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Bolling v. Gold

United States District Court, W.D. Washington, at Seattle

May 19, 2015

CHRISTOPH BOLLING, et al., Plaintiffs,
v.
MITCHELL H. GOLD, et al., Defendants.

ORDER

JAMES L. ROBART, District Judge.

I. INTRODUCTION

Before the court is Plaintiffs' motion to amend their Second Amended Complaint ("SAC") and file a Third Amended Complaint ("TAC"). (Mot. (Dkt. # 102).) Plaintiffs' proposed TAC would revive claims based on the Security Exchange Act of 1934 that the court previously dismissed in rulings issued on January 28, 2014, and June 5, 2014. ( See 1/28/14 Order (Dkt. # 54); 6/5/14 Order (Dkt. # 75).) The court has reviewed the motion, all submissions filed in support of and opposition thereto, the balance of the record, and the applicable law. Being fully advised, [1] the court GRANTS the motion.

II. BACKGROUND

Plaintiffs are roughly 30 investors in Dendreon Corporation ("Dendreon") who opted out of a class action settlement in 2013. ( See SAC (Dkt. ## 55 (redacted), 56 (sealed)) ¶¶ 18-39.) Dendreon is a Seattle-based biotechnology firm that makes and distributes a prostrate cancer treatment called Provenge.[2] ( See id. ¶ 40.) Defendants are several Dendreon officers, including Mitchell H. Gold, who served as Dendreon's President, Chief Executive Officer ("CEO"), and Chairman of the Board; Gregory R. Schiffman, who served as Chief Operating Officer ("COO") and Executive Vice President; and Hans E. Bishop, who served as Chief Financial Officer ("CFO"), Executive Vice President, and Treasurer. ( Id. ¶¶ 41-43.) Plaintiffs claim they were harmed by an extensive fraud related to Dendreon's launch of Provenge. ( See generally id. )

If permitted by the court, the proposed TAC will be Plaintiffs' fourth complaint in this lawsuit. ( See Compl. (Dkt. ## 1 (redacted), 7 (sealed)); Am. Compl. (Dkt. ## 32 (redacted), 33 (sealed)); SAC; TAC.) Defendants filed two previous motions to dismiss, and in both instances the court dismissed Plaintiffs' federal securities fraud claims but permitted several state law claims to advance. (1/28/14 Order; 6/5/14 Order.) In its second order dismissing Plaintiffs' federal securities fraud claims, the court granted Plaintiffs leave to amend their complaint within 20 days of the date of the order. (6/5/14 Order at 31-32.) Plaintiffs did not file an amended complaint within the timeframe set by the court ( see generally Dkt.), and instead proceeded to conduct discovery with respect to their state law claims. ( See Mot. at 1 ("Between July and October 2014, Defendants produced nearly 160, 000 pages of documents to Plaintiffs.").) On September 4, 2014, the court entered a scheduling order which set the deadline for amended pleadings on August 26, 2015. (Sched. Ord. (Dkt. # 89) at 1.)

Plaintiffs assert that the information they amassed during discovery on their state law claims "significantly alter[ed] the landscape" of this suit and "revealed... with respect to each category of omissions/misstatements alleged in the SAC... [that] Defendants unequivocally knew their public statements were false or misleading." (Mot. at 1 (emphasis in original).) Thus, Plaintiffs now argue that they have discovered direct evidence of Defendants' scienter-an essential element missing from the previous iterations of their claims. On this basis, Plaintiffs seek to amend their SAC in an effort to revive their previously dismissed federal securities fraud claims. ( See id. ) Defendants oppose the motion arguing that any amendment to Plaintiffs' SAC would be procedurally improper in light of the Private Securities Litigation Reform Act ("PSLRA") and futile in any event. ( See Resp. (Dkt. # 104).)

III. ANALYSIS

A. Standards

Plaintiffs assert that their motion is governed by Federal Rule of Civil Procedure 15(a), which provides that "[t]he court should freely give leave [to amend a pleading] when justice so requires." Fed.R.Civ.P. 15(a)(2); ( see Mot. at 1-2). Plaintiffs correctly note that the Ninth Circuit has instructed district courts to apply this rule "with extreme liberality." (Mot. at 1 (citing AmerisourceBergen Corp. v. Dialyist West, Inc., 465 F.3d 946, 951 (9th Cir. 2006); DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).) A district court should analyze the following factors in deciding whether to grant leave to amend, including: (1) undue delay, (2) bad faith, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether the complaint was previously amended. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). In the absence of any of these factors, "the leave sought should, as the rules require, be freely given.'" Foman, 371 U.S. at 182. Consideration of these principles is especially important in the context of the PSLRA because it "requires a plaintiff to plead a complaint of securities fraud with an unprecedented degree of specificity." Eminence Capital, 316 F.3d at 1052.

Defendants, however, argue that the forgoing standard is incorrect under the present circumstances and that Plaintiffs' motion is procedurally improper. (Resp. at 3-5.) Defendants assert that once the court dismissed Plaintiffs' federal securities claims and Plaintiffs failed to file an amended complaint within the timeframe set forth in the court's order, the court's order automatically ripened into a dismissal with prejudice. ( See Resp. at 3.) Defendants contend that this means that the liberal standard ordinarily applicable to a motion to amend pleadings is inappropriate here, and Plaintiffs' motion is instead governed by the more stringent standards applicable to a motion under Federal Rules of Civil Procedure 59 or 60. ( Id. at 3-4.) Defendants also argue that under the PLSRA, a complaint must be tested by reference to facts in Plaintiffs' possession when the action was commenced and not by means of facts Plaintiffs unearthed during discovery. ( Id. at 4-5.) Having reviewed the relevant law, the court concludes that Defendants are incorrect.

The court's prior orders dismissing Plaintiffs' federal securities fraud claims did not end this litigation. Plaintiffs' state law claims survived. ( See generally 1/28/14 Order; 6/5/14 Order.) Pursuant to Federal Rule of Civil Procedure 54(b), "any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed.R.Civ.P. 54(b). Further, the Ninth Circuit has recognized that "[a]s long as a district court has jurisdiction over the case, then it possesses the inherent procedural power to reconsider, rescind or modify any interlocutory order for cause seen by it to be sufficient." City of L.A. v. Santa Monica Baykeeper, 254 F.3d 882, 889 (9th Cir. 2001) (italics omitted) (quoting Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. 1981) and citing Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1315 (11th Cir. 2000) (stating that when a district court issues "an interlocutory order, the district court has plenary power over it and this power to reconsider, revise, alter or amend the interlocutory order is not subject to the limitations of Rule 59"); High Country Arts& Craft Guild v. Hartford Fire Ins. Co., 126 F.3d 629, 635 (4th Cir. 1997) (same); Wagoner v. Wagoner, 938 F.2d 1120, 1122 n.1 (10th Cir. 1991) (same)). No judgment has been entered in this case, and the court retains plenary power to revisit its prior rulings herein.

The court also finds that the PSLRA sets up no barrier to Plaintiffs' motion. In this regard, the court finds WPP Luxembourg Gamma Three Sarl v. Spot Runner Inc., 655 F.3d 1039 (9th Cir. 2011), to be instructive. WPP involved an appeal of a district court's dismissal of a claim for violation of Section 10(b) of the Exchange Act and a crossappeal of the district court's dismissal of the Section 10(b) claim without prejudice. 655 F.3d at 1058-59. In addressing the cross-appeal and the district court's decision to dismiss the claims without prejudice, the Ninth Circuit noted that where a district court dismisses some claims and others survive a motion to dismiss, the district court, within its discretion, can allow an amended complaint even with respect to claims the district court earlier dismissed. Id. at 1059. The Ninth Circuit further noted that "this procedure would be appropriate should discovery reveal evidence indicating that previously dismissed Defendants were in fact involved in the alleged fraudulent conduct." Id. Indeed, the Ninth Circuit remarked that "[t]o some extent, the ability of the district court to revive dismissed claims should evidence come to light tempers the heightened pleading standards of the PSLRA in securities actions where claims survive against codefendants." Id. [3] Although WPP occurred in the context of an order to dismiss without prejudice, nothing in Rule 54(b) indicates that the result would be any different if the interlocutory order of dismissal had been with prejudice. See Fed.R.Civ.P. 54(b).

Further, the court's order in this case did not expressly indicate whether it was with or without prejudice. ( See generally 6/5/14 Order.) However, since the court offered Plaintiffs the opportunity to amend their complaint, it follows logically that the court's June 5, 2014, order of dismissal was without prejudice. When Plaintiffs did not file an amended complaint within the specified time period, the court did not issue an order dismissing the claims with prejudice and never expressly warned Plaintiffs that it intended to do so. Defendants nevertheless argue, based on Lynch v. City of Alhambra, 880 F.2d 1122, 1124 (9th Cir. 1989), that the court's June 5, 2014, order automatically ripened into an order with prejudice after Plaintiffs failed to file an amended complaint within the timeframe set by the court. (Resp. at 3.) However, this argument stretches Lynch too far. In Lynch, the court stated that "[b]ecause [the plaintiff] failed to cure the deficiency perceived by the district court within the period provided by the district court, the dismissal was converted to a final order of dismissal with prejudice." Id. The court acknowledges that the Ninth Circuit's use of the passive voice renders its statement less than crystal clear, but nevertheless, there ...


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