b'on the grounds that defendants made allegedly falseThe court held plaintiffs failed to adequately allege and misleading statements and omissions by publiclyscienter by conflating the significance of the individual expressing a willingness to negotiate with Broadcomdefendants awareness of the CFIUS review and their about a potential deal while simultaneously seeking toawareness of whether their statements were false and stop the deal by unilaterally seeking CFIUS review ofmisleading in light of the companys alleged effort to the proposed transaction. Defendants moved to dismissget CFIUS to preemptively block the deal The court the consolidated amended complaint, which the courtcited several warnings by the individual defendants granted, with leave to amend, holding that (1) many ofof regulatory scrutiny over the deal and held that the challenged statements were inactionable becausethose statements created an opposing inference that they were made before plaintiffs owned QualcommDefendants did not think that disclosure [of the CFIUS stock, (2) where plaintiffs adequately alleged actionablereview] was required because Qualcomm did disclose misstatements, plaintiffs failed to adequately allegethe CFIUS risk. The court also disregarded plaintiffs scienter where several disclosures by defendantsmotive allegations, summarily holding that motive and about regulatory risks to the deal created an opposingopportunity is simply inadequate to establish scienter. inference that defendants did not think that disclosure ofThe court also held that plaintiffs failed to plead loss the CFIUS review was required, and (3) and the allegedcausation because the March 5 and 6, 2018, 4.02% stock stock drops were so minimal and effected by interveningprice reductions at issue were minimal and there is a events as to undermine loss causation. First, the courtmore plausible explanation that the market reacted to held that several of the challenged statementsthoseCFIUS action and not that Qualcomm had provided notice made on and between February 16 and March 1wereto CFIUS. Similarly, the court held that, with respect to the inactionable because they occurred after plaintiffs lastMarch 13, 2018 stock price drop, plaintiffs cannot establish acquired stock in Qualcommon February 12, 2018.loss causation based on an intervening event, explaining Though plaintiffs contended that, at the pleading stage, a[i]t is quite evident that the stock drop on March 13, 2018 class period is not confined to plaintiffs last purchase ofwas connected to the Presidents order rather than a stock, the court sided with defendants and followed Ninthmisrepresentation by Qualcomm. Circuit precedent in holding that statements made after plaintiffs last acquired Qualcomm stock could not servePlaintiffs filed a second amended complaint on May 11, as the basis of a claim under section 10(b) given the stock2020. Defendants moved to dismiss again, which was was not acquired in connection with those statementsheard on October 8, 2020, and granted with prejudice at or omissions.the hearing without issuance of a formal order. Plaintiffs Second, the court held that plaintiffs sufficiently allegedappealed the dismissal on November 7, 2020. The appeal some actionable misstatements or omissions. Namely,is currently set to be fully briefed by June 2021. the court explained that defendants repeated statements that the company was ready to meet with BroadcomCai v. Switch, Inc., et al., Case No. in an attempt to reach a negotiated deal may have2:18-cv-1471, 2020 WL 3893246 been misleading by defendants failure to disclose that(D. Nev. July 10, 2020) the company was simultaneously actively engaged in discussions with CFIUS. While the court acknowledgedShift In Sales Strategythat defendants disclosed the transaction may wellSwitch, Inc. hosts data centers and provides its customers result in significant national security concerns that couldwith colocation, telecommunications, cloud, and content potentially block the transaction[, t]herefore, we believeecosystems services. During its initial years, Switch was approval by CFIUS is far from assured[,] the courtprimarily focused on colocation servicesthe leasing reasoned that had Qualcomm disclosed that it initiatedof information technology infrastructure, such as servers a CFIUS review it plausibly could have resulted in theand data-storage hardware. In 2002, Switch purchased a market evaluating a greater risk of CFIUS blocking thisrecently constructed facility through Enrons bankruptcy transaction rather than the normal low risk that CFIUSproceedings. Having acquired a state-of-the-art facility would block a transaction. Additionally, the courtin Las Vegas at a heavily discounted rate, Switch saw determined that plaintiffs adequately alleged defendantsrapid profitability and growth. On October 5, 2017, Switch engaged in a scheme to mislead by suggesting thecompleted a successful IPO and issued approximately company was genuinely open to merger negotiations36 million shares of common stock at $17 per share. In its while not disclosing the company simultaneouslyRegistration Statement, Switch did not disclose information unilaterally initiated a CFIUS review, which was anabout Switchs decision to shift its sales strategy away unusual move. from colocation to focus on selling hybrid cloud solutions Despite holding plaintiffs adequately pled materially false a decision it allegedly made earlier that year. or misleading statements, the court was not persuaded by plaintiffs scienter and loss causation allegations. 50'