11 CALIFORNIA DISTRICT COURT CASES GOODWIN industries. Super Micro’s annual and quarterly reports in 2014 and 2015 included Super Micro’s officers’ signed certifications pursuant to the Sarbanes Oxley Act of 2002 (“SOX”). Through the SOX certifications, the com- pany’s certifying officers represented that the financial information included in the reports fairly represented all material information, including disclosure of all signifi- cant deficiencies and material weaknesses in internal controls, and any fraud involving management or other employees who had a role in the company’s financial reporting. On November 16, 2015, Super Micro filed a Form 8-K/A acknowledging that a material weakness existed in the Company’s internal controls over financial reporting related to the revenue recognition of con- tracts with extended product warranties. An investor filed a class action alleging claims under Sections 10(b) and 20(a) of the 1934 Act and Rule 10b-5 against Super Micro and its officers. Plaintiff alleged that the disclosure of the material weakness in November 2015 rendered all of the prior SOX certifications false and misleading. Defendants moved to dismiss, and the district court granted that motion. Specifically, the court reasoned that plaintiff failed to allege facts explaining why the SOX certifications were false at the time they were made, and that plaintiff could not satisfy his plead- ing burden under the PSLRA simply by “pointing out a later-discovered inaccuracy in certified reports,” partic- ularly given that “SOX Certifications were not intended to create a per se violation of securities laws.” Nor did plaintiff allege any facts establishing that defendants issued their SOX certifications with actual knowledge of their falsity, had any motive to deceive the public, or sold any stock before the disclosure of the material weakness. Moreover, the court held that to the extent plaintiff challenged alleged misstatements or omissions made after he purchased shares, such statements were not actionable as a matter of law because such statements could not “have influenced his decision to purchase Super Micro stock, or in any way affected the price he paid” before such statements were made. Wochos v. Tesla, Inc., et al., Case No. 3:17-cv- 05828, 2018 WL 4076437 (N.D. Cal. Aug. 27, 2018) - Missed Production Targets Tesla, Inc. (“Tesla”) designs, develops, manufactures, and sells high-performance electric vehicles and solar energy generation and energy storage products. In 2016, Tesla announced plans to produce an affordable, mass-market electric vehicle, the “Model 3.” Tesla stat- ed that it planned to develop a fully-automated produc- tion line, which would have made it the first mass-manu- facturer of an all-electric vehicle. Tesla reported in May 2016 that it expected to achieve volume production and deliveries in late 2017. At that time, however, Tesla cautioned that it had experienced “significant delays or other complications” associated with other vehicles and “may experience similar delays or other compli- cations in bringing to market and ramping production of new vehicles, such as Model 3.” Tesla also warned that it had “no experience” in manufacturing at the high volumes that it anticipated for the Model 3, and that its plans were built on many assumptions, including suppliers’ abilities to meet Tesla’s needs. Tesla’s CEO described in February 2017 “new issues that pop up every week,” and that the “things that are likely to be schedule issues are things that we actually just don’t know about today.” At a Model 3 unveiling event in July 2017, Tesla’s CEO stated that Tesla was entering “production hell,” and stated the following month that the company faced “an incredibly difficult production ramp.” In October 2017, Tesla issued a press release stating that Tesla had failed to meet its production goals because of “production bottlenecks.” Four days later, the Wall Street Journal reported that the few Model 3s that were being built were being constructed by hand rather than on an automated production line. During an October 2017 earnings call, Tesla’s CEO stated that “it’s looking good for production volume second half of 2017,” but cautioned that “a car consists of several thousand unique items,” and that Tesla could “only go as fast as the slowest item.” Tesla’s CEO cautioned that “it’s very difficult to predict exactly where the beginning part of the exponential curve . . . fits in between quar- terly reporting.” Tesla’s quarterly report filed a few days later warned about the possibility that Tesla might not hit its Model 3 production targets. Thereafter, in Novem- ber 2017, Tesla announced that it was pushing back its production goal of 5,000 vehicles per week to the first quarter of 2018. Tesla’s stock price declined by 6.8%. Investors filed a securities class action lawsuit, alleging that Tesla and its officers violated Section 10(b) and 20(a), and Rule 10b-5, by misrepresenting Tesla’s prog- ress with respect to bringing the Model 3 to market. De- fendants moved to dismiss. The district court granted that motion, holding that defendants’ statements were forward-looking and thus protected under the PSLRA’s safe harbor.