10 CALIFORNIA DISTRICT COURT CASES GOODWIN With respect to plaintiffs’ allegations concerning Lenovo, the court agreed with defendants that Extreme’s optimistic forward-looking statements about the partnership were inactionable opinions, and that Extreme’s new CEO’s later-in-time statements con- cerning Lenovo “cannot be deemed an admission” of what defendants “knew at the time the statements were made.” The court also concluded that defendants’ statements concerning their “commitment” to achieve double-digit growth were nonactionable because the word “commitment” is not an actionable “word of certainty,” but rather “inactionable puffery.” Ziolkowski v. Netflix, Inc., et al., Case No. 17-cv- 01070-HSG, 2018 WL4587515 (N.D. Cal. Sept. 25, 2018) - Price Increase’s Negative Impact on Growth Netflix, Inc. (“Netflix”) is a subscription-based service company offering the online streaming of movies and television programs to its members. Following a price increase of its monthly subscription rate in 2014, an investor filed a class action against Netflix and its CEO and CFO under Sections 10(b) and 20(a), and Rule 10b-5, alleging that defendants made materially false and misleading statements related to Netflix’s operat- ing results for the second quarter of 2014. The plaintiff identified statements from a shareholder letter in which the company stated that (1) its “net additions in the U.S. remain[ed] on par with last year,” and (2) “[t]here was minimal impact on membership growth from this price change.” During an earnings call on the same day, the company stated that the price change’s impact would be “pretty nominal,” “background noise,” and would have made “no noticeable effect in the business.” The plaintiff also alleged that the 2014 second quarter report failed to identify the price increase as a “risk factor.” Plaintiff contended that the company effectively admitted falsity of its statements when it explained in the third quarter of 2014 that the price increase had a substantial negative impact on growth, but that the impact had gone unnoticed because it had been tem- porarily mitigated by the release of a new season for a popular show. According to the plaintiff, Netflix’s stock price declined by approximately 20% following this disclosure. Defendants moved to dismiss. The district court granted defendants’ motion to dis- miss, holding that the plaintiff had failed to meet the PSLRA’s exacting pleading requirements. First, the court held that the plaintiff failed to adequately allege that “defendant’s statements [ ] directly contradict what the defendant knew at that time,” as required under the Ninth Circuit’s recent decision in Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1008 (9th Cir. 2018). The court explained that plaintiff’s allegations did not establish that the company’s net additions in the U.S. were actually “not on par with the previous year,” nor did plaintiff allege facts supporting his claim that the company did not believe the impact of the price was minimal. That the company later admitted that the price change had a negative impact on growth “amounted to only hindsight analysis.” As to scienter, the court found that the company’s subsequent third quarter statements were based on newly discovered information, and did not establish that defendants’ prior statements were misrepresentations at all. The court held that although “falsity and scienter are distinct inquiries, Plaintiff’s ability to plead facts showing Defendants acted with the requisite scienter is substantially hindered by his inability to plead the existence of a materially false or misleading statement or omission.” Wanca v. Super Micro Computer, Inc., et al. Case No. 5:15-cv-04049-EJD, 2018 WL 3145649 (N.D. Cal. June 27, 2018) - SOX Certifications and Sub- sequently Reported Material Weakness Super Micro Computer, Inc. (“Super Micro”) provides high-performance server solutions to data centers, cloud computing, enterprise IT, big data, and related With respect to defendants’ positive state- ments concerning the status of Extreme’s integration of Enterasys, however, the court held that plaintiffs adequately pleaded falsi- ty and scienter, in light of allegations based on confidential witness accounts that defen- dants were intimately involved in day-to-day operations surrounding the integration and that employees had voiced concerns to defendants concerning the inadequacy of Extreme’s integration.