12 CALIFORNIA DISTRICT COURT CASES GOODWIN The court rejected plaintiffs’ argument that Tesla’s predictions about achieving future goals were not forward-looking because they characterized the current state of affairs, reasoning that “every future projection depends on the current state of affairs,” and “were the Court to adopt Plaintiffs’ conclusion, the distinction be- tween present statements and forward-looking state- ments would collapse.” The court also found that Tesla’s forward-looking disclosures meaningfully described “a host of uncertainties regarding the production process,” cautioned investors that it had “no experience to date in manufacturing vehicles at the high volumes” project- ed, and noted a number of assumptions underlying its production plan. Plaintiffs filed an amended complaint in March 2018, alleging that defendants violated the Sections 10(b) and 20(a), and Rule 10b-5, by misrepresenting or failing to disclose that Tesla “had severely inadequate inventory and was woefully unprepared to launch the Model 3 sedan as anticipated” in late 2017. Defendants moved to dismiss the amended complaint in November 2018, and the motion is scheduled to be heard in March 2019. Rodriguez v. Gigamon, Inc., 325 F. Supp. 3d 1041 (N.D. Cal. July 11, 2018) - Missed Earnings Gigamon, Inc., is a technology company that offers network visibility and traffic monitoring software and related services. During a conference call on October 27, 2016, Gigamon’s CEO and CFO discussed Gigam- on’s third quarter 2016 financial results. During the call, the CEO and CFO projected that Gigamon would earn revenues in the fourth quarter of between $91 million and $93 million, and that the company had a “large deferred service” and “healthy backlog” leaving it “on track to deliver our second consecutive year of accel- erating top-line revenue growth and expanding profit- ability.” On November 2, 2016, Gigamon’s CEO stated in an interview that Gigamon was expecting fourth quarter revenues of only $89 million. Thereafter, on January 17, 2017, the company issued an earnings release which reported preliminary fourth quarter 2016 revenues of between $84.5 million and $85 million. Gigamon attributed this earnings miss to “lower than expected product bookings in our North America West region, as several significant existing customer accounts deferred purchasing decisions into 2017.” During an investor call in February 2017, Gigamon’s CEO repeated this expla- nation, and Gigamon’s CFO explained that its product backlog at quarter end was $3.1 million lower than it had been during the preceding six quarters. Gigam- on’s stock price fell by 5.3%, from $32.10 per share to $30.40 per share. Investors filed a securities class action complaint against Gigamon and its CEO and CFO, alleging claims under Sections 10(b) and 20(a) and Rule 10b-5. Plaintiffs alleged that defendants made materially false and mis- leading statements concerning anticipated revenues and Gigamon’s sales backlog. Defendants moved to dismiss on the grounds that plaintiffs had failed to iden- tify actionable statements or adequately allege scienter. First, defendants argued that statements concerning the company’s “large deferred service” and “healthy backlog” were merely non-actionable predicate as- sumptions underlying its forward-looking revenue projections. The court disagreed, holding that those statements described “the present state of the Com- pany” and were “not assumptions.” Nor did defendants couch statements concerning “backlogs” with any meaningful cautionary disclosures specifically related to “orders existing at the time” of the alleged misstate- ments, as opposed to generic cautionary language concerning future orders. And defendants’ statements about the company being “on track,” with a “healthy backlog” and “large” deferred services, were not mere “puffery.” Nonetheless, the court held that plaintiffs alleged no facts establishing that defendants’ optimistic statements were false when made. The court also held that plaintiffs failed to adequately allege scienter based on defendants’ stock sales during the class period, explaining that the CEO’s sales were made pursuant to a Rule 10b5-1 trading plan adopted more than one year before the alleged fraud, and that plaintiffs had failed to identify when the CFO made any particular stock sale. Defendants moved to dismiss. The district court granted that motion, holding that de- fendants’ statements were forward-looking and thus protected under the PSLRA’s safe harbor.