action arises from Musk’s $44 billion Buyout of Twitter. The storied,
`tumultuous course of the Buyout, which unfolded between April and October 2022, has attracted
`daily media coverage and is worthy of its own Wikipedia page.2 This storied Buyout was
`extraordinary and unusual not only because of the intense media attention, but also because Musk
`attempted to renegotiate the Buyout price of $54.20 per Twitter share and to impose conditions on
`the Buyout and, in the course of doing so, caused Twitter to lose billions of dollars in market
`capitalization. At every stage of this Buyout, Musk sought profits for himself at the expense of
`Twitter shareholders, by engaging in conduct designed to depress the price of Twitter stock. Musk
`
`
`1 The Musk Defendants include Musk and two companies under his control, X Holdings I,
`Inc. and X Holding II, Inc.
`2
`Elon Musk, WIKIPEDIA,
`available
`by
`Twitter
`Acquisition
`of
`https://en.wikipedia.org/wiki/Acquisition_of_Twitter_by_Elon_Musk (last visited Dec. 8, 2022).
`1
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`at
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`Memorandum of Points and Authorities in Support Thereof
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`did so with the help of two close friends and allies who sat on Twitter’s Board of Directors — Jack
`Dorsey and Egon Durban.3
`In broad strokes, Musk engaged in misconduct on three fronts. First, before making the
`Buyout offer to Twitter, Musk began secretly acquiring Twitter shares in January 2022 — failing to
`comply with the federal securities laws’ reporting requirements to file a Form 13 with the Securities
`and Exchange Commission (“SEC”) when his holdings in Twitter exceeded the 5% threshold.
`Musk’s failure to timely file a Form 13 caused Twitter stock to trade at artificially depressed prices
`and allowed him to save hundreds of millions of dollars while continuing to increase his stake in
`Twitter to above 9% by April 2022.
`Second, Musk aided and abetted Dorsey and Durban in their breaches of fiduciary duties owed
`to Twitter shareholders. Acting out of their allegiances to Musk, Dorsey and Durban breached their
`duties by, among other things, failing to shop Twitter to other potential buyers and failing to conduct
`adequate due diligence regarding Musk’s sources of financing. Dorsey also publicly denigrated
`Twitter’s board. Dorsey and Durban’s actions allowed Musk to successfully acquire Twitter at the
`price of $54.20 per share. Their failure of due diligence contributed to the delay in the closing of the
`Buyout, which was caused, in substantial part, by difficulties and problems with Musk’s sources of
`financing.
`Third, Musk delayed the Buyout by unilaterally terminating — without justification — the
`agreement with Twitter. As a result, Musk earned unjust interest on his monies and unjustly deprived
`Plaintiff and other Twitter shareholders of interest on the Buyout proceeds they should have received
`over a month before the eventual closing of the Buyout in October 2022.
`When Plaintiff commenced this action in May 2022, whether the Buyout would consummate
`was in doubt because Musk was disseminating false and misleading information to the public sowing
`
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`3 Dorsey, Twitter’s founder, has for years been Musk’s close ally and friend. Durban is co-
`CEO of the private equity firm Silver Lake, which has deep ties with Musk and his companies,
`including Tesla, Inc. and SolarCity Corporation. See Giles Turner, Musk’s Talks With Twitter All
`Started With Dorsey, Durban, BLOOMBERG, May 17, 2022.
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`doubts about his willingness to close the Buyout. The events that transpired in the ensuing months,
`including Twitter’s action against Musk in Delaware to enforce the Buyout agreement, gave rise to
`additional bases for Plaintiff’s claims and necessarily altered some of Plaintiff’s potential remedies.
`Plaintiff therefore seeks leave to amend the complaint in conformity with these factual
`developments. Under Rule 15’s liberal policy favoring amendment, leave to amend is particularly
`appropriate here because this action is in its infancy. Plaintiff amended his complaint once in July in
`part to include facts that had just developed. Defendants have not yet responded to any discovery
`requests. Nor has the briefing for Defendants’ motions to dismiss the complaint been completed. As
`such, there is no basis for Defendants to claim any prejudice or delay that can result from giving
`Plaintiff leave to amend his complaint.
`To the extent that Defendants challenge the sufficiency of Plaintiff’s allegations in his
`proposed Second Amended Complaint (“SAC”),4 those challenges must be deferred to the motion-
`to-dismiss stage. Accordingly, the Court should grant Plaintiff’s motion and allow him to file the
`Second Amended Complaint.
`
`BACKGROUND
`
`I.
`
`Plaintiff’s Claims
`Plaintiff asserts three claims in this action: (1) aiding and abetting breaches of fiduciary duty;
`(2) declaratory relief; and (3) unjust enrichment. ¶¶ 195–209.5 These claims arise from Defendants’
`misconduct in connection with Musk’s Buyout of Twitter.
`A. Musk’s Failure to Disclose His Stake in Twitter in March While He Stockpiled
`Twitter Stock to Position Himself for a Buyout
`Musk first started purchasing Twitter shares on January 31, 2022. ¶ 9. Musk soon exceeded
`the 5% threshold, requiring him to file a Form 13 with the SEC. Id. Musk did not timely file the
`
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`4 A copy of Plaintiff’s proposed SAC is attached to the Declaration of Tyson C. Redenbarger
`as Exhibit 1. A redline comparison between the SAC and the First Amended Complaint is attached
`to the Declaration of Tyson C. Redenbarger as Exhibit 2.
`5 The allegations in the SAC are cited as “¶ ___.”
`3
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`Form 13; failing to do so benefitted Musk because he was able to continue to buy Twitter shares at
`depressed prices. Id. When Musk belatedly filed the Form 13, Twitter’s shares increased
`substantially, rising 27% after he filed the Form 13. Id.
`Even when Musk eventually filed his Form 13 on April 4, 2022, it was materially misleading.
`¶ 12. He did not disclose his intent to join the Twitter Board and he failed to disclose that he was
`contemplating buying Twitter. Id. Both disclosures would have caused Twitter’s stock to increase
`more than it did when his filing was made. Id.
`Musk benefitted himself by approximately $156 million by failing to timely file a Form 13.
`¶ 10. By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and
`unjustly bought Twitter stock at an artificially low price, in violation of the law. Id.
`The Announcement of the Proposed Buyout in April
`B.
`On April 25, 2022, Twitter announced that it had agreed to sell itself to Musk for $54.20 per
`share, or approximately $44 billion. ¶ 3. With two of his close friends, Dorsey and Durban, on
`Twitter’s Board, Musk was able to negotiate the Twitter Buyout over the weekend of April 23–24,
`2022, without carrying out any due diligence. ¶ 120. Acting out of their allegiances to Musk, Dorsey
`and Durban breached their duties by, among other things, failing to shop Twitter to other potential
`buyers and failing to conduct adequate due diligence regarding Musk’s sources of financing. ¶ 122.
`Dorsey also publicly denigrated Twitter’s Board. ¶ 84. Dorsey and Durban’s actions allowed Musk
`to successfully acquire Twitter at the price of $54.20 per share. And their failure of due diligence
`contributed to the delay in the closing of the Buyout, which was caused, in substantial part, by
`difficulties and problems with Musk’s sources of financing. ¶ 123.
`The Buyout was only conditioned on the approval of Twitter’s shareholders at a meeting to
`be scheduled in the summer of 2022 and regulatory approval. ¶ 3. Musk — a sophisticated
`businessman advised by a team of legal and financial talents — specifically agreed to waive detailed
`due diligence as a condition of the merger agreement. ¶ 4. At the time, Musk was well aware that
`Twitter had a certain amount of “fake accounts” and accounts controlled by “bots” and had in fact
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 10 of 18
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`settled a lawsuit based on the fake accounts for hundreds of millions of dollars.6 Id. Indeed, on April
`13, 2022, when he sent a letter to Twitter’s board offering to buy Twitter, he later tweeted: “If our
`Twitter bid succeeds, we will defeat the spam bots or die trying!” Id.
`Musk believed he was obtaining Twitter at a sale price, since Twitter’s stock price had
`decreased significantly in the months before he made his offer, declining from $71.69 on July 23,
`2021 to just $32.42 on March 7, 2022. ¶ 6. After Musk agreed to buy Twitter for $54.20, the stock
`market experienced a decline. The market decline, however, did not affect Twitter’s stock price. Id.
`After the announcement of the Buyout, Twitter’s stock consistently traded close to the Buyout price,
`at around $50 per share. Id. The small delta between its trading price and the $54.20 buyout price
`was typical of the trading prices of companies who have agreed to be acquired, characterized by a
`small discount for the time value of money and a relatively small risk that the deal would not go
`through.
`Musk, however, had a unique and multi-billion-dollar problem. Musk pledged his Tesla stock
`as collateral for a $12.5 billion loan to finance the buyout of Twitter. Unfortunately for Musk, Tesla’s
`shares declined by over 37% after the announcement of the Buyout. ¶ 7. Following the announcement
`of the Buyout, because Tesla’s stock was worth much less than when Musk agreed to buy Twitter,
`Musk was at risk of a margin call or a requirement to put up more cash.
`C. Musk’s Efforts to Drive Down Twitter’s Stock Price Between May and July
`Musk quickly acted to attempt to mitigate these personal risks to himself by engaging in
`unlawful conduct that moved the price of Twitter’s stock down. ¶ 8. As Tesla shares cratered by
`almost 30% in April and May 2022, Musk proceeded to make statements, send tweets, and engage in
`conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order
`to create leverage that Musk hoped to use to either back out of the purchase or re-negotiate the buyout
`price by as much as 25% (approximately $11 billion). ¶¶ 8, 12. Musk’s conduct was contrary to the
`
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`6 Musk and his team must have been aware of the $809.5 million settlement Twitter entered
`into in September 2021, in a securities-fraud class action alleging Twitter overstated its user numbers
`and growth rate (In re Twitter Inc. Securities Litigation, Case No. 16-cv-5314 (N.D. Cal.)). ¶ 5.
`5
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`contractual terms he agreed to in the Buyout. Id.
`In May 2022, Musk issued multiple tweets sowing doubts regarding his willingness to
`complete the Buyout. On May 13, 2022, for example, he tweeted that the buyout was “temporarily
`on hold” — knowing full well that he had no contractual right to do so. ¶ 13. Musk’s statements
`were misleading because they implied that his obligation to consummate the buyout was conditioned
`on his satisfaction with due diligence to determine whether “spam/fake accounts do indeed represent
`less than 5% of users.” ¶ 14. This was false because Musk had specifically waived detailed due
`diligence as a condition precedent to his obligations under the buyout contract. ¶ 14. Thus, Musk
`had no right to cancel the buyout based on any results from due diligence concerning the number of
`spam/fake accounts at Twitter. Musk then continued issuing false and disparaging tweets about
`Twitter in an effort to drive its stock price down further. Id.
`Musk’s false and misleading tweets had the desired effect, as they caused Twitter’s stock to
`decline in the days following the tweets, in stark contrast to the Nasdaq index, which increased. ¶ 15.
`Musk’s wrongful conduct not only substantially harmed Twitter’s shareholders by causing Twitter’s
`stock to crater by approximately 25%, but it has also substantially harmed Twitter’s employees. ¶ 17.
`Musk’s false statements and market manipulation have created “chaos” at Twitter’s headquarters in
`San Francisco. ¶ 18. Musk’s manipulation of Twitter stock has also encouraged other market
`participants to short Twitter’s stock. ¶ 21.
`D. Musk’s Attempts to Terminate the Buyout Agreement in July Leading to the
`Delaware Litigation
`In the ensuing months, Musk sent three separate letters to Twitter officially terminating the
`Merger. ¶ 22. Those letters were dated July 8, August 29, and September 9, 2022. Id.
`After receiving the July 8, 2022 termination letter, Twitter sued Musk in the Delaware Court
`of Chancery seeking specific performance of the Buyout agreement. ¶ 23. But Musk’s emphatic and
`repeated cancellation of the Merger led the market to continue to discount Twitter’s stock. Id.
`Twitter’s lawsuit against Musk was expedited and set for trial on October 17, 2022. ¶ 24.
`Musk made several attempts to continue that date, but each was rejected by the Delaware court. Id.
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`E. Musk’s Eventual Closing of the Buyout in October, After Substantial Delays
`On September 13, 2022, while the Delaware litigation was ongoing, Twitter shareholders
`voted to approve the Merger, satisfying the last remaining condition for the closing of the Merger.
`¶ 25. Musk therefore was contractually obligated to close the Merger within two business days. Id.
`The Merger thus should have closed on September 15, 2022.
`But Musk wrongfully refused to do so. ¶ 26. Instead, Musk continued his defense of the
`Delaware action, as well as his conduct of making false statements about the Buyout and attempting
`to delay its closing. Id.
`On October 4, 2022, less than two weeks before the trial was set to commence in Delaware,
`Musk shocked the markets by announcing that he intended to go through with the Merger at the
`original price of $54.20. ¶ 27. Twitter’s stock immediately jumped by over 15% before trading in
`the stock was halted by the stock exchange. Id. When trading resumed later in the day, the stock
`increased another 7%, eventually closing up over 22% in one day. Id.
`Instead of trying to re-negotiate for a lower Buyout price, Musk attempted to impose a new
`condition not contained in the Buyout agreement — financing contingency. ¶ 29. Twitter apparently
`rejected Musk’s attempts, as the trial date of October 17, 2022 loomed. Id.
`In an order dated October 5, 2022, the Delaware court also ordered Musk and his legal team
`to produce additional discovery and criticized them for failing to produce communications that could
`be evidence in Twitter’s lawsuit. ¶ 31. Facing spoliation sanctions, Musk eventually dropped his
`attempt to impose a financing contingency on the deal and closed the Buyout on the original price of
`$54.20 per Twitter share. ¶ 34.
`However, the closing of the Buyout had been substantially delayed due to Musk’s wrongful
`conduct. Id. Twitter shareholders did not receive the Buyout consideration until October 31, 2022,
`thus depriving Plaintiff and the class of interest on the Buyout proceeds that they should have received
`by mid-September. Id.
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`Case 3:22-cv-03074-CRB Document 56 Filed 12/09/22 Page 13 of 18
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`II.
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`Procedural History of This Action
`Following Musk’s tweets sowing doubts regarding the completion of the Buyout, Plaintiff
`commenced this action on May 25, 2022. His initial complaint asserted claims for violations of the
`California Corporations Code, declaratory relief, and unjust enrichment. Dkt. No. 1 at 33–36. On
`July 1, 2022, Plaintiff filed an amended complaint under Rule 15(a)(1) as of right. See Dkt. No. 7.
`In August 2022, Plaintiff served four document requests on the Musk Defendants and 18
`special interrogatories on Twitter. Plaintiff also moved for expedited discovery. By order dated
`August 31, 2022, the Honorable Sallie Kim denied Plaintiff’s motion. To date, Defendants have not
`responded to any of Plaintiff’s discovery requests.
`On September 9, 2022, Defendants filed three motions to dismiss the complaint under Rule
`12 or for forum non conveniens, to stay discovery, and to transfer this action. Before Plaintiff’s
`oppositions to these motions were due, however, the Delaware Court of Chancery stayed the
`Delaware Action until October 28, 2022 to permit Musk and Twitter to close the Buyout. Because
`the potential closing would have a material impact on this action, Plaintiff and Defendants stipulated
`to a stay of this action until November 4, 2022. Dkt. No. 51. On October 11, 2022, the Court approved
`this stipulated stay. Dkt. No. 52.
`Following the closing of the Buyout and the conclusion of the stay, Plaintiff served on
`Defendants his proposed SAC. The proposed SAC did not alter any of Plaintiff’s three claims (aiding
`and abetting breaches of fiduciary duties, declaratory relief, and unjust enrichment (¶¶ 195–209)).
`Nor did the proposed SAC add new parties or claims. The proposed SAC simply added new facts
`and evidence of Defendants’ misconduct that surfaced between July and October, including, for
`example, the events in the Delaware litigation (see, e.g., ¶¶ 22–34, 161–177) and Dorsey’s equity
`rollover agreement with Musk revealed in October 31, 2022 SEC filings (¶¶ 189–190, 198). The
`proposed SAC also updated the relief sought in conformity with post-July events. See ¶¶ 205, 207.
`Specifically, the SAC seeks to recover the damages caused by Musk’s delays which deprived Plaintiff
`and the class of interest on the Buyout proceeds that they should have received by mid-September as
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`Case No. 3:22-cv-3074-CRB
`Plaintiff’s Notice of Motion and Motion for Leave to Amend the Complaint;
`Memorandum of Points and Authorities in Support Thereof
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`well as disgorgement of the unjust enrichment realized by Musk, including the savings he realized
`when he originally bought Twitter shares at depressed prices after he failed to timely his Form 13D.
`Defendants refused to consent to the filing of the proposed second amended complaint. Due
`to Defendants’ refusal to consent, Plaintiff now moves for leave to file his SAC.
`SUMMARY OF ARGUMENT
`Federal Rule of Civil Procedure 15 requires that courts “freely give leave [to amend pleadings]
`when justice so requires.” FED. R. CIV. P. 15(a)(2). “This policy is to be applied with extreme
`liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (quotation
`omitted). In Foman v. Davis, 371 U.S. 178, 182 (1962), the Supreme Court identified a narrow set
`of factors, the existence of which may allow district courts to deny a motion to amend under Rule
`15(a). Those factors include: “undue delay, bad faith[,] … dilatory motive on the part of the movant,
`repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the
`opposing party by virtue of allowance of the amendment, [and] futility of amendment[.]