City of Dearborn Heights Act 345 Police & Fire Retirement System v. Align Technology, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CITY OF DEARBORN HEIGHTS ACT No. 14-16814 345 POLICE & FIRE RETIREMENT SYSTEM, Individually and On Behalf D.C. No. of All Others Similarly Situated, 5:12-cv-06039- Plaintiff-Appellant, BLF

v.

OPINION

ALIGN TECHNOLOGY, INC.; THOMAS

M. PRESCOTT; KENNETH B. AROLA,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California Beth Labson Freeman, District Judge, Presiding

Argued and Submitted October 19, 2016 San Francisco, California

Filed May 5, 2017

Before: ANDREW J. KLEINFELD and MILAN D. SMITH, JR., Circuit Judges, and JOHN A. KRONSTADT, * District Judge.

* The Honorable John A. Kronstadt, United States District Judge for the Central District of California, sitting by designation. Opinion by Judge Milan D. Smith, Jr.; Concurrence by Judge Kleinfeld

SUMMARY **

Securities Fraud

The panel affirmed the district court’s dismissal, for failure to adequately plead falsity or scienter, of a securities fraud action under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934…

Concurrence by Judge Kleinfeld

OPINION

Plaintiff-Appellant City of Dearborn Heights Act 345 Police & Fire Retirement System (Plaintiff) represents all the investors who purchased stock in Align Technology, Inc. (Align) between January 31, 2012, and October 17, 2012 (the Class Period). Plaintiff alleges that Defendants Align, Align CEO Thomas M. Prescott, and Align CFO Kenneth B. Aróla (collectively, Defendants) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5 in connection *610 with statements regarding Align’s goodwill valuation of its subsidiary, Cadent Holdings, Inc. (Cadent). The district court dismissed with prejudice Plaintiffs Second Amended Complaint (SAC) for failure to adequately plead falsity or scienter. We affirm the district court for four reasons.

First, we hold that the three standards for pleading falsity of opinion statements articulated in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, — U.S. -, 135 S.Ct. 1318 , 191 L.Ed.2d 253 (2015), apply to Section 10(b) and Rule 10b-5 claims. Second, we hold that Plaintiff has failed to sufficiently plead falsity under any of the three Omnicare…

concurring in the judgment:

I concur. The majority opinion is compelling on the record before us, with respect to Jack of scienter. Because scienter is an element of section 10(b) liability, the reasoning in Part I.B., with which I fully agree, compels the result we reach.

The majority provides an alternative ground for reaching the same result, under the Supreme Court decision in Omnicare Inc., v. Laborers District Council Construction Industry Pension Fund. 1 That was a section 11 case. This js a section 10(b) case. As the Supreme Court explained in Herman & MacLean v. Huddleston, section 10(b) and section 11 are materially different, 2 The majority holds that the reasoning in Omnicare effectively overrules our decision in Reese v. Malone. 3 Under Miller v. Gammie 4 and its progeny, the tension between Reese and Omni-care and the doubt Omnicare casts on our analysis in Reese does not suffice to overrule Reese. Reese has to be “clearly irree- *624 oncilable” with Omnicare for Reese to be overruled. 5 Whether it is clearly irreconcilable strikes me as debatable, because Om-nicare is a section 11 case and Reese is a section 10(b) case.

I do not suggest that Reese survives. My…