NOT FOR PUBLICATION
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE NINTH CIRCUIT
`
`
`FILED
`
`
`OCT 19 2022
`
`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
`
`
`
`
`No. 21-16837
`
`
`D.C. Nos. 3:18-cv-06208-JD
`
`
`
`
`3:18-cv-06565-JD
`
`
`
`
`3:18-cv-06965-JD
`
`
`
`
`3:18-cv-07427-JD
`
`
`
`MEMORANDUM*
`
`
`
`
`
`
`
` Plaintiff-Appellant,
`
`GANESH KASILINGAM, Individually and
`on Behalf of All Others Similarly Situated,
`
`
`
` v.
`
`
`STITCH FIX, INC.; KATRINA LAKE;
`PAUL YEE,
`
`
`
`
`
`
`
`
`
` Defendants-Appellees.
`
`
`
`Appeal from the United States District Court
`for the Northern District of California
`James Donato, District Judge, Presiding
`
`Submitted October 17, 2022**
`San Francisco, California
`
`Before: McKEOWN, CALLAHAN, and VANDYKE, Circuit Judges.
`
`
`Plaintiff-Appellant Ganesh Kasilingam appeals from the district court’s
`
`dismissal of his complaint under Federal Rule of Civil Procedure 12(b)(6). We have
`
`jurisdiction under 28 U.S.C. § 1291, and we affirm.
`
`
`* This disposition is not appropriate for publication and is not precedent except as
`provided by Ninth Circuit Rule 36-3.
`
`** The panel unanimously concludes this case is suitable for decision without oral
`argument. See Fed. R. App. P. 34(a)(2).
`
`
`
`
`
`
`
`
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE NINTH CIRCUIT
`
`
`FILED
`
`
`OCT 19 2022
`
`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
`
`
`
`
`No. 21-16837
`
`
`D.C. Nos. 3:18-cv-06208-JD
`
`
`
`
`3:18-cv-06565-JD
`
`
`
`
`3:18-cv-06965-JD
`
`
`
`
`3:18-cv-07427-JD
`
`
`
`MEMORANDUM*
`
`
`
`
`
`
`
` Plaintiff-Appellant,
`
`GANESH KASILINGAM, Individually and
`on Behalf of All Others Similarly Situated,
`
`
`
` v.
`
`
`STITCH FIX, INC.; KATRINA LAKE;
`PAUL YEE,
`
`
`
`
`
`
`
`
`
` Defendants-Appellees.
`
`
`
`Appeal from the United States District Court
`for the Northern District of California
`James Donato, District Judge, Presiding
`
`Submitted October 17, 2022**
`San Francisco, California
`
`Before: McKEOWN, CALLAHAN, and VANDYKE, Circuit Judges.
`
`
`Plaintiff-Appellant Ganesh Kasilingam appeals from the district court’s
`
`dismissal of his complaint under Federal Rule of Civil Procedure 12(b)(6). We have
`
`jurisdiction under 28 U.S.C. § 1291, and we affirm.
`
`
`* This disposition is not appropriate for publication and is not precedent except as
`provided by Ninth Circuit Rule 36-3.
`
`** The panel unanimously concludes this case is suitable for decision without oral
`argument. See Fed. R. App. P. 34(a)(2).
`
`
`
`
`
`
`
`
`
`Defendant-Appellee Katrina Lake founded Defendant-Appellee Stitch Fix,
`
`Inc. in 2011. In November 2017, Stitch Fix went public. That same year, Stitch Fix
`
`diversified its broad marketing portfolio to include television advertising. Although
`
`the move proved successful, in the fourth quarter of Fiscal Year (FY) 2018, Stitch
`
`Fix “temporarily ceased [its] national TV campaign for [ten] weeks” as part of an
`
`ongoing plan to test the efficacy of its different marketing channels. Despite this
`
`temporary pause in television advertising, Stitch Fix increased its marketing
`
`expenditures during the fourth quarter of FY 2018 and added 54,000 new customers.
`
`But the day after Stitch Fix published its fourth quarter results, its stock price
`
`dropped more than 35%.
`
`In October 2018, a securities-fraud complaint was filed against Stitch Fix and
`
`several of its officers, including Lake. Related actions followed. In August 2019,
`
`the district court consolidated the various lawsuits and appointed Kasilingam lead
`
`plaintiff. Kasilingam filed a consolidated complaint, which Stitch Fix moved to
`
`dismiss for failure to state a claim. In September 2020, the district court dismissed
`
`the consolidated complaint with leave to amend. Two months later, Kasilingam filed
`
`an amended complaint, seeking “remedies under §§ 10(b) and 20(a) of the Securities
`
`Exchange Act … and SEC Rule 10b-5.” See 15 U.S.C. §§ 78j(b), 78t(a); 17 C.F.R.
`
`§ 240.10b-5. Kasilingam challenged three of Stitch Fix’s statements, claiming the
`
`statements were false and misleading because the company represented it was using,
`
`
`
`2
`
`
`
`
`
`and “would continue” to use, “national television advertising” to “deliver near-term
`
`payback” at a time when Stitch Fix had temporarily ceased national television
`
`advertising.
`
`Stitch Fix moved to dismiss Kasilingam’s amended complaint. In September
`
`2021, the district court dismissed the amended complaint with prejudice. The court
`
`found, in relevant part, that the challenged statements “are too general about [Stitch
`
`Fix’s] ongoing [marketing] efforts and future plans to be misleading with respect to
`
`the test that shut down national television advertisements for [ten] weeks.” And
`
`Kasilingam “does not point to anything even hinting that investors had reason to
`
`believe that national television advertisements were essential to Stitch Fix’s
`
`continued success.” The district court also found that Kasilingam had misread other
`
`statements that were “clearly about advertising more generally,” as being “limited
`
`to television advertising.” Kasilingam timely appealed.
`
`“We review de novo an order granting a motion to dismiss for failure to state
`
`a claim under [Rule] 12(b)(6).” Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15
`
`F.4th 885, 889 (9th Cir. 2021). In considering a Rule 12(b)(6) motion, we normally
`
`ask whether the complaint contains “sufficient factual matter, accepted as true, to
`
`state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
`
`678 (2009) (cleaned up). But the standard pleading requirements are supplemented
`
`in this case by rules specific to securities fraud cases. Specifically, the circumstances
`
`
`
`3
`
`
`
`
`
`constituting the alleged fraud must be stated with particularity under Federal Rule
`
`of Civil Procedure 9(b). See Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d
`
`598, 604 (9th Cir. 2014). In addition, the Private Securities Litigation Reform Act
`
`of 1995 requires a complaint to “specify each statement alleged to have been
`
`misleading, [and] the reason or reasons why the statement is misleading.” 15 U.S.C.
`
`§ 78u-4(b)(1).
`
`“To plead a claim under [§] 10(b) and Rule 10b-5, [Kasilingam] must allege:
`
`(1) a material misrepresentation or omission; (2) scienter; (3) a connection between
`
`the misrepresentation or omission and the purchase or sale of a security; (4) reliance;
`
`(5) economic loss; and (6) loss causation.” Or. Pub. Emps. Ret. Fund., 774 F.3d at
`
`603 (citation omitted). We need only address the first of these elements.
`
`Kasilingam argues that the challenged statements “led investors to believe that
`
`Stitch Fix was maintaining its successful national-television advertising campaign.”
`
`But none of the challenged statements reference “national” television advertising.
`
`Moreover, although television advertising is mentioned in two of the statements, it’s
`
`mentioned simply as one of several marketing channels. And although television
`
`advertising had proven successful in the past, the challenged statements give no
`
`indication that the company was certain to continue television advertising in the
`
`future. Rather, the statements only generally describe Stitch Fix’s marketing efforts.
`
`In short, none of the challenged statements “affirmatively create an impression of a
`
`
`
`4
`
`
`
`
`
`state of affairs that differs in a material way from the one that actually exists.” Brody
`
`v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002).
`
`Kasilingam’s argument that the challenged statements “are false and
`
`misleading because the television-dark test was not designed to achieve near-term
`
`payback,” fails for the same reason. Stitch Fix’s statement about “investments
`
`designed to achieve near-term payback” cannot be construed as the company
`
`promising to pursue “near-term payback” using national television advertising.
`
`Indeed, as with the other challenged statements, television advertising was simply
`
`mentioned as one marketing channel among others. Moreover, the statement refers
`
`to Stitch Fix’s activities during the third quarter of FY 2018, not the fourth quarter.
`
`And the fact remains that Stitch Fix’s marketing efforts generally achieved some
`
`level of “near-term payback” in the fourth quarter of FY 2018, with the company
`
`adding more than 50,000 new customers.
`
`Kasilingam’s remaining arguments fail for the same reason. Accordingly,
`
`Kasilingam fails to adequately allege a material misrepresentation or omission.
`
`AFFIRMED.
`
`
`
`5
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`
`
`
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