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Loos v. Immersion Corp.

United States Court of Appeals, Ninth Circuit

August 7, 2014

JOHN P. LOOS, individually and on behalf of all others similarly situated, Plaintiffs-Appellants,
v.
IMMERSION CORPORATION; VICTOR A. VIEGAS; RALPH EDWARD CLENTON RICHARDSON; STEPHEN AMBLER; RICHARD VOGEL, Defendants-Appellees

Argued and Submitted, San Francisco, California: February 12, 2014.

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Northern District of California. D.C. No. 3:09-cv-04073-MMC. Maxine M. Chesney, Senior District Judge, Presiding.

SUMMARY[**]

Securities Fraud

The panel affirmed the district court's dismissal for failure to state a claim of a securities fraud class action alleging violations of Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5.

Agreeing with the Eleventh Circuit, the panel held that the announcement of an investigation, standing alone, is insufficient to establish loss causation. It held that the plaintiff could not establish loss causation on the facts alleged in the amended complaint because he had not attempted to correlate his losses to anything other than the announcement of an internal investigation.

David A.P. Brower and Richard H. Weiss (argued), Brower Piven, New York, New York; and Sanford Svetcov, Susan K. Alezander, and Willow E. Radcliffe, Robbins Geller Rudman & Dowd, LLP, San Francisco, California, for Plaintiffs-Appellants.

Susan S. Muck, Jennifer C. Bretan (argued), and Marie C. Bafus, Fenwick & West, LLP, San Francisco, California; and Felix S. Lee, Fenwick & West, LLP, Mountain View, California, for Defendants-Appellees.

Before: Richard C. Tallman and Johnnie B. Rawlinson, Circuit Judges, and Thomas O. Rice, District Judge.[*] Opinion by Judge Rice.

OPINION

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RICE, District Judge:

Plaintiff John Loos appeals the district court's dismissal of his securities fraud class action for failure to state a claim. Plaintiff argues that the district court erred by analyzing his allegations of scienter in isolation rather than " collectively" as mandated by Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). Plaintiff further challenges the district court's conclusion that he failed to establish loss causation by alleging a precipitous decline in Immersion Corp.'s stock price on the heels of a July 1, 2009 press release announcing an internal investigation into the company's revenue accounting practices.

We hold that the announcement of an investigation, standing alone, is insufficient to establish loss causation. We further conclude that Plaintiff cannot establish loss causation on the facts alleged in the amended complaint because he has not attempted to correlate his losses to anything other than the announcement of an internal investigation. We therefore affirm the district court on this loss causation issue. We do not reach Plaintiff's arguments regarding scienter.

I.

Immersion Corporation (" Immersion" ) is a publicly-traded company listed on the NASDAQ stock exchange. Immersion develops and licenses " haptics" technology, which, in broad strokes, allows high-tech electronic devices to produce tactile feedback to the user. One example of a haptics-enabled device is a smartphone that produces a " pulse" or a " pushback" sensation when the user clicks a button on the screen. At the times relevant to this appeal, Immersion focused primarily on developing haptics technology for use in handheld electronics and medical training devices.

Plaintiff John Loos (" Plaintiff" ) and several other purchasers of Immersion stock filed class actions against Immersion in the Northern District of California in late 2009. The district court consolidated the cases and appointed Plaintiff to represent the putative class. Plaintiff subsequently filed a consolidated complaint on behalf of himself and a class of shareholders who purchased Immersion stock between May 3, 2007, and July 1, 2009 (the " class period" ). This complaint alleged violations of Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission's implementing regulations. Named as defendants were Immersion and five of its top executives, Defendants Victor Viegas, Clent Richardson, Stephen Ambler, Richard Vogel and Daniel Chavez.

Defendants moved to dismiss the complaint on June 15, 2010, for failure to state a claim. The district court granted the motion on March 11, 2011, ruling, inter alia, that Plaintiff failed to adequately plead the scienter and loss causation elements of his claims. Finding that these deficiencies could potentially be cured, the district court granted Plaintiff leave to amend.

Plaintiff filed an amended complaint asserting the same causes of action on April 29, 2011.[1] Defendants filed a second motion to dismiss on July 1, 2011. The district court granted the motion on December 16, 2011, concluding, once again, that Plaintiff failed to plausibly allege the scienter

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and loss causation elements of his claims. Because Plaintiff had failed to correct the deficiencies identified in its prior dismissal order, the district court dismissed the amended complaint with prejudice.

Plaintiff now ...


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