Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 1 of 18
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`
`Orin Snyder (pro hac vice)
`osnyder@gibsondunn.com
`GIBSON, DUNN & CRUTCHER LLP
`200 Park Avenue
`New York, NY 10166-0193
`Telephone: 212.351.4000
`Facsimile: 212.351.4035
`
`Brian M. Lutz (SBN 255976)
`blutz@gibsondunn.com
`GIBSON, DUNN & CRUTCHER LLP
`555 Mission Street, Suite 3000
`San Francisco, CA 94105-0921
`Telephone: 415.393.8200
`Facsimile: 415.393.8306
`
`Attorneys for Nominal Defendant Facebook, Inc.
`
`Joshua S. Lipshutz (SBN 242557)
`jlipshutz@gibsondunn.com
`GIBSON, DUNN & CRUTCHER LLP
`1050 Connecticut Avenue, N.W.
`Washington, D.C. 20036-5306
`Telephone: 202.955.8500
`Facsimile: 202.467.0539
`
`Paul J. Collins (SBN 187709)
`pcollins@gibsondunn.com
`GIBSON, DUNN & CRUTCHER LLP
`1881 Page Mill Road
`Palo Alto, CA 94304-1211
`Telephone: 650.849.5300
`Facsimile: 650.849.5333
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`
`LEAD CASE NO. 4:18-CV-01792-HSG
`
`ASSOCIATED CASES: NOS. 4:18-CV-
`01834-HSG, 4:18-CV-01893-HSG, 4:18-CV-
`01929-HSG, 4:18-CV-02011-HSG
`
`FACEBOOK, INC.’S REPLY
`MEMORANDUM OF POINTS AND
`AUTHORITIES IN SUPPORT OF
`MOTION TO DISMISS PLAINTIFFS’
`FIRST AMENDED CONSOLIDATED
`SHAREHOLDER DERIVATIVE
`COMPLAINT PURSUANT TO FED. R.
`CIV. P. 23.1 OR, IN THE ALTERNATIVE,
`TO STAY
`
`Hearing:
`Date: June 25, 2020
`Time: 2:00 P.M.
`Location: Courtroom 2, 4th Floor
`Judge: Hon. Haywood S. Gilliam, Jr.
`
`Date First Action Filed: March 22, 2018
`
`
`
`
`IN RE FACEBOOK, INC. SHAREHOLDER
`DERIVATIVE PRIVACY LITIGATION
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`This Document Relates To:
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`ALL ACTIONS
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`Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 2 of 18
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`TABLE OF CONTENTS
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`C.
`D.
`
`Page
`I. PRELIMINARY STATEMENT ....................................................................................................... 1
`II. ARGUMENT ................................................................................................................................... 2
`A.
`Plaintiffs’ Distortion Of The Demand Futility Standard Must Be Rejected. ................ 2
`B.
`Demand Is Not Futile Simply Because Mr. Zuckerberg Is A Controlling
`Stockholder. .................................................................................................................. 3
`Demand Is Not Futile Under An Independence Theory. .............................................. 4
`Demand Is Not Futile Under A Substantial Likelihood Of Liability Theory. .............. 5
`1.
`Plaintiffs Fail To Establish That Demand Is Futile As To The Section
`10(b) Claims. ..................................................................................................... 6
`The Insider Trading Claims Fail To Establish Demand Futility. ...................... 9
`2.
`Demand Is Not Excused For Claims Not Asserted In This Action. ............... 10
`3.
`If The Court Does Not Dismiss This Action, It Should Be Stayed. ........................... 12
`E.
`III. CONCLUSION ............................................................................................................................. 13
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`Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 3 of 18
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`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`In re Advanta Corp. Sec. Litig.,
`180 F.3d 525 (3d Cir. 1999), abrogation on other grounds recognized by Fan v.
`StoneMor Partners LP, 927 F.3d 710 (3d Cir. 2019) .......................................................................8
`
`Beam v. Stewart,
`833 A.2d 961 (Del. Ch. 2003) ...........................................................................................................2
`
`Brenner v. Albrecht,
`2012 WL 252286 (Del. Ch. Jan. 27, 2012) .....................................................................................12
`
`Brudno v. Wise,
`2003 WL 1874750 (Del. Ch. Apr. 1, 2003) ..............................................................................12, 13
`
`In re Facebook, Inc. Section 220 Litig.,
`2019 WL 2320842 (Del. Ch. May 30, 2019), as revised (May 31, 2019) ......................................10
`
`In re Facebook, Inc. Sec. Litig.,
`405 F. Supp. 3d 809 (N.D. Cal. 2019) ........................................................................................8, 12
`
`In re GoPro, Inc. Stockholder Deriv. Litig.,
`2020 WL 2036602 (Del. Ch. Apr. 28, 2020) ....................................................................................4
`
`Hong v. Extreme Networks, Inc.,
`2017 WL 1508991 (N.D. Cal. Apr. 27, 2017) ..................................................................................8
`
`Horman v. Abney,
`2017 WL 242571 (Del. Ch. Jan. 19, 2017) .....................................................................................10
`
`Janus Capital Grp., Inc. v. First Deriv. Traders,
`564 U.S. 135 (2011) ..........................................................................................................................6
`
`Kautz v. Sugarman,
`456 F. App’x 16 (2d Cir. 2011) ......................................................................................................11
`
`Koshy on behalf of Quality Systems Inc. v. Barbarosh,
`2018 WL 6131215 (C.D. Cal. July 25, 2018), aff’d sub nom., Koshy v. Barbarosh,
`788 F. App’x 536 (9th Cir. 2019) ...................................................................................................11
`
`In re LendingClub Corp. Deriv. Litig.,
`2019 WL 5678578 (Del. Ch. Oct. 31, 2019) .....................................................................................2
`
`Lorenzo v. SEC,
`139 S. Ct. 1094 (2019) ......................................................................................................................7
`
`Malouf v. SEC,
`933 F.3d 1248 (10th Cir. 2019) .........................................................................................................7
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`Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 4 of 18
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`TABLE OF AUTHORITIES
`(continued)
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`
`
`Page(s)
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`McElrath v. Kalanick,
`224 A.3d 982 (Del. 2020) .................................................................................................................5
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`Oswald v. Humphreys,
`-- Fed. App’x --, 2020 WL 1638420 (9th Cir. Apr. 2, 2020) ........................................................2, 3
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`Pfeiffer v. Toll,
`989 A.2d 683 (Del. Ch. 2010) .........................................................................................................11
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`In re Pfizer Inc. S’holder Deriv. Litig.,
`722 F. Supp. 2d 453 (S.D.N.Y. 2010) ...............................................................................................3
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`Roseblum v. Sharer,
`2008 WL 9396534 (N.D. Cal. Apr. 15, 2016) ................................................................................13
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`Rosenbloom v. Pyott,
`765 F.3d 1137 (9th Cir. 2014) ...........................................................................................................3
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`Shaev v. Baker,
`2017 WL 1735573 (N.D. Cal. May 4, 2017) ....................................................................................3
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`South v. Baker,
`62 A.3d 1 (Del. Ch. 2012) ...............................................................................................................10
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`Towers v. Iger,
`912 F.3d 523 (9th Cir. 2018) .........................................................................................................3, 8
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`Wood v. Baum,
`953 A.2d 136 (Del. 2008) ...............................................................................................................11
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`Rules
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`Fed. R. Civ. P. Rule 23.1(b)(3) .............................................................................................................11
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`Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 5 of 18
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`I. PRELIMINARY STATEMENT
`Plaintiffs’ Opposition confirms that they have utterly failed to meet the strict requirement for
`pleading that they were excused from making a demand on Facebook’s Board of Directors before
`filing this lawsuit. Plaintiffs argue first that demand is futile because Facebook’s Chairman and
`CEO, Mr. Zuckerberg, is an “interested” director, and the other directors are so beholden to him that
`they cannot impartially consider a demand to assert claims against him. But this Court already held
`that the identical allegations in Plaintiffs’ previous complaint failed to establish that any of the
`directors are incapable of considering a demand to bring claims against Mr. Zuckerberg. ECF No.
`113 (the “Order”) at 20-21.
`Plaintiffs fare no better on their only other theory: that a majority of the Facebook directors at
`the time Plaintiffs filed their amended complaint (the “Demand Board”) faced a substantial likelihood
`of liability for defrauding Facebook under the federal securities laws. Plaintiffs ask this Court to
`credit the head-scratching argument that Facebook, acting through its directors, was deceived by
`allegedly false statements the directors supposedly caused Facebook to make. This theory not only
`defies common sense; it lacks any supporting facts, let alone the particularized facts required under
`Rule 23.1 and the PSLRA to plead that Facebook’s directors are substantially likely to be held liable
`under the securities laws. Plaintiffs have no response to the fact that the vast majority of the
`allegedly false statements are not even claimed to have been made or approved by a majority of
`Facebook’s Directors. And Plaintiffs do not contest that their pleading fails to satisfy the heightened
`standard for pleading scienter under the PSLRA for each director, let alone a majority of the Demand
`Board.
`Recognizing that they cannot plead, as they must, that a majority of the Demand Board faces
`a substantial likelihood of liability for their perplexing “derivative securities” claims, Plaintiffs
`devote most of their Opposition to arguing that the Demand Board faces liability for a breach of
`fiduciary duty claim not even at issue in this case. Plaintiffs’ attempt to distract the Court from their
`own pleading should be rejected. The relevant question is whether it would have been futile for
`Plaintiffs to make a demand on the Facebook Board because a majority of the Board faces a
`substantial likelihood of liability for the claims asserted in Plaintiffs’ complaint. Whether the Board
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`members face liability for different claims in a different case—which the Defendants will strongly
`contest at the appropriate time—is beside the point for purposes of assessing whether demand is
`excused in this case. By raising fiduciary duty claims that are not even at issue in this action,
`Plaintiffs concede that they cannot plead that a majority of the Demand Board faces a substantial
`likelihood of liability for the derivative securities claims they actually assert in this case.
`After more than two years of litigation and repeated attempts by Plaintiffs to satisfy the
`threshold demand requirement, this much is clear: Plaintiffs cannot plead particularized facts
`demonstrating that they were excused from making a demand on the Facebook Board before
`proceeding with this lawsuit. This action should be dismissed, this time with prejudice.
`
`A.
`
`II. ARGUMENT
`Plaintiffs’ Distortion Of The Demand Futility Standard Must Be Rejected.
`Plaintiffs misstate the basic legal standard for pleading demand futility. First, Plaintiffs argue
`that directors do not need to be “impartial for the identical reason;” one director may be disinterested
`“because he made false statements” while another because “she participated in insider trading.” Opp.
`at 6. This argument only goes so far. “‘Demand futility analysis is conducted on a claim-by-claim
`basis.’” Oswald v. Humphreys, -- Fed. App’x --, 2020 WL 1638420, at *1 (9th Cir. Apr. 2, 2020)
`(quoting Beam v. Stewart, 833 A.2d 961, 977 n.48 (Del. Ch. 2003)) (emphasis added). That means
`that Plaintiffs must plead that a majority of the Demand Board faces a substantial likelihood of
`liability for each claim—to justify taking control of that specific claim from the Board. See, e.g., In
`re LendingClub Corp. Deriv. Litig., 2019 WL 5678578, at *9 (Del. Ch. Oct. 31, 2019) (evaluating
`“whether a substantial likelihood of liability impugns the impartiality of a demand board on a claim-
`by-claim basis”). Thus, Plaintiffs are wrong that, to plead demand futility on the ground that a
`majority of the Demand Board faces a substantial likelihood of liability, they can meet their burden
`by showing that some directors face a substantial likelihood of liability for one claim, and that other
`directors face a substantial likelihood of liability for a different claim. There is no legal basis for
`holding that a director who faces liability for the first claim is unable to consider a demand as to the
`second (and vice versa), and Plaintiffs certainly identify no such authority. Thus, the Court must
`assess, for each claim in this case, whether Plaintiffs have pleaded with particularity that a majority
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`of directors cannot impartially consider a demand as to that claim. See Oswald, 2020 WL 1638420,
`at *1. Plaintiffs have not met this burden, and as a result, they have failed to plead demand futility as
`to any claim in the FAC. See OB at 16-20; infra at 5-11.
`Second, Plaintiffs are wrong that they do not need to plead demand futility as to each member
`of the Demand Board. Opp. at 15. In addition to assessing demand futility on a claim-by-claim
`basis, “demand futility is assessed on a director-by-director basis” as this Court has already correctly
`noted. Order at 14; see also Towers v. Iger, 912 F.3d 523, 529 (9th Cir. 2018) (“demand must be
`assessed on a director-by-director basis”). Again, this means that to plead demand futility with
`respect to each claim in the FAC, Plaintiffs are required to plead specific facts showing, on a director-
`by-director basis, that a majority of the directors cannot impartially consider a demand because they
`face a substantial likelihood of personal liability. See id. Plaintiffs’ argument that they should be
`relieved of this burden is based on exceptional cases where plaintiffs pleaded with particularity that
`the whole board was made aware of “red flags” of illegal conduct at the company, so an
`individualized inquiry was unnecessary. See Rosenbloom v. Pyott, 765 F.3d 1137, 1142, 1144-46
`(9th Cir. 2014) (particularized allegations that the whole board received information about illegal off-
`label marketing of Botox); In re Pfizer Inc. S’holder Deriv. Litig., 722 F. Supp. 2d 453, 460-61
`(S.D.N.Y. 2010) (demand futility pleaded based on “the unique facts of this case,” including a “large
`number of reports made to members of the board”); Shaev v. Baker, 2017 WL 1735573, at *10-12
`(N.D. Cal. May 4, 2017) (particularized allegations that many red flags were raised up to the board).
`As the Court already recognized, these cases have no application here. See Order at 17
`(distinguishing Rosenbloom and Pfizer).
`Because Plaintiffs fail to plead particularized facts establishing that the Demand Board
`received and ignored any red flags, let alone red flags of egregious conduct like the cases they cite,
`Plaintiffs’ attempt to evade the requirement of pleading demand futility on a director-by-director
`basis must be rejected. See OB at 18-19; infra at 8-9.
`B.
`Demand Is Not Futile Simply Because Mr. Zuckerberg Is A Controlling Stockholder.
`Plaintiffs do not dispute that they cannot plead demand futility merely by alleging that Mr.
`Zuckerberg is a controlling stockholder. OB at 12-13. Plaintiffs also have no response to the
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`argument that adding allegations about Mr. Zuckerberg’s “control” gets Plaintiffs nowhere. Id.
`Instead, Plaintiffs repeat their deficient allegations, without citing a single supporting case, that
`Mr. Zuckerberg’s “voting control” and ability to “replace” directors excuses demand. Opp. at 17-19.
`Nothing should change this Court’s prior conclusion that Plaintiffs’ “control” theory is contrary to
`established law. Order at 20-21; see also In re GoPro, Inc. Stockholder Deriv. Litig., 2020 WL
`2036602, at *11 (Del. Ch. Apr. 28, 2020) (“[i]t is well-settled that” allegations that a 75% controlling
`stockholder’s “voting power” and ability to “remove any director who voted against his interests” do
`not plead demand futility).
`C.
`Demand Is Not Futile Under An Independence Theory.
`Plaintiffs also fail to plead demand futility based on their unsupported assertion that a
`majority of Facebook’s directors are so beholden to Mr. Zuckerberg that they cannot fairly consider
`asserting claims against him. Plaintiffs do not dispute that this inquiry is only necessary if they have
`adequately pleaded with particularized facts that Mr. Zuckerberg is “interested” (they have not). OB
`at 13. But even so, their independence allegations also fail.
`Plaintiffs do not contest the independence of Ms. Sandberg and Messrs. Chenault and Zients;
`they only argue in their Opposition that Ms. Alford and Messrs. Thiel and Andreessen supposedly
`lack independence. Opp. at 21-23. Plaintiffs fail to plead the required particularized facts
`demonstrating that any of these three directors—let alone each of them—lacks independence from
`Mr. Zuckerberg. Accordingly, demand cannot be excused on an independence theory.
`Peter Thiel. There is no dispute that Plaintiffs’ allegations against Mr. Thiel are the same
`allegations that this Court already rejected as insufficient to plead lack of independence from Mr.
`Zuckerberg. OB at 14; see Lutz Ex. 25.1 Plaintiffs offer no reason why the Court should reverse its
`previous ruling, so their deficient allegations should be rejected again.
`Marc Andreessen. Plaintiffs’ bald assertion that the “FAC alleges new facts” about Mr.
`Andreessen’s lack of independence from Mr. Zuckerberg is refuted by their own pleadings. OB at 14
`
`
` 1 Plaintiffs do not dispute that Exhibit 25 is an accurate redline of the independence allegations in
`the CC and FAC. Thus, their objection to the Court considering Exhibit 25 because it is
`“misleading,” Opp. at 17 n.11, should be rejected.
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`(comparing current complaint with previous complaint). The purportedly “new” allegations Plaintiffs
`point to merely summarize the allegations that Plaintiffs previously made and now repeat in the FAC.
`Id. A comparison of the complaints makes this clear. See Lutz Ex. 25. Thus, there is no reason for
`this Court to depart from its prior ruling.2
`Peggy Alford. Defendants demonstrated in their opening brief that Plaintiffs’ allegation that
`Ms. Alford briefly worked at the Chan Zuckerberg Initiative does not demonstrate a lack of
`independence from Mr. Zuckerberg. OB at 15. Plaintiffs make no attempt to rebut Defendants’
`argument, because they cannot. Plaintiffs emphasize that they also allege Ms. Alford lacks
`independence from Mr. Thiel. Opp. at 22-23. Those allegations are insufficient, but they also are
`beside the point; Plaintiffs’ theory is that the Board supposedly is beholden to Mr. Zuckerberg, not
`Mr. Thiel. ¶ 546. Finally, Plaintiffs’ argument that the “timing of [Ms. Alford’s] appointment …
`implies that her installation was designed to protect these directors” (Opp. at 23) fails because it is
`entirely speculative and foreclosed by binding precedent holding that the mere “appointment to the
`board is an insufficient basis for challenging [] independence.” See McElrath v. Kalanick, 224 A.3d
`982, 996 (Del. 2020) (rejecting theory that appointment during a struggle for control of the board
`establishes lack of independence).3
`D.
`Demand Is Not Futile Under A Substantial Likelihood Of Liability Theory.
`Plaintiffs also fail to plead with particularity that a majority of the Demand Board faces a
`substantial likelihood of liability for the claims in this action. As discussed in Facebook’s opening
`brief, Plaintiffs’ derivative securities claims defy logic and are rooted in the nonsensical position that
`Facebook’s directors, acting on behalf of Facebook, deceived Facebook into repurchasing shares on
`
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` 2 Plaintiffs spend nearly two pages arguing about “specific instances of the Board submitting to
`[Mr. Zuckerberg’s] will,” but only one of these instances is even about a member of the Demand
`Board (as opposed to a former director of Facebook). Opp. at 19-21. And as to that single
`allegation (about Mr. Andreessen’s service on a special committee) the Court already rejected this
`identical allegation because it does not show that Mr. Andreessen would be influenced by
`extraneous considerations if presented with a demand. Compare FAC ¶¶ 594-95, with CC
`¶¶ 439-40; see Order at 21.
` 3 Plaintiffs also argue that FTC Commissioner Chopra suggested that “Defendants” showed
`improper “fealty” to Mr. Zuckerberg. Opp. at 19 (citing ¶ 561). But Mr. Chopra was not even
`talking about the Board in the language quoted by Plaintiffs. ¶ 561. Plaintiffs’ distortion of what
`Mr. Chopra actually said does not help them plead demand futility.
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`the basis of allegedly false and misleading public statements. OB at 16-17. Plaintiffs do not even try
`to explain to the Court how their theory makes any sense, let alone that it is cognizable under the
`federal securities laws.
`In any event, Plaintiffs make no argument that three of Facebook’s seven directors—
`Ms. Alford and Messrs. Chenault and Zients—face a substantial likelihood of liability for any claims
`in this case. Instead, they focus on Ms. Sandberg and Messrs. Zuckerberg, Andreessen, and Thiel.
`Opp. at 7. Thus, if even one of those directors does not face a substantial likelihood of liability for a
`given claim, then demand is not futile as to that claim. See supra at 2-3. As with the Opening Brief,
`Facebook respectfully directs the Court to the Individual Defendants’ Rule 12(b)(6) briefs for all of
`the reasons why Plaintiffs’ claims do not give rise to liability for any director, some of which are
`summarized below.
`1.
`
`Plaintiffs Fail To Establish That Demand Is Futile As To The Section
`10(b) Claims.
`a.
`Plaintiffs Do Not Plead Particularized Facts Showing That Any
`Directors (Let Alone a Majority of Them) Made Any False
`Statements.
`Defendants demonstrated in their opening brief that the vast majority of the allegedly false
`statements identified by Plaintiffs in support of their securities fraud claims (Counts 2 and 3) were
`not made by or attributable to the full Board (or a majority of the directors). OB at 17-18. Plaintiffs
`concede that the bulk of the challenged statements allegedly were made either by Mr. Zuckerberg or
`Ms. Sandberg. Opp. at 7. Clearly, the other directors—who comprise a majority of the Demand
`Board—cannot be liable for statements they did not make. OB at 17-18; see Janus Capital Grp., Inc.
`v. First Deriv. Traders, 564 U.S. 135, 141 (2011). Because Plaintiffs fail to plead that the few
`statements allegedly attributable to a majority of the Demand Board (all in the 2016 10-K) are false
`or misleading, a majority of the Demand Board does not face a substantial likelihood of liability for
`Plaintiffs’ securities fraud claims. OB at 18; see Individual Defendants’ Opening Brief (ECF No.
`145) at 12-13, 15-16; Individual Defendants’ Reply Brief at 8, 9-10.4
`
`
` 4 Plaintiffs claim they also challenge the 2015 and 2017 10-Ks, but they misstate their own
`complaint. Opp. at 6 n.2 (citing ¶¶ 231 & 254). Paragraph 231 does not even appear in the
`section of the FAC identifying the statements Plaintiffs challenge, and paragraph 254 merely
`explains why the 2016 10-K is allegedly misleading.
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`Case 4:18-cv-01792-HSG Document 154 Filed 05/26/20 Page 11 of 18
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`While Plaintiffs’ failure to plead that a misstatement was made by a majority of the Demand
`Board is outcome dispositive under Rule 23.1, Plaintiffs also fail to plead that Mr. Zuckerberg or Ms.
`Sandberg made any false or misleading statement. See Individual Defendants’ Opening Brief at 10-
`17; Individual Defendants’ Reply Brief at 6-10. For example, Mr. Zuckerberg’s statement that
`“We’ve worked hard to make sure that we comply with [the FTC Consent Order]” (¶ 279) is not
`actionable because it is not capable of objective verification. Individual Defendants’ Opening Brief
`at 15. Ms. Sandberg’s statement that “We don’t sell your data” (¶ 307) is not false because Plaintiffs
`allege no facts demonstrating that Facebook ever sold any user data. Individual Defendants’ Opening
`Brief at 16. Neither Mr. Zuckerberg nor Ms. Sandberg face (and certainly no other director faces) a
`substantial likelihood of liability for Plaintiffs’ deficient claims.
`Plaintiffs also are wrong that, under a scheme liability theory (Count 3), they do not need to
`show that the directors “made” the allegedly false statements. Opp. at 8. As set forth in Defendants’
`Rule 12(b)(6) motion, Plaintiffs’ scheme liability claim is nothing more than a repackaging of their
`claim in Count 2 that the Defendants allegedly made misleading statements that caused Facebook to
`repurchase shares at inflated prices. ECF No. 145 at 23; see also Individual Defendants’ Reply Brief
`at 14. The law is clear that there is no independent scheme liability claim in these circumstances,
`including under Lorenzo v. SEC, 139 S. Ct. 1094 (2019), in which the Supreme Court held that a
`defendant can be liable for securities fraud for knowingly “disseminating” a false statement.
`Plaintiffs do not plead anything like the claim in Lorenzo, where the defendant sent emails to
`investors containing false statements “made” by his supervisor that the defendant knew were false.
`Id. at 1099.5 Plaintiffs do not allege that the Demand Board “disseminated” any false statement to
`Facebook, let alone that they did so knowingly. Plaintiffs simply cannot overcome their failure to
`allege that a majority of the Demand Board made or approved almost any of the challenged
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` 5 Nor do Plaintiffs plead anything like the claim in Malouf v. SEC. Opp. at 8 n.5. The defendant in
`that case, an officer of a broker-dealer with responsibility for the broker’s disclosure documents,
`used the broker to route clients to a business in which he also had an interest, but failed to correct
`the broker’s disclosure that it “was providing impartial advice untainted by any conflicts of
`interest.” 933 F.3d 1248, 1254-55 (10th Cir. 2019). Plaintiffs allege nothing like that here.
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`statements. See also Individual Defendants’ Opening Brief at 10-11; Individual Defendants’ Reply
`Brief at 6-7.
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`b.
`Plaintiffs Do Not Plead Particularized Facts Establishing Scienter.
`Plaintiffs fail to plead a substantial likelihood of liability as to the securities fraud claims for
`the independent reason that Plaintiffs do not plead with particularity that a majority of the Demand
`Board knew or was deliberately reckless in not knowing that the challenged statements were false.
`OB at 18-19; see also Individual Defendants’ Opening Brief at 17-19; Individual Defendants’ Reply
`Brief at 11. Plaintiffs do not dispute that they fail to allege a single fact concerning the scienter of
`Ms. Alford or Messrs. Thiel, Chenault, and Zients. Thus, there is no dispute that Plaintiffs failed to
`plead scienter as to a majority of the Demand Board. Accordingly, a majority of the Demand Board
`does not face a substantial likelihood of liability for Counts 2 and 3. OB at 19 (citing Towers, 912
`F.3d at 529, 532).6
`The allegations that Plaintiffs point to in their Opposition also do not establish scienter as to
`any Defendant. First, Plaintiffs confusingly direct the Court to their allegation that the Board was
`briefed about Russian activity on Facebook’s platform in support of their argument that the “Board
`was aware of data privacy breaches.” Opp. at 9 (citing ¶ 149); see id. at 11 (same). But Plaintiffs are
`conflating alleged Russian manipulation of Facebook’s platform—which is not alleged to be a
`“breach” or even a misuse of user data—with Cambridge Analytica’s misappropriation of user data.
`OB at 18-19; see also In re Facebook, Inc. Sec. Litig., 405 F. Supp. 3d 809, 844 (N.D. Cal. 2019)
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` 6 While the scienter allegations against Ms. Sandberg and Messrs. Zuckerberg and Andreessen (a
`minority of the Board) do not need to be examined to dismiss this action on demand futility
`grounds, those allegations fail for all of the reasons stated in the Rule 12(b)(6) briefing. See, e.g.,
`Individual Defendants’ Opening Brief at 17-19. In particular, the allegation that Ms. Sandberg
`and Mr. Zuckerberg have “claimed personal responsibility” (Opp. at 14) is not an admission that
`they knew about the “Cambridge Analytica breach and scandal” before it became public. See In
`re Advanta Corp. Sec. Litig., 180 F.3d 525, 536 (3d Cir. 1999) (allegation that defendant
`“expressed regret” nine months after allegedly false statement does not demonstrate “actual
`knowledge of [] statements’ falsity”), abrogation on other grounds recognized by Fan v.
`StoneMor Partners LP, 927 F.3d 710, 716 (3d Cir. 2019); Hong v. Extreme Networks, Inc., 2017
`WL 1508991, at *21 (N.D. Cal. Apr. 27, 2017) (rejecting supposed “admission” because
`statement was not “along the lines of ‘I knew it all along’”). And Plaintiffs’ allegation that Mr.
`Andreessen might have met with Christopher Wylie says nothing about what Mr. Andreessen
`knew—let alone that he knew that any statement he made was false. Opp. at 14; see Towers, 912
`F.3d at 531 (“Plaintiffs’ invitation to play inferential hopscotch does not comport with Rule
`23.1’s ‘stringent requirements of factual particularity.