NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS FEB 8 2022

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 20-56178 GATUBHAI MISTRY, Lead Plaintiff; et. al., D.C. No. 3:18-cv-01208-CAB-

AHG

Plaintiffs - Appellants,

v. MEMORANDUM*

QUALCOMM, INC.; et al.,

Defendants - Appellees.

Appeal from the United States District Court for the Southern District of California Cathy Ann Bencivengo, District Judge, Presiding

Argued and Submitted November 16, 2021 Pasadena, California

Before: BYBEE and BENNETT, Circuit Judges, and BATAILLON,** District Judge.

Court-appointed lead plaintiff, Gatubhai Mistry and other Qualcomm

investors (Investors), appeal the district court’s dismissal under Federal Rule of Civil

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Joseph F. Bataillon, United States District Judge for the District of Nebraska, sitting by designation. Procedure 12(b)(6) of their second amended complaint (SAC) alleging violations of

Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange

Commission Rule 10b-5. We review Rule 12(b)(6) dismissals de novo. In re

Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1140 (9th Cir. 2017). We have

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

This action involves an unsuccessful bid by a Singapore chipmaker,

Broadcom, to acquire Qualcomm, a United States chipmaker. The Investors

generally allege that false or misleading statements or omissions by Qualcomm in

connection with an unsuccessful hostile take-over bid—a deal that was eventually

blocked by regulatory action and an executive order from then-President Donald

Trump—resulted in a drop in Qualcomm’s stock share price.

Broadcom offered to acquire Qualcomm in November 2017, for a share price

that was approximately 30% over Qualcomm’s share price at the time. Although

Qualcomm’s board rejected the offer, Broadcom persisted in efforts to acquire the

company. Broadcom launched a proxy fight, writing to shareholders and urging

them to vote to replace Qualcomm’s board of directors. The Investors contend that

Qualcomm engaged in a secret scheme to interfere with Broadcom’s attempted

acquisition by lobbying lawmakers and complaining to the Committee on Foreign

Investment in the United States (CFIUS), a federal interagency committee that

evaluates the national security implications of foreign investments in U.S.

2 20-56178 companies, while outwardly assuring shareholders and potential investors that it was

pursuing the merger in good faith.

On appeal, the Investors argue that the district court erred in dismissing their

securities fraud class action for failure to adequately plead falsity, scienter, and loss

causation.

1. “To survive a motion to dismiss, a complaint must contain 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) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). Federal Rule of Civil Procedure 9(b) requires

that a party “state with particularity the circumstances constituting fraud.” To state

a claim in a private civil action under Section 10(b) and Rule 10b–5, a plaintiff must

allege “(1) a material misrepresentation (or omission); (2) scienter, i.e., a wrongful

state of mind; (3) a connection with the purchase or sale of a security; (4) reliance .

. . ; (5) economic loss; and (6) ‘loss causation,’ i.e., a causal connection between the

material misrepresentation and the loss[.]” Dura Pharms., Inc. v. Broudo, 544 U.S.

336, 341–42 (2005) (citations omitted). These allegations “are subject to heightened

pleading requirements” imposed by Federal Rule of Civil Procedure 9(b) and the

Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. § 78u-4(b)(1)–(2)(A).

Nguyen v. Endologix, Inc., 962 F.3d 405, 414 (9th Cir. 2020).

3 20-56178 2. We find no error in the district court’s finding that the Investors failed

to allege falsity in their SAC.

[T]o properly allege falsity, a securities fraud complaint must . . . “specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, . . . state with particularity all facts on which that belief is formed.”

In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 877 (9th Cir. 2012) (third

alteration in original) (quoting 15 U.S.C. § 78u-4(b)(1)).

The Investors allege facts in their SAC showing that Qualcomm made it clear

from the outset that its directors and officers opposed the deal. On November 12,

2017, in a press release, Qualcomm stated “the Board has concluded that

Broadcom’s proposal dramatically undervalues Qualcomm and comes with

significant regulatory uncertainty.” Qualcomm told shareholders and potential

investors that Broadcom’s offer “pose[d] unacceptable regulatory risks, and

significant regulatory uncertainty[,]” “regulatory approval was highly uncertain; at

least [an] 18 month process[,]” “Broadcom’s opportunistic proposal dramatically

undervalues Qualcomm and there is significant doubt about whether it can ever be

completed[,]” and explicitly informed them that “any divestiture to a non-U.S. buyer

must be approved by the Committee on Foreign Investment in the United States

(CFIUS).”

4 20-56178 We reject the Investors’ argument that, despite these statements, Qualcomm

downplayed the risk of regulatory oversight by CFIUS. Negotiating in good faith is

not necessarily incompatible with having sincere regulatory, antitrust, and national

security concerns. Also, Qualcomm’s statements regarding good faith negotiations

came with significant qualifications and caveats. CFIUS’s and the administration’s

subsequent actions were not foreseeable in a way that would have given rise to a

duty to provide any more definite qualifying statements.

3. We also find no error in the district court’s finding that the Investors

failed to plead scienter. To satisfy the requisite state of mind element, a complaint

must allege that the defendant made false or misleading statements either

intentionally or with deliberate recklessness. In re VeriFone Holdings, Inc. Sec.

Litig., 704 F.3d 694, 701 (9th Cir. 2012). A complaint will survive a Rule 12(b)(6)

motion to dismiss “only if a reasonable person would deem the inference of scienter

cogent and at least as compelling as any opposing inference one could draw from

the facts alleged.” Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 324

(2007). The Investors have not alleged facts from which a reasonable person could

draw equally plausible opposing inferences of Qualcomm’s intent.

4. We further find no error in the district court’s conclusion that the

Investors failed to adequately plead loss causation. Loss causation is shorthand for

the requirement that “investors must demonstrate that the defendant’s deceptive

5 20-56178 conduct caused their claimed economic loss.” Erica P. John Fund, Inc. v.

Halliburton Co., 563 U.S. 804, 807 (2011). The Investors have not alleged a causal

connection between the allegedly wrongful statements and omissions in late 2017

and early 2018 and the stock-price drop. They allege the public learned of a U.S.

Senator’s letter to the Treasury Secretary urging a CFIUS review via a national news

report on February 26, 2018. On March 4, 2018, CFIUS ordered Qualcomm to

postpone its board elections for 30 days. The stock did not drop appreciably until

one week later, and dropped again after then-President Trump issued the Executive

Order blocking the deal on March 12, 2018.

AFFIRMED.

6 20-56178