Teamsters Local 617 Pension v. Apollo Group, Inc.

Full title: Teamsters Local 617 Pension and Welfare Funds, on behalf of itself and all…

Court: United States District Court, D. Arizona

Date published: Mar 31, 2011

No. CIV 06-02674-PHX-RCB (D. Ariz. Mar. 31, 2011)

Opinion

No. CIV 06-02674-PHX-RCB.

March 31, 2011

ORDER

ROBERT BROOMFIELD, Senior District Judge

Currently pending before the court in this securities fraud action are motions to dismiss the second amended complaint ("SAC") for failure to state a claim pursuant to FED.R.CIV.P. 12(b)(6) by defendant Apollo Group, Inc. ("Apollo") (Doc. 122); and by the individual defendants John G. Sperling, Todd S. Nelson, Kenda B. Gonzales, Daniel E. Bachus, John Blair, John R. Norton III, Hedy Govenar, Brian E. Mueller, Dino J. DeConcini, Peter Sperling, and Laura Palmer Noone ("the individuals" or "the individual defendants")¹ (Doc. 120). If the court denies their motion to dismiss, alternatively, pursuant to FED.R.CIV.P. 12(f), the individual defendants are moving to strike allegations which this court previously dismissed or found insufficient as a matter of law in Teamsters Local 617 Pension Welfare Funds v. Apollo Group, Inc., 633 F.Supp.2d 763 (D.Ariz. 2009) ("Apollo I").² Oral argument will not aid the court's decisional process, hence the court denies the parties' requests in that regard.³ See FED.R.CIV.P. 78(b).

1 The individual defendants explicitly "join in and . . . incorporate by reference" Apollo's motion to dismiss and supporting memorandum, as well as "join[ing]" in Apollo's reply. Defs'. Mot. (Doc. 120) at 1:28, n. 1; Defs'. Reply (Doc. 133) at 1:28, n. 1. Likewise, Apollo specifically "adopts and incorporates the Individual [s'] . . . motion to dismiss and to strike[,]" as well as their reply. Apollo Mot. (Doc. 122) at 1:4-5 (footnote omitted); and Apollo Reply (Doc. 132) at 1:2-3 (footnote omitted). Thus, unless necessary to distinguish among them, Apollo and the individual defendants will be collectively referred to throughout as "the defendants."

2 In Teamsters Local 617 Pension and Welfare Fund v. Apollo Group, Inc., 609 F.Supp.2d 959 (D.Ariz. 2010) ("Apollo II"), granted plaintiff's motion for reconsideration in part, and vacated in part the previously entered judgment.

3 The court will briefly address the parties' respective Requests for Judicial Notice ("RJN") (Docs. 121; 123; and 131). These Requests need not detain the court for long because they are unopposed, and in securities litigation courts routinely take judicial notice of the types of documents which these RJNs list.
The majority of the documents which are the subject of these RJNs pertain to various Securities and Exchange Commission ("SEC") filings. All three RJNs include Form 10-Ks and Form 4 SEC filings. Such SEC filings are properly subject to judicial notice. See Apollo I, 633 F.Supp.2d at 776-77; see also Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1064 n. 7 (9^th Cir. 2008) (citation omitted) ("proper" for district court to take judicial notice of defendant's "SEC filings[]"). The court reiterates that:

[I]t only is taking judicial notice of the content of these various SEC filings, and the fact that they were filed with the agency. . . . The truth of the content, and the inferences properly drawn from them, however, is not a proper subject of judicial notice under Rule 201.

Id. at 776 (citations and internal quotation marks omitted).
Further, this court will take judicial notice of the complaint filed in Alaska Electrical Pension Fund v. Sperling et al., No. 2:06-cv-02124-ROS (Doc. 125-5), as it is a matter of public record. See Lauter v. Anoufrieva, 642 F.Supp.2d 1060, 1077 (C.D.Cal. 2009) (citing cases).
Pursuant to the incorporation by reference principles outlined in Apollo I, 633 F.Supp.2d at 775, to the extent necessary to resolve these motions, the court will consider the SAC's 40 attached exhibits. That doctrine also allows the court to consider documents referenced in the SAC, but not attached thereto. See id. Here, those documents include the September 19, 2006, letter by SEC's Chief Accountant; the Bloomberg Transcript of Apollo's "Q1 2005 Earnings Call[;]" and the historical trading prices for Apollo stock from January 1, 1998 through December 31, 2007, downloaded from Yahoo! Finance (http://finance.yahoo.com) ("Apollo stock chart"). The Apollo I stock chart did not include trading dates between January 1, 2002 and December 31, 2005. The present chart closes that gap. In sum, the SAC references the foregoing documents, and no party is questioning their authenticity. The court will, therefore, take these documents into account to the extent necessary to resolve these motions.
In accordance with FED. R. Evid. 201, the court also takes judicial notice of the "print out from Bloomberg Finance L.P., documenting the market price of Apollo's common stock from January 2, 2003 until August 31, 2004" (RJN (Doc. 121) at 1:7-8).See id. at 776 (citing Metzler, 540 F.3d at 1064 n. 7) ("Rule 201 . . . provides an alternative means by which the court can consider Apollo's SEC filings, reported stock price history, and . . . other publicly available financial documents[.]")

I. Overview of SAC

The SAC sets forth three separate securities fraud claims. The first is for an alleged violation of § 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), as amended by the Private Securities Litigation Reform Act of 1995 ("the PSLRA"), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (the "section 10(b) claims"). Whereas the FAC named Apollo and all 11 individuals as defendants in that section 10(b) claim, the SAC now limits those defendants to Apollo and four of the previously named individuals. Those individuals are: (1) John Blair, an Apollo director from September 2000 until his resignation in May 2007, and "Chairman of the Audit Committee" and "a member of the Compensation Committee[;]" (2) Kenda B. Gonzales, Apollo's "CFO, Secretary and Treasurer . . . from October 1998 until" allegedly "she was forced to resign in November 2006 because of her involvement in stock option backdating at Apollo[;]" (3) Todd S. Nelson, who "was until 2006" variously Apollo's "Chairman, CEO and President[;]" and (4) John R. Norton III, an Apollo director during the relevant time frame, and "a member of the Audit Committee" and "Chairman of the Compensation Committee[.]" SAC (Doc. 112) at 8:4 and 8:5-6, ¶ 21; 7:18-20, ¶ 19; 7:8, ¶ 18; and at 8:11 and 13, ¶ 22.

After first alleging "defendants' duties with respect to granting and approving stock options[,]" the SAC devotes its next section to "backdated stock option grants at Apollo[.]" Id. at 13:6 (emphasis omitted). The court previously granted defendants' motion "to dismiss as untimely any claims based upon backdating itself with respect to the five option grants" alleged in the FAC. Apollo I, 633 F.Supp.2d at 781. Yet, the SAC includes precisely those same five grant allegations and adds a sixth grant date — October 20, 2003. The next section of the SAC enumerates "defendant's false and misleading statements issued during the class period[.]" Id. at 20:3 (emphasis omitted) (footnote added). Compared to the FAC, the SAC more than doubles the number of those statements, from 26 to 54.

The SAC's second and third claims for relief are not nearly as expansive as its first. In the second, in contrast to the FAC which alleged insider or contemporaneous trading in violation of section 20A of the Exchange Act by all defendants, the SAC names only defendant Blair in this claim. Just like the FAC though, the SAC's third claim for relief alleges "control person" liability against all defendants pursuant to section 20(a) of the Exchange Act.

. . .

II. Section 10(b) Claim ⁴

4 Previously this court articulated the general Rule 12(b)(6) standards, as well as the dual pleading standards of the PSLRA and Rule 9(b) which apply to a section 10(b) claim. See Apollo I, 633 F.Supp.2d at 778-780; 783-784; and 787-789. The court will apply those same standards in evaluating defendants' current motions to dismiss. Apart from form, there are a number of similarities between the FAC and the SAC. Hence, the court incorporates by reference the "Overview of Allegations" in Apollo I, 633 F.Supp.2d at 770-775. Other allegations will be fully developed herein as necessary to resolve the pending motions.

"Section 10(b) of the Securities Exchange Act makes it unlawful for any person to `use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.'" Matrixx Initiatives, Inc. v. Siracusano, ___ S.Ct. ___, 2011 WL 977060, at *7 (U.S. March 22, 2011) (quoting 15 U.S.C. § 78j(b)). "SEC Rule 10b-5 implements this provision by making it unlawful to, among other things, `make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.'"Id. (quoting 17 CFR § 240.10b-5(b)). The Supreme Court has "implied a private cause of action from the text and purpose of § 10(b)." Id. (citing Tellabs, Inc. v. Makor Issues Rights, Ltd., 551 U.S. 308, 318, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007)). "`In a typical § 10(b) private action a plaintiff must prove (1) a material misrepresentation or omission by the defendant⁵; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.'" In Re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9^th Cir. 2010) (quotingStoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 156, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008) (citation omitted)).

5 In a shortened form, this is sometimes referred to as the "falsity" element. See N.Y. State Teachers' Retirement Sys. v. Fremont Gen. Corp., 2009 WL 3112574, at *2 (C.D.Cal. Sept. 25, 2009).

In arguing that the SAC fails to state a section 10(b) claim, the defendants broadly assert that the SAC does not plead backdating with particularity. Separately analyzing the newly added October 20, 2003 grants, defendants then turn to the sufficiency of all six grants, include the five original grants which the SAC re-alleges. Next, defendants argue that the SAC's "false and misleading statements" do not satisfy the particularity requirements of Rule 9(b) and the PSLRA. Defendants further contend that the SAC does not adequately plead scienter or loss causation. The court will address these issues seriatim.

A. October 20, 2003 Grants

Paragraph 44 of the SAC adds a new grant date — October 20, 2003. More specifically, the SAC alleges that "[d]efendants dated certain of Apollo's 2003 grants on" that date "at $60.90 per share[.]" SAC (Doc. 112) at 19:2-3, ¶ 44. Allegedly that share price was not only the low of the month but also the low for the entire year." Id. at 19:3, ¶ 44. Defendants John Sperling, Nelson, Gonzales, and Noone allegedly received options at that price. The SAC alleges that "Carroll" received 20,000 options dated October 20, 2003, and that he is a defendant. See id. at 19:5-6; and 25, ¶ 44. The record shows that Mr. Carroll filed a Form 4 on October 22, 2003 for 20,000 options at a price of $60.90 per share. Farrell Decl'n (Doc. 124), exh. 8 thereto. Other than this paragraph, Carroll's name does not appear anywhere else in the SAC. The caption does not list him as a defendant; nor is he including the in SAC's enumeration of "parties."⁶ In any event, of the six identified grants, this is the only one alleging a "2 Day Return[.]" Id. at 19:21-22, ¶ 44.

6 That is not the only inconsistency in the SAC's allegations as to the October 20, 2003 grants. The associated chart indicates that defendant Bachus, among others, received such options, but, in contrast to John Sperling, Nelson, Gonzales and Noone, there are no specific allegations preceding that chart as to Bachus' actual receipt of such options.

Defendants argue that there are "insufficient" allegations in the SAC as to that grant date "to raise any reasonable inference that [it] was backdated." Defs.' Mot. (Doc. 120) at 4:20. Defendants offer two reasons as to why a reasonable inference of backdating cannot be drawn as to those October 20^th grants. First, those grants were publicly disclosed by the timely filing of Form 4s with the SEC. Second, despite what the SAC alleges, those grants were not made at "the low for the entire year." See SAC (Doc. 112) at 16:3, ¶ 44. Disagreeing as to the impact of the timely reporting to the SEC, plaintiff maintains that such reporting "simply restricts [the] backdating to two days." Resp. (Doc. 129) at 22:7-8 (citations omitted).

1. Form 4 SEC Filings

Pursuant to section 16(a) of the Exchange Act, "[i]nitial statements of beneficial ownership of equity securities" must be filed with the SEC on a Form 3, whereas "[s]tatements of changes in beneficial ownership" must be filed on a Form 4. See 17 C.F.R. § 240.16a-3(a); see also 15 U.S.C. § 78p(a). "On August 29, 2002, Congress passed the Sarbanes-Oxley Act [("SOX")], which instituted new reporting requirements for stock option grants." U.S. v. Shanahan, 2008 WL 2225731, at *6 (E.D.Mo. 2008). That Act significantly decreased the filing time for employees who received a stock option grant, making "a company's ability to fraudulently backdate option grants . . . much more difficult."Id. (citation omitted).

Prior to SOX, "an employee who received a stock option grant had to file financial forms with the SEC within forty-five days after the company's fiscal year end." Id. But after SOX, those forms must be filed with the SEC "before the end of the second business day" following the transaction. 15 U.S.C. § 78p(a)(2)(C). Therefore, "[b]ackdaters must now work with the two-day window plus the one or more late days they think will be overlooked." In re Zoran Corp. Derivative Litig., 511 F.Supp.2d 986, 1006 (N.D.Cal. 2007). Or, as the Zoran court colloquially put it, "[t]he Form 4 requirement has cramped [management's] style." Id. "Management no longer has the latitude to backdate as far back." Id.

There is no dispute here that the Form 4s were timely filed as to the October 20, 2003 grant. See Farrell Decl'n (Doc. 124), exhs. 7-13 thereto. Rather, the dispute centers on the impact of those filings upon plaintiff's theory that those particular grants were the product of intentional backdating. Defendants argue that due to the timely filing of the Form 4s, plaintiff has failed to state a section 10(b) claim based upon the October 20, 2003 grants. They reason that any "inference of backdating is entirely undermined by" the timely filing of those Form 4s. Defs'. Mot. (Doc. 120) at 4:21; see also Apollo Mot. (Doc. 122) at 8:5-6 (emphasis omitted) ("contemporaneously filed Form 4s prove that the October 20, 2003 grant date was not retroactively selected").

On the other hand, plaintiff counters that "a timely filed Form 4 does not eliminate the possibility of backdating, but simply restricts such backdating to two days." Resp. (Doc. 129) at 22:6-8 (citations omitted). Plaintiff reasons that "there is the potential for substantial self-enrichment if a company's stock price increases sharply in [that] day or two" after the filing of the Form 4. Id. at 22:15-17. To make this point, plaintiff notes that defendant "Nelson's stock options were $915,000 in the money by the time such options were reported" to the SEC two days later on October 22, 2003. Id. at 22:17-18 (citing SAC (Doc. 112) at ¶ 44). Thus, plaintiff asserts that the October 20, 2003, grant "further supports an inference of scienter with respect to defendant's backdating[.]" Id. at 23:8-10. Plaintiff's argument is not convincing.

The timely filing of a Form 4 has broader ramifications than "simply restrict[ing] such backdating to two days[,]" as plaintiff urges. See id. at 22:7-8 (citations omitted). In re Hansen Natural Corp. Sec. Litig., 527 F.Supp.2d 1142 (C.D.Cal. 2007), to which defendants cite, is illustrative. One way the plaintiff there alleged scienter was by alleging a scheme to backdate stock option grants. The court held that such allegations did not give rise to a strong inference of scienter because, inter alia, Form 4s "were all filed with the SEC within days" of the challenged grants. Id. at 1156 (emphasis added). TheHansen court soundly reasoned that the timely filing of Form 4s "corroborates the grant dates, and makes backdating of [stock] options highly unlikely[.]" Id. (emphasis added). Significantly, the Hansen court found that to be so "regardless of the change in the stock price." Id. (emphasis added) (citation omitted). Thus, because the Hansen plaintiffs did not otherwise adequately allege scienter, and because they did not adequately plead materiality or loss causation, the court granted defendants' motion to dismiss.

Like here, in In re CNET Networks, Inc. Shareholder Derivative Litig., 483 F.Supp.2d 947 (N.D.Cal. 2007), to which Apollo cites, the directors timely filed Form 4s, and there were no allegations that those Forms were false. Consequently, the court held that plaintiffs "failed to plead facts that th[e] grant [at issue] and the accompanying returns could not have merely been the product of chance." Id. at 961. In reaching that conclusion, the CNET court astutely explained:

It is highly unlikely that defendants could have gone back in time to change the date for this grant if it was on record with the SEC two days after the fact. Defendants would not have had time to see what the stock did in the next few days in order to find the most advantageous grant date. This does cast doubt on plaintiffs' allegations.

Id. at 961. The CNET court did recognize the "possibl[ity] that as part of the scheme, CNET had adopted a `wait-and-see' approach toward the timing of options trying to spot periodic low points."Id. Nonetheless, the court soundly reasoned, "the executives and directors simply could not have known precisely what the stock would do in the coming days. The ability to go back and change the date to a more fortuitous time is essentially the guts of any backdating scheme." Id.

That reasoning applies with equal force here. As in CNET, the defendants which the SAC alleges received grants dated October 20, 2003 at a price of $60.90 per share, John Sperling, Nelson, Gonzales and Noone, all timely filed their Form 4s as to those grants. See Farrell Decl'n (Doc. 124), exhs. 9-12. Also as in CNET, the SAC does not allege that those Form 4s were false. Moreover, quoting verbatim from the Restatement, ⁷ the SAC alleges that based upon the timely filed Forms 4 for Section 16 officers, such as Ms. Gonzales, Apollo "generally determined the original stated grant date is the most likely measurement date for Section 16 Officer grants after August 2002." SAC (Doc. 112) at ¶ 96, 47:12-13 (emphasis added). Also quoting from the Restatement, the SAC further alleges that as to the post-SOX grants to former CEO and a section 10(b) defendant, Todd Nelson, the Restatement "generally concluded the original stated grant date is the most likely measurement date after August 2002, based on the history of the filing process for Forms 4 after a grant." Id. at ¶ 96, 47:26-27 (emphasis added). These allegations, especially when coupled with the timely filed Form 4s, severely erode a strong inference of scienter to engage in intentional backdating as to the October 20, 2003 grants.

7 The SAC repeatedly refers to the "restatement of May 22, 2007[.]" See, e.g., SAC (Doc. 112) at 20:25, ¶ 48. For clarification, that Restatement was accomplished by and published in Apollo's May 22, 2007 Form 10-K. See RJN (Doc. 126), exh. 19. So although this decision will continue to refer to the Restatement, as does the SAC, it actually means that 2007 Form 10-K.

Edward J. Goodman Life Income Trust v. Jabil Circuit, Inc., 595 F.Supp.2d 1253 (M.D.Fl. 2009), aff'd on other grounds, 594 F.3d 783 (11^th Cir. 2010), bolsters that conclusion. There, the complaint merely alleged that "Jabil's Section 16 officers usually[,]" filed Forms 4 within two days of the option grant."Id. at 1275 (citation and internal quotation marks omitted) (emphasis added). In sharp contrast to the present case, there was nothing before the Jabil court showing that those officers actually timely filed the Form 4s. Nonetheless, the court found that because those officers "usually" timely filed Form 4s such filings "completely undermine[d] any suspicion otherwise attending any grant after 2001." Id. (emphasis added). Therefore, the court held that "plaintiffs' allegations of receipt of stock options fail[ed] to support an inference of scienter as to any defendant." Id.

The allegations and proof here, as discussed, are even more compelling than in Jabil. Certainly, if allegations that section 16 officers usually filed Form 4s "fail[]s to support an inference of scienter," then allegations and proof that defendants Nelson and Gonzales actually timely filed Form 4s for the October 20, 2003 grants, likewise negates any such inference.

Courts have recognized that theoretically it is possible to backdate within the two day window for filing Form 4s, as plaintiff suggests. Plaintiff overlooks the fact, however, that ultimately those same courts held that backdating was not sufficiently pled as to such grants. For example, in In re Openwave Systems, Inc. Shareholder Derivative Litigation, 503 F.Supp.2d 1341 (N.D.Cal. 2007) ("Openwave I"), the court did remark that "[b]ackdating stock options by two days is still backdating." Id. at 1350. The court thus found that the timely filed Form 4s "somewhat diminished the ability to infer backdating from the allegations [in the] Complaint[.]" Id. at 1349. Consequently, the court did recognize that where "the stock price increased in the two days following the grants[,]" those three grants "may . . . still support plaintiffs' claims, despite the filing of Forms 4 within two days of the grants." Id. (emphasis added). Nevertheless, because the "allegations and statistical analyses [we]re simply insufficient, at th[at] point, to allow a reasonable inference of backdating[,]" the court granted nominal defendants' motion to dismiss, albeit with leave to amend. Id. at 1351.

Given the rise in Apollo's stock in the two days after the October 20, 2003, grants plaintiff asserts that Openwave I supports its backdating claim as to those grants. Plaintiff overlooks that even after amendment, the court in In re Openwave Systems, Inc., 2008 WL 410259 (N.D.Cal. Feb. 12, 2008) (citation omitted) ("Openwave II"), was "not convinced that a one-or two-day window could give defendants enough perspective on the market to intentionally choose the lowest closing prices of the quarter." Id. at *3 (citation omitted). For that reason, among others, the court held that "the specific dates . . . in [the] Amended Complaint and Opposition d[id] not suggest backdating."Id. at *4. Thus the Openwave II court again granted nominal defendants' motion to dismiss, but it did again allow amendment.Id. at *7.

The same is true here. The narrow two day window between the October 20, 2003 grants and the timely filed Form 4s would not have "given defendants enough perspective on the market to intentionally choose the lowest closing price" for fiscal year 2004. See id. at *3 (citation omitted). This is especially so, as the individual defendants emphasize, because the bulk of that time frame ( e.g., October 22, 2003 through August 31, 2004) took place after the filing of the Form 4s. Thus, despite what the SAC implies, in picking the October 20, 2003 grant date, for most of the relevant time frame, defendants would not have had the advantage of hindsight.

With no analysis, plaintiff also relies upon selective quotes by the courts in Zoran, 511 F.Supp.2d 986, and Finisar Corp. Derivative Litig., 542 F.Supp.2d 980 (N.D.Cal. 2008) ("Finisar I"). Close examination of those cases reveals that rather than supporting plaintiff's argument, they actually support defendants' position. The Zoran court, too, acknowledged, that "backdating is [not] completely impossible within a two-day window[.]" Zoran, 511 F.Supp.2d at 1006. But at the same time, that court indicated that "on any given business day, the range of phony dates is restricted to only two for those who file [their Form 4s] on time." Id. at 1066. Of the six post-SOX grants discussed in Zoran, the court held that plaintiff had not sufficiently pled backdating as to three of those grants solely because, as here, the directors who received those grants timely filed their Form 4s. Id. at 1007 — 1008. Indeed, the only one of the six grants to survive defendants' motion to dismiss in Zoran was the grant where, inter alia, the Form 4s were filed three business days late. Id. at 1008. Clearly, Zoran does nothing to advance plaintiff's argument herein that it has sufficiently pled backdating as to the October 20, 2003 grants, despite the timely filing with the SEC of the Form 4s.

Plaintiff's reliance upon Finisar I, 542 F.Supp.2d 980, is similarly unavailing. As plaintiff mentions, the Finisar I court did observe: "The delay in filing a Form 4 with the SEC reporting option grants may support an indication of backdating in that it is theoretically possible to manipulate the grant date during the window between the grant date and the public reporting of the option grant to the SEC." Id. at 994 (citations omitted) (emphasis added). Plaintiff is ignoring both the plain language of that observation and the broader context in which it was made.

First, the Finisar I plaintiffs alleged that "of the 12 purportedly backdated stock options, the Form 4s related to 9 of them were filed late." Id. (citation omitted) (emphasis added). It is in the context of those allegedly late filed Form 4s that the court made the above observation which the plaintiff herein quotes. Here, there was no delay in the filing of the Form 4s as to the October 20, 2003 grants. Thus, the Finisar I court's recognition that it is "theoretically possible" to backdate where Form 4s are late, has no bearing on the October 20, 2003 grants at issue where, undisputably, the Form 4s were timely filed.

Second, even as to the one grant date in Finisar I where the Form 4s were timely filed, the court found that the totality of plaintiffs' allegations as to those grants did "not support a finding that th[ose] . . . option grants were backdated." Finisar I, 542 F.Supp.2d at 990. Moreover, even as to the untimely filed Form 4s, the Finisar I court found that plaintiffs' complaint "otherwise fail[ed] to support a clear showing that th[o]se grants were backdated" because "the allegations d[id] not support a conclusion that the Form 4s were late because the late-reported grants were backdated." Id. at 994. The court thus "conclude[d] that, without more, plaintiffs' allegations do not support" a finding "that the 12 grants to directors and officers identified in the complaint were backdated or indicate[d] a pattern of backdating of grants to directors and officers." Id. Thus, plaintiff's single quote from Finisar I regarding the "theoretical possib[ility]" of backdating within the two day window for filing with the SEC does not, without more, mandate a finding that backdating occurred as to the October 20, 2003 grants. Nor does such a possibility warrant a strong inference of scienter to engage in intentional backdating.

To salvage the October 20, 2003 grant allegations, plaintiff contends that in its motion "Apollo admits that for one grant date, there was in fact a possibility that such grant was backdated by a single day." Resp. (Doc. 129) at 22:22-23 (emphasis added) (citation omitted). Based upon that purported "admission," plaintiff surmises that "[i]t is entirely plausible, and consistent with Apollo's admissions, that on October 21, 2003, [defendant and former CEO] Nelson retroactively selected the October 20 grant date, giving himself almost $1 million of unvested and undisclosed gains, and then reported such grants to the SEC on October 22, 2003." Id. at 23:5-8. Notably, the SAC is void of any such allegations. Nonetheless, plaintiff argues that "the 2003 grant only further supports an inference of scienter with respect to defendants' backdating[.]" Id. at 23:8-9.

Apollo's supposed admission that for one grant date there is a possibility of backdating by a single day is important for two reasons, plaintiff suggests. First, it "directly contradicts [defendants'] . . . assertions that backdating within a two-day window would be impossible." Id. at 23:3-4 (footnote omitted). Second, this purported admission renders "inapplicable" the case law upon which Apollo is relying "for the proposition that backdating by two days would by unlikely[.] Id. at 23:21-22, n. 8. Plaintiff's reasoning is based upon the faulty premise that in its motion Apollo admitted backdating; it did not.

As plaintiff construes Apollo's motion, it "states `a grant date may have been retroactively selected for three grants (one, by a day ).'" Id. at 22:23 — 23:1 (quoting Mot. (Doc. 122) at 3) (emphasis added by plaintiff). Quoting from the SAC, which in turn quotes from Apollo's Form 10-K for the period ending August 31, 2006, Apollo's motion actually states:

The Special Committee . . . reported that, after analyzing all 100 grants between 1994 and 2006, it `found no direct evidence that the grant dates for any of the large Management Grants were selected with the benefit of hindsight,' and that of the 100 grants, at most, there was a `possibility' that a grant date may have been retroactively selected for three grants (one, by a day), but there `was insufficient evidence to reach such a conclusion.'"

Defs'. Mot. (Doc. 122) at 3:22-24 (quoting SAC at ¶ 96 and citing Farrell Decl'n (Doc. 126), exh. 19 thereto at 50) (emphases added). By omitting the phrases in italics and bold font, and disregarding the equivocal nature of that statement as a whole, plaintiff mischaracterizes Apollo's motion as containing an "admission" of backdating when it does not.

Additionally, the same SEC filing which forms the basis for the SAC's allegation that "another grant . . . may have been retroactively selected by a day," also alleges that for grants such as the October 20, 2003 grant, where Form 4s were timely filed, "the original stated grant date is the most likely measurement date[.]" SAC (Doc. 112) at ¶ 96, 47:12-13; and 47:26-27 (emphasis added). Therefore, the SEC filing "that raises questions whether another grant (in addition to the two grants referenced in a previous Form 8-K dated November 6, 2006), may have been retroactively selected by a day," cannot be referring to the October 20, 2003 grants. See id. at ¶ 96, 44:18-20. For these reasons, the court finds no merit to plaintiff's argument that in its motion Apollo admitted backdating. That contrived admission therefore does not cure the SAC's pleading deficiencies as to the October 20, 2003 grants.

It is clear to this court, as it has been to others, that it is "theoretically possible" to backdate even within the narrow two day window between the grant date and the filing of the Form 4 with the SEC. See Finisar I, 542 F.Supp.2d at 994 (citing cases). Undoubtedly, it takes more than the "theoretical possibility" of backdating to survive a motion to dismiss. The allegations in the SAC pertaining to the October 20, 2003 grants do not support a strong inference of scienter to backdate those grants, especially as discussed, taking into account the timely filing of the Form 4s as to those grants. The timely filing of those Forms is not the only factor undermining plaintiff's reliance upon that grant date, as discussed next.

2. Time Frame

The SAC alleges in relevant part that:

Defendants dated certain of Apollo's 2003 option grants on October 20, 2003 at $60.90 per share — not only the low of the month but also the low for the entire year. The stock traded as high as $68.51 per share in October and as high as $97.93 per share in the [sic] 2003.

SAC (Doc. 112) at 19:2-5, ¶ 44 (underline emphasis added). Defendants assert that the allegation that the October 20th "grant[s] w[ere] made at `the low of the entire year' is contrived[,]" further undermining any inference of backdating as to those grants. See Defs'. Mot. (Doc. 120) at 5:12-13. Reconciling paragraph 44 with Apollo's stock chart, defendants explain that the alleged $60.90 price per share "purportedly" would be "the low for fiscal year 2004, which ran from September 1, 2003 until August 31, 2004." Mot. (Doc. 120) at 5: 16-17 (citations omitted) (emphasis in original). Defendants stress that they "could not have used hindsight for most of th[at] time period[]" though "because most of [it] (e.g., from October 22, 2003 until August 31, 2004), took place after the grant was reported to the SEC." Id. at 5:18-20 (emphasis in original). Defendants thus claim that plaintiff is "manipulat[ing] the time period to make the [October 20, 2003] grant[s] appear more improbable." Id. at 5:20-21.

Assuming that paragraph 44 is referring to calendar year 2003, ⁸ Apollo similarly argues that that paragraph contains two "false" allegations. Apollo's Mot. (Doc. 122) at 7:24. First, Apollo points out that because its "stock closed lower on 116 of the 252 trading days in 2003 (46% of the time)[,]" id. at 7:24-25 (citation omitted), and because its "average closing price in 2003 was $58.26[,]" id. at 8:1, the allegation that the October 20, 2003 grant was the "`low for the entire year'" is "false." Id. at 7:24. Next, Apollo argues that because "[t]he highest closing price [in the 2003 calendar] year was $72.72 on December 2, 2003, $25 lower than what Plaintiff alleges[,]" id. at 8:2-3 (citation omitted), the SAC falsely alleges that its "`stock traded . . . as high as $97.93 per share in the [sic] 2003.'" Id. at 7:22-23 (quoting SAC (Doc. 112) at ¶ 44) (sic added by Apollo).

8 On its face, the SAC does not indicate whether the allegations as to the other five grant dates are referring to calendar or fiscal years. Apollo's assumption that the SAC is referring to calendar years is reasonable though because those other five grant date allegations comport with Apollo's stock chart only if they are read as referring to calendar years — not fiscal years.
For example, the SAC alleges that the grants dated December 15, 2000, "at $14.84 per share (split adjusted)" were, inter alia, "the low for the fourth quarter of 2000." SAC (Doc. 112) at 16:23-24, ¶ 42. The SAC further alleges that Apollo's stock "hit its high for the year at $22.14 per share . . . on December 28, 2000[.]" Id. at 16:28-17:1, ¶ 42 (emphasis added). Only if those allegations are read as referring to calendar year 2000 do they correspond to Apollo's stock chart.
The same is true of the January 12, 2000 grant allegations. The allegations of $8.39 per share as the "low of the year[,]" and $22.14 per share as the "high . . . during the year[,]" only correlate to Apollo's stock chart if "year" refers to calendar year 2000. See id. at 15:20-22, ¶ 41.
With respect to the September 21, 2001 grants, the SAC alleges that "at $23.33 per share" those grants were "the low for the second half of 2001." Id. at 17:26-27 — 18:1, ¶ 43. Again, that allegation correlates to Apollo's stock chart only if it is referring to the 2001 calendar year. However, if the SAC is referring to fiscal year 2001, the alleged "low for the second half of 2001" would be inaccurate because Apollo's stock traded at less than $23.33 per share numerous times during that time frame. See Farrell Decl'n (Doc. 125), exh. 20 thereto at 15-20. Regardless, $23.33 could not be the low for fiscal year 2001 because September 21, 2001 does not fall within that fiscal year. Thus, the SAC's allegations as to the September 21, 2001 grants also comport with Apollo's stock chart only if "the second half of 2001[]" means calendar year 2001. Neither the court nor the defendants should have to go through this exacting exercise to ascertain whether the SAC's grant allegations are based upon a calendar or a fiscal year, however.

Based upon the foregoing, Apollo contends that the SAC's "description of the October 20, 2003 grant is replete with errors[.]" Id. at 7:17 (emphasis omitted). The court agrees, and finds that those errors, taken together with the timely filing of the Form 4s, "undermin[e] any claim of intentional `backdating'" as to the October 20, 2003 grants. See id. at 7:17-18 (emphasis omitted).

Attempting to clarify matters, plaintiff acknowledges an unspecified "inadvertent omission of the word `fiscal' in the [SAC][.]" Resp. (Doc. 129) at 21, n. 6. Significantly, inserting "fiscal" into paragraph 44 does not rectify the ambiguity surrounding the phrases "entire year" or "the [sic] 2003." See SAC (Doc. 112) at 19:3 and 5, ¶ 44. Based upon Apollo's stock chart, the allegation of "$60.90 per share" as "the low [price] for the entire year[]" is only accurate if paragraph 44 is referring to fiscal year 2004, as earlier noted. See Farrell Decl'n (Doc. 125), exh. 20 thereto at 29-34. Further, paragraph 44 pertains strictly to "2003 Stock Options[;]" it does not mention 2004 — either as a calendar or a fiscal year. SAC (Doc. 112) at 19:1. So, despite plaintiff's urging, paragraph 44 cannot be made consistent with Apollo's stock chart by merely inserting the word "fiscal."

Plaintiff compounds the confusion as to the exact meaning of the time frames paragraph 44 alleges by stating that "the individual[s] . . . correctly recognized [] the strike price on October 20, 2003, $60.90, was the lowest price that Apollo's stock traded during the entire 2003 fiscal year." Resp. (Doc. 129) at 21:25, n. 6 (underlined emphasis added). That misstates the individual defendants' position; they did not recognize that $60.90 was the lowest trading price of fiscal year 2003. Indeed, Apollo's stock chart shows that during fiscal year 2003 the trading price for its stock fell well below $60.90 to a low of $40.10 on December 13, 2002. See Farrell Decl'n (Doc. 125), exh. 20 thereto at 26. Instead, as defendants already clarified, and as Apollo's stock chart reflects, that $60.90 was "purportedly . . . the low for fiscal year 2004[.]" Defs'. Mot. (Doc. 120) at 5:16 (bold emphasis added).

Paragraph 44's allegation that Apollo stock traded "as high as $97.93 per share in the [sic] 2003 []" adds yet another layer of confusion. See SAC (Doc. 112) at 19:4-5, ¶ 44 (emphasis added). Regardless of whether that allegation is referring to the 2003 fiscal or calendar year, still, it does not comport with Apollo's stock chart. Scrutinizing that chart reveals that $97.93 per share was the high for fiscal year 2004. See Farrell Decl'n (Doc. 125), exh. 20 thereto at 33. As already mentioned though, paragraph 44 does not refer to the year 2004 in any form. Indeed, the SAC limits its specific allegations of backdating stock options to the years from 1998 — 2001, inclusive, and the October 20, 2003 grants. The foregoing makes the SAC's references to $97.93 per share all the more perplexing. Defendants strongly insinuate that plaintiff had some nefarious motive in making the allegations in paragraph 44; but it strikes the court that those allegations are nothing more than the product of inexact pleading.

In sum, the Apollo stock chart confirms that contrary to the SAC's allegations: (1) $60.90 per share was not the "low for the entire year[]" of 2003 — whether read as a fiscal or calendar year; and (2) Apollo's stock price did not trade "as high as $97.93 per share in . . . 2003 []" — again, whether for that calendar or fiscal year. See SAC (Doc. 112) at 19:3-4 (emphasis omitted). Thus, due to the timely filing of Form 4s for each of the alleged October 20, 2003 grants, and the factual inaccuracies in paragraph 24 detailed above, the court disagrees with plaintiff; the 2003 grant allegations do not "further support an inference of scienter with respect to defendants' backdating[]" — either from a legal or a factual standpoint. See Resp. (Doc. 129) at 23:8-9. Accordingly, plaintiff cannot, as it is seeking to do, rely upon the October 20, 2003 grants "as a circumstance contributing to a strong inference of scienter[.]"⁹ See id. at 20:13.

9 It is possible to construe the SAC as alleging an independent claim of backdating based upon the October 20, 2003 grants. Plaintiff disavows that construction though, as indicated above. Presumably this allays Apollo's concern that "Plaintiff is attempting to resuscitate a claim of fraud based on alleged backdating of the five time-barred grants[.]" See Apollo Mot. (Doc. 122) at 7:27 n. 12.

B. Backdating Allegations

Reasoning that because "`backdated' stock option grants[]" are "a necessary predicate to all of Plaintiff's claims," and because the SAC does not allege "particular facts to support its conclusion that Apollo `backdated' stock option grants[,]" defendants argue that dismissal is mandated. Apollo Mot. (Doc. 122) at 13:18-20 (emphasis added); see also Defs'. Mot. (Doc. 120) at 7:26-27 (dismissal is proper because the SAC does not "plead necessary facts . . . to establish that the six grants were suspicious[]"). In making this argument, defendants claim that the SAC's backdating allegations are "rife with errors[.]" Apollo Reply (Doc. 132) at 3:6.

Plaintiff's first response to these defense arguments is to distance itself from the backdating aspect of this action. Plaintiff stresses that "[a]s [it] [has] made clear[,] this case is based on defendants' knowingly false and misleading statements about Apollo's financial results and stock option granting practices." Resp. (Doc. 129) at 2010-12 (citations omitted). Plaintiff thus maintains that in Apollo I, this court "correctly analyzed backdating as contributing to a strong inference of scienter, not an independent claim[,]" and that [n]othing in the [SAC] changes th[at] analysis." Id. at 20:12-14 (citation omitted); and at 20:26. In light of the foregoing, by challenging the sufficiency of the SAC's backdating allegations, plaintiff asserts that defendants "appear intent on repeatedly advancing rejected theories." Id. at 19:22 (emphasis added). Plaintiff thus objects to what it views as "renewed attacks on issues this Court has already decided, and . . . issues that were previously raised[.]" Id. at 19:15-16; and 19:18 (emphasis added).

As plaintiff strongly implies, with a few exceptions not applicable here, the law of the case doctrine precludes consideration of previously resolved issues. That doctrine "posits that `when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case[.]'" United States v. Park Place Assoc., Ltd., 563 F.3d 907, 918 (9^th Cir. 2009) (quoting Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983)); see also United States v. Phillips, 367 F.3d 846, 856 (9^th Cir. 2004) (footnotes omitted) (emphasis added) ("The law of the case doctrine precludes a court from reconsidering an issue that it has already resolved. Issues that a district court determines during pretrial motions become law of the case.")

The law of the case doctrine is not as all encompassing as plaintiff urges, however. It does not preclude a court from subsequently addressing issues that were merely raised before, but not resolved. "For a prior ruling to become law of the case as to a particular issue, that issue must have been decided explicitly or by necessary implication in the previous disposition." Park Place, 563 F.3d at 925 (citations and quotation marks and alteration omitted). Likewise, the "`law of the case' does not apply to issues or claims that were not actually decided." Mortimer v. Baca, 594 F.3d 714, 720 (9^th Cir. 2010) (citations and internal quotation marks omitted) (emphasis added).

This court held in Apollo I that the five specifically pled grants in the FAC were time-barred. Apollo I, 633 F.Supp.2d at 782 n. 4. Therefore, the court did not address various defense arguments such as the lack of specificity as to the FAC's "roughly 100 unidentified grants[,]" or issues as to the measurement standards for the five grants identified therein. See Apollo I, 633 F.Supp.2d at 782 n. 4. Thus, the law of the case doctrine does not preclude the court from now resolving those previously raised but unresolved defense arguments.

Bolstering that conclusion is the fact that the operative complaint now is the SAC, the filing of which this court expressly permitted in Apollo I. See Apollo I, 633 F.Supp.2d at 834. Although they are similar, there are important differences between the Apollo I complaint and the SAC. One, as already discussed, is the addition of the October 20, 2003 grant date. InApollo I, the court accepted at face value the accuracy of the FAC's allegations pertaining to the five grant dates therein. The ambiguous, inconsistent and sometimes erroneous allegations of the October 20, 2003 grants, however, has magnified the court's concern, inter alia, regarding the factual accuracy of allegations as to those same five grant dates.

Moreover, despite the slight shift in focus from the FAC, the allegations in the SAC show that a critical part of the alleged fraudulent scheme is backdating.¹⁰ The SAC explicitly alleges three "circumstances" where "stock option manipulation," i.e., backdating, is "fraudulent[,]" and that "[a]ll three . . . circumstances existed here." SAC (Doc. 121) at 2:18-19; and 2:22-23. Indeed, the SAC goes so far as to specifically allege that "defendants' manipulation of Apollo's stock option grants was the linchpin of a broader fraudulent scheme[.]" Id. at 2:26-27, ¶ 6 (emphasis added). As the SAC makes abundantly clear, there are several aspects to the alleged fraudulent scheme and backdating is an integral part of that scheme. Thus, "[b]ecause a § 10(b) claim alleges fraud, Plaintiff[] must plead with particularity the circumstances constituting the fraud[,]'" including, in this case, backdating which is a critical part of the alleged fraudulent scheme. See In re Washington Mutual Securities Litig., 649 F.Supp.2d 1192, 1207 (W.D.Wash. 2009) (quoting FED.R.CIV.P. 9(b)). Accordingly, the court will examine the sufficiency of the SAC's backdating allegations because: (1) the operative complaint here differs from that in Apollo I; (2) the issues which these motions now raise were not actually decided in Apollo I; (3) backdating is a critical component of the SAC's alleged fraudulent scheme; (4) and the factual inaccuracies in the October 20, 2003 grant allegations mandate closer examination of the other five grant date allegations.

10 The "crux of the fraudulent scheme" in the FAC "was a practice whereby defendants intentionally manipulated stock option grants to [Apollo's] officers, directors and employees in order to provide the recipients with a more profitable exercise price and to under-report [Apollo's] expenses and thereby overstate [Apollo's] earnings." FAC (Doc. 71) at 1:10-13, ¶ 2. Slightly shifting the emphasis, the SAC now alleges that "the crux of the fraudulent scheme was a practice whereby defendants overstated Apollo's earnings and income by failing to report compensation expenses associated with granting in-the-money stock options, which had been intentionally manipulated in order to provide the recipient with a more profitable exercise price." SAC (Doc. 112) at 1:9-12, ¶ 2 (emphasis added).

Defendants offer several reasons as to why the specific grant allegations are insufficient. Some of those reasons pertain to a lack of facts and others pertain to purported errors in the facts as alleged. Significantly, plaintiff offers very little substantively to refute any of defendants' arguments, as will quickly become evident.

1. Measuring Standards

Defendants contend that the SAC uses inconsistent measuring standards "because use of consistent [ones] would undercut Plaintiff's case by showing that not all of the [alleged] grants had positive returns[.]" Apollo Reply (Doc. 132) at 3:10-11 (citation omitted).

The SAC, in calculating the return for the six identified grants, does employ three different return dates. For the 1998 grants, it uses a ten day return; for the 2003 grants, it uses a two day return;¹¹ and for the other four grants, it uses a five day return. SAC (Doc. 112) at ¶¶ 39-44. This lack of internal consistency is troubling. If the SAC had used the same five day return for the December 18, 1998 grants as it did for the other pre-SOX grants, the result would have been a "5 day return" of nothing — $0.00. That is because, as Apollo's stock price reflects, its stock price closed at the exact same price — $11.39 — on December 18, 1998 and five trading days later, on December 28, 1998. See Farrell Decl'n (Doc. 125), exh. 20 thereto at 6. Similarly, given that the October 20, 2003 grants were post-SOX, plaintiff's choice of a two day return does not seem coincidental; but use of a ten or two day return would also undercut plaintiff's backdating theory because it would provide returns after the filing of the Form 4s. The court thus finds that plaintiff's "choice of comparison dates and prices is inconsistent and therefore arbitrary." See Nach v. Baldwin, 2008 WL 410261, at *6 (N.D.Cal. Feb. 12, 2008) (variously comparing grants with stock prices ten days later; six and five months later and one month later).

11 Use of a two day return date for those 2003 grants is fully consistent with the fact, as explained herein, that by that time SOX had been enacted, almost, but not completely eliminating the possibility of backdating.

Even if the SAC had used the same five day return for all six grants, without any explanatory allegations, it would be problematic. Cf. Hansen, 527 F.Supp.2d at 1156 (citation omitted) ("Plaintiff does not explain why a higher stock price on the tenth day after a stock option grant date is significant, or how it gives rise to a strong inference of scienter.") The use of two, five or 10 day returns is all the more questionable given the SAC's allegation that "Apollo's stock options typically vested over a four year period." SAC (Doc. 112) at 20:9, ¶ 46; see In re Finisar Deriv. Litig., 2009 WL 3072882, at *12 (N.D.Cal. Sept. 22, 2009) ("Finisar II") (use of a 20 day return was "uninformative" in part because it was "untethered to any realistic scenario of exercising the options[]"). The seeming arbitrariness or selective nature of those dates is heightened because the SAC's representative sampling of grants is so small.

Plaintiff's silence on the issue of inconsistent measurements is deafening. "By failing to at least meaningfully summarize and combat" this sound defense argument, plaintiff has "essentially abdicated [its] responsibility to rebut defendants' dismissal arguments, and conceded th[is] point." See In re Bare Escentuals, Inc. Sec. Litig., 2010 WL 3893622 (N.D.Cal. Sept. 30, 2010).

2. Lack of Other Grant Date Allegations

Quoting from the Restatement, the SAC alleges that "`57 of the 100 total grants made [between FY94 and September 2006] used incorrect measurement dates for accounting purposes.'" SAC (Doc. 112) at 13:8-9, ¶ 37. The SAC further alleges that "[w]hile many of these grants were not publicly reported, several¹² grants reported in Apollo's Forms 10-K had purported grants dates so improbable that backdating is the only plausible explanation."Id. at 13:10-12, ¶ 38. Defendants challenge the fact that, aside from the six grants discussed herein, the SAC does not include any allegations as to the 94 other grants which are the subject of the Restatement. Instead the SAC relies upon only six grants (one of which the court has now found was not backdated). Defendants thus claim that plaintiff engaged in "cherry-pick[ing]," relying upon only a few selected grants to allege backdating. See Apollo Mot. (Doc. 122) at 9:6.

12 The FAC had alleged that "some" of those grants had not been "publicly reported[.]" FAC (Doc. 71) at 17:25, ¶ 48.

Plaintiff dismissively replies:

Far from cherry-picking grants, the [SAC] alleges that, between 1998 and 2003, all but one (six out of seven) of Apollo's stock options reported in Apollo's Forms 10-K were backdated . . . This is systematic and considered fraudulent conduct by and for the benefit of Apollo's most senior executives, not `cherry-picking.'

Resp. (Doc. 129) 25:13-17 (citation and footnote omitted). Plaintiff then resorts to claiming that "most" of the 100 grants at issue for purposes of the Restatement "were never publicly disclosed[.]" Id. at 24:20. Plaintiff asserts that "even under the PSLRA, [it] is not required to provide details of improper transactions known only to the defendants." See id. at 25:6-7.

The supposed lack of publicly available grant details would carry far more weight if plaintiff had not ignored at least two other publicly reported grants, which undermine rather than support its backdating theory. To illustrate, as the publicly filed Form 4s indicate, Apollo made grants to defendants Govenar, Norton, Blair and DeConcini on September 10, 2005. See Farrell Decl'n (Doc. 125), exhs. 14-17 thereto. Apollo's stock chart shows that whether using a two, five or ten day "return," as in the SAC, Apollo's stock closed lower, not higher, than that September 10^th grant date. See id., exh. 20 thereto at 39. In fact, the "10 day return" there was a negative 14%. The same is true of the October 22, 2002 grants to defendants Noone, Bachus, Peter Sperling, John Sperling, Nelson and Gonzales. See id., exhs. 1-6 thereto. Under a two, five, or ten day "return" scenario, those stocks closed lower not higher. "The `2 day return' was -2.34%; the `5 day return' was -.14% and the `10 day return' was -2.62%." Apollo Mot. (Doc. 122) at 12:5-6. Defendants surmise, and it certainly appears, that plaintiff deliberately chose to ignore these publicly reported grants because they do not conform to its backdating theory.

Remarkably, once again plaintiff's response is silent as to this argument. Plaintiff concedes in its response that it was aware of one such grant, however. Plaintiff declares that "the [SAC] alleges that, between 1998 and 2003, all but one (six out of seven) of Apollo's stock options reported in Apollo's Forms 10-K were backdated, but the SAC does not include any such allegation. See Resp. (Doc. 129) at 25:13-15 (citing SAC (Doc. 121) at ¶¶ 37-44). Moreover, the SAC is also void of any allegations regarding how many publicly reported stocks there were between 1994 to September 2006. Cf. City of Westland Police and Fire Ret. Sys. v. Sonic Solutions, 2009 WL 942182, at *7 (N.D.Cal. April 6, 2009) ("In the absence of further information as to why these fourteen grants are distinguishable from thousands of other grants made by [defendant], these fourteen grants must be viewed as a small unrepresentative sample of all stock option grants.") "Plaintiff thus appears to focus on a subset of [six] option grants, and . . . fails to explain why this subset is analytically important, and why he has not included data on all grants[,]" including the two other known publicly disclosed grants, "during the relevant time period." See Nach, 2008 WL 410261, at *5. In any event, because plaintiff's response wholly disregards the two publicly reported grants which, defendants have shown, undercut plaintiff's backdating theory, plaintiff has "failed to discharge [its] burden to successfully rebut" defendants' arguments and thus "conceded the point." See Bare Escentuals, 2010 WL 3893622, at *21 and *22.

Returning briefly to the claimed lack of publicly disclosed grant data, plaintiff's cited cases bear no resemblance to the present situation. Hence they do not provide a means to circumvent plaintiff's pleading obligations under either the PSLRA or Rule 9(b). In Pirraglia v. Novell, Inc., 339 F.3d 1181 (10^th Cir. 2003), the Tenth Circuit merely held that plaintiff did not have "to describe in detail documents and paperwork that would presumably be kept, if at all, in [defendant's] private files." Id. at 1193 n. 14. That is far different than the present case where the SAC lacks the necessary specificity to support its backdating allegations, and in fact, disregards available information which detracts that theory. The manufacturer's complaint in United Technologies Corp. v. Mazer, 556 F.3d 1260 (11^th Cir. 2009), contained far more detail than the SAC, to support its claim that the president of the company was acting within the scope of his employment regarding the theft and sale of aircraft blueprints. The Eleventh Circuit also relied upon the fact that plaintiff was "at a clear informational disadvantage."Id. at 1273 (emphasis added). The same cannot be said of the plaintiff herein.

Finally, "Rule 9(b) does not permit a party to make conclusory allegations and then," as plaintiff herein strongly implies, "through the discovery process, gain more specific information and amend its pleadings to satisfy the particularity requirement." See Periguerra v. Meridas Capital, Inc., 2010 WL 395932, at *5 (N.D.Cal. Feb. 1, 2010) (citation omitted). "Allowing Plaintiff[] to conduct discovery in order to comport with heightened pleading requirement[s] applicable to fraud-based claims is directly contrary to the purpose of Rule 9(b); namely, that plaintiff[] show[s] that there is some substance to [its] claim of fraud before subjecting a defendant to the rigors of the discovery process." Id. (citation omitted).

Furthermore, allowing discovery under these circumstances also would contradict the PSLRA's "Stay of Discovery" provision, ¹³ and contravene Congressional intent. That stay provision was "intended to prevent unnecessary imposition of discovery costs on defendants." SG Cowen Sec. Corp. v. U.S. Dist. Court, 189 F.3d 909, 911 (citing H.R. Conf. Rep. No. 104-369, 104^th Cong. 1^st Sess. at 32 (1995), reprinted in 1995 U.S.C.C.A.N. Sess. 731)). The Ninth Circuit has held that the PSLRA's stay of discovery provision "clearly contemplated that `discovery should be permitted in securities class actions only after the court has sustained the legal sufficiency of the complaint.'" Id. at 913 (quoting S.Rep. No. 104-98, at 14 (1995) reprinted in U.S.C.C.A.N. 693 (emphasis added by Ninth Circuit)). By suggesting that it should have access to Apollo grants which were not publicly disclosed to enhance the SAC's allegations, plaintiff is putting the proverbial cart before the horse, at least when it comes to the PSLRA's clear pleading requirements and stay of discovery provision.

13 Under the PSLRA, "all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party." 15 U.S.C. § 78u-4(b)(3)(B).

3. "Lows"

Accepting at face value the truth of allegations in the FAC as to the "lows" for the five grants specified therein, this court found that the alleged dates, "with one exception, appear to reflect at a minimum the lowest price of the month, and in one instance the lowest price for the year." Apollo I, 633 F.Supp.2d at 793 (emphasis added). Especially in light of the factual inaccuracies pertaining to the October 20, 2003 grants, the court has scrutinized Apollo's stock chart in terms of both the backdating and false statement allegations. Apparently plaintiff took some liberties in construing Apollo's historical trading history.

The SAC alleges that the December 18, 1998 grants at "$11.39 per share" were "nearly the low for the month of December[.]" SAC (Doc. 112) at 13:15-16, ¶ 39. As defendants emphasize, however, the stock price was lower the day before, December 17, 1998 at $11.17. Farrell Decl'n (Doc. 125), exh. 20 thereto at 6. The price was also lower on the four trading days after: $10.22 on December 21, 1998; $10.42 on December 22, 1998; $11.28 on December 23, 1998 and $10.89 on December 24, 1998. Id. Apollo's stock was also at $11.39 per share on December 28, 1998 — the fifth trading date after the alleged December 18, 1998 grants.Id. So, as alleged, the December 18, 1998 grant was actually the sixth lowest price of the month. That seems inconsistent with plaintiff's backdating theory. See Finisar I, 542 F.Supp.2d at 989 (an option "dated at the fifth lowest price seem[s] at least equally plausible the result of chance []").

The SAC's allegation that defendants dated the April 19, 1999 grant to defendant Gonzales at $10.22 per share, "the low of the month," SAC (Doc. 112) at 14:23-24, ¶ 40 (emphasis added), creates the inaccurate impression that April 19^th was the only day that month where Apollo stock traded at that price. It was not. Apollo's stock chart shows that its stock actually traded at that price two other times that month — on April 13^th and April 20^th. Farrell Decl'n (Doc. 125), exh. 20 thereto at 8. To be sure, a stock "need not be priced at the lowest price of the month . . . to support an inference of backdating[.]" Finisar I, 542 F.Supp.2d at 992 (citation omitted) (emphasis added). But the allegation that the April 19, 1999 grants were made at "the low of the month," SAC (Doc. 112) at 14:23-24, ¶ 40, "may be misleading because," on two other "instances, the stock traded at the same price" in April, 1999. See City of Westland, 2009 WL 942182, at *7. However, because the SAC relies upon so few specific grants, and some contain factual inaccuracies, this allegation further demonstrates the need for particularity.

4. Stock Price Charts

The stock price charts in the SAC have differing y-axes representing the "Dollars Per Share" price. Compare SAC (Doc. 112) at 14:2-13 with SAC (Doc. 112) at 18:6-17. Based upon the court's observation in Goodman, 595 F.Supp.2d 1253, supra, defendants argue that because of those differing axes, plaintiff is "apparent[ly] `attempt[ing] to `magnify' the depth of the `suspicious' fall and subsequent rise in the share price coinciding with option grants to the defendants." Defs'. Mot. (Doc. 120) at 7:22-23 (quoting Goodman, 595 F.Supp.2d at 1274 n. 10). The plaintiff herein offhandedly remarks "that Apollo's stock option granting history speaks for itself, and is `suspicious' enough on its own." Resp. (Doc. 129) at 23:12-14. Plaintiff does not even bother to address defendants' substantive challenge to the SAC's charts. Especially under these circumstances, this court agrees with theGoodman court's astute observation that "[t]his convenient (but obvious) manipulation of scale — disguising the weakness of the plaintiff['s] claims of suspicious timing — taints the plaintiff['s] allegations." See Goodman, 595 F.Supp.2d at 1275 n. 10.

The court continues to adhere to the view that "lack of a sound financial analysis" is not critical or necessarily dispositive at the pleading stage when backdating is a part of an alleged section 10(b) fraudulent scheme. See Apollo I, 633 F.Supp.2d at 793-794. From closely examining the SAC's six specifically identified grants, however, it is not readily apparent that the backdating allegations therein are not lacking merely due to the "lack of a sound financial analysis[.]" See id. Rather, it is a culmination of pleading deficiencies which compels the conclusion that the SAC's backdating allegations are not plead with the requisite particularity. This is evidenced by internal inconsistencies, ambiguities, and erroneous and misleading factual allegations which do not comport with Apollo's own stock chart. Even if the SAC had adequately plead backdating, nonetheless, as discussed next, it fails to plead falsity with the requisite particularity. Thus, in any event, the SAC cannot withstand these motions to dismiss.

C. "Material Misrepresentations or Omissions" ¹⁴ 1. Pleading Standards

14 For the sake of brevity, hereinafter these claims shall be referred to as "false statements."

A securities fraud plaintiff, as Apollo I discusses, must satisfy Rule 9(b)'s particularity requirements, as well as the PSLRA's "exacting requirements for pleading falsity." Metzler, 540 F.3d at 1070. The court incorporates by reference that prior discussion of particularity pleading standards. See Apollo I, 633 F.Supp.2d at 783-784. Several principles bear repeating and expansion though.

Under the PSLRA's "heightened pleading standard[s][,] . . . `the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." In re Cutera Secs. Litig., 610 F.3d 1103, 1107 (9^th Cir. 2010) (quoting 15 U.S.C. § 78u-4(b)(1)(B)). "Thus, a plaintiff must plead falsity with particularity[.]" Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156, 1164 (9^th Cir. 2009) (citation omitted). Similarly, Rule 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." FED.R.CIV.P. 9(b).

The PSLRA could not be more clear: "If a plaintiff fails to plead the alleged misleading statements or omissions or the defendant's scienter with particularity, the complaint must be dismissed." Nursing Home Pension v. Oracle Corp., 380 F.3d 1226, 1231 (9^th Cir. 2004) (citing 15 U.S.C. § 78u-4(b)(3)(A)). The purpose of those "heightened pleading requirements is `to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.'" Apollo I, 633 F.Supp.2d at 783 (quoting Neubronner v. Milken, 6 F.3d 666, 671 (9^th Cir. 1993) (internal quotations and citation omitted)).

Agreeing with defendants, in Apollo I this court found that plaintiff's false statements were not pled with the requisite particularity in accordance with the principles just outlined. Not only was the FAC "a puzzle-like pleading which the court [could] not countenance[,]" but the FAC's "cut and paste nature" was also "troubling." Apollo I, 633 F.Supp.2d at 786. To this court though, "[p]erhaps the most troubling aspect of the FAC" was "that the `vague allegations of deception' [we]re `unaccompanied by a particularized explanation stating why the defendant's alleged statements or omissions are deceitful." Id. (quoting Metzler, 540 F.3d at 1061 (citation omitted) (emphasis added by Metzler Court). Despite those glaring deficiencies, the court declined to dismiss the FAC based upon its form. Following the Ninth Circuit's "recommend[ation][,]" this court instead "require[d] . . . plaintiff to streamline and reorganize the [FAC][.]" Id. (citations and internal quotation marks omitted). More specifically, the court directed plaintiff to "be clear and concise in identifying the false statements and articulating the factual allegations supporting an inference that the statement is false or misleading." Id. at 786-787 (citation and internal quotation marks omitted)). The SAC's changes in form only highlight the substantive deficiencies of the SAC, though, revealing that it does not plead falsity with the requisite degree of particularity.

. . . 2. Overview of SAC

Plaintiff did reorganize and arguably streamline¹⁵ the FAC. The SAC separately numbers each allegedly false and misleading statement, whereas the FAC did not; but the SAC more than doubles the number of such statements, from 26 to 54. Before enumerating each of those 54 statements, the SAC generally alleges:

15 The SAC itself is 25 pages less than the FAC, but with attached exhibits, it is approximately 500 pages — almost 100 pages longer than the FAC and its exhibits.

Apollo's stock options typically vested over a four year period. Because Apollo was required to take a compensation charge for in-the-money options during each quarter in which such stock options vested, each of Apollo's financial statements detailed herein were false and misleading because of defendants' failure to recognize compensation associated with in-the-money stock options which vested during a given quarter, and which were granted in the four years preceding the quarter of the financial statement.

SAC (Doc. 112) at 20:9-14, ¶ 46. The SAC goes on to group the allegedly false statements into four categories pertaining to: (1) Apollo's "earnings and financial results;" (2) Apollo's "compliance with Accounting Principles Board (APB) 25 and IRS Code § 162(m);" (3) Apollo's "internal controls relating to stock option grants and related financial reporting;" and (4) "denials of backdating[.]" Id. at 20:18-23, at ¶ 47. Apart from the denials of backdating, the other three types of alleged false statements were in Apollo's earnings announcements, Form 10-Ks, Form 10-Qs¹⁶ and SOX certifications.

16 "The primary difference between a form 10-K and a form 10-Q is the time it is filed; a 10-K is filed yearly and a 10-Q is filed quarterly. However, both the 10-K and the 10-Q require the company to disclose information about its financial condition, operations, and the owners of its securities." U.S. v. Jenkins, 2011 WL 208357, at *11 (9^th Cir. Jan. 25, 2011) (citations omitted).

With the exception of the fiscal year 2001 Form 10-K, for the 35 false statements pertaining to Apollo's "earnings and financial results," the SAC follows a distinct pleading pattern. Each such allegedly false statement consists of three subparagraphs.

In the first, the SAC alleges that approximately one month before Apollo filed its Form 10-Qs and Form 10-Ks, it would make "Earnings Announcement[s]" in the form of press releases. See, e.g., SAC (Doc. 112) at ¶¶ 50(a); 61(a); exh. 2 at 686; and exh. 24 at 3-4. Thereafter, the SAC alleges that either a Form 10-Q or a Form 10-K, or both, were filed with the SEC. Those forms "reaffirmed the previously announced financial results[.]" See, e.g., id. at 22:21, ¶ 51(b). The SAC identifies by name the individuals who signed the Form 10-Qs and Form 10-Ks, ¹⁷ but only generically alleges that Apollo issued the earnings announcements. The third part of each "earnings and financial results" allegation is a separate paragraph entitled "Reasons Why the Statement Was False and Misleading[.]" See, e.g., id. at ¶¶ 49(b) (emphasis in original). For 17 of these 35 statements, the SAC relies exclusively upon the Restatement to support its allegations as to why those statements are false. For the other 18 statements, the SAC does not refer to any source in alleging why a given statement was false.

17 The Form 10-Qs were signed by two section 10(b) defendants, Gonzales and Nelson, and defendant Bachus. Those 10-Ks were signed by nine of the 11 individuals, four of whom are section 10(b) defendants.

Apollo's 10-Ks are the source of the second group of alleged false statements — those pertaining to compliance with IRS Code § 162(m)¹⁸ and APB 25.¹⁹ Insofar as compliance with section 162(m) is concerned, the SAC alleges that in Apollo's Form 10-Ks for fiscal years 2002 — 2005:

18 Very basically, that section of the Internal Revenue Code "prohibits a federal income tax deduction to publicly held companies for compensation paid to certain executive officers, to the extent that compensation exceeds $1.0 million per covered officer in any fiscal year." Middlesex, 527 F.Supp.2d at 1174;see also SAC (Doc. 112) at 49:11-13, ¶ 96

19 "Accounting for employee stock options is governed by prescribed methodology and measurement standards." S.E.C. v. Pattison, 2011 WL 723588, at *5 (N.D.Cal. Feb. 22, 2011). The SAC alleges:

Pursuant to [APB] Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), which was in effect through June 2005, [Apollo] was obligated to recognize this gain [from "options . . . priced below a stock's fair market value when they are awarded []"] as compensation expense over the vesting period of the option.

SAC (Doc. 112) at 3:6-10, ¶ 6(a).

Apollo stated that `The company's policy is to comply with the requirements of Section 162(m) and maintain deductibility for all executive compensation, except in circumstances where we conclude on an informed basis that it is in the best interest of the Company and the shareholders to take actions with regard to the payment of executive compensation which do not qualify for tax deductibility.'

Id. at 32:17-21, ¶ 67(a) (quoting exh. 9 thereto at 27). Likewise, in Apollo's Form 10-Ks for fiscal years 2002-2005, as to compliance with APB 25, the SAC alleges:

`The Company applies the recognition and measurement principles of [APB] Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for those plans. Stock-based employee compensation expense is not reflected in the Consolidated Statement of Operation as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.'

Id. at 34:14-19, ¶ 68(b) (quoting exh. 9 thereto at 18).²⁰ The Restatement is the SAC's primary basis for alleging why the statements as to compliance with section 162(m) and APB 25 were false.

20 The statement regarding compliance with APB 25 differed slightly in the fiscal year 2001 Form 10-K:

`The Company applies APB No. 25 and related interpretations in accounting for its stock-based compensation, and has adopted the disclosure-only provisions of SFAS No. 12. Accordingly, no compensation cost has been recognized for these plans.'

SAC (Doc. 112) at 34:7-10, ¶ 68(a) (quoting exh. 1 thereto at 107).

The third category of false statements pertaining to "internal controls relating to stock option grants and related financial reporting" are in the SOX certifications for fiscal years 2002-2005, signed by section 10(b) defendants Nelson and Gonzales. Again, the SAC relies upon the Restatement in alleging why those certifications were false. The fourth category of allegedly false statements comprises a relatively small part of the SAC. The SAC alleges six statements wherein certain defendants denied any wrongdoing as to Apollo's stock option practices. The Restatement is not a basis for alleging why these six statements are false, but the SAC continues the pattern of separately pleading "why" such statements were false.

For analytical purposes, Apollo divides the 54 allegedly false statements into two groups — "accounting statements" (Nos. 1-48) and backdating denials (Nos. 49-54); so, too, will this court.

3. "Accounting Statements"

Together, Apollo and the individual defendants offer a host of reasons as to why the accounting statements are not plead with the necessary degree of particularity. The Restatement is an integral part of most of these defense arguments. Likewise, the Restatement is at the heart of plaintiff's response. This is so even though, as mentioned at the outset of this section, not all of the accounting statements rely upon the Restatement as the source for alleging falsity. Overlooking that fact, viewing the Restatement as "an admission that [Apollo's] reported financial results . . . were false and misleading when made[,]" plaintiff maintains that the SAC "alleges falsity with particularity." Resp. (Doc. 129) at 11:3-5 (citation omitted); and at 10:10 (emphasis omitted). The defendants did not directly address the issue of whether the Restatement is an admission of falsity. Instead, essentially they argue, among other things, that the SAC does not allege falsity with the requisite particularity due to a lack of allegations showing a sufficient nexus between the Restatement and the purportedly false accounting statements.

The court will address these Restatement arguments momentarily, but first it will examine the SAC's allegedly false statements which undermine rather than advance plaintiff's fraud theory herein.

a. Fiscal Year 2004 Understatement

The "crux of the fraudulent scheme[,]" according to the SAC, is that "defendants overstated Apollo's earnings and income by failing to report compensation expenses associated with granting in-the-money stock options," which in turn led to "an artificial inflation of [Apollo's] stock[.]" SAC (Doc. 112) at 1:9-11; and 16, ¶ 2 (emphasis added). Nonetheless, as to Apollo's fiscal year 2004 Form 10-K and its related "Earnings Announcement," the SAC alleges that Apollo "misstated" rather than overstated its net income and earnings per share and compensation expenses. Id. at 28:13-28-29:1-3, ¶¶ 61(a)-(c). Allegedly, that misstatement was "as a result of Apollo's failure to account for compensation and tax expenses associated with stock options priced below the fair market value of Apollo's common stock on the date of the grant."²¹ Id. at 29:16-19, ¶ 61(c).

21 The other 34 accounting statements include this exact same allegation. See, e.g., SAC (Doc. 112) at ¶¶ 49(b); and 54(c).

To be compatible with the SAC's theory of fraud quoted above, however, the "misstatement" would necessarily have to be an overstatement. The SAC explicitly refers to overstatements, understatements and misstatements, so presumably plaintiff knew the difference and intended to distinguish among them.

Moreover, the SAC also alleges that the Restatement "admits" that Apollo's net income was "understated . . . during FY04 due to Apollo's failure to properly account for in-the-money stock option grants." Id. (emphasis added). This understatement allegation makes no sense if, as the SAC explicitly alleges, a critical aspect of the purported "fraudulent scheme" was overstating earnings. See id. at ¶ 2. Thus the court agrees with Apollo that an understatement of net income is "incompatible" with the plaintiff's fraud theory as the SAC defines it. See Apollo Mot. (Doc. 122) at 16:3.

Plaintiff ignores the argument that the allegations outlined above do not comport with plaintiff's theory of fraud set forth in the SAC. As to the alleged understatement of net income, plaintiff weakly counters that such an understatement "could merely have been caused by the cancellation of previously issued backdated stock options." Resp. (Doc. 129) at 16:4-5. This is pure, unpled conjecture. The SAC does not allege how understating net income could have been part of an alleged "fraudulent scheme" to "overstate[] Apollo's earnings and income by failing to report compensation expenses associated with granting in-the-money stock options[.]" Id. at 1:9-11, ¶ 2; cf. McCasland v. Formfactor Inc., 2009 WL 2086168, at *8 (N.D.Cal. 2009) (SAC did not plead scienter where it did not "advance any persuasive theory of how understating gross margins and earnings could have been part of defendants' fraudulent scheme[]" to "deliberate[ly] understate[] . . . the costs of revenue and overstate[] . . . gross margins[]"). It defies logic that Apollo would intentionally understate its net income as part of a scheme to artificially inflate its stock price. That, combined with the fact that the SAC does not allege how a misstatement of net income supports a fraudulent theory to overstate net income warrants granting defendants' motion to dismiss insofar as it is premised upon false statements No. 24 (¶ 61(a)) and No. 25 (¶ 61(b)).²² False statements 24 and 25 can be dismissed for the additional reason that although they rely upon the Restatement as the sole basis for alleging falsity, as discussed herein, the SAC does not adequately correlate the Restatement to these allegations, among others.

22 Because there is no correlation between the SAC's paragraphs and the number of a given alleged false statement, for clarity's sake this decision will cite to both.

b. Overstatement of Compensation Expenses

The false statements discussed in the preceding section are not the only allegedly false statements directly contradicting plaintiff's theory of securities fraud as pled in the SAC. The SAC alleges that Apollo's Form 10-K for fiscal year 2005, its Form 10-Q for the first quarter of fiscal year 2002, and their corresponding earnings announcements, overstated both Apollo's net income and its compensation expenses. See id. at ¶ 65(c).²³ Supposedly the Restatement "admits" that "Apollo's net income was overstated by $6.4 million, or 1.5%, during FYO5 due to Apollo's failure to properly account for in-the-money stock option grants." Id. The SAC does not allege, however, the amount of the overstatement in this particular Form 10-Q.

23 More specifically, paragraph 65(c) alleges that the preceding statements were:

false and misleading because they overstated Apollo's net income and earnings per share and Apollo's compensation expenses as a result of Apollo's failure to account for the compensation and tax expenses associated with stock options granted at a price below the fair market value of Apollo's common stock on the date of the grant.

SAC (Doc. 112) at 31:17-20, ¶ 65(c) (emphasis added); at 22:9-12, ¶ 50(c) (same).

Much like the alleged 2004 understatement of net income, there is nothing in the SAC alleging how an overstatement of a compensation expense could result in an increase in net income, and the court is at a loss as to how this could be so. "Logically, such [an] overstatement [of compensation expenses] would mean that the price of [Apollo] stock purchased by Plaintiff[] was deflated rather than inflated." See Kelly v. Rambus, Inc., 2008 WL 5170598, at *5 (N.D.Cal. Dec. 9, 2008). What is more, plaintiff's response is conspicuously silent on this issue as well. The PSLRA's stringent standard for pleading falsity is not met absent "specific facts indicating why those statements were false[.]" See Metzler, 540 F.3d at 1070 (citation omitted) (emphasis added). These bare allegations as to misstatements of net income, an understatement of net income in 2004, and an overstatement of compensation expenses which are facially inconsistent with the SAC's fraud theory, vividly show the need for "`articulating the factual allegations supporting an inference that the statement is false or misleading.'" See Apollo I, 633 F.Supp.2d at 786-787 (quotingPatel v. Parnes, 253 F.R.D. 531, 554 (C.D.Cal. 2008) (internal quotation marks and citation omitted)).

Statement number three pertaining to the 10-Q for the first quarter of fiscal year 2002 is lacking in particularity for the additional reason that it does not allege the amount of the purported overstatement. See Hansen, 527 F.Supp.2d at 1153 (citations omitted) (plaintiff insufficiently plead financial statements were false and misleading where, inter alia, the complaint did not allege "the amount by which th[ose] . . . statements were misstated[]"). Accordingly, the court grants defendants' motion to dismiss to the extent it is premised upon a failure to plead falsity with particularity as to false statements Nos. 2-3 (¶¶ 50(a)(b); and Nos. 32-33, (¶¶ 65(a)(b)).²⁴ c. Misstatements

24 Plaintiff's reliance upon the Restatement, especially the method by which it calculated the amounts of the alleged overstatement, as explained herein, provides another reason for dismissing false statements 32 and 33.

The SAC also alleges that four 10-Qs, and their corresponding earnings announcements, were false and misleading because they "misstated Apollo's net income and earnings per share and Apollo's compensation expenses as a result of Apollo's failure to account for compensation and tax expenses associated with stock options granted at a price below the fair market value of Apollo's common stock on the date of the grant." See SAC (Doc. 112), at ¶¶ 58(a)-(c); ¶¶ 59(a)-(c); ¶¶ 60(a)-(c); and ¶¶ 66(a)-(c) (emphasis added). Once again, because plaintiff's fraud theory is premised upon Apollo's overstatement of earnings and income, on the face of it, these misstatement allegations do not support that theory. See id. at ¶ 2. What is more, the SAC also does not include the amount of those purported misstatements. As set forth above, that omission is legally significant. See Hansen, 527 F.Supp.2d at 1153. For both of these reasons, the court grants defendants' motions to dismiss to the extent that it is premised upon false and misleading statements Nos. 18-23 (¶¶ 58(a)(b); ¶¶ 59(a)(b); ¶¶ 60(a)(b); and Nos. 34-35 (¶¶ 66(a)(b)).

d. Restatement

Paragraph 48 aside, ²⁵ the SAC expressly relies upon the Restatement to plead why slightly more than half (or 28 of 48) of the accounting statements were false. For example, the SAC alleges that in Apollo's 10-Ks for fiscal years 2001-2005, and in its 10-Qs for fiscal year 2005, the "restatement admits" overstating or, in one instance, understating Apollo's net income. See, e.g., SAC (Doc. 112) at ¶ 49(b). Some courts have found, as plaintiff urges, "that the mere fact that financial results are restated is sufficient at the pleading stage to establish that the results were false when originally made."Beaver County Retirement Bd. v. LCA-Vision Inc., 2009 WL 806714, at *16 (S.D.Ohio March 25, 2009) (citations omitted); see also In re Enron Corp. Sec. Litig., 2010 WL 5100809, at *25, n. 25 (W.D.Tex. Dec. 8, 2010) (citing, inter alia, In re Atlas Air Worldwide Holdings, Inc. Sec. Litig., 324 F.Supp.2d 474, 486-87 (S.D.N.Y. 2004) ("[a]lthough a restatement is not an admission of wrongdoing, the mere fact that financial results were restated is sufficient basis for pleading that those statements were false when made."), citing In re Cylink Sec. Litig., 178 F.Supp.2d 1077, 1084 (N.D.Cal. 2001) ("existence of restated financial results is sufficient to support plaintiff's belief that the statements were misstated[]"); but see In re Atlas Mining Co. Sec. Litig., 670 F.Supp.2d 1128, 1133-1134 (D.Idaho 2009) (rejecting plaintiffs' theory that "a restatement of audited financial statements constitutes an admission of falsity and materiality[,]") (citing In re Metawave Communications Corp. Sec. Litig., 298 F.Supp.2d 1056, 1079 (W.D.Wash. 2003) ("Plaintiff's contention that Metawave's restatement is an admission that Defendants issued false and misleading financial reports is without merit."))

25 The FAC did not include any allegations as to the purported import of the Restatement, but the SAC does. The SAC generally alleges:

Apollo's May 22, 2007 restatement is an admission that the Company's previously filed and announced financial statements alleged herein were materially false and misleading. A restatement admits that previously filed financial statements were materially false when they were issued. The restatement means that facts existed and were known to [Apollo] at the time the financial statements were issued that rendered them false.

SAC (Doc. 112) at 20-21, ¶ 48 (emphasis added). Additionally, as discussed herein, the Restatement is the sole basis for alleging falsity as to a number of the SAC's false statements ( i.e., 28).
Whether the Restatement is an admission is a legal conclusion, as discussed above. Legal conclusions couched as factual allegations "are not entitled to the assumption of truth,"Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009), and therefore are "`insufficient to defeat a motion to dismiss for failure to state a claim,'" In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9<sup>th</sup> Cir. 2010) (citation omitted). As such, this court is "`not bound to accept as true'" those "`legal conclusion[s] couched as . . . factual allegation [s][.]'" Iqbal, 129 S.Ct. at 1950 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965 (2007)); see also Freedman v. Louisiana-Pac. Corp., 922 F.Supp. 377, 392 (D.Or. 1996) (internal quotation marks omitted) (striking paragraph alleging "a legal conclusion regarding the existence and scope of defendants' duty to disclose" information "that would materially affect the present and true financial operating results"). Indeed, "merely alleg[ing] [those] legal conclusion [s]" only "confuses the issues." See Freedman, 922 F.Supp. at 396. Thus, in resolving these motions, the court will disregard paragraph 48 to the extent it contains legal conclusions as to the import of restatements generally or Apollo's Restatement in particular.
The court hastens to add that given the broad nature of paragraph 48, and the lack of "further factual enhancement [s][,]" Iqbal, 129 S.Ct. at 1949 (citation and internal quotation marks omitted), even if the court were to consider that paragraph, the result would not change here. That is because, as explained herein, the SAC still does not allege falsity with sufficient particularity.

Even assuming arguendo that Apollo's Restatement is an admission that certain accounting statements were false when made, that assumption cannot cure the SAC's failure to plead falsity with particularity. The lack of particularity primarily arises from the manner in which the SAC relies upon the Restatement. It is not enough to simply allege that a given statement is false and misleading and then baldly rely upon a restatement. Rule 9(b) and the PSLRA demand more. That is especially so here where the Restatement does not always support the SAC's allegations and, on its face, the correlation between the Restatement and the false statements is fairly attenuated.

The SAC includes a nine page, single spaced, block quote from the Restatement. Only a few aspects of the Restatement factor into the court's analysis at this juncture. Quoting directly from the Restatement, the SAC alleges that Apollo "determined that 57 of the 100 total grants made during this time period [i.e., "fiscal year 1994 through September 2006"] used incorrect measurement dates for accounting purposes." SAC (Doc. 112) at 44;see also Farrell Decl'n (Doc. 126), exh. 19 thereto at 3 (same). Continuing to quote directly from the Restatement, the SAC alleges that "revised measurement dates were selected for many grants and resulted in exercise prices that were less than the fair market value of the stock on the most likely measurement dates." Id. Consequently, as the Restatement indicates and the SAC alleges, Apollo "recorded pretax compensation expense of $52.9 million ($59.9 million after-tax) in the aggregate over the fiscal years 1994 through 2005." Id.

In arguing that the SAC does not plead falsity with particularity, Apollo contends that it "does not allege which portion of the restatement relates to allegedly backdated grants." Apollo Mot. (Doc. 122) at 14:14-15. Or, as the individual defendants put it, the SAC does not "draw a nexus between the option grants [it] [is] challenging in this action' and the additional compensation expenses recognized in the Restatement." Defs'. Mot. (Doc. 120) at 10:5-8 (citation and internal quotation marks omitted). Nor, Apollo argues, does the SAC allege "which part [of the restatement] pertained to accounting errors and conduct during the class period." Apollo Mot. (Doc. 122) at 14:20-21 (emphasis omitted). In sum, "[p]laintiff makes no effort to plead properly (because it cannot) that the alleged falsehood actually arose from the wrongdoing alleged in the SAC." Defs'. Mot. (Doc. 120) at 2:18-19. Defendants thus argue that they lack "notice of the particular misconduct which is alleged to constitute the fraud charged." See Apollo I, 633 F.Supp.2d at 783 (citation and internal quotation marks omitted).

Emphasizing that it "has never claimed that the entirety of Apollo's restatement was caused by" the six options which the SAC identifies, plaintiff retorts that "the fact that the [SAC] only identifies [those] six specific backdated grants does not make defendants' statements any less false." Resp. (Doc. 129) at 14:14-15; and at 14:12-13 (citation omitted). This is not responsive to defendants' lack of particularity and lack of notice arguments.

As Apollo points out, and plaintiff disregards, the SAC is void of any allegations regarding "how much of the $52.9 million restatement resulted from allegedly backdated grants — much less the six grants at issue" herein. Apollo Mot. (Doc. 122) at 14:26-28. Exacerbating that omission is, as the SAC alleges, the fact that the Restatement spanned 12 years, yet plaintiff did not plead how much of that "12-year adjustment pertained to accounting errors that occurred during the class period [,]" i.e., between November 28, 2001 and October 18, 2006. Id. at 15:2-3 (emphasis in original). That is a significant pleading omission because the Restatement indicates that $31.8 million of the $52.9 million pre-tax adjustment — or about 60% — pertained to fiscal years 1995 through 2001, which ended on August 31, 2001 — nearly three months prior to the commencement of the class period. See Farrell Decl'n (Doc. 126), exh. 19 thereto at 56. Necessarily then, by Apollo's estimation, 60% of the Restatement "applies to pre-class period financials, and . . . relates to options granted well before the beginning of the class period." See Apollo Mot. (Doc. 122) at 15:6-8.

Of course, because allegedly "Apollo's stock options typically vested over a four year period[,]" SAC (Doc. 112) at 20:9, ¶ 46, conceivably there could have been accounting and tax consequences during the class period although the grants were made prior thereto. Rather than undermining Apollo's argument, this only highlights the SAC's lack of particularity in failing to correlate any backdated stock options — much less the grants which the SAC identifies — to Apollo's purported failure to properly account for compensation expenses. See In re PMC-Sierra, Inc., 2007 WL 2427890, at *5 (N.D.Cal. Aug. 22, 2007) ("the fact that PMC . . . admitted to erroneously record[ing] some option grant dates d[id] not create an inference that the challenged options were intentionally and fraudulently backdated[]" where plaintiffs did not "draw[] [any] nexus between the option grants they [we]re challenging . . . and PMC's `admission'").

Further, due to the four year vesting period, the largest adjustment of slightly more than 28 million dollars for fiscal year 2001, apparently resulted from options granted prior to the class period. See RJN (Doc. 126), exh. 19 thereto at 56. The same is true, but to a much lesser extent, of the nearly 22.8 million dollar adjustment for fiscal year 2002. While the bulk of that adjustment was within the class period ( i.e., approximately 10 months), not all of it was.

Without regard to the foregoing, plaintiff contends that the SAC "clearly identifies why [Apollo's] financial statements were false and misleading[]" in that they "overstated Apollo's net income and understated Apollo's compensation expenses as a result of Apollo's failure to account for compensation and tax expenses associated with stock options priced below the fair market value of Apollo's common stock on the date of the grant." Resp. (Doc. 129) at 11:9-13 (citations omitted). With a few slight variations, the SAC alleges that the just quoted statement is the reason "why" every one of the 35 alleged earnings releases and financial filings is purportedly false. Rote repetition of that conclusory allegation does not satisfy the PSLRA's particularity requirement. See In re Ferro Corp., 2007 WL 1691358, at *20 (N.D. Ohio June 11, 2007) ("because the `substance of why' amount[ed] to little more than a repetitive series of vague, redundant, and conclusory allegations[,]" plaintiff "did not me[e]t its burden under the PSLRA of establishing that the challenged statements were false or misleading because the SAC lacks the requisite particularity as a matter of law[]"). Although the form has changed, plaintiff did not cure what this court previously found to be "[p]erhaps the most troubling aspect of the fact" — "the `vague allegations of deception' [were] "unaccompanied by a particularized explanation stating why the defendant's alleged statements or omissions [we]re deceitful." Apollo I, 633 F.Supp.2d at 786 (quoting Metzler, 540 F.3d at 1061 (citation omitted)).

The fact, as plaintiff mentions, that the SAC "details, wherever possible, the exact amount of net income overstated[]" does not rectify the SAC's lack of particularity. Resp. (Doc. 129) at 11:14. The difficulty arises because close scrutiny of the alleged "details" and the Restatement, which is the basis for those "details," shows several discrepancies and inconsistencies.

To show that the SAC provides details, plaintiff refers to paragraph 49(b) wherein it alleges that Apollo's fiscal year 2001 Form 10-K was false because as the "restatement admits, Apollo's net income was overstated by $20.5 million, or 23.6%, during FY01 due to Apollo's failure to properly account for in-the-money stock option grants." SAC (Doc. 112) at 21:18-19, ¶ 49(b). The SAC includes three nearly identical allegations pertaining to the 10-Ks for fiscal years 2002, 2003 and 2005, but with differing amounts. The SAC claims that "[a]s Apollo's [R]estatement admits . . . Apollo's net income was overstated" by the following amounts: (1) $17.2 million or 12% in fiscal year 2002; (2) $11.1 million or 4.7% in fiscal year 2003; and (3) $6.4 million or 1.5% in fiscal year 2005. Id. at 24:7-9, ¶ 53(c); at 26:20-22, ¶ 57(c); and at 31:20-22, ¶ 65(c).

Although the SAC includes numbers, as Apollo convincingly argues, plaintiff's method of calculating those dollar amounts and percentages "demonstrates a failure to plead fraud with particularity[.]" Apollo Mot. (Doc. 122) at 17:18. This is yet another defense argument which, for the most part, plaintiff chose to ignore.

Alleging that the "[R]estatement admits" that Apollo's net income was overstated by the dollar amounts just enumerated, leaves the impression that those amounts are actually in the Restatement. Tellingly, though, the SAC does not cite to any specific part of the roughly 500 page Restatement as the basis for those amounts. "[T]he only possible source" for those amounts, as Apollo points out and plaintiff does not dispute, is a chart in the Restatement entitled "Summary of Impact Restatement Adjustments[.]" See Apollo Mot. (Doc. 122) at 17:27, n. 24. Comparing that chart to the SAC's allegations of net income overstatements, as Apollo did, demonstrates that plaintiff inconsistently calculated those amounts, resulting in a lack of particularity.

For fiscal years 2001, 2002 and 2005, plaintiff arrived at the net income overstatement amounts by adding three line items — "Share Based Compensation Expense[s,]" "Income Tax Provision (Benefit) — Related to Share Based Compensation Expense" and "Tax Effect of 162(m) Limitation[.]" See id. at 17:1-3; see also RJN (Doc. 126), exh. 19 thereto at 56. In calculating the net income overstatement for 2003 and the understatement for 2004, however, besides those three categories, plaintiff included "Bad Debt Expense[s,]" "Other Adjustments[,]" and "Penalty and Interest on Exercises[.]"Id. Plainly, the adjustments for bad debt expenses and the unspecified "Other Adjustments" are irrelevant here.

Additionally, if plaintiff had used the same three factors for its 2003 and 2004 calculations as it used for fiscal years 2001, 2002 and 2005, as Apollo asserts, it would have "yield[ed] a much smaller overstatement of net income in 2003 (2.1% versus 4.7% claimed in the SAC) and a much larger understatement of net income in 2004 (2.8% versus 0.8% claimed in the SAC)." Id. at 17:20-22 (emphasis in original). Thus, Apollo argues, the SAC "uses inconsistent measuring standards, which exaggerate the impact of the Restatement[,]" hence "demonstrat[ing] a failure to plead fraud with particularity[.]" Id. at 16:7-8 (emphasis omitted); and at 17:18.

Plaintiff does not deny using the method Apollo suggests to calculate these dollar amounts. Included in a footnote, plaintiff even "agrees that . . . bad debt expenses do not appear to be the result of Apollo granting options below fair market value." Resp. (Doc. 129) at 16:26, n. 5. Presumably then, plaintiff also agrees that the SAC improperly relies upon such expenses in alleging the amount by which the Restatement purportedly "admitted" to understating net income in fiscal year 2004 and overstating net income in 2005. Regardless, plaintiff further remarks in passing that "the inclusion of th[o]se [bad debt expense] numbers does not provide a basis for dismissal." Id. at 16:26-27, n. 5 (citingManiscalco v. Brother Int'l Corp., 627 F.Supp.2d 494, 497 n. 1 (D.N.J. 2009)).

The court cannot overlook the SAC's inclusion of those bad debt expenses as a means of finding particularity where none exists. First, even if the court were inclined to disregard those bad debt expenses, the SAC still relies upon "other adjustments" in the Restatement which on the face of it are unrelated to the alleged fraudulent accounting scheme. Second, neither the court nor the defendants should be expected to recalculate (or second-guess) the amounts which the SAC alleges to bring those amounts into conformity with the Restatement. That would entirely defeat the "notice pleading . . . theory of Rule 8(a) and of the federal rules in general[.]" See Starr v. Baca, 2011 WL 477094, at *10 (9^th Cir. Feb. 11, 2011).

Third, although plaintiff attempts to liken this case toManiscalco, there are fundamental differences between that case and the present one rendering Maniscalco wholly inapposite. There, purchasers brought a putative class action against a printer manufacturer alleging violations of the New Jersey Consumer Fraud Act and unjust enrichment. The Maniscalco complaint alleged one purchase date, which "[p]laintiff's counsel represent[ed] . . . was a "typographical error[.]" Maniscalco, 627 F.Supp.2d at 497 n. 1. Nonetheless, in moving to dismiss and refusing to consent to correct the date, the defendant manufacturer insisted that the court use the purchase date alleged in the complaint. The court refused, explaining that it would "adjudicate[] the claims on the merits rather than on . . . mere technicalities[]" where the defendant had become aware of the correct date during discovery. Id. (citation omitted).

Unlike Maniscalco, there has been no suggestion here (and the court fails to see how there could be) that the amounts alleged in the SAC were due to typographical errors. Nor is this a situation where the numbers in the SAC are a "mere technicality." Plaintiff's allegations as to the amounts by which the Restatement purportedly overstated (and in 2004 understated) Apollo's net income go to the very crux of the SAC's alleged fraudulent scheme, in sharp contrast to Maniscalco. Further, the heightened pleading standards of a federal securities fraud action were not invoked in Maniscalco, alleging violations of a state consumer fraud statute. Plaintiff, therefore, cannot rely upon Maniscalco to circumvent the clear mandate of both the PSLRA and Rule 9(b) that falsity be pled with particularity.

The SAC's broad, conclusory allegations that Apollo overstated its net income and understated its compensation expenses as a result of granting stock options below the fair market value of Apollo's common stock on the date of the grant do not satisfy the exacting pleading standards of the PSLRA and Rule 9(b). The SAC's reliance on the Restatement does not provide the necessary particularity because it does not "draw a specific nexus between the allegedly fraudulent statement and the facts upon which the allegation of fraud is dependent[,]" i.e. the Restatement, "or, at least, a clear statement of why and how the plaintiff has reached the conclusion that a particular statement is fraudulent." See Ferro, 2007 WL 1691358, at *19 (citation, internal quotation marks and emphasis omitted). Even if the SAC provided that missing link, it still could not withstand these dismissal motions because in relying upon the Restatement as a basis for falsity, the SAC does not always comport with the Restatement. Consequently, the court grants defendants' motions to dismiss insofar as it is predicated upon those false and misleading statements where the Restatement is the sole basis for pleading falsity (No. 1, ¶ 49; Nos. 8-9, ¶¶ 53(a)(b); Nos. 16-17, ¶¶ 57(a)(b); Nos. 24-33, ¶¶ 61(a)(b); ¶¶ 62(a)(b); ¶¶ 63(a)(b); ¶¶ 64(a)(b); ¶¶ 65(a)(b); and ¶¶ 66(a)(b)). That includes the allegations pertaining to compliance with IRS Code § 162(m) and APB No. 25, and the SOX certifications (Nos. 36-48, ¶¶ 67(a)-(d); ¶¶ 68(a)-(e); and ¶¶ 69(a)-(d)).

e. Non-Restatement Based Allegations

In addition to the Form 10-Qs relying upon the Restatement discussed above, the SAC alleges that five others and their related press releases contained false statements. The SAC alleges the exact same reason as to why those Forms and press releases were false and misleading:

because they overstated Apollo's net income and earnings per share and understated Apollo's compensation expenses as a result of Apollo's failure to account for the compensation and tax expenses associated with stock options granted at a price below the fair market value of Apollo's common stock on the date of the grant.

SAC (Doc. 112) at ¶¶ 51(c); 52(c); 54(c); 55(c); and 56(c). The SAC further alleges that section 10(b) defendants Gonzales and Nelson, and defendant Bachus signed the Form 10-Qs. The "financial results" were simply "announced" by Apollo though.See, e.g., id. at ¶¶ 51(a); and (b). That is the total of the allegations as to these particular Form 10-Qs and related earnings announcements.

Even in the face of those rote and conclusory allegations, without any analysis, plaintiff baldly declares that "[t]hese allegations of falsity are as detailed, if not far more detailed, than allegations that have been upheld in comparable stock option backdating cases, and cases involving restatements." Resp. (Doc. 129) at 11:17-19 (citations omitted). Careful review of plaintiff's cited authority belies this assertion, and conveniently disregards case law supporting the contrary point of view, i.e., the foregoing falsity allegations do not satisfy the PSLRA.

Indeed, the allegation quoted is strikingly similar to the complaint in Hansen which alleged:

[A]ll of the . . . financial statements and press releases issued by Hansen were false and misleading when issued because the Company did not reveal that it had engaged in the practice of backdating option grants, had understated its compensation expenses and potential tax liabilities and overstated its net income.

Hansen, 527 F.Supp.2d at 1152 (citation omitted). The Hansen court held that the complaint "violat[ed] . . . the [PSLRA]'s requirement that a complaint must specify the reasons why each statement is alleged to have been misleading[]" because, inter alia, "nowhere" therein did plaintiff "explain in which of th[ose] . . . ways . . . each of the 17 pages of allegedly false statements [we]re false." Id.

To be sure, in contrast to Hansen, here the SAC does number each false statement and alleges that "misleading statements were false individually or by category[.]" See id. Those stylistic differences do not render the reasoning of Hansen any less applicable here though because the fundamental pleading shortfall is the same — lack of particularity as to falsity. The allegations as to these Form 10-Qs and their related press releases lack a foundation in particular facts. Cf. In re Daou Systems, Inc., 411 F.3d 1006, 1017 (9^th Cir. 2005) (citation and internal quotation marks omitted) (in pleading irregularities in revenue recognition, "[a] general allegation that the practices at issue resulted in a false report of company earnings is not a sufficiently particular claim of misrepresentation to satisfy Rule 9(b)[]"). The SAC does not include details such as the amounts of the alleged overstatements or understatements, or what compensation expenses were associated with the backdating.

Plaintiff's cited authority does nothing to dispel this court of its view that the SAC does not plead falsity with the necessary particularity as to the Form 10-Qs and press releases discussed in this section. For example, in Middlesex Retirement System v. Quest Software Inc., 527 F.Supp.2d 1164 (C.D.Cal. 2007), the court found, albeit in the context of scienter, that investors did not state with sufficient particularity the allegation that the company's financial statements failed to report $150 million as a result of backdated stock option grants where the complaint did not "state what the unreported expense was for each individual year that improperly granted options were given." Id. at 1189. Therefore, rather than supporting plaintiff's position herein, Middlesex actually supports the defense argument as to lack of particularity.

Plaintiff fares no better with its reliance upon In re Cylink Sec. Litig., 178 F.Supp.2d 1077 (N.D.Cal. 2001). The Cylink court was considering the issue of what satisfies the PSLRA's requirement that "if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." See 15 U.S.C. § 17u-4(b)(1). In addressing that narrow issue, the court held that "the existence of restated financial results [wa]s sufficient to support plaintiffs' belief that the statements were false." Id. at 1084. Significantly, however, none of the allegations in the SAC are based upon information and belief.

This is yet another instance where the SAC contains merely "[a] litany of alleged false statements "unaccompanied by the pleading of specific facts indicating why those statements were false[.]"See Metzler, 540 F.3d at 1070 (emphasis added) (citing Falkowski v. Imation Corp., 309 F.3d 1123, 1133 (9^th Cir. 2002) ("Although the allegations here are voluminous, they do not rise to the level of specificity required under the PSLRA. The allegations consist of vague claims about what statements were false or misleading, how they were false, and why we can infer intent to mislead. We have dismissed much more specific and compelling allegations.")). The blanket assertion of falsity as to overstating Apollo's net income and earnings per share and understating Apollo's compensation and tax expenses associated with backdated stock options, quite simply, does not meet the PSLRA's "exacting requirements for pleading `falsity.'" See id. Thus, to the extent defendants are seeking dismissal of false and misleading statements Nos. 4-7, ¶¶ 51(a)(b); and ¶¶ 52(a)(b); Nos. 10-15, ¶¶ 54(a)(b); ¶¶ 55(a)(b); and ¶¶ 56(a)(b), they are entitled to such relief.

f. Earnings Announcements

The individual defendants are entitled to dismissal of the 17 earnings announcement allegations because, critically, they are not specifically identified therein, much less that they made, prepared or disseminated those earnings announcements.

This is a significant omission for two reasons. First, "[g]enerally, only those defendants who actually make a false or misleading statement can be held liable under section 10(b) or Rule 10b-5." Downey, 2009 WL 736802, at *5 (citation omitted). Second, as the individual defendants are quick to point out, to satisfy the particularity requirements for pleading falsity, among other things, "`a pleader must identify the individual who made the alleged representation[.]" Apollo I, 633 F.Supp.2d at 783 (quoting Hansen, 527 F.Supp.2d at 1151). Defendants argue that the SAC's press release allegations do not meet that standard because they do not "identify any particular [individual] Defendant[s] responsible for the preparation and dissemination of th[os]e statements[.]" Mot. (Doc. 120) at 8:23-24. Instead, the SAC generally alleges that "Apollo announced financial results." Id. at 9:1 (citation and internal quotation marks omitted) (emphasis added).

Plaintiff retorts that the SAC alleges "who made . . . false and misleading earnings release[s][.]" Resp. (Doc. 129) at 11:6-7 (citing [SAC (Doc. 112) at] ¶¶ 49-66; [SAC], Exh. 1-35) (emphasis added). Citing to those same 17 paragraphs, earlier in its response, plaintiff similarly declares that the SAC complies with Rule 9(b) and the PSLRA in that, inter alia, it "alleges . . . who made ["false and misleading . . . financial statements][.]"Id. at 1:20-22 (citations omitted) (emphasis added). Plaintiff does not specify where in any of the SAC's cited paragraphs, or in the 17 earnings announcement exhibits, totaling 177 pages, the name of a single individual defendant can be found. After closely reviewing each of the paragraphs to which plaintiff cites and the corresponding press releases, it is obvious why plaintiff resorted to such vague declarations in its response. The SAC is void of any allegations as to exactly who made, prepared or disseminated the purportedly misleading press releases. Merely because plaintiff claims that the SAC contains such allegations does not make it so.

Moreover, as this court previously noted, individual defendants such as corporate officers like Nelson and Gonzales, "cannot . . . be liable for . . . press releases, except to the extent that there are specific statements attributed to them, or the press releases are otherwise connected to them[.]" Apollo I, 633 F.Supp.2d at 808, n. 13 (citation and internal quotation marks omitted). The SAC likewise is void of any allegations that the 17 press releases or earnings announcements at issue contain "specific statements" which may be "attributed" to any of the individual defendants. Nor does the SAC contain any other allegations "connecting" the press releases to those defendants. Finally, the general allegations that "Apollo announced financial results[,]" see, e.g., SAC (Doc. 112) at ¶ 50(a), "cannot be attributed to the Individual Defendants under the group pleading doctrine because, as this Court . . . previously held,"²⁶ that "doctrine did not survive the PSLRA." See Downey, 2009 WL 736802, at *7 (footnote and citation omitted). For these reasons, the court grants the individual defendants' motion to dismiss insofar as it is directed to allegedly false and misleading earnings announcements, i.e., the even numbered (two through thirty-four inclusive) alleged false and misleading statements.

26 Apollo I, 633 F.Supp.2d at 809 (citation and internal quotation marks omitted) ("This court [j]oin[s] the majority of other courts in this Circuit, . . . hold[ing] that group pleading is no longer viable under the PSLRA.")

Finally, because the court has found that the SAC does not sufficiently plead falsity with respect to any statements which were preceded by an earnings announcement, the SAC's allegations as to Apollo making those announcements is not a form of actionable conduct under section 10(b). Apollo is thus entitled to dismissal of these 17 earnings announcement statements referenced above.

4. Backdating Denials

Lastly, the SAC includes six allegedly false statements wherein plaintiff claims that certain defendants denied any wrongdoing as to Apollo's stock option practices. More specifically, the SAC alleges that a section 10(b) defendant Norton, then Chairmen of Apollo's Compensation Committee, denied backdating stock options.See SAC (Doc. 112) at ¶ 72 (No. 49). Further, the SAC alleges that after a June 8, 2006 report of a Lehman Brothers' analyst, "Apollo continued to issue false statements and half-truths about the backdating at the Company[]" on five different occasions. Id. at ¶ 70; and at ¶¶ 73-91 (Nos. 50-54).

The individual defendants offer several reasons why the court should dismiss these six statements pertaining to backdating denials. First, they argue that four of these denial allegations are inadequately pled because they are not attributable to any of the individual section 10(b) defendants. Second, there are no allegations that any particular section 10(b) defendant was instrumental in preparing or disseminating these statements. Third, the individual defendants contend that the two statements which the SAC directly attributes to section 10(b) defendants are, nonetheless, deficient. One statement, "fails to plead falsity adequately[,]" while the other "fails to plead the requisite particulars" in that it "pleads only the date, nothing more." Defs'. Mot. (Doc. 120) at 13:15 (citation omitted); and at 14:4-5.

Apollo makes a single, temporal argument, noting that two of the six denial statements, i.e., Nos. 53 (¶ 86) and 54 (¶ 54) were made after the class period. Apollo thus baldly asserts that "[p]laintiff cannot predicate claims of fraud on [either of those] statements[.]" Apollo Mot. (Doc. 122) at 18:23.

At the risk of repetition, plaintiff did not directly respond to any of these defense arguments. It merely offers this one sentence declaration: "[T]he [SAC] alleges that certain of Apollo's denials of misconduct throughout the Class Period were materially false and misleading because defendants knew or were deliberately reckless in not knowing that Apollo had in fact engaged in the very conduct that they were denying." Resp. (Doc. 129) at 13:15-19 (citations omitted) (emphasis added). That sweeping declaration, void of any legal analysis, ²⁷ and failing to identify any particular defendant, or the six statements at issue, is hardly a meaningful response to defendants' arguments. Moreover, this retort does not in any way elucidate plaintiff's conclusory assertion that the SAC "explains why the denials of misconduct were false when made." Id. at 13:14-15 (emphasis omitted). Thus, "because plaintiff d[id] not bother to address any of th[ese] other" allegedly false statements addressed by defendants, plaintiff has "failed to discharge [its] burden to successfully rebut defendants' . . . arguments." See Bare Escentuals, 2010 WL 3893622, at *22. While that is a sufficient reason in and of itself to grant defendants' motions to dismiss to the extent they are directed at the six backdating denial false statements, as outlined below, there are additional substantive reasons also warranting dismissal.

27 Plaintiff cites to Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 270 (3^rd Cir. 2009), which obviously is of limited precedential value given that it is outside the Ninth Circuit. Moreover, without the benefit of any legal analysis whatsoever from plaintiff, the relevance of the cited page is not apparent.

a. Post-Class Period Statements

Here, as the SAC alleges, the class period is between November 28, 2001 and October 18, 2006. SAC (Doc. 112) at 1, ¶ 1. Among other things, the SAC premises section 10(b) liability expressly upon "defendants' false and misleading statements issued during the class period[.]" Id. at 20:3-4 (bold and capitalized emphasis omitted) (italicized emphasis added). Despite that, the SAC includes two allegedly false statements made on November 3, 2006 — roughly two and a half weeks after the class period. See id. at ¶ 86 (No. 53); and ¶ 90 (No. 54).

In a securities fraud action, "[t]he class period defines the time during which defendants' fraud was allegedly alive in the market[.]" In re Clearly Canadian Sec. Litig., 875 F.Supp. 1410, 1420 (N.D.Cal. 1995). Thus, "a defendant may be held liable, . . . only for the statements made during the class period." In re REMEC Inc. Sec. Litig., 702 F.Supp. 1201, 1223 (S.D.Cal. 2010) (citations omitted) (emphasis added); see also Hodges v. Akeena Solar, Inc., 2010 WL 3705345, at *2 (N.D.Cal. 2010) (striking "allegedly false and misleading statements . . . made prior to the start of the Class Period" because they could "not serve as a basis for liability as a matter of law"; Clearly Canadian, 875 F.Supp. at 1420 (striking as "irrelevant to plaintiffs' fraud claims . . . statements made . . . before or after the purported class period"). Consequently, because the class period here, November 28, 2001 through October 18, 2006, dictates the period of liability, defendants cannot be liable for the two allegedly false statements, i.e., Nos. 53 and 54, made after the class period. Perhaps plaintiff realizes this because nowhere in its response does it even cite to these statements, let alone argue that they can form the basis for a section 10(b) misleading statement claim. Accordingly, the court grants defendants' motion to dismiss to the extent it is based upon false statements No. 53 (¶ 86); and No. 54 (¶ 90).

b. Lack of Attribution

Of the four remaining backdating denial statements, the SAC attributes two of them strictly to Apollo. See id. at ¶¶ 74 (No. 50); and 76 (No. 51). The SAC alleges that on June 9, 2006, "the Company issued a news release denying that it had backdated stock options." Id. at 38:24-25, ¶ 74. Further, the SAC alleges:

Apollo claimed that it had reviewed its stock option practices `including reviewing documents and interviewing employees,' and that Apollo's management believed that Apollo had `complied with all applicable laws . . . in granting options to officers and it has not backdated options.'

Id. at 38:25-28, ¶ 74. Likewise, the SAC alleges:

[Apollo] issued a press release disclosing that it had received a subpoena from the U.S. Attorney for the Southern District of New York requesting documents relating to Apollo's stock option grants. Apollo again denied impropriety, stating that `Apollo's board of directors had hired an outside firm to review and confirm [the company's] initial conclusions that [the Company] acted appropriately regarding its stock option practices.'

Id. at 39:6-11, ¶ 76. As to these denial allegations, the SAC does not include even the most basic details the identity, i.e., the "who" of any of the individual defendants, Blair, Gonzales, Nelson or Norton. Thus, the SAC does not adequately allege that any of them made a false statement on the basis of those two press releases attributable solely to Apollo.

Not only does the SAC fail to name any of the section 10(b) individual defendants in those allegations, it also does not allege that they "played any role whatsoever in the preparation or dissemination of" those two press releases. See Hansen, 527 F.Supp.2d at 1153. Finally, to the extent plaintiff is attempting to rely upon the group pleading doctrine, it cannot. "[T]he general allegations against [Apollo] cannot be attributed to the Individual Defendants under th[at] . . . doctrine, because, as this Court . . . previously held, the group pleading doctrine did not survive the PSLRA." See In re Downey Sec. Litig., 2009 WL 736802, at *7 (C.D.Cal. 2009) (citation and footnote omitted);Apollo I, 633 F.Supp.2d at 809; see also Hansen, 527 F.Supp.2d at 1153-54 ("A defendant must actually make a false or misleading statement in order to be held liable under Section 10(b)."). In light of the foregoing, the court grants the individual defendants' motion to dismiss insofar as it is based upon false statement No. 50 (¶ 74) and No. 51 (¶ 76).

c. Form 8-K

The SAC does specifically identify one of the section 10(b) defendants, Ms. Gonzales, as having made an allegedly false statement in a Form 8-K. "[A] Form 8-K filing is required from an issuer of securities when substantial events occur[.]" S.E.C. v. Gemstar-TVGuide Intern., Inc., 401 F.3d 1031, 1059 (9^th Cir. 2005) (citation and internal quotation marks omitted). The SAC alleges that "[o]n June 20, 2006, Apollo filed a Form 8-K signed by Gonzales[]" and two other non-section 10(b) defendants, Bachus and Mueller. SAC (Doc. 112) at 39, ¶ 77 (No. 52). That Form repeated Apollo's prior statement that its "board of directors has hired an outside firm to review and confirm [Apollo's] initial conclusions that [Apollo] acted appropriately regarding its stock option practices.'" Id. at 39, ¶ 76 (No. 51). That statement was allegedly "false and misleading" because "Apollo had not `acted appropriately regarding its stock option practices[.]'" Id. at 39, ¶ 78.

That allegation ignores the broader context of the Form 8, however. It is self-evident that the purpose of that Form was to announce that Apollo had hired an outside firm. Moreover, the outside firm was tasked with "`review[ing] and confirm[ing] [Apollo's] initial conclusions that [Apollo] had acted appropriately regarding its stock option practices.'" Id. at 39, ¶ 76 (emphasis added). As worded, this Form left open the possibility that those "initial conclusions" could be changed at a later date, depending upon the outcome of the outside review. Thus, on the face of it there is nothing false or misleading about statement 52, and the SAC does not suggest otherwise. This allegation also lacks specific facts indicating why that Form 8 was false at the time it was signed. See In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1086 (9^th Cir. 2002) (falsity not established due to lack of particularity where "much of the complaint fail[ed] to allege any facts indicat[ing] why th[e] statement would have been misleading at the several points at which it was alleged to have been made[]"). The foregoing provides an alternative basis for granting defendants' motion to dismiss to the extent it is premised upon false statement No. 52 (¶ 77).

d. Norton's Denial of Backdating

The SAC alleges that "[o]n June 7, 2006, in response to [the Lehman Brothers'] report . . . question[ing] the timing of Apollo's stock option grants, Norton, the Chairman of Apollo's Compensation Committee[,]' and a section 10(b) defendant, "stated that `Our option policies are clean and straightforward. We never backdated options. Never once.'" SAC (Doc. 112) at 38, ¶ 72 (No. 49). Defendant Norton argues that these allegations are "insufficient[]" because they do not include "the requisite particulars[.]" Defs'. Mot. (Doc. 120) at 14:7 and 14:4. It is impossible to discern from the SAC whether Mr. Norton's alleged remark was publicly made and, if so, under what circumstances. Without factual allegations such as the "time[], . . ., place[], . . . benefits received, and other benefits of the alleged fraudulent activity[,]" this allegation does not comport with either the PSLRA or Rule 9(b). Hence, defendant Norton does not have notice of the "particular misconduct . . . so that []he[] can defend against the charge and not just deny that []he[] has done anything wrong." See Apollo I, 633 F.Supp.2d at 783 (citations and internal quotation marks omitted). For these reasons, coupled with plaintiff's failure to counter defendant Norton's argument, the court grants his motion to the extent it is based upon false statement No. 49 (¶ 72)).

As with the SAC's backdating allegations, it is a culmination of factors — not the omission of a single factor — which leaves the court with the firm conviction that the SAC does not plead falsity in accordance with the requisite degree of particularity. The hallmark of the SAC continues to be what was "[p]erhaps the most troubling aspect of the FAC[.]" See Apollo I, 633 F.Supp.2d at 786. That is, even with amendment, the SAC's false and misleading statements remain nothing more than "`vague allegations of deception' . . . `unaccompanied by a particularized explanation stating why the defendant's alleged statements or omissions are deceitful." Id. (quoting Metzler, 540 F.3d at 1061 (citation omitted) (emphasis added by Metzler Court). Additionally, plaintiff disregarded Apollo I because the SAC, like the FAC, is not "clear and concise in identifying the false statements and articulating the factual allegations supporting an inference that the statement is false or misleading." Id. at 786-787 (citation and internal quotation marks omitted)) (emphasis added).

Seemingly, plaintiff has mistaken quantity for quality. Here, quantity did not cure the deficits in the FAC. In fact, especially with respect to the addition of the October 20, 2003 grants, if anything, quantity made the weaknesses all the more appreciable. In short, this prolix and discursive complaint does not satisfy the PSLRA's stringent pleading standards. As the Fifth Circuit has pointedly observed, a "long-winded, even prolix" style of pleading "is not an uncommon mask for an absence of detail." Williams v. WMX Techologies, Inc., 112 F.3d 175, 178 (5^th Cir. 1997). Here, as in Williams, the SAC, "although long, states little with particularity." See id. Likewise, the Ninth Circuit's comment in Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9^th Cir. 2009), albeit in the scienter context, is an apt description of the SAC. "The plaintiff[] . . . assume[s] that compiling a large quantity of otherwise questionable allegations" will satisfy the particularity pleading requirements. See id., at 1008. It does not. Succinctly put, the SAC falls far short of satisfying the stringent pleading standards of the PSLRA and Rule 9(b).

Because the court has expressly found that at least one of the elements of plaintiff's section 10(b) claim is missing, i.e., falsity, that claim fails, and there is no need for the court to consider defendants' loss causation and scienter arguments. See Cutera, 610 F.3d at 1108 n. 1; accord In re 2007 Novastar Fin., Inc. Sec. Litig., 579 F.3d 878, 884 n. 5 (8^th Cir. 2009) ("Because we conclude that the district court properly dismissed the complaint for failing to comply with the PSLRA's pleading requirements concerning falsity under § 78u-4(b)(1), we need not address . . . additional arguments concerning . . . compliance with the PSLRA's pleading requirements concerning scienter under § 78u-4(b)(2).")

III. Section 20A Claim

The FAC alleged that all defendants violated section 20(A)'s proscription against "contemporaneous" insider trading, 15 U.S.C. § 78t-1(a), but now the SAC names only one defendant, John Blair, in this claim. In Apollo I, this court found that the insider trading claim against defendant Blair was "lacking" because the FAC did not plead such facts. Id.

Defendant Blair continues to argue that the SAC "fail[s] to describe [his] prior history[,]" and hence it does not state a section 20A(a) claim against him. Defs'. Mot. (Doc. 120) at 14:15-16. Plaintiff disagrees that allegations of Blair's prior trading history are necessary to state a section 20A(a) claim against him. Plaintiff readily concedes, though, that one can be liable under section 20A "only where an independent violation of another provisions of securities law has occurred[.]" Resp. (Doc. 129) at 18:22-23 (citation and internal quotation marks omitted) (emphasis added).

That is an accurate statement of the law in this Circuit. "Claims under Section 20A are derivative and therefore require an independent violation of the Exchange Act." In re Oracle Sec. Litig., 627 F.3d 376, 394 (9^th Cir. 2010) (citation and internal quotation marks omitted). Consequently, regardless of whether the SAC includes allegations of defendant Blair's trading history, because the court has found that plaintiff's section 10(b) claim must be dismissed, that finding requires dismissal of the section 20A claim against defendant Blair. See id. (plaintiffs' contemporaneous trading claims "end[ed]" because they could not establish a triable issue on loss causation as to their other Exchange Act claims).

IV. Section 20(a) Claim

After reciting section 20(a) of the Exchange Act, the Ninth Circuit in Zucco Partners, reiterated that "a defendant employee of a corporation who has violated the securities law will be jointly and severally liable to the plaintiff, as long as the plaintiff demonstrates `a primary violation of federal securities law' and that `the defendant exercised actual power or control over the primary violator.'" Zucco Partners, 552 F.3d at 990 (citing America West, 320 F.3d at 945) (quoting Howard v. Everex Sys., Inc., 228 F.3d 1057, 1065 (9th Cir. 2000) (quotation marks omitted)) (other citations omitted)) (emphasis added). Put differently, "[c]ontrol person liability is secondary only and cannot exist in the absence of a primary violation." In re Silicon Storage Technology, Inc. Deriv. Litig., 2009 WL 1974535, at *11 (N.D.Cal. July 7, 2009) (citations and internal quotation marks omitted). So where, as here, the section 10(b) claims have been dismissed, "the § 20(a) claims [a]re also properly dismissed." See Cutera, 610 F.3d at 1113 n. 6.

V. Motion to Strike

Having granted defendants' motion to dismiss, there is no need to consider their request for alternative relief pursuant to FED.R.CIV.P. 12(f). Indeed, dismissal renders moot that alternative motion to strike.

VI. Amendment

Lastly, plaintiff perfunctorily "requests leave to amend . . . [s]hould the Court grant any portion of defendants' motions to dismiss[.]" Resp. (Doc. 129) at 32:20-22. Defendants did not address this one sentence "request."

In granting plaintiff's "`request' for leave [to amend][,]" inApollo I, this court explained that "[t]he pleading deficiencies" in the FAC did not lie "in the raw content of the FAC, but in the absence of rigorously particularized allegations in accordance with the PSLRA." Apollo I, 633 F.Supp.2d at 832 (citation and internal quotation marks omitted). In allowing amendment, the court expressly "advised" plaintiff "that failure to cure the pleading deficiencies identified therein, and failure to comply with the relevant case law in that regard, may well lead to dismissal of these claims in the future." Id. (emphasis added). Thereafter, plaintiff acknowledged "that it [was] `[m]indful that[Apollo I] required [it] to amend [its] Complaint to more particularly allege[] the falsity of the alleged misstatements[.]'" Apollo II, 690 F.Supp.2d at 981 (quoting Mot. (Doc. 107) at 3). Nonetheless even after amendment, as thoroughly discussed herein, the hallmark of the SAC is, still, the "absence of rigorously particularized allegations in accordance with the PSLRA[]" and Rule 9(b). See Apollo I, 633 F.Supp.2d at 832 (citation and internal quotation marks omitted).

Denial of leave to amend is subject to an abuse of discretion standard of review. See Telesaursus VPC, LLC v. Power, 623 F.3d 998, 1003 (9^th Cir. 2010). "[W]here the plaintiff has previously been granted leave to amend and has subsequently failed to add the requisite particularity to its claims, [t]he district court's discretion to deny leave to amend is particularly broad.'" Zucco Partners, 552 F.3d at 1007 (citations and internal quotation marks omitted). Moreover, as the Ninth Circuit has repeatedly recognized, "[t]he fact that [plaintiff] failed to correct the deficiencies in its [FAC] is `a strong indication that the plaintiffs have no additional facts to plead'." See id., (quotingVantive Corp., 283 F.3d at 1098). For that reason, the Zucco Partners Court held that the "district court did not err when it dismissed the SAC with prejudice, since it was clear that the plaintiffs had made their best case and had been found wanting."Id. (citing Metzler, 540 F.3d at 1072 ("upholding a dismissal with prejudice where, inter alia, the deficiencies at issue `persisted in every prior iteration of the [complaint]'"). Likewise, "[w]here the plaintiff fails to set forth any additional facts that could save the complaint, . . ., dismissal with prejudice is appropriate." Finisar II, 2009 WL 3072882, at *15 (citing, inter alia, In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 991 (9^th Cir. 1999), abrogated on other grounds, Tellabs, 551 U.S. at 322-24, 127 S.Ct. 2499, 168 L.Ed.2d 179)).

Application of those rules to the present case mandates that the SAC be dismissed without prejudice to renew. Plaintiff has been given the opportunity to amend once, following a fairly comprehensive analysis of the FAC's deficiencies and overall weaknesses. The SAC did not correct those deficiencies; nor has plaintiff offered any additional facts in its response that could be alleged in a third amended complaint, and that would save the SAC from dismissal with prejudice.²⁸ See In re MIPS Techs., Inc. Deriv. Litig., 2008 WL 3823726, at *8 (N.D.Cal. Aug. 13, 2008) (dismissing without leave to amend derivative shareholder suit where plaintiff did not "set forth additional facts he could plead in either his briefing or at argument[]). Further, in contrast to "many securities fraud cases," plaintiff's allegations herein are not based upon "the statements of confidential witnesses and/or employees and former employees[.]"See Hansen, 527 F.Supp.2d at 1163. Therefore, as in Hansen, "it is difficult to imagine what additional facts Plaintiff could allege to satisfy the strict pleading requirements of the PSLRA and Rule 9(b)." Id. Plaintiff, represented by experienced counsel who routinely practice in the area of securities class action litigation, ²⁹ were given an adequate opportunity to file an amended complaint addressing this court's concerns in Apollo I, and satisfying the governing pleading standards as developed in the applicable case law. Plaintiff did not avail itself of that opportunity. Accordingly, the court denies plaintiff's "request" for leave to amend and grants defendants' motions to dismiss in their entirety with prejudice and without leave to amend.

28 Plaintiff did not move to amend under FED.R.CIV.P. 15. Instead, it simply "request[ed] leave to amend." Resp. (Doc. 129) at 32:22. This is a somewhat telling, although not entirely dispositive, distinction. Because plaintiff sought leave to amend in the form of a request, arguably it was not required to attach a proposed amended complaint or otherwise comply with the dictates of LRCiv 15.1. Among other things, that Rule requires that if "[a] party moves for leave to amend," it "must attach a copy of the proposed amended pleading[,]" and it "must indicate in what respect it differs from the pleading which it amends, by bracketing or striking through the text to be deleted and underlining the text to be added." LRCiv 15.1 (emphasis added). Perhaps plaintiff made this "request" as a means of circumventing that Local Rule and because it does not have any additional facts. Otherwise, surely plaintiff would have brought them to the attention of the court and defendants.

29 See Salcido Decl'n (Doc. 33), exh. D thereto.

Conclusion ³⁰

30 On March 29, 2011, plaintiff filed a Notice of Supplemental Authority (Doc. 141), "appris[ing]" this court of the recent Supreme Court decision, Matrixx, supra, 2011 WL 977060. Not. (Doc. 141) at 1:1. Plaintiff asserts that Matrixx "holdings regarding [the] materiality" element of a section 10(b) claims lend "further support" for its opposition arguments herein. Id. at 1:13. In their Reply of that same date, the individual defendants contend, and the court agrees, that Matrixx has "no bearing" on the primary issue herein — plaintiff's alleged "failure to meet the pleading standard for falsity under the PSLRA[.]" See Reply (Doc. 142) at 1:14-16. The court thus finds that no supplemental briefing of Matrixx is necessary.

"To be successful, a securities class-action plaintiff must thread the eye of a needle made smaller and smaller over the years by judicial decree and congressional action." Alaska Elec. Pension Fund v. Flowserve Corp., 572 F.3d 221, 235 (5^th Cir. 2009) ( per curiam) (Hon. Sandra Day O'Connor, Associate Justice of the U.S. Supreme Court (Ret.), sitting by designation pursuant to 28 U.S.C. § 294(a)). In the present case, even with the opportunity for amendment, plaintiff was unable to thread that needle.

For all of the reasons set forth herein, IT IS ORDERED that:

(1) the "Motion to Dismiss . . . Lead Plaintiff's Second Amended Complaint for Violations of the Federal Securities Laws" by individual defendants John G. Sperling, Todd S. Nelson, Kenda B. Gonzales, Daniel E. Bachus, John Blair, John R. Norton III, Hedy Govenar, Brian E. Mueller, Dino J. DeConcini, Peter Sperling, and Laura Palmer Noone (Doc. 120) is GRANTED;

(2) the "Alternative[] [Motion] to Strike Portions of Lead Plaintiff's Second Amended Complaint for Violations of the Federal Securities Laws[]" (Doc. 120) by the defendants listed in paragraph (1) above is DENIED as MOOT;

(3) the "Motion to Dismiss by Defendant Apollo Group, Inc. (Doc. 122) is GRANTED; and

(4) the "Motion for Judicial Notice in Support of Lead Plaintiff's Omnibus Opposition to Defendants' Motion to Dismiss the Second Amended Complaint for Violations of the Federal Securities Laws by Plaintiff Pension Trust Fund for Operating Engineers" (Doc. 131) is GRANTED.

IT IS FURTHER ORDERED that the Second Amended Complaint (Doc. 112) is DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to enter JUDGMENT in favor of defendants and terminate the case.