City of Hialeah Employees' Retirement System v. Fei Company et al

Motion to Dismiss for Failure to State a Claim . Oral Argument requested.

D. Or.April 21, 2017

David Angeli, OSB No. 020244 david@angelilaw.com Kristen Tranetzki, OSB No. 115730 kristen@angelilaw.com ANGELI LAW GROUP 121 S.W. Morrison Street, Suite 400 Portland, OR 97204 Telephone: (503) 954-2232 Facsimile: (503) 227-0880 Boris Feldman (pro hac vice) boris.feldman@wsgr.com Keith E. Eggleton (pro hac vice) keggleton@wsgr.com Michael R. Petrocelli (pro hac vice) mpetrocelli@wsgr.com WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 565-5100 Attorneys for Defendants FEI Company, Thomas F. Kelly, Donald R. Kania, Homa Bahrami, Arie Huijser, Jan C. Lobbezoo, Jami K. Dover Nachtsheim, James T. Richardson, and Richard H. Willis UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION CITY OF HIALEAH EMPLOYEES’ RETIREMENT SYSTEM, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. FEI COMPANY, THERMO FISHER SCIENTIFIC INC., THOMAS F. KELLY, DONALD R. KANIA, HOMA BAHRAMI, ARIE HUIJSER, JAN C. LOBBEZOO, JAMI K. DOVER NACHTSHEIM, JAMES T. RICHARDSON, and RICHARD H. WILLS, Defendants. Case No.: 3:16-cv-01792-SI FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS ORAL ARGUMENT REQUESTED Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 1 of 39 PAGE i - FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT TABLE OF CONTENTS Page LR 7-1 CERTIFICATION .............................................................................................................. 1 MOTION......................................................................................................................................... 1 LEGAL MEMORANDUM ............................................................................................................ 1 I. PRELIMINARY STATEMENT ........................................................................................ 1 II. STATEMENT OF FACTS ................................................................................................. 4 A. Defendants .............................................................................................................. 4 1. FEI and Thermo Fisher ............................................................................... 4 2. The Individual Defendants .......................................................................... 4 B. The Merger.............................................................................................................. 5 1. FEI Receives an Unsolicited Proposal from Thermo Fisher ...................... 5 2. Thermo Fisher Increases Its Offer .............................................................. 5 3. FEI Tests the Market While Negotiating with Thermo Fisher ................... 6 4. Thermo Fisher Increases Its Offer a Second Time ..................................... 7 5. Thermo Fisher Makes a “Best and Final” Offer ......................................... 8 6. The Merger Agreement ............................................................................... 9 7. The Merger Proxy Statement .................................................................... 10 8. FEI’s Shareholders Overwhelmingly Approve the Merger ...................... 11 9. The Merger Closes .................................................................................... 11 C. Procedural History ................................................................................................ 11 III. ELEMENTS OF CLAIM AND PLEADING STANDARD ............................................ 13 IV. ARGUMENT .................................................................................................................... 14 A. The Amended Complaint Does Not State a Claim under Section 14(a) and Rule 14a-9 ............................................................................................................. 15 1. The SAC Does Not State a Claim Based on Statements in the Proxy About the Board’s Views of Which Projections Were More Likely to Be Accurate ............................................................................... 15 Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 2 of 39 PAGE ii - FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT a. Statements About the Projections Are Protected by the PSLRA Safe Harbor for Forward-Looking Statements ................ 15 i. Statements About the Projections Were Forward-Looking16 ii. The Safe Harbor Applies Because the Statements Were Identified as Forward-Looking and Accompanied by Meaningful Cautionary Language .................................... 17 iii. The Safe Harbor Also Applies Because the SAC Does Not Plead Facts Showing that Defendants Had “Actual Knowledge” that the Statements Were False at the Time They Were Made............................................................... 19 b. Even If the Court Were to Find that the Safe Harbor Did Not Apply, the SAC Does Not Plead Sufficient Facts Showing the Statements Were False or Misleading ..................... 20 2. The SAC Does Not State a Claim Based on the Proxy’s Description of Goldman Sachs’ Fairness Opinion.................................... 25 3. The SAC Does Not State a Claim Based on Allegedly Omitted Details ....................................................................................................... 26 a. The SAC Does Not Allege That Any of the Omissions Made Any Statement in the Proxy False or Misleading ............... 26 b. The Alleged Omissions Do Not Rise to the Level of Materiality On Their Own ............................................................ 29 4. The Amended Complaint Does Not Allege Facts Giving Rise to a Strong Inference of that Any Defendant Acted With the Required State of Mind............................................................................................. 30 B. The Amended Complaint Does Not State a Claim Under Section 20(a) .............. 32 V. CONCLUSION ................................................................................................................. 33 Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 3 of 39 PAGE iii - FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT TABLE OF AUTHORITIES Page(s) CASES Assad v. Mines Mgmt., Inc., No. 2:16-CV-00256-SMJ, 2016 WL 4611573 (E.D. Wash. Sept. 2, 2016) ......................28 Azar v. Blount International, Inc., Case No. 3:16-cv-483-SI, slip op. (D. Or. Mar. 20, 2017) ........................................2, 3, 24 Beck v. Dobrowski, 559 F.3d 680 (7th Cir. 2009) .............................................................................................29 Branch v. Tunnell, 14 F.3d 449 (9th Cir. 1994) .................................................................................................4 Bumgarner v. Williams Cos., Case No. 16-CV-26-GFK-FHM, 2016 WL 1717206 (N.D. Okla. Apr. 28, 2016) ..................................................................................................................................15 Desaigoudar v. Meyercord, 223 F.3d 1020 (9th Cir. 2000) ................................................................................... passim Dreiling v. Am. Exp. Co., 458 F.3d 942 (9th Cir. 2006) ...............................................................................................4 Fanni v. Northrop Grumman Corp., 23 F. App’x 782 (9th Cir. 2001) ..................................................................................15, 21 Goldfinger v. Journal Commc’ns Inc., No. 15-C-12, 2015 WL 2189752 (E.D. Wis. May 8, 2015) ..............................................29 Gottlieb v. Willis, No. 12-CV-2637, 2012 WL 5439274 (D. Minn. Nov. 7, 2012) ........................................28 Greenthal v. Joyce, No. 4:16-CV-41, 2016 WL 362312 (S.D. Tex. Jan. 29, 2016) ..........................................28 Harris v. Ivax Corp., 182 F.3d 799 (11th Cir. 1999) ...........................................................................................16 In re 3Com S’holders Litig., No. CIV. A. 5067-CC, 2009 WL 5173804 (Del. Ch. Dec. 18, 2009) ...............................30 In re CheckFree Corp. S’holders Litig., No. CIV. A. 3193-CC, 2007 WL 3262188 (Del. Ch. Nov. 1, 2007) .................................30 In re Cutera Sec. Litig., 610 F.3d 1103 (9th Cir. 2010) ...........................................................................................19 In re Daou Sys., Inc., 411 F.3d 1006 (9th Cir. 2005) ...........................................................................................19 Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 4 of 39 PAGE iv - FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT In re Hot Topic, Inc. Sec, Litig., No. CV 13-02939 SJO, 2014 WL 7499375 (C.D. Cal. May 2, 2014) ...................24, 30, 31 In re McKesson HBOC, Inc. Sec. Litig., 126 F. Supp. 2d 1248 (N.D. Cal. 2000) .............................................................................32 In re Nike, Inc. Sec. Litig., 181 F. Supp. 2d 1160 (D. Or. 2002) ....................................................................................4 In re Radiology Assoc., Inc. Litig., 611 A.2d 485 (Del. Ch. 1991)............................................................................................25 In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970 (9th Cir. 1999) .........................................................................................4, 14 In re Splash Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059 (N.D. Cal. 2001) .............................................................................16 In re VeriSign, Inc., Deriv. Litig., 531 F. Supp. 2d 1173 (N.D. Cal. 2007) .............................................................................32 Jackson v. Fischer, No. C 11-2753 PJH, 2015 WL 1143582 (N.D. Cal. Mar. 13, 2015) .................................21 Knollenberg v. Harmonic, Inc., 152 F. App’x 674 (9th Cir. 2005) ...............................................................................31, 32 Krieger v. Atheros Commc’ns, Inc., No. 11-CV-00640-LHK, 2012 WL 1933559 (N.D. Cal. May 29, 2012) ....................30, 32 Metzler Inc. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049 (9th Cir. 2008) ...........................................................................................21 Montanio v. Keurig Green Mountain, Inc., Case No. 5:16-cv-19, 2017 WL 658237 (D. Vt. Feb. 16, 2017)........................................21 N.Y. City Emps.’ Ret. Sys. v. Jobs, 593 F.3d 1018 (9th Cir. 2010), overruled on other grounds by Lacey v. Maricopa Cty., 693 F.3d 896 (9th Cir. 2012) ....................................................................13 Police Ret. Sys. v. Intuitive Surgical, Inc., 759 F.3d 1051 (9th Cir. 2014) .........................................................................15, 16, 17, 19 Resnik v. Swartz, 303 F.3d 147 (2d Cir. 2002).........................................................................................14, 26 Rosenblatt v. Getty Oil Co., 493 A.2d 929 (Del. 1985) ..................................................................................................30 S.E.C. v. Shanahan, 646 F.3d 536 (8th Cir. 2011) .............................................................................................32 Steiner Corp. v. Benninghoff, 5 F. Supp. 2d 1117 (D. Nev. 1998) ....................................................................................24 Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 5 of 39 PAGE v - FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976) .....................................................................................................28, 29 Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991) ...................................................................................................13, 31 STATUTES 15 U.S.C. § 78j(b) ..........................................................................................................................26 15 U.S.C. § 78n(a)(1) .....................................................................................................................13 15 U.S.C. § 78u-4(b) ................................................................................................................14, 32 15 U.S.C. § 78u-5(b) ......................................................................................................................16 15 U.S.C. § 78u-5(c)(1) .....................................................................................................14, 15, 16 15 U.S.C. § 78u-5(e) ......................................................................................................................16 15 U.S.C. § 78u-5(i) .................................................................................................................15, 17 RULES 17 C.F.R. § 240.14a-9 ....................................................................................................................26 17 C.F.R. § 240.14a-9(a) ...............................................................................................................13 MISCELLANEOUS H.R. CONF. REP. 104-369 (1995), reprinted in 1995 U.S.C.C.A.N. 730 .......................................16 Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 6 of 39 PAGE 1 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT LR 7-1 CERTIFICATION In compliance with LR 7-1, counsel for Defendants FEI Company, Thomas F. Kelly, Donald R. Kania, Homa Bahrami, Arie Huijser, Jan C. Lobbezoo, Jami K. Dover Nachtsheim, James T. Richardson, and Richard H. Wills (“FEI Defendants” or “Defendants”) certify that they conferred by telephone with counsel for plaintiff City of Hialeah Employees’ Retirement System (“Plaintiff”) on April 20, 2017 and made a good faith effort to resolve the disputed issues included in this Motion, but were unable to do so. MOTION The FEI Defendants respectfully bring this motion to dismiss the Second Amended Complaint for Violations of the Federal Securities Laws pursuant to Federal Rule of Civil Procedure 12(b)(6). This motion is supported by the following Legal Memorandum and by the Declaration of Michael R. Petrocelli (“Petrocelli Decl.”) filed on February 2, 2017 (Dkt. No. 47). LEGAL MEMORANDUM I. PRELIMINARY STATEMENT This is a securities case in which Plaintiff challenges the disclosures FEI Company (“FEI”) made to its public shareholders before those shareholders overwhelmingly voted to approve FEI’s acquisition by Thermo Fisher Scientific Inc. (“Thermo Fisher”). Plaintiff’s primary theory in the Second Amended Complaint (“SAC”) is that an explanation in FEI’s merger proxy of why the board of directors (the “Board”) primarily relied on one version of internal projections over another was false or misleading. These allegations do not state a claim under the substantive protections and stringent pleading standards of the Private Securities Litigation Reform Act (“PSLRA”). Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 7 of 39 PAGE 2 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT First, those statements are protected by the PSLRA safe harbor for “forward-looking statements.” The statements are quintessentially forward-looking. They set forth the Board’s and management’s view of FEI’s likely future results absent a sale and the assumptions underpinning that view. And the statements qualify under either path to the safe harbor: (1) they were identified as forward-looking and accompanied by meaningful cautionary language, and (2) they are not alleged to have been made with actual knowledge of falsity. Second, even if the safe harbor did not apply, the SAC’s allegations about the Board’s decision to use the “Case One” projections over “Case Two” would be insufficient to plead a Section 14(a) claim. Under the PSLRA, generalized allegations of falsity are insufficient. A plaintiff must plead specific facts demonstrating that a challenged statement is false. Moreover, under Ninth Circuit law, the SAC clearly sounds in fraud. Accordingly, Federal Rule of Civil Procedure 9(b) requires those facts to be pleaded with “a high degree of meticulousness.” Plaintiff has not pleaded such facts here in support of its contention that the Board’s statements about the projections were false. Tellingly, Plaintiff is forced to characterize both the nature of the two sets of projections (dubbing them the “Full Projections” and the “Worst Case Projections”) and the nature of the Board’s statement about them (claiming that the Proxy said Case Two was “unrealistic” ) in a way that does not jibe with what the Proxy actually says. Plaintiff’s attempt to turn the Proxy’s explanation of the Board’s opinion into a false or misleading statement falls well short of the mark. Plaintiff is likely to rely on Azar v. Blount International, Inc., in which this Court recently denied a motion to dismiss a Section 14(a) merger claim. That reliance would be misplaced. How is this case different from Blount? • In Blount, the transaction at issue was a management buyout in which board members were on both sides of the deal. Here, the Board was only on the sell- Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 8 of 39 PAGE 3 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT side of the deal. The merger and the negotiations that led to it were at arm’s length and involved discussions with multiple potential buyers. • In Blount, the Proxy entirely omitted an earlier set of projections in favor of more pessimistic projections created by management near the end of the merger process. Here, the Proxy disclosed both the “Case One” projections the Board and its financial advisor relied upon and the “Case Two” projections that Plaintiff favors. • In Blount, the PSLRA safe harbor was not raised. Here, the safe harbor protects the challenged statements about the projections. The SAC’s remaining theories are equally inadequate. Plaintiff has alleged nothing to show that the Proxy’s description of Goldman Sachs’ fairness opinion was false. The SAC’s assertion that Goldman applied a “double discount” is not only based on a fundamental misunderstanding of how a fairness analysis works, it ignores that the steps it complains of were fully disclosed in the Proxy. The remaining allegations deal with omitted details that are not alleged to have made any statement in the Proxy false and are the sort of incremental scraps of information that are not required in Proxy statements. Additionally, the SAC does not allege facts showing that Defendants acted with the requisite state of mind when they allegedly omitted information from the proxy statement. Plaintiff’s main theory of liability, based on the Board’s stated opinion of the projections, requires that Defendants acted with knowledge of falsity. The SAC does not plead any facts that could support a strong inference that any Defendant acted with such knowledge. Indeed, the SAC does even plead facts sufficient to meet a negligence standard, if one applied to some portion of the SAC. The SAC should be dismissed. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 9 of 39 PAGE 4 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT II. STATEMENT OF FACTS The following facts are taken from the allegations in the SAC, which are taken as true solely for the purpose of this motion, and from the disclosures set forth in FEI’s public filings with the SEC.1 A. Defendants 1. FEI and Thermo Fisher FEI is an Oregon corporation that designs, manufactures, and supports a broad range of high-performance microscopy workflow solutions that provide images and answers at the micro-, nano-, and picometer scales. ¶¶ 2, 17, 37.2 Thermo Fisher is a Delaware corporation that provides products and services to customers in a variety of scientific fields. ¶¶ 3, 18, 38. On September 19, 2016, FEI was acquired by Thermo Fisher and became its wholly owned subsidiary. ¶ 4. 2. The Individual Defendants Prior to the merger, the FEI board of directors (the “Board”) consisted of eight members, seven of whom were independent, outside directors. See ¶¶ 19-26. Its members each have many years of experience and expertise in the high technology market. See Petrocelli Decl. Exhibit 1 (Notice of Annual Meeting and Proxy Statement filed by FEI on March 28, 2016), at 5-8. 1 The Court may take judicial notice of FEI’s public filings with the SEC. See Dreiling v. Am. Exp. Co., 458 F.3d 942, 946 n.2 (9th Cir. 2006) (SEC filings are subject to judicial notice); In re Nike, Inc. Sec. Litig., 181 F. Supp. 2d 1160, 1165 (D. Or. 2002) (same). The Court also may consider FEI’s proxy filings under the doctrine of incorporation by reference. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (court may consider documents “whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff’s] pleadings.”) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)). 2 Citations to “¶ _” refer to paragraphs in the SAC. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 10 of 39 PAGE 5 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT B. The Merger 1. FEI Receives an Unsolicited Proposal from Thermo Fisher On February 2, 2016, Marc Casper, the president and chief executive officer of Thermo Fisher, called Don Kania, FEI’s president and chief executive officer, to express Thermo Fisher’s interest in discussing a potential strategic transaction with FEI. Petrocelli Decl. Exhibit 2 (Definitive Proxy Statement filed by FEI in connection with the merger on July 27, 2016, hereinafter “Proxy”) at 46.3 On February 4, 2016, Dr. Kania and Tom Kelly, the chairman of the Board, met with a representative of Goldman Sachs to inquire about retaining the firm as FEI’s financial advisor. Id. On February 17, 2016, Mr. Casper met in person with Dr. Kania and reiterated Thermo Fisher’s interest in acquiring FEI. Id. at 47. On March 21, 2016, FEI received an initial non-binding indication of interest from Thermo Fisher proposing to acquire FEI for $96.00 in cash per share of FEI common stock. Id. That same day, the Board met with management, Goldman Sachs, and its legal advisors to discuss Thermo Fisher’s offer. Id. Following that discussion, the Board determined that Thermo Fisher’s proposal was too low to warrant negotiations. Id. Dr. Kania called Mr. Casper later that day and explained that the Board perceived a significant disconnect between Thermo Fisher’s proposed price and FEI’s intrinsic value. Id. 2. Thermo Fisher Increases Its Offer On April 12, 2016, representatives of Goldman Sachs spoke with Thermo Fisher’s financial advisor to discuss a potential transaction between the two companies. During that conversation, Goldman Sachs communicated that the Board viewed Thermo Fisher’s initial 3 While this is a motion to dismiss, citation to the Proxy is appropriate because the Amended Complaint relies on the Proxy. Citations to page numbers in the Proxy refer to the exhibit page numbering. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 11 of 39 PAGE 6 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT offer was inadequate, but that the Board had authorized continued discussions if Thermo Fisher made a proposal at a meaningfully higher price. Id. at 47-48. Dr. Kania delivered the same message to Mr. Casper on April 15, 2016. Id. at 48. Later that day, Thermo Fisher sent FEI a revised proposal to acquire FEI for $103.00 per share in cash. Id. 3. FEI Tests the Market While Negotiating with Thermo Fisher The Board met the next day to discuss next steps, including whether to reach out to other potential acquirers to test the market. Id. The Board also considered the competitive and confidentiality risks of reaching out to a large group of potential bidders. Id. After Goldman Sachs reviewed a list of potential third parties identified by FEI management, the Board authorized Goldman Sachs to reach out to three companies—one of whom FEI had informal discussions with earlier that month—to gauge interest. Id. The Board also instructed management and Goldman Sachs to begin negotiations with Thermo Fisher to obtain a higher offer. Id. Between April 16 and 18, 2016, representatives of Goldman Sachs contacted the three additional companies. Id. Two of these companies, referred to in the proxy as “Party 1” and “Party 2,” expressed some interest in evaluating a potential transaction with FEI. Id. at 48-49. The third company, referred to as “Party 3,” declined to enter discussions with FEI. Id. at 49. At a meeting on April 28, 2016, the Board, along with management, Goldman Sachs, and the Board’s legal advisors, discussed strategies for obtaining more favorable proposals from Party 1, Party 2, and Thermo Fisher. The Board also revisited whether to contact other third parties. Id. Recognizing the competitive and confidentiality risks and the Board’s and managements’ view that it was unlikely any other parties would have interest in a transaction Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 12 of 39 PAGE 7 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT and the financial resources to consummate one, the Board decided not to contact other parties. Id. Between April 27 and April 29, 2016, FEI entered into confidentiality agreements with Thermo Fisher, Party 1, and Party 2 to allow sharing of confidential information needed to facilitate discussions. Id. at 49-50. Over the next few days, FEI provided the three companies with additional information about FEI. FEI management engaged with each of them to answer questions and provide supplemental information about FEI and its business. Id. at 50. The Board met again on May 2, 2016 to review the status of the discussions. Id. On May 5 and May 12, 2016, Party 2 and Party 1, respectively, informed Goldman Sachs that they had decided not to continue discussions with FEI. Id. at 50-51. 4. Thermo Fisher Increases Its Offer a Second Time Also on May 12, 2016, Thermo Fisher contacted FEI with a new proposal of $105.00 per share in cash. Id. at 51. The next day, the Board discussed how to respond to Thermo Fisher’s revised offer. As part of that discussion, the Board discussed the Company’s plan for operation as a standalone business as compared against Thermo Fisher’s offer. Id. In conducting this review, the Board primarily used a set of management projections called “Case One,” but also considered another set of projections called “Case Two.” Id. The Case One projections were developed by aggregating projections developed by managers at each of FEI’s business units and then applying adjustments developed by FEI senior management to reflect the business units’ dynamics and performance variables. Id. at 64. The Case Two projections were developed in the same way, but without the adjustments by senior management. Id. That lack of adjustment meant that the Case Two projections represented an “upside case” that management considered significantly less likely to be achieved than the Case Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 13 of 39 PAGE 8 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT One projections. This is because Case Two depended on nearly all of the business units performing at planned levels, which had not been FEI’s historical experience. Id. Because of its view that the Case One projections were more likely to reflect FEI’s future performance as a standalone entity, the Board instructed Goldman Sachs to use the Case One projections in performing the financial analyses of the potential transaction. Id. at 51. The Proxy disclosed this fact to shareholders so that they could draw their own conclusions as to the adequacy of Goldman Sachs’ analysis. Id. Specifically, the Proxy disclosed: FEI’s Board of Directors instructed Goldman Sachs to use the Case One Projections for the purpose of performing various financial analyses, as the Board had determined that the Case One Projections were more likely to reflect the future business performance of FEI on a stand-alone basis than would the Case Two Projections, which were compiled based on individualized projections developed by managers at various business units across FEI without any adjustments by FEI senior management to reflect the historical reality that it was rare for all of FEI’s business units to achieve their projected financial goals in any particular year. Therefore, Case Two Projections represented an upside case that would be dependent on substantially all individual business units of FEI performing at planned levels of performance, which was inconsistent with FEI’s historical experience, and as a result such Case Two Projections were significantly less likely than the Case One Projections to reflect a reasonable estimate of the future performance of FEI on a stand-alone basis. Id. at 64. Following the discussion at the May 13, 2016 meeting, the Board instructed management and Goldman Sachs to seek a per share price above $110.00 from Thermo Fisher. Id. at 51. 5. Thermo Fisher Makes a “Best and Final” Offer Following the May 13, 2016 Board meeting, Dr. Kania and Goldman Sachs informed Thermo Fisher that its revised proposal at $105.00 per share was not acceptable to the Board, but that the Board could be willing to entertain a transaction above $110.00 per share in cash. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 14 of 39 PAGE 9 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT Id. On May 14, 2016, Mr. Casper called Dr. Kania and offered an acquisition price of $107.50 per share, which he characterized as Thermo Fisher’s “best and final” offer. Id. at 52. Thermo Fisher confirmed the offer in writing the next day and also indicated that acceptance was contingent on FEI entering into a period of exclusive negotiations through June 2, 2016, while the parties negotiated non-price terms and finalized legal due diligence. Id. On May 16, 2016, the Board met with management and the Company’s financial and legal advisors to discuss Thermo Fisher’s offer. The Board concluded that $107.50 per share was a compelling offer for FEI and that it would be in the best interest of FEI’s shareholders to seek a transaction at that price. Id. Pursuant to the Board’s instruction, FEI and Thermo Fisher entered into an exclusivity period that day. Id. 6. The Merger Agreement On May 26, 2016, the Board met to discuss proposed final terms of the merger agreement. Id. at 53. Goldman Sachs delivered its opinion that the $107.50 per share merger consideration was fair to shareholders from a financial point of view. Id. The Board then approved entry into the merger agreement, directed that it be submitted to shareholders for approval, and resolved to recommend its approval. Id. The following morning, FEI and Thermo Fisher issued a joint press release announcing the transaction. Id. The merger consideration represented a substantial premium to FEI shareholders. It was approximately 15.5% higher than the closing price of FEI stock on May 25, 2016, the last trading day before the merger announcement; approximately 21.7% and 23.5% over the volume-weighted average price in the one-month period and three-month period, respectively, prior to May 26, 2016; and approximately 51.2% over the closing price on February 1, 2016, Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 15 of 39 PAGE 10 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT the day before Thermo Fisher initiated contact with FEI. Id. at 54. The merger consideration also exceeded FEI’s all-time high closing price up to that point. Id. 7. The Merger Proxy Statement On June 24, 2016, FEI filed with the SEC a Preliminary Proxy Statement on Schedule 14A. ¶ 7. On July 27, 2016, FEI filed with the SEC a substantially unchanged Definitive Proxy Statement on Schedule 14A (the “Proxy”). Id. The Proxy contained 97 pages of detailed disclosures about the proposed transaction, followed by annexes containing additional documents relevant to a stockholder’s voting decision. The Proxy discussed the terms of the merger and the merger consideration (Proxy at 45- 46), and attached a complete copy of the merger agreement as Annex A. The Proxy described the sale process in detail, including the background of the merger, the facts and circumstances considered by the Board, and the reasons why the Board concluded that the merger was in the best interest of shareholders. Id. at 46-57. The Proxy also included more than six pages of discussion of the details of Goldman Sachs’ engagement and its analysis of the fairness of the merger to FEI shareholders. Id. at 57-63. Goldman Sachs’ full fairness opinion was attached to the Proxy as Annex B. The Proxy included summaries of both the Case One and Case Two projections, along with an explanation of how they were developed. Id. at 64-68. The Proxy advised shareholders that the projections were forward-looking statements, and that they reflected “numerous assumptions and estimates as to future events” and “should not be relied upon as being necessarily indicative of actual future results.” Id. at 64. Additionally, the Proxy included seven pages of detailed disclosures regarding the interests of FEI’s directors and executive officers in the merger, including accelerated vesting of certain options and other Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 16 of 39 PAGE 11 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT compensation that individuals would receive upon consummation of the merger. Id. at 68-75. The Proxy announced that a special meeting of shareholders would be held on August 30, 2016 to vote on the merger agreement. 8. FEI’s Shareholders Overwhelmingly Approve the Merger On August 30, 2016, FEI’s shareholders overwhelmingly approved the merger, with 35,414,825 shares voted in favor and 50,104 shares voted against. See Petrocelli Decl. Exhibit 3 (Form 8-K filed by FEI on August 30, 2016). 9. The Merger Closes On September 19, 2016, the merger closed, and FEI became a subsidiary of Thermo Fisher. ¶ 4. C. Procedural History The current complaint is Plaintiff’s third attempt to plead a viable claim. Plaintiff began this action on September 9, 2016—more than three months after the preliminary proxy was filed, more than a month after the definitive proxy was filed announcing the date of the shareholder vote, and more than a week after the shareholder vote. The initial complaint asserted claims under Sections 14(a) and 20(a) of the Securities Exchange Act, as well as a claim for breach of fiduciary duties. See Complaint for Breach of Fiduciary Duties and Violation of the Federal Securities Laws (Dkt. No. 1). In the initial complaint, Plaintiff prayed for injunctive relief blocking consummation of the merger. Id. at pp. 30-31. But Plaintiff never took any steps to stop the shareholder vote or the closing of the merger, despite basing their claims entirely on the contents of the proxy statements and associated announcements. On December 30, 2016, Plaintiff filed the Amended Complaint (“FAC”). Dkt. No. 44. The Amended Complaint dropped the original complaint’s claim for breach of fiduciary duty Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 17 of 39 PAGE 12 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT and asserted only claims under Section 14(a) of the Securities Exchange Act and SEC Rule 14a-9 promulgated thereunder, as well as Section 20(a) of the Securities Exchange Act. Rather than injunctive relief, the FAC sought compensatory damages. The FAC did not identify any false or misleading statements in the Proxy, instead relying entirely on allegedly omitted information. On February 2, 2017, Defendants filed a motion to dismiss the Amended Complaint. Dkt. Nos. 45, 46. Instead of defending the Amended Complaint—which was Plaintiff’s second attempt at pleading a viable cause of action—Plaintiff acknowledged the defects by declining to file an opposition. Instead, on March 6, 2017, Plaintiff filed an Unopposed Motion for Leave to File a Second Amended Complaint. Dkt. No. 59. That unopposed motion reflected an agreement between Plaintiff and Defendants that Plaintiff would respond to any motions to dismiss a second amended complaint on the merits rather than seek to file a further amended complaint. Id. Plaintiff filed the SAC on March 7, 2017. The SAC continues to assert claims under Section 14(a) and Rule 14a-9 against the FEI Defendants (¶¶ 111-119) and under Section 20(a) against the FEI Defendants and Thermo Fisher (¶¶ 120-127). The SAC’s primary theory is that the Proxy was false and misleading in its description of the Board’s opinion that the Case One projections were more likely than the Case Two projections to reflect FEI’s future results as a standalone entity. ¶¶ 87-93. The SAC also alleges that the Proxy was false and misleading because the fairness analysis conducted by Goldman Sachs included a “discounted cash flow analysis” against the Case One projections (¶¶ 94-95) and because it omitted certain details about the Case Two projections (¶¶ 96-101) and Goldman Sachs’ analysis (¶¶ 102-107). Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 18 of 39 PAGE 13 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT III. ELEMENTS OF CLAIM AND PLEADING STANDARD Section 14(a) prohibits the solicitation of proxies “in contravention of such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for the protection of investors . . . .” 15 U.S.C. § 78n(a)(1). SEC Rule 14a-9 bars solicitation by means of a proxy “containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading . . . .” 17 C.F.R. § 240.14a-9(a). “To state a claim under § 14(a) and Rule 14a-9, a plaintiff must establish that ‘(1) a proxy statement contained a material misrepresentation or omission which (2) caused the plaintiff injury and (3) that the proxy solicitation itself, rather than the particular defect in the solicitation materials, was an essential link in the accomplishment of the transaction.’” N.Y. City Emps.’ Ret. Sys. v. Jobs, 593 F.3d 1018, 1022 (9th Cir. 2010) (citation omitted), overruled on other grounds by Lacey v. Maricopa Cty., 693 F.3d 896 (9th Cir. 2012). In addition, “a Section 14(a), Rule 14a-9 plaintiff must demonstrate that the misstatement or omission was made with the requisite level of culpability[.]” Desaigoudar v. Meyercord, 223 F.3d 1020, 1023 (9th Cir. 2000). The pleading of these elements is subject to some requirements in addition to the ordinary standard under Federal Rule of Civil Procedure 12(b)(6). For statements of opinion contained in a proxy, a plaintiff must allege facts demonstrating not only that the opinion was “objectively false,” but also that it was “subjectively false”—i.e., that the maker knew it was false at the time it was made. See Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1095 (1991). Where a claim is based on information allegedly omitted from a proxy statement, the complaint must plead facts showing either that disclosure of that particular information was Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 19 of 39 PAGE 14 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT specifically required by SEC regulations or that the omission “makes other statements in the proxy statement materially false or misleading.” Resnik v. Swartz, 303 F.3d 147, 151 (2d Cir. 2002). In addition, all of the elements of Section 14(a) claims must be pleaded in accordance with the heightened pleading standards of the Private Securities Litigation Reform Act (“PSLRA”). The PSLRA requires plaintiffs to “specify each statement alleged to have been misleading, the . . . reasons why the statement is misleading,” and to “state with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1); Desaigoudar, 223 F.3d at 1023; see also In re Silicon Graphics Sec. Litig., 183 F.3d 970, 984 (9th Cir. 1999) (PSLRA requires plaintiff to “provide a list of all relevant circumstances in great detail”). The PSLRA also requires a plaintiff to plead facts giving rise to a “strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A). Claims under Section 14(a) also are subject to the PSLRA safe harbor for forward-looking statements. 15 U.S.C. § 78u-5(c)(1). IV. ARGUMENT The Amended Complaint does not state a claim under either Section 14(a) or Section 20(a). Statements in the Proxy regarding the Board’s opinion that the Case One projections set forth FEI’s most likely future results were protected by the PSLRA safe harbor for forward- looking statements. The SAC also does not allege facts demonstrating that any challenged statement was false. Nor does the SAC identify any statement in the Proxy made materially false or misleading by information omitted from the Proxy. Finally, the SAC does not it allege facts giving rise to a strong inference that any Defendant acted with the requisite state of mind. Plaintiff’s remaining claim for secondary liability under Section 20(a) fails because the SAC does not state a claim for primary liability. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 20 of 39 PAGE 15 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT A. The Amended Complaint Does Not State a Claim under Section 14(a) and Rule 14a-9 1. The SAC Does Not State a Claim Based on Statements in the Proxy About the Board’s Views of Which Projections Were More Likely to Be Accurate Plaintiff’s primary contention in the SAC is that portions of the Proxy describing the Board’s view that the Case One projections were more likely than the Case Two projections to be accurate were false and misleading. See ¶¶ 87-93. The SAC does not state a claim based on these statements for two reasons: (1) these statements are protected from suit by the PSLRA safe harbor for forward-looking statements, and (2) the SAC does not plead particularized facts that would make these statements false or misleading. a. Statements About the Projections Are Protected by the PSLRA Safe Harbor for Forward-Looking Statements Claims under Section 14(a) are subject to the PSLRA’s safe harbor for “forward- looking statements.” 15 U.S.C. § 78u-5(c)(1) (safe harbor applies “in any private action arising under [the Securities Exchange Act] that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading.”); see also Fanni v. Northrop Grumman Corp., 23 F. App’x 782, 784 n.2 (9th Cir. 2001) (unpublished) (applying safe harbor to statements in a merger proxy in dismissing Section 14(a) claim); Bumgarner v. Williams Cos., Case No. 16-CV-26-GFK-FHM, 2016 WL 1717206, at *3-4 (N.D. Okla. Apr. 28, 2016) (same). A forward-looking statement is “any statement regarding (1) financial projections, (2) plans and objectives of management for future operations, (3) future economic performance, or (4) the assumptions underlying or related to any of these issues.” Police Ret. Sys. v. Intuitive Surgical, Inc., 759 F.3d 1051, 1058 (9th Cir. 2014) (citation omitted); see also 15 U.S.C. § 78u-5(i)(1). The safe harbor provides that “a person . . . shall not be liable with respect to any forward-looking statement” that is either “(i) identified as a forward-looking Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 21 of 39 PAGE 16 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement,” or (ii) not “made . . . with actual knowledge . . . that the statement was false or misleading.” 15 U.S.C. § 78u-5(c)(1); Intuitive Surgical, 759 F.3d at 1058. “Congress enacted the safe-harbor provision in order to loosen the ‘muzzling effect’ of potential liability for forward-looking statements, which often kept investors in the dark about what management foresaw for the company.” Harris v. Ivax Corp., 182 F.3d 799, 806 (11th Cir. 1999) (citing H.R. CONF. REP. 104-369, at 42 (1995), reprinted in 1995 U.S.C.C.A.N. 730, 741); see also In re Splash Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059, 1068 (N.D. Cal. 2001) (“The purpose behind this safe harbor is to encourage the disclosure of forward- looking information.”). Application of the safe harbor is properly considered on a motion to dismiss. See 15 U.S.C. § 78u-5(e).4 i. Statements About the Projections Were Forward- Looking The challenged statements regarding the Board’s view of the relative likelihoods of the Case One and Case Two projections (¶ 87) fall squarely within the statutory definition of forward-looking statements. These statements explained to investors the nature of the projections and told them that in the Board’s opinion “the Case Two projections represented an upside case that would be dependent on substantially all individual business units of FEI performing at planned levels of performance, which was inconsistent with FEI’s historical experience, and as a result such Case Two Projections were significantly less likely than the Case One Projections to reflect a reasonable estimate of the future performance of FEI on a 4 The safe harbor does not apply to certain categories of issuers and certain types of transactions, including tender offers and “going private” transactions. See 15 U.S.C. § 78u- 5(b). None of these exclusions applies in this case. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 22 of 39 PAGE 17 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT stand-alone basis.” Proxy at 51, 64; ¶ 87. By informing investors that it believed the Case One projections represented the most likely future financial results, the Board was making “classic growth and revenue projections, which are forward-looking on their face.” Intuitive Surgical, 759 F.3d at 1059. The portions of these statements explaining the reasons for the Board’s belief—that experience indicated it was unlikely for all business units to meet their individual projections— also fall within the statutory definition of forward-looking because they are “statement[s] of the assumptions underlying or relating to” the prediction that Case One was the more likely scenario for FEI’s future economic performance. 15 U.S.C. § 78u-5(i)(1)(D); Intuitive Surgical, 759 F.3d at 1059. As the Ninth Circuit has made clear, such statements of assumptions underlying financial projections fall within the definition of forward-looking. See Intuitive Surgical, 759 F.3d at 1059 (holding statements regarding past and present conditions covered by the safe harbor because “examined as a whole, the challenged statements related to future expectations and performance.”). ii. The Safe Harbor Applies Because the Statements Were Identified as Forward-Looking and Accompanied by Meaningful Cautionary Language One way the safe harbor can apply to a forward-looking statement if it is “identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.” Id. at 1058 (citation omitted). The Proxy identified its discussion of the projections as forward-looking and included meaningful cautionary language. On the page immediately following the Table of Contents, the Proxy included a section generally advising investors that the Proxy contained forward-looking statements. Proxy at 11- 12. The discussion of the projections that Plaintiff challenges appears in a section entitled Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 23 of 39 PAGE 18 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT “Management Projections” that included a summary of the Case One and Case Two projections and a discussion of the different assumptions underlying them and the Board’s opinion that Case One was more likely to pan out than Case Two. See id. at 64-68. This section specifically informed investors that “[t]he Management Projections are forward-looking statements.” Id. at 65. It also included the following warning to investors: Although a summary of the Management Projections is presented with numerical specificity, they reflect numerous assumptions and estimates as to future events made by FEI management, taking into account the relevant information available to FEI management at the time. This information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Management Projections not to be achieved include general economic conditions, FEI’s ability to achieve forecasted sales, accuracy of certain accounting assumptions, changes in actual or projected cash flows, competitive pressures and changes in tax laws. In addition, the Management Projections do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the Merger. As a result, there can be no assurance that the Management Projections will be realized, and actual results may be materially better or worse than those contained in the Management Projections. The Management Projections cover multiple years, and such information by its nature becomes less reliable with each successive year. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Board of Directors, FEI, Goldman Sachs, J.P. Morgan, Thermo Fisher or any of their respective affiliates or representatives or any other recipient of this information considered, or now considers, the Management Projections to be predictive of actual future results. The summary of the Management Projections is not included in this proxy statement in order to induce any shareholder to vote in favor of the proposal to approve the Merger Agreement[.] We do not intend to update or otherwise revise the Management Projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumption underlying the Management Projections are shown to be in error or no longer appropriate. In light of the foregoing factors and the uncertainties inherent in the Management Projections, shareholders are cautioned not to place undue, if any, reliance on the projections included in this proxy statement. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 24 of 39 PAGE 19 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT Id. at 64-65.5 This language is sufficient to invoke the safe harbor under Ninth Circuit law. See Intuitive Surgical, 759 F.3d at 1059-60 (alteration in original) (finding sufficient cautionary language in a disclaimer that “[a]ctual results may differ materially from those expressed or implied, as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company’s [SEC] filings. Prospective investors are cautioned not to place undue reliance on such forward-looking statements.”); see also In re Cutera Sec. Litig., 610 F.3d 1103, 1112 (9th Cir. 2010). iii. The Safe Harbor Also Applies Because the SAC Does Not Plead Facts Showing that Defendants Had “Actual Knowledge” that the Statements Were False at the Time They Were Made Even without sufficient identification or cautionary language, “[u]nder the PSLRA’s ‘safe harbor’ provisions, plaintiffs must prove that ‘forward-looking’ statements are made with ‘actual knowledge’ that they were false or misleading.” In re Daou Sys., Inc., 411 F.3d 1006, 1021 (9th Cir. 2005) (citation omitted); see also Cutera, 610 F.3d at 1112-13 (safe harbor applies to “unidentified forward-looking statements or forward-looking statements lacking sufficient cautionary language where the plaintiff fails to prove actual knowledge that the statement was false or misleading.”). This independent avenue to the safe harbor places the burden on Plaintiff to plead facts showing that Defendants had actual knowledge that the Proxy’s statements regarding the relative likelihoods of Case One and Case Two were false at the time they were made. Plaintiff has not pleaded facts showing that any Defendant had actual knowledge that these statements were false. The SAC alleges that “[t]he Board was fully aware all along of 5 The “Management Projections” section also referred investors to a section of the Proxy entitled “Forward-Looking Statements,” which in turn referred investors to additional “risk factors” included in FEI’s other SEC filings. Proxy at 65 and 11. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 25 of 39 PAGE 20 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT both FEI’s supposed ‘historical reality’ of missing projected goals and the Company’s financial results versus guidance in the quarters leading up to the Acquisition” and “had full opportunity to reject the [Case Two projections] at any time” but did not do so. ¶ 89. That allegation seeks to draw some inference of bad faith from the timing of the Board’s decision. Even if such an inference could be drawn (it cannot), it still would not show actual knowledge that it was false for the Proxy to say that the Case Two projections were “significantly less likely . . . to reflect a reasonable estimate of the future performance of FEI . . . .” ¶ 87. The SAC also alleges that “the Board did not reject the [Case Two projections] because they thought they were unrealistic” but rather “in order to drive down the calculation of FEI’s intrinsic value and make Thermo Fisher’s $107.50 per share offer appear financially fair.” ¶ 91. This naked assertion also does nothing to show actual knowledge the challenged statements were false. For one, the Board did not “reject” the Case Two projections nor say they were “unrealistic”—it instructed Goldman Sachs to use Case One because of a belief that it was more likely to reflect future results. Moreover, this says nothing about the Board having knowledge that Case Two was not less likely than Case One to be an accurate projection of future results. Absent facts showing such knowledge, the safe harbor bars a claim based on these forward-looking statements. b. Even If the Court Were to Find that the Safe Harbor Did Not Apply, the SAC Does Not Plead Sufficient Facts Showing the Statements Were False or Misleading Even if the safe harbor did not apply, statements about the projections would not support Plaintiff’s claim because the SAC does not allege particularized facts showing they were false or misleading. The SAC alleges that the Proxy’s statements regarding the Case One and Case Two projections were “both subjectively false (the Board did not actually believe that the [Case Two projections] were unrealistic) and objectively false (the [Case Two projections] were not unrealistic).” ¶ 88. According to Plaintiff’s theory, the Board “instructed Goldman Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 26 of 39 PAGE 21 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT Sachs to use the [Case Two projections] in order to drive down the calculation of FEI’s intrinsic value and make Thermo Fisher’s $107.50 per share offer appear financially fair.” ¶ 91. By alleging that the Board intentionally misled investors as to the standalone value of FEI in order to induce them to vote for the merger at an unfair price, the SAC “clearly sounds in fraud.” Desaigoudar, 223 F.3d at 1022; see also Northrup Grumman, 23 F. App’x at 784 (Section 14(a) claim “clearly allege[d] fraud” where it “accus[ed] Defendants of concealing their awareness” of an impediment to a merger “in order to secure shareholder approval.”). Accordingly, not only the PSLRA but also Federal Rule of Civil Procedure 9(b) requires Plaintiff to plead its case with a “high degree of meticulousness.” Desaigoudar, 223 F.3d at 1022. Plaintiff cannot get by on generalized facts and assertions; it must plead “specific facts indicating why [the challenged statements] were false.” Metzler Inc. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1070 (9th Cir. 2008); see also Montanio v. Keurig Green Mountain, Inc., Case No. 5:16-cv-19, 2017 WL 658237, at *7 (D. Vt. Feb. 16, 2017) (“To prove that a projection of future performance . . . is objectively false requires allegations of specific, provable facts to the contrary.”); Jackson v. Fischer, No. C 11-2753 PJH, 2015 WL 1143582, at *9 (N.D. Cal. Mar. 13, 2015) (under PSLRA complaint must allege “specific contemporaneous facts showing that any particular alleged statement . . . was false at the time it was made.”). The SAC contains no such allegations. Strip away the adjectives and adverbs that come from Plaintiff’s mouth but not the Proxy, and the story told in the SAC is unremarkable: 1. The Board had two versions of the management projections at its disposal during the process leading to the merger. ¶ 8. 2. One version (Case Two) consisted only of “bottoms-up” estimates by individual business units, while the other (Case One) included an adjustment by senior management based on historical experience. ¶ 65. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 27 of 39 PAGE 22 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT 3. On May 13, 2016, the Board rejected an offer from Thermo Fisher of $105.00 per share of FEI stock. ¶ 66. At the same time, recognizing that it may soon need the opinion of Goldman Sachs as to the fairness of a merger offer, the Board instructed Goldman to use Case One to conduct a financial analysis because of the Board’s view that Case One was “more likely to reflect the future business performance of FEI on a standalone basis” than Case Two was. ¶¶ 65, 87. 4. On May 16, 2016, the Board agreed to accept an offer from Thermo Fisher of $107.50 per share. ¶ 69. 5. On May 26, 2016, Goldman Sachs presented its financial analysis based on the Case One projections, and the Board decided to approve the merger and recommend that shareholders do the same. ¶ 70. 6. FEI filed the Proxy, in which it disclosed both the Case One and Case Two projections. ¶¶ 96, 97. The Proxy also disclosed to investors that Goldman Sachs’ fairness opinion was based upon Case One, that the Board had instructed Goldman Sachs to use Case One, and the reasons why the Board believed that Case One was more likely than Case Two. ¶ 87. None of this suggests that the statement at issue—that the Board believed Case One was more likely than Case Two to reflect future FEI results—was false. The SAC’s dramatic language does not change that. Throughout the SAC, Plaintiff refers to the Case Two projections as “Full Projections” and the Case One Projections as “Worst Case Projections.” E.g., ¶¶ 8-10, 50, 51, 54, 65, 87-93, 95-101. This is a false dichotomy not supported by the actual descriptions of the projections in the Proxy and the SAC. As the Proxy clearly discloses, in passages quoted in the SAC, neither set of projections was “full” or “worst case.” Rather, one included senior management’s adjustments based on historical experience companywide, and one did not. See ¶ 87. The SAC also asserts that the Proxy told stockholders the Board believed the Case Two projections were “unrealistic” (¶¶ 8, 65, 87), and then devotes many of its allegations to attempting to show the projections were not “unrealistic” and that the Board did not sincerely believe that they were “unrealistic” (see ¶¶ 50, 51, 89). But the Proxy did not say the Board thought the Case Two projections were Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 28 of 39 PAGE 23 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT “unrealistic.” It said that that Case Two represented an “upside case that management considered significantly less likely to be achieved” than Case One. ¶ 87. Plaintiff cannot plead a claim by constructing and then trying to knock down a strawman statement. Moreover, the SAC does not identify a single statement or action by FEI or the Board that ran contrary to the stated rationale for favoring Case One (that historical experience showed it was unlikely for each individual business unit to hit its projections). It alleges that “as the Board was fully aware, the Company had just met or beat its guidance numbers” (¶ 65), but that does not say anything about the likelihood of Case Two being more accurate than Case One. There is no allegation linking the public earnings guidance Plaintiff refers to with the internal Case Two projections at all. Nor is there any allegation that meeting or exceeding those public guidance numbers necessarily meant that each business unit had met its individual internal projections. Moreover, the SAC’s assertion that “[i]t was only when the Acquisition was imminent, and at a price that did not reflect the true value of the Company, that the Board suddenly rejected” the Case Two projections (¶ 90) is belied by its own allegations. As the Complaint alleges, the Board instructed Goldman to rely on Case One on May 13, 2016, when the Board was meeting to discuss Thermo Fisher’s offer of $105.00 per share. ¶ 65. But the Board did not accept that offer. It instructed management to tell Thermo Fisher that the offer was not high enough, and to continue negotiations. ¶¶ 65-66. It was only when Thermo Fisher came back the next day with an offer at $107.50 per share that the Board decided to accept. ¶ 69. In other words, even based on the facts alleged in the SAC, it cannot be reasonably inferred that the Board suddenly chose Case One over Case Two in order to justify an offer it had already decided to accept. The offer it ultimately agreed to was not on the table at the time the Board gave its instructions to Goldman. In short, Plaintiff here has no facts it can point to Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 29 of 39 PAGE 24 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT in support of its suspicion that the Board misled shareholders about the two projections it disclosed. This is a very different case than Azar v. Blount International, Inc., Case No. 3:16-cv- 483-SI, slip op. (D. Or. Mar. 20, 2017), (the “Blount Order”) (attached as Exhibit A for the Court’s convenience ), in which the Court recently denied a motion to dismiss a Section 14(a) merger claim. In Blount, it was alleged that the defendant company used one set of projections (the “September Projections”) at the beginning of discussions about a management buyout, and then created two new, more pessimistic sets of projections later in negotiations. Blount Order at 5-6. Crucially, the merger proxy statement in Blount did not disclose the September Projections at all. See id. at 7. Here, by contrast, FEI’s proxy disclosed a summary of both the Case One and Case Two versions of its projections—neither was withheld. Moreover, the merger in Blount was a management buyout in which no attempt was made to test the market. Id. at 3-7. In such circumstance, it is perhaps possible to draw an inference that created new projections at the last minute in order to justify an untested merger price. Not so here, where the transaction was at arm’s length and the Board tried and failed to obtain a competing bid despite outreach to three likely partners.6 6 Nor should the claim here be allowed to go forward based on In re Hot Topic, Inc. Securities Litigation, No. CV 13-02939 SJO (JCx), 2014 WL 7499375 (C.D. Cal. May 2, 2014). That case involved a company creating an entirely new set of downgraded projections on the eve of a merger agreement, projections which were based on pessimistic assumptions about expansion and growth that were contradicted by specific public statements made by the defendants. Id. at *2, *6. The SAC does not allege such facts. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 30 of 39 PAGE 25 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT 2. The SAC Does Not State a Claim Based on the Proxy’s Description of Goldman Sachs’ Fairness Opinion The SAC next alleges that the discussion in the Proxy of a “discounted cash flow analysis” conducted by Goldman Sachs as part of its fairness analysis was false and misleading because it represented a “double discount.” ¶ 95. This allegation is incoherent. Plaintiff’s theory is that Goldman Sachs’ analysis was somehow improper because it applied a “discount rate” to the Case One projections, which Plaintiff alleges were already “discounted off the top for supposed risk.” Id. This misunderstands both the nature of a discounted cash flow (DCF) analysis and management’s role in creating projections. A DCF analysis is not performed to shave off a portion of projected revenues, as the SAC suggests. It is performed to convert expected future cash flows, derived from management’s projections, into present-day dollars in order to estimate a current value for the company. See, e.g., Steiner Corp. v. Benninghoff, 5 F. Supp. 2d 1117, 1130 (D. Nev. 1998) (“The theory behind the DCF method is that the current value of a company is essentially equal to the amount of cash it will generate in the future, discounted to present value.”); In re Radiology Assoc., Inc. Litig., 611 A.2d 485, 490 (Del. Ch. 1991) (DCF analysis is used because “[i]n theory, the value of an interest in a business depends on the future benefits discounted back to a present value at some appropriate discount (capitalization) rate.”). This conversion to present-day value involves application of a “discount rate,” which in this instance reflected “estimates of the Company’s weighted average cost of capital . . . .” Proxy at 61. The SAC’s assertion that applying a standard DCF analysis to the Case One projections amounted to a “double discount” that “resulted in false and misleading representations to shareholders” is simply illogical on its face and cannot form the basis of a claim. The supposed first “discount” was company management using its experience and perspective to create Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 31 of 39 PAGE 26 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT projections. The second “discount” was Goldman Sachs’ effort to determine how much the company was worth today based on the expected profits over the next several years as reflected in management’s projections. Both of these steps were entirely normal and proper. Moreover, the relevant facts about both the nature of the Case One projections and the DCF analysis performed by Goldman Sachs were disclosed in the Proxy—indeed, that is where Plaintiff’s allegations about this are drawn from. Shareholders had the information they needed to determine whether the DCF analysis was properly performed. 3. The SAC Does Not State a Claim Based on Allegedly Omitted Details The SAC lastly alleges that the Proxy was false and misleading because of omitted details about (1) the Case Two projections, and (2) Goldman’s fairness analysis. Neither category of omissions supports a claim under Section 14(a), both because Plaintiff has not alleged facts showing that any of these omissions made any statement in the Proxy false or misleading and because the omissions are not material. a. The SAC Does Not Allege That Any of the Omissions Made Any Statement in the Proxy False or Misleading Section 14(a) and Rule 14a-9 prohibit “the solicitation of a proxy by a statement that contains either (1) a false or misleading declaration of material fact, or (2) an omission of material fact that makes any portion of the statement misleading.” Desaigoudar, 223 F.3d at 1022 (citing 15 U.S.C. § 78j(b); 17 C.F.R. § 240.14a-9). Where a claim is based on information allegedly omitted from a proxy statement, the complaint must plead facts showing either that disclosure of that particular information was specifically required by SEC regulations or that the omission “makes other statements in the proxy statement materially false or misleading.” Resnik, 303 F.3d at 151. The SAC does not point to any information that was omitted and was specifically required to be disclosed by SEC regulations. Nor does it plead Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 32 of 39 PAGE 27 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT any facts showing that any statements in the Proxy were rendered materially false or misleading because of any omission, let alone do so with the “high degree of meticulousness” required by the PSLRA and Rule 9(b). Desaigoudar, 223 F.3d at 1022-23. The SAC challenges the omission of three line items from the Proxy’s summary of the Case Two projections: (a) changes in net working capital, (b) capital expenditures, and (c) unlevered free cash flow. ¶ 98. The SAC offers a number of assertions as to why such information was supposedly “vital to shareholders”: they allegedly needed it “to make an apples-to-apples comparison” of the Case One and Case Two projections, to “understand exactly how and where management slashed” the Case Two projections, to “understand the flaws in Goldman Sachs’ analysis,” and “to understand the true standalone value of the Company.” ¶ 99. But the SAC does not allege a single fact showing how these omissions made the material set forth in the Proxy false or misleading. There is no allegation, for example, that had one of the allegedly omitted line items been included in the Proxy it would have shown the Proxy’s disclosures about the projections to be inaccurate or somehow misleading. The SAC doesn’t claim the disclosures are inaccurate, only that they are “incomplete.” ¶ 101. That cannot form the basis of a Section 14(a) claim. The SAC’s list of alleged omissions from the Proxy’s discussion of Goldman Sachs’ fairness opinion (¶ 102) suffers from the same defect. The SAC alleges that shareholders were “entitled” to this information, that the information was “material,” and that “[s]hareholders needed the omitted information to understand and adjust for the flaws [in Goldman Sachs’ analysis], assess the standalone value of the Company . . . and judge the adequacy of Thermo Fisher’s offer.” ¶¶ 103-105. That is not enough to state a claim. “Rule 14a-9 is concerned only with whether a proxy statement is misleading with respect to its presentation of material Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 33 of 39 PAGE 28 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT facts.” TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 462 (1976). The Proxy explicitly stated that it was presenting only “a summary of the material financial analyses delivered by Goldman Sachs to the Board of Directors” that “does not purport to be a complete description of the financial analyses performed by Goldman Sachs . . . .” Proxy at 58. The Proxy also explicitly stated that FEI was presenting “a summary” of the management projections because they were shared with Thermo Fisher during the due diligence process and explained the reasons why the Board believed the Case Two projections were “significantly less likely than the Case One Projections to present a reasonable estimate of the future performance of FEI . . . .” Id. at 51. Plaintiff has not alleged that anything presented in the Proxy about the Goldman Sachs’ analysis was inaccurate in any way. Courts routinely reject the type of claim asserted here by Plaintiff, where a list of omissions is alleged with no allegations showing that any proxy statement was false or misleading as a result. See, e.g., Assad v. Mines Mgmt., Inc., No. 2:16-CV-00256-SMJ, 2016 WL 4611573, at *4, *5 (E.D. Wash. Sept. 2, 2016) (dismissing complaint based on omission of “some additional information that was not disclosed that [plaintiff] would like to have” because “the complaint never explains how the allegedly omitted information is misleading”); Greenthal v. Joyce, No. 4:16-CV-41, 2016 WL 362312, at *5 (S.D. Tex. Jan. 29, 2016) (dismissing complaint because “Plaintiff does not allege that the information in the proxy statement is misleading; Plaintiff simply requests additional information.”); Gottlieb v. Willis, No. 12-CV-2637 (PJS/JSM), 2012 WL 5439274, at *3 (D. Minn. Nov. 7, 2012) (denying preliminary injunction under Section 14(a) because complaint “does not cite a single statement in the proxy statement that she says is false or misleading” but instead “cites various truthful statements made in the proxy statement and argues, in essence, that defendants must tell her Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 34 of 39 PAGE 29 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT more about the subject of those statements.”); see also Beck v. Dobrowski, 559 F.3d 680, 684- 85 (7th Cir. 2009) (“The plaintiff contends that the shareholders might have liked to have more backup information, and perhaps some of them would have. But there is nothing in the complaint to suggest that any shareholder was misled or was likely to be misled by the dearth of backup information—that is, that the shareholder drew a wrong inference from that dearth.”). This Court should do the same. b. The Alleged Omissions Do Not Rise to the Level of Materiality On Their Own The Court should also dismiss the SAC for the independent reason that it does not sufficiently allege that any of the purported omissions represent material information. “An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.” TSC Indus., 426 U.S. at 449. None of the omissions alleged in the Amended Complaint rises to that standard. The Proxy contains, among other things, ample explanation of the process leading to the merger price, the reasons for the Board’s recommendation, and a thorough summary of Goldman Sachs’ analysis and the management projections upon which it was based. See generally Proxy at 46-68. The list of allegedly omitted details about management projections and Goldman Sachs’ analysis represents the sort of “tell me more” pleading that “does not state a Section 14(a) claim . . . .” Goldfinger v. Journal Commc’ns Inc., No. 15-C-12, 2015 WL 2189752, at *5 (E.D. Wis. May 8, 2015). This is information of “such dubious significance” that requiring a company to disclose it or face liability “may cause it simply to bury the shareholders in an avalanche of trivial information [—] a result that is hardly conducive to informed decisionmaking.” TSC Indus., 426 U.S. at 448-49. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 35 of 39 PAGE 30 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT Allegations that a proxy statement omitted “particularized accounting details” of the kind sought by Plaintiff are “insufficient to maintain a § 14(a) claim” without more. Hot Topic, 2014 WL 7499375, at *7 (omission of details in projections including working capital and unlevered free cash flow not material standing alone); see also In re 3Com S’holders Litig., No. CIV. A. 5067-CC, 2009 WL 5173804, at *3 (Del. Ch. Dec. 18, 2009) (full disclosure of projections underlying an “adequate and fair summary” of Goldman Sachs analysis “would [not] alter the total mix of available information and may even undermine the clarity of the summaries”); In re CheckFree Corp. S’holders Litig., No. CIV. A. 3193-CC, 2007 WL 3262188, at *2 (Del. Ch. Nov. 1, 2007) (“a disclosure that does not include all financial data needed to make an independent determination of fair value is not . . . per se misleading or omitting a material fact. The fact that the financial advisors may have considered certain non- disclosed information does not alter this analysis.”) (citation omitted).7 The Amended Complaint does not allege “facts to support the inference that it was substantially likely” that a reasonable shareholder “ʻwould have considered [these details] important in deciding how to vote,’ as required to show materiality.” Krieger v. Atheros Commc’ns, Inc., No. 11-CV-00640- LHK, 2012 WL 1933559, at *8 (N.D. Cal. May 29, 2012) (quoting Desaigoudar, 223 F.3d at 1025-26). 4. The Amended Complaint Does Not Allege Facts Giving Rise to a Strong Inference of that Any Defendant Acted With the Required State of Mind Plaintiff also has not satisfied the requirement that it plead facts giving rise to a strong inference that Defendants acted with the required state of mind in making the alleged 7 Delaware courts apply the federal materiality standard set forth by the Supreme Court in TSC Industries. Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (“[I]t is clear from the Delaware cases that the materiality standard of [TSC Industries] applies.”). Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 36 of 39 PAGE 31 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT omissions. In the SAC, Plaintiff primarily challenges a statement of opinion: the Board’s stated belief that the Case One projections were more likely than Case Two to reflect FEI’s future results. ¶ 87. For such a claim to succeed, Plaintiff must, at a minimum, allege facts giving rise to a strong inference that Defendants “knew their statements about the [projections] were false.” Hot Topic, 2014 WL 7499375, at *7; see also Sandberg, 501 U.S. at 1095 (“Under § 14(a) . . . a plaintiff is permitted to prove a specific statement of reason knowingly false or misleadingly incomplete.”) (emphasis added). The SAC’s allegations do not rise to that standard. As argued above with respect to the PSLRA safe harbor, the SAC alleges no facts showing that any Defendant had actual knowledge that it was false to say that Case One was a more likely scenario than Case Two. There is no allegation of any statement by Defendants contradicting that opinion or any information any Defendant was exposed to that would indicate that it was false. Instead, Plaintiff relies on allegations that the Board “had full opportunity to reject” the Case Two projections “at any time” but did not do so until it was close to an agreement on the merger. That the Board chose which “case” should be the basis of Goldman Sachs’ analysis at a time when it appeared an acceptable offer might be near does not give rise to a strong inference that the Board knew Case One was not more likely than Case Two. Even if the Court were to find that a negligence standard applies to some portion of the SAC’s allegations,8 the SAC fails because it does not plead “specific facts that would tend to 8 The Ninth Circuit has held, in an unpublished opinion, that negligence is generally sufficient to support a claim under Section 14(a). See Knollenberg v. Harmonic, Inc., 152 F. App’x 674 (9th Cir. 2005) (unpublished). Knollenberg did not address whether a higher “scienter” standard under the PSLRA should apply to outside directors, as opposed to company officers. See id. at 682-83 (referring only to claims against “executives”). The Eighth Circuit, (continued...) Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 37 of 39 PAGE 32 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT show culpable conduct” by any defendants. In re McKesson HBOC, Inc. Sec. Litig., 126 F. Supp. 1248, 1267 (N.D. Cal. 2000) (rejecting as insufficient under the PSLRA an allegation that the defendants “acted negligently and without due care in distributing, or causing to be distributed, the Joint Proxy Statement containing the false and misleading statements [and] omissions.”); see also In re VeriSign, Inc., Deriv. Litig., 531 F. Supp. 2d 1173, 1213 (N.D. Cal. 2007) (dismissing Section 14(a) claim where “plaintiffs plead[ed] no particularized facts ʻgiving rise to a strong inference’ that each defendants acted with” negligence (quoting 15 U.S.C. § 78u-4(b)(2)); Krieger, 2012 WL 1933559, at *8 (finding that complaint did not satisfy requirement of pleading particularized facts giving rise to a strong inference of negligence because “Plaintiff has not adequately pled that any specific Defendant breached any duty, a necessary element of a negligence claim.”).9 B. The Amended Complaint Does Not State a Claim Under Section 20(a) The Amended Complaint’s claim under Section 20(a) of the Securities Exchange Act (¶¶ 120-127) should be dismissed because Plaintiff has not pleaded a claim for primary liability under Section 14(a). Knollenberg, 152 F. App’x at 684-85 (Section 20(a) claim must be dismissed where a plaintiff has “not met the threshold requirement of adequately pleading a primary violation of the federal securities laws.”). (...continued from previous page) however, has held that where Section 14(a) claims are brought against outside directors, scienter is a required element. See S.E.C. v. Shanahan, 646 F.3d 536, 546-47 (8th Cir. 2011). Defendants believe that the appropriate standard for the non-Safe Harbor claims is recklessness, not negligence. The Court does not have to address this issue, because even under a negligence standard, the allegations fail. 9 The Amended Complaint alleges that certain of the director defendants were conflicted because they stood to gain personally from a completed merger. See ¶¶ 75-76. There are no allegations, however, connecting these purported conflicts with the alleged proxy omissions such as would show culpability on the part of any defendant. Moreover, these purported conflicts were disclosed in the Proxy. See Proxy at 68-75. Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 38 of 39 PAGE 33 – FEI DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT V. CONCLUSION For the foregoing reasons, the SAC should be dismissed. Dated: April 21, 2017 s/ David Angeli David Angeli, OSB No. 020244 david@angelilaw.com Kristen Tranetzki, OSB No. 115730 kristen@angelilaw.com ANGELI LAW GROUP 121 S.W. Morrison Street, Suite 400 Portland, OR 97204 Telephone: (503) 954-2232 Facsimile: (503) 227-0880 Boris Feldman (pro hac vice) boris.feldman@wsgr.com Keith E. Eggleton (pro hac vice) keggleton@wsgr.com Michael R. Petrocelli (pro hac vice) mpetrocelli@wsgr.com WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 565-5100 Attorneys for Defendants FEI Company, Thomas F. Kelly, Donald R. Kania, Homa Bahrami, Arie Huijser, Jan C. Lobbezoo, Jami K. Dover Nachtsheim, James T. Richardson, and Richard H. Willis Case 3:16-cv-01792-SI Document 65 Filed 04/21/17 Page 39 of 39