NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS MAY 8 2020

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

STEPHANIA NOZAK and CRISTOS No. 19-55342 THANOS, Lead Plaintiffs, D.C. No. Plaintiffs - Appellants, 2:17-cv-01241-PSG-SS

v.

NORTHERN DYNASTY MINERALS MEMORANDUM*

LTD.; et al.,

Defendants - Appellees.

Appeal from the United States District Court for the Central District of California Philip S. Gutierrez, District Judge, Presiding

Submitted May 6, 2020** Pasadena, California

Before: M. SMITH, OWENS, and BRESS, Circuit Judges.

Plaintiffs Stephania Nozak and Cristos Thanos appeal from the district

court’s dismissal of Plaintiffs’ claims for violations of Section 10(b) of the

* 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). Securities Exchange Act (Exchange Act), 15 U.S.C. § 78j(b), and Rule 10b-5, 17

C.F.R. § 240.10b-5; and Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).

As the parties are familiar with the facts, we do not recount them here. We have

jurisdiction under 28 U.S.C. § 1291, and we affirm.

The district court properly dismissed Plaintiffs’ securities fraud claims

because Plaintiffs failed to allege a strong inference of scienter.1 Under the Private

Securities Litigation Reform Act (PSLRA), Plaintiffs alleging securities fraud must

“state with particularity facts giving rise to a strong inference that the defendant

acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A); see also Fed.

R. Civ. P. 9(b) (requiring Plaintiffs to “state with particularity the circumstances

constituting fraud”). Plaintiffs raise several theories to support a strong inference

of scienter, but each of them, even when viewed together, is insufficient to create a

cogent and compelling inference of scienter. See Tellabs, Inc. v. Makor Issues &

Rights, Ltd., 551 U.S. 308, 326 (2007) (“[T]he court’s job is not to scrutinize each

allegation in isolation but to assess all the allegations holistically.”); see also id. at

324 (“A complaint will survive . . . only if a reasonable person would deem the

inference of scienter cogent and at least as compelling as any opposing inference

1 Because Plaintiffs failed to adequately plead a violation of Section 10(b), the district court correctly dismissed Plaintiffs’ Section 20(a) control liability claim summarily. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009).

2 one could draw from the facts alleged.”).

Plaintiffs rely on confidential source statements within a third-party short-

sale report (the Kerrisdale Report) to support the inference that Northern Dynasty

Minerals (NDM); its Chief Executive Officer, Ronald Thiessen; and its Chief

Financial Officer, Marchand Snyman (collectively, Defendants) knew they falsely

stated the reasons for Anglo American plc’s (Anglo) departure from the Pebble

Project. However, there is no indication that the unnamed sources are reliable or

have any personal knowledge of Defendants’ state of mind, as Plaintiffs provide

little to no detail regarding the positions the sources held, whether the sources

worked at NDM, or whether the sources interacted with NDM personnel. See

Zucco, 552 F.3d at 995. Additionally, the confidential sources’ statements fall

short of showing that NDM knew its announcement regarding Anglo’s departure

was false or misleading, and therefore, the statements are not “themselves . . .

indicative of scienter.” Id.

Plaintiffs argue that NDM’s report responding to the Kerrisdale Report (the

Rebuttal Report) corroborates allegations in the Kerrisdale Report and contradicts

Thiessen’s statement that “this is not about Pebble, it is about Anglo.” However,

the Rebuttal Report only shows that NDM was aware of a preliminary thirteen-

billion-dollar capital estimate, which falls short of providing a compelling

inference of scienter. Plaintiffs also point to Anglo’s Chief Executive Officer’s

3 statement that Anglo’s decision to leave a “major project . . . was an economic one

and not associated with environmental or social issues.” This statement is far too

vague to support a strong inference of scienter.

Furthermore, Plaintiffs cannot rely on Defendants’ desire to attract

investment because “to hold otherwise would support a finding of scienter for any

company that seeks to enhance its business prospects.” Inter-Local Pension Fund

GCC/IBT v. Deleage (In re Rigel Pharm., Inc. Sec. Litig.), 697 F.3d 869, 884 (9th

Cir. 2012).

Finally, Plaintiffs’ reliance on the core operations theory and corporate

scienter doctrine is unavailing. The core operations theory cannot support a strong

inference of scienter because Plaintiffs have not provided “detailed and specific

allegations about management’s exposure to factual information within the

company.” S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 785 (9th Cir. 2008).

Rather, Plaintiffs have only alleged “corporate management’s general awareness of

the day-to-day workings of the company’s business,” which this court has held

generally does not establish scienter. Id. at 784–85 (internal quotation marks and

citation omitted). Moreover, Plaintiffs have not sufficiently alleged that

Defendants knew about the basis for Anglo’s business decision. Finally, even

putting aside that this court has not adopted the corporate scienter doctrine,

Plaintiffs have not alleged a “dramatic[]” falsehood that would warrant its

4 application. See Cohen v. NVIDIA Corp. (In re NVIDIA Corp. Sec. Litig.), 768

F.3d 1046, 1063 (9th Cir. 2014).

AFFIRMED.

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