` No. 21-15823
`D.C. No.
`RETIREMENT SYSTEM, individually
`and on behalf of all others similarly
`Appeal from the United States District Court
`for the Northern District of California
`Maxine M. Chesney, District Judge, Presiding
`Argued and Submitted March 10, 2022
`San Francisco, California
`Filed July 7, 2022


`Before: J. Clifford Wallace, Sidney R. Thomas, and
`M. Margaret McKeown, Circuit Judges.
`Opinion by Judge McKeown
`Securities Fraud
`The panel affirmed the district court’s dismissal of a
`securities fraud class action under §§ 10(b), 20(a), and 20A
`of the Securities Exchange Act of 1934 and Rule 10b-5.
`Plaintiff alleged that corporate executives at Align
`Technology, Inc., a medical device manufacturer best known
`for selling “Invisalign” braces, misrepresented
`company's prospects in China.
`The panel rejected as unsupported defendants’ argument
`that their statements could not be considered false at the time
`they were made because plaintiff did not allege sufficient
`facts to make plausible the inference that the rate of Align’s
`growth in China had begun to decline significantly when the
`challenged statements were made. The panel concluded that
`former employees’ reports, viewed alongside circumstantial
`evidence of the short period of time between the twelve
`challenged statements and the downturn of Align’s prospects
`in China, sufficiently supported the inference that Align’s
`growth in China had slowed materially when the statements
`were made.
`* This summary constitutes no part of the opinion of the court. It
`has been prepared by court staff for the convenience of the reader.


`The panel held that the district court correctly found that
`six of the challenged statements were non-actionable
`“puffery,” which involves vague statements of optimism
`expressing an opinion that is not capable of objective
`verification. The district court also correctly found that the
`remaining six statements did not create a false impression of
`Align’s growth in China and so were not actionable. Having
`determined that all of the challenged statements were non-
`actionable, the panel declined to reach issues of scienter and
`control-person or insider-trading liability. The panel
`rejected the argument that because Align touted positive
`facts about China, the company had a duty to disclose
`negative facts in order to make the statements not
`Javier Bleichmar (argued), Bleichmar Fonti & Auld LLP,
`New York, New York, for Plaintiffs-Appellants.
`Shay Dvoretzky (argued) and Peter A. Bruland, Skadden
`Arps Slate Meagher & Flom LLP, Washington, D.C.; Peter
`B. Morrison, Virginia F. Milstead, and Mayra Aguilera,
`Skadden Arps Slate Meagher & Flom LLP, Los Angeles,
`California; for Defendants-Appellees.


`McKEOWN, Circuit Judge:
`Securities actions often ask courts to distinguish between
`corporate braggadocio and genuinely false or misleading
`statements. This is one of those cases. In reviewing the
`dismissal of this class action, we consider whether corporate
`executives misrepresented their company’s prospects in
`China to such an extent that their statements were actionable
`under our securities laws. After a careful review of the
`record, we conclude that the district court did not err in
`determining that all twelve challenged statements were non-
`For the better part of twenty years, Align Technology,
`Inc. (“Align”)—a medical device manufacturer that is best
`known for selling clear, plastic “Invisalign” braces—
`enjoyed skyrocketing growth. At the beginning of 2002, the
`company had served roughly 44,000 customers, but by 2019
`that number had grown to 7 million. During much of that
`period, the growth was driven primarily by international
`sales, especially in China: Between 2013 and 2017,
`shipments of Invisalign cases to China increased by an
`average of 88 percent each year, and then by another
`91 percent in 2018. Indeed, every quarter in 2017 and 2018,
`Align’s year-over-year revenue growth rate in China
`hovered between 70 percent and 100 percent.
`But then the trouble began. At the start of 2019, Align’s
`Chinese growth rate dipped slightly, apparently due to
`increased competitive pressure and diminished consumer
`demand, and in the second quarter of that year the rate fell to
`between 20 and 30 percent. As news of this fall reverberated


`across the market, Align’s stock dropped by roughly
`27 percent, from $275.16 per share on July 24, 2019, to
`$200.90 per share on July 25, 2019, erasing approximately
`$5.4 billion in shareholder value.
`A year later, Macomb County Employees’ Retirement
`System (“Macomb”), a Michigan-based pension plan, filed
`suit against Align (and several of its senior executives) on
`behalf of itself and all others that acquired Align common
`stock between April 25, 2019, and July 24, 2019 (the “Class
`Period”), and were damaged thereby. Macomb alleged that
`several Align senior executives had “misrepresent[ed]”
`Align’s growth in China throughout the second quarter of
`2019, claiming strong numbers despite knowing (or
`recklessly disregarding) that the growth rate in China had
`slowed significantly.
` According
`to Macomb, Align
`executives made twelve statements during the Class Period
`that are actionable under Sections 10(b), 20(a), and 20A, as
`well as Rule 10b-5, of the Securities Exchange Act of 1934,
`15 U.S.C. § 78a et seq. (“Exchange Act” or “Act”).
`The district court dismissed the action with leave to
`amend, holding that the majority of the challenged
`statements constituted non-actionable puffery and the rest
`were not false or misleading. Instead of amending the
`complaint, Macomb requested a final judgment, so the
`district court dismissed the action with prejudice. Macomb
`We review de novo a district court’s dismissal for failure
`to state a claim, “tak[ing] all allegations of material fact as
`true and constru[ing] them in the light most favorable to the
`nonmoving party.” In re Quality Sys., Inc. Sec. Litig.
`(Quality Systems), 865 F.3d 1130, 1140 (9th Cir. 2017).


`the Act prohibits using “any
`Section 10(b) of
`manipulative or deceptive device” that contravenes “such
`rules and regulations as the Commission may prescribe.”
`15 U.S.C. § 78j(b). Pursuant to this section, Rule 10b-5
`prohibits making “any untrue statement of a material fact”
`or omitting “a material fact necessary” to make a statement
`“not misleading.” 17 C.F.R. § 240.10b-5(b); see also In re
`Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To
`recover damages for violations of Section 10(b) and Rule
`10b-5, as Macomb is seeking to do, “a plaintiff must prove
`(1) a material misrepresentation or omission by the
`defendant; (2) scienter; (3) a connection between the
`misrepresentation or omission and the purchase or sale of a
`security; (4) reliance upon
`the misrepresentation or
`omission; (5) economic loss; and (6) loss causation.”
`Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258,
`267 (2014) (internal citations and quotation marks omitted).
`Only the first two elements are at issue here.
`A complaint alleging a violation of Section 10(b) of the
`Exchange Act must meet both the heightened pleading
`requirements for fraud claims under Fed. R. Civ. P. 9(b),
`which requires that the complaint “state with particularity
`the circumstances constituting fraud,” and the “[e]xacting
`pleading requirements” of the Private Securities Litigation
`Reform Act (“PSLRA”). Tellabs, Inc. v. Makor Issues &
`Rights, Ltd. (Tellabs), 551 U.S. 308, 313 (2007). The
`PSLRA requires plaintiffs to state with particularity the facts
`constituting the alleged violation. Id. These “heightened
`pleading requirements for securities fraud cases . . . present
`no small hurdle for
`the securities fraud plaintiff.”
`Schueneman v. Arena Pharms., Inc., 840 F.3d 698, 705 (9th
`Cir. 2016) (citation omitted).


`As a threshold matter, Align asks this court to affirm the
`district court on the narrow ground that Macomb’s complaint
`is based on an unsupported premise. Macomb’s complaint
`rests on the premise that Align’s rate of growth had, in fact,
`“significantly declined” by the time Align’s executives were
`touting the company’s growth in China in May and June of
`2019. But, according to Align, it is possible that the rate of
`growth only started to decline “significantly” during the
`Class Period (which lasts until July 24, 2019). Because,
`Align continues, Macomb has not alleged sufficient facts to
`make plausible the inference that the rate of growth had
`begun to decline “significantly” by the time the Align
`executives made the challenged statements, the statements
`cannot be considered false at the time they were made, and
`therefore they are not actionable. See In re Rigel Pharms.,
`Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012) (holding
`that for statements to be actionable under the PSLRA, they
`must have been “false or misleading at the time they were
`made”). We reject this argument as unsupported.
`It is settled precedent that the passage of just a short
`period of time between executives’ rosy statements about
`their company’s prospects and a downturn in those prospects
`is “circumstantial evidence” that the challenged statements
`“were false when made.” Fecht v. Price Co., 70 F.3d 1078,
`1083 (9th Cir. 1995). In Fecht, for instance, the passage of
`two-and-a-half months was a sufficient “shortness of time”
`to be considered “circumstantial evidence
`challenged statements were false when made.” Id. Here,
`just three months passed between the first challenged
`statement and the revelation of Align’s downturn in China.
`In addition, Fecht demands that we accord such
`circumstantial evidence “more weight” where there is no


`“intervening catastrophic event” that might suggest a later,
`abrupt downturn, such that the executives’ earlier statements
`may not, in fact, have been false. Id. at 1083–84. Here, as
`in Fecht, there was no such catastrophic event.
`Macomb has provided additional evidence to support the
`that Align’s growth
`rate was declining
`substantially at the time of the challenged statements.
`Multiple reports from former employees support the
`inference that Align’s growth in China had slowed
`materially when the challenged statements were made in late
`April, May, and June 2019. For instance, one analyst’s
`report described “clear, early indications as of April 1, 2019
`that Align’s growth in China had slowed . . . and that data
`was available to executives to monitor.” Viewed alongside
`the short period of time between the challenged statements
`and the downturn in Align’s prospects in China, Macomb
`has alleged sufficient evidence to support the inference that
`Align’s growth in China had slowed materially when the
`challenged statements were made in late April, May, and
`June 2019. Macomb’s complaint does not rest on an
`unsupported premise.1
`1 Align contends that Ronconi v. Larkin, 253 F.3d 423 (9th Cir.
`2001), supports the opposite conclusion. This case is not like Ronconi.
`There, the plaintiffs inadequately pleaded falsity because the complaint
`“fail[ed] to describe, chart or graph what sales actually did” and failed to
`“identify any documents or facts suggesting that the defendants knew
`that the growth rate was not accelerating.” Ronconi, 253 F.3d at 431.
`By contrast, Macomb has explained “what sales actually did” (i.e., sales
`growth in China fell from close to 70% to 20–30% in one quarter), id.,
`and Macomb pointed to specific systems and reports that executives
`allegedly reviewed indicating slowing growth.


`Turning to the challenged statements, we hold that the
`district court correctly found that six were non-actionable
`“puffery.” Corporate “puffing” involves “expressing an
`opinion” that is not “capable of objective verification.”
`Retail Wholesale & Dep’t Store Union Local 338 Ret. Fund
`v. Hewlett-Packard Co., 845 F.3d 1268, 1275 (9th Cir. 2017)
`(quoting Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,
`774 F.3d 598, 606 (9th Cir. 2014)). These “vague statements
`of optimism like ‘good,’ ‘well-regarded,’ or other feel good
`monikers, are not actionable because professional investors,
`and most amateur investors as well, know how to devalue
`the optimism of corporate executives.” Police Ret. Sys. of
`St. Louis v. Intuitive Surgical, Inc. (Intuitive Surgical),
`759 F.3d 1051, 1060 (9th Cir. 2014) (internal quotation
`marks omitted) (quoting In re Cutera Sec. Litig., 610 F.3d
`at 1111).
`The six challenged statements that the district court
`determined to be puffery are as follows:
`1. During an April 24, 2019, earnings call,
`Chief Executive Officer Joseph Hogan
`stated in response to analyst questions
`about Align’s
`international business,
`“[w]e still have a great business in APAC
`from a growth standpoint overall,” and
`“China is a great growth market for us.”
`2. At a healthcare conference on May 14,
`2019, Chief Financial Officer John
`Morici said, “China . . . gets a lot of
`attention. And rightly so, it’s a huge
`market opportunity for us.”


`3. At a dental and veterinary conference on
`May 29, 2019, in response to an analyst
`question about growth rates in the Asia-
`Pacific (i.e., APAC) region, Morici
`responded, “we see tremendous growth in
`APAC, in China in particular.”
`4. At the same conference, in response to an
`analyst question probing deeper about
`China, Morici stated, “we’re seeing
`tremendous growth.”
`5. At the same conference, Morici said,
`“[t]he dynamics in China are really good
`for us . . . . [T]he appetite for growth and
`new technology adoption in China has
`been great for us. And as you mentioned,
`the economics work well for us.”
`6. At a healthcare conference on June 5,
`2019, Morici also described China as “a
`market that’s growing significantly for
`us” with “[g]reat economics.”
`These six statements plainly fit beneath the umbrella of
` All use vague, generically positive terms,
`describing China as “a great growth market,” “a huge market
`opportunity,” “a market that’s growing significantly for us,”
`and possessing “really good” “dynamics,” and describing
`Align’s performance there as “tremendous” and “great.”
`Such characterizations are not “objectively verifiable.”
`Retail Wholesale, 845 F.3d at 1276. None of these six
`statements present the kind of precise information on which
`investors rely “[w]hen valuing corporations.” In re Cutera
`Sec. Litig., 610 F.3d at 1111.


`Contrary to Macomb’s assertions, the district court did
`not err by failing to “consider the context” in which these six
`statements were made. Although “general statements of
`optimism” made against a clearly pessimistic backdrop
`“may form a basis for a securities fraud claim,” Intuitive
`Surgical, 759 F.3d at 1060 (citation omitted), this was not
`the case here. Significantly, at the time Align’s executives
`made the six challenged statements, the company’s sales
`were still growing in China, albeit at a diminished rate, so
`these feel-good descriptions from Align’s executives did not
`“affirmatively create[] an impression of a state of affairs that
`differ[ed] in a material way from the one that actually
`exist[ed].” Quality Systems, 865 F.3d at 1144 (quoting
`Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th
`Cir. 2002)).
`We next hold that the district court correctly found that
`the remaining six statements did not create a false
`impression of Align’s growth in China and so were not
`actionable. We briefly address each of these six statements
`Three of the statements contained factual assertions that
`Macomb’s complaint does not contradict:
`1. At a dental and veterinary conference on
`May 29, 2019, in response to an analyst
`question whether he saw China as “fastest
`growth, highest [average sales price] that
`should remain in place for the next couple
`of years,” Morici stated, “[China] is
`higher [average sales price]. They start
`with a higher list price. They have very
`complicated cases, comprehensive cases,


`and we’ve invested from a treatment
`planning to be in country, speak the same
`language, reduce the cycle time between
`iTero [a digital scanner of
`patients’ teeth sold by Align] in China.
`We introduced that in second quarter of
`last year. We went from almost no cases
`sent digitally to almost 50% of the cases
`sent digitally within China.
`2. At a healthcare conference on June 5,
`2019, in response to an analyst question
`about competition
`in China, Morici
`responded, “Great economics there from
`the standpoint that massive population,
`growing middle class, we have higher list
`prices, higher [average sales prices] in
`China, very complicated cases, a lot of
`orthodontists that we sell to, selling more
`and more to hospitals . . . .”
`3. At a healthcare conference on June 11,
`2019, an analyst asked whether Align had
`seen the same increase in Invisalign
`uptake after placing iTero scanners into
`the market as the company had in the U.S.
`Morici responded, “Yes
`. . . [iTero]
`drives higher and higher amount of
`Invisalign volume.”
`that Macomb’s complaint contains no
`We observe
`allegations contrary to the assertions regarding Align’s
`average sales price in China, the relative complexity of the
`cases, the “cycle time,” China’s “massive population,”
`China’s growing middle class, iTero’s effects on driving


`higher Invisalign volume, etc. As a result, these three
`statements are not actionable under our securities laws.
`A fourth statement was an accurate assessment of
`Align’s past growth when considered in context:
`4. At a healthcare conference on May 14,
`2019, in response to an analyst question
`about competitors absorbing market
`share over a period of several years,
`Morici stated, “whether it’s in China or
`U.S. or other places, we’ve been
`competing against many of
`companies that I mentioned for a number
`of years and still been able to grow as we
`Read in light of the analyst’s question, a reasonable investor
`would understand the phrase “grow as we have” to refer to
`Align’s historical growth rate in China over at least the prior
`year if not longer. Considering the context, this statement
`would not “give a reasonable investor the impression of a
`state of affairs that differs in a material way from the one that
`actually exists” sufficient to make the statement actionably
`misleading. Reese v. BP Expl. (Alaska) Inc., 643 F.3d 681,
`691 (9th Cir. 2011) (internal quotation marks and citation
`A fifth statement was an assessment of the effect of a
`competitor’s entry into the market:
`5. During an April 24, 2019, earnings call,
`Hogan stated in response to analyst
`questions about how Align could
`continue to grow in China as quickly as
`they historically had, “China is a great


`growth market for us,” and “Straumann’s
`[the competitor] move with third- or
`fourth-tier player from a clear aligner
`standpoint, I don’t see that as dramatic
`effect on this market now or in the
`immediate future at all.”
`The Align executive’s optimistic prediction was not a clearly
`untrue or misleading gloss. Macomb failed to plead
`sufficient facts to establish that the competitor’s presence in
`China caused the slowdown in Align’s growth, especially
`considering that the complaint referenced at least two other
`competitors in addition to Straumann (SmileDirectClub and
`Angel Align) that were putting pressure on Align in China.
`So, the executive’s assertion was not “false when made.”
`Fecht, 70 F.3d at 1083.
`This leaves a final statement contained in Align’s May
`2, 2019, Form 10-Q:
`6. “Demand for our products may not
`increase as rapidly as we anticipate due to
`a variety of factors including a weakness
`in general economic conditions.”
`Macomb never argued on appeal that this sixth statement
`was actionable, so that argument was waived. Brown v.
`Rawson-Neal Psychiatric Hosp., 840 F.3d 1146, 1148 (9th
`Cir. 2016). Even if this argument were not waived, the
`statement presents no concrete assertions that could render it
`actually false or trigger a duty to disclose additional
` “Disclosure is required … only when
`necessary ‘to make … statements made, in the light of the
`circumstances under which
`they were made, not
`misleading.’” Matrixx Initiatives, Inc. v. Siracusano,
`563 U.S. 27, 44 (2011) (quoting 17 C.F.R. § 240.10b-5(b)).


`Having determined that all of the challenged statements
`are non-actionable, we can quickly dispense with Macomb’s
`remaining arguments. We decline to reach the matters of
`scienter and control-person or insider-trading liability.2
`And we reject Macomb’s argument that because Align
`touted “positive facts about China,” the company had “a duty
`to disclose negative facts in order to make the statements not
`misleading.” Our securities laws “do not create an
`affirmative duty
`to disclose any and all material
`information.” Id. Because all twelve challenged statements
`are non-actionable, Align had no duty to provide additional
`information to render those statements “not misleading.”
`See Retail Wholesale, 845 F.3d at 1278 (no duty to disclose
`where statements did not “affirmatively create an impression
`of a state of affairs that differs in a material way from the
`one that actually exists”).
`2 To prevail on claims for violations of Section 20(a), 15 U.S.C.
`§ 78t(a) (creating joint and several liability for any person who controls
`a person liable for violating the Act), or Section 20A, 15 U.S.C. § 78t-
`1(a) (creating liability for anyone who violates the Act or its regulations
`“by purchasing or selling a security while in possession of material,
`nonpublic information”), “[a] plaintiff[] must first allege a violation of
`§ 10(b) or Rule 10b-5.” Lipton v. Pathogensis Corp., 284 F.3d 1027,
`1035 n.15 (9th Cir. 2002). Thus, whether Align violated Section 10(b)
`or Rule 10b-5 is a threshold issue. Because we agree with the district
`court that Macomb failed to state a claim under Section 10(b) or Rule
`10b-5, Macomb is likewise unable to state a claim under Sections 20(a)
`or 20A.

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