Jackson v. Fischer et al

MOTION for Summary Judgment [Notice of Motion and Motion for Summary Judgment]

N.D. Cal.October 26, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 1 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Mark D. Petersen (State Bar No. 111956) mpetersen@fbm.com Matthew S.L. Cate (State Bar No. 295546) mcate@fbm.com Farella Braun + Martel LLP 235 Montgomery Street, 17th Floor San Francisco, California 94104 Telephone: (415) 954-4400 Facsimile: (415) 954-4480 Attorneys for Defendant JOSHUA ROSEN UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION SUZANNE D. JACKSON, Plaintiff, vs. WILLIAM FISCHER, et al., Defendants. Case No. 4:11-cv-02753-PJH DEFENDANT JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT______ Date: November 30, 2016 Time: 9:00 a.m. The Hon. Phyllis J. Hamilton Trial Date: None set TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE that on November 30, 2016, at 9:00 a.m., or as soon thereafter as the matter can be heard, in the above-captioned action, Defendant Joshua Rosen will, and hereby does, move for summary judgment on the grounds that there is no genuine issue as to any material fact and he is entitled to judgment as a matter of law on the remaining claim asserted against him under Section 20(a) of the Securities & Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78t(a). Mr. Rosen moves on the grounds that there is no genuine issue as to any material fact and that Mr. Rosen is entitled to judgment as a matter of law. The undisputed material facts establish that (1) William Fischer did not commit a primary violation of Section 10(b) of the 1934 Act, 15 Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 1 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 2 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 U.S.C. § 78j and Rule 10b-5, 17 C.F.R. § 240.10b-5, (2) Ms. Jackson’s claims are barred by the statute of limitations, and (3) regardless of whether there was a primary violation, the evidence establishes that Mr. Rosen “acted in good faith and did not directly or indirectly induce” Mr. Fischer to act in any manner that violates Section 10(b) and Rule 10b-5. In particular, the allegedly false statements that Mr. Fischer (or Mr. Rosen) made to Ms. Jackson about Mr. Rosen’s company, Notebookz.com, Inc. (“Notebookz”), are not actionable because they were vague assertions of corporate optimism and, as forward-looking statements of the company’s performance, are protected by the “safe harbor” provision of the Private Securities Litigation Reform Act (“PSLRA”). Mr. Rosen is also entitled to summary judgment because Ms. Jackson has no evidence that Mr. Fisher (or Mr. Rosen) acted with the requisite scienter. Moreover, Ms. Jackson could not, as a matter of law, have justifiably relied on the statements Mr. Fischer (or Mr. Rosen) allegedly made about Notebookz. Also, a reasonable investor would have known no later than December 2007 that the statements, at least as Ms. Jackson interpreted them, could not have been true. The statute of limitations bars her claims because Ms. Jackson did not sue until nearly four years later. Finally, the claim against Mr. Rosen must fail because the undisputed facts show that he acted in good faith and did not control Mr. Fischer’s conduct. This Motion is based on this Notice of Motion and Motion, the Memorandum of Points and Authorities, the accompanying Declarations of Mark D. Petersen and Joshua Rosen and exhibits attached thereto, the files and records for this action, and such additional materials as may be presented to the Court. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 2 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH i 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 TABLE OF CONTENTS Page I. INTRODUCTION AND SUMMARY OF ARGUMENT .................................................... 1 II. ISSUES TO BE DECIDED ................................................................................................... 2 III. STATEMENT OF RELEVANT FACTS ............................................................................. 2 A. Ms. Jackson Meets Mr. Fischer. ................................................................................... 2 B. Mr. Fischer Introduces Ms. Jackson To Notebookz And Mr. Rosen. .......................... 3 C. Ms. Jackson Learns That Notebookz Needs Additional Funds To Continue Operations, And Waits Nearly Four Years To Sue. ..................................................... 4 IV. LEGAL STANDARD ........................................................................................................... 4 V. ARGUMENT ........................................................................................................................ 5 A. None Of The Alleged Statements Are Actionable. ...................................................... 5 1. The Google Statement ......................................................................................... 7 2. The “Develop And Commercialize” Statement .................................................. 8 3. The “Ready To Add Capital” Statement ............................................................. 9 B. Ms. Jackson Has No Evidence That Mr. Fischer (Or Mr. Rosen) Acted With Scienter. ...................................................................................................................................... 9 C. Ms. Jackson Could Not Justifiably Rely On Any Of The Three Statements. ............ 10 D. The Statute Of Limitations Bars Ms. Jackson From Basing Her Claim On The Alleged Statements. .................................................................................................... 11 E. Mr. Rosen Acted In Good Faith And Did Not Induce Any Primary Violation. ........ 12 VI. CONCLUSION ................................................................................................................... 13 Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 3 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH ii 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 TABLE OF AUTHORITIES Page Federal Court Cases Bull v. Chandler, No. C-86-5710 MHP, 1992 WL 103686 (N.D. Cal. Mar. 12, 1992) ................................... 10, 11 In re Daou Sys., Inc., 411 F.3d 1006 (9th Cir. 2005) ...................................................................................................... 5 In re Impac Mortg. Holdings, Inc. Sec. Litig., 554 F. Supp. 2d 1083 (C.D. Cal. 2008) ......................................................................................... 5 In re REMEC Inc. Sec. Litig., 702 F. Supp. 2d 1202 (S.D. Cal. 2010) .................................................................................. 9, 10 In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970 (9th Cir. 1999) ........................................................................................................ 9 In re Syntex Corp. Sec. Litig., 95 F.3d 922 (9th Cir. 1996) ...................................................................................................... 5, 7 Kaplan v. Rose, 49 F. 3d 1363 (9th Cir. 1994) ..................................................................................................... 13 Lloyd v. CVB Fin. Corp., 811 F.3d 1200 (9th Cir. 2016) ...................................................................................................... 5 Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986) ..................................................................................................................... 5 Merck & Co. v. Reynolds, 559 U.S. 633 (2010) ................................................................................................................... 11 Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051 (9th Cir. 2014) ...................................................................................................... 6 Federal Statutory Authorities 15 U.S.C. § 78t(a) ....................................................................................................................................... 12 § 78u-5(c)(1)(A)(ii) ...................................................................................................................... 6 § 78u–5(c)(1)(A)(i) ...................................................................................................................... 6 § 78u–5(c)(1)(B) .......................................................................................................................... 6 28 U.S.C. § 1658(b) ........................................................................................................................ 11 Federal Rules and Regulations Fed. R. Civ. P. 56(a) .......................................................................................................................... 4 Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 4 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 1 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION AND SUMMARY OF ARGUMENT Plaintiff Suzanne Jackson accuses Defendant Joshua Rosen of violating Section 20(a) of the 1934 Act by directing Defendant William Fischer to trick her into investing in Mr. Rosen’s former company, Notebookz.com, Inc. (“Notebookz”), by misrepresenting certain facts. The Fourth Amended Complaint (“4thAC”) alleges three statements supposedly actionable under federal securities law: (1) a statement that Notebookz was “likely” to be acquired by Google; (2) a statement that Notebookz had raised capital “to develop and commercialize its product and generate revenues within 1-2 years;” and (3) a statement that Notebookz “was preparing a new securities offering and had experienced investors ready to add additional capital.” None of these alleged misrepresentations are actionable, and the primary violation on which Ms. Jackson’s claim against Mr. Rosen depends fails as a matter of law. First, each of the three statements constitutes forward-looking projections of vague “corporate optimism.” Such statements are protected by the safe harbor provided by the PSLRA, and Ms. Jackson has no evidence that the statements were false when they were made. Second, Ms. Jackson has no evidence that Mr. Fischer or Mr. Rosen acted with scienter. Instead, both men acted in good faith, had obtained the support of seasoned investors, and sought to grow a promising young company as an epic recession descended upon the economy. Third, Ms. Jackson could not have justifiably relied on the statements at issue. Fourth, even assuming the statements are actionable, Ms. Jackson—or at least a reasonable investor—would have been on notice of the alleged falsity of the statements, as Ms. Jackson allegedly interpreted them, by no later than the Fall of 2007. She filed this action in June 2011. The statute of limitations therefore bars Ms. Jackson’s claims. Finally, Mr. Rosen acted in good faith and did not control Mr. Fischer; he thus cannot be liable under Section 20(a). There is no genuine dispute as to these facts. Ms. Jackson’s claim that Mr. Fischer violated Section 10(b) and Rule 10b-5 fails as a matter of law, and Mr. Rosen in turn cannot be liable for // // Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 5 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 2 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 violation for Section 20(a).1 Mr. Rosen is accordingly entitled to judgment as a matter of law. The Court should grant the motion. II. ISSUES TO BE DECIDED 1. Whether Mr. Rosen is entitled to summary judgment because the three statements remaining in this case about Notebookz are not actionable material misrepresentations under Section 10(b) and Rule 10b-5. 2. Whether Mr. Rosen is entitled to summary judgment because Ms. Jackson cannot present any evidence that Mr. Fischer or Mr. Rosen acted with scienter. 3. Whether Mr. Rosen is entitled to summary judgment because Ms. Jackson could not have justifiably relied on any of the three statements remaining in this case about Notebookz. 4. Whether the statute of limitations bars Ms. Jackson’s claims. III. STATEMENT OF RELEVANT FACTS A. Ms. Jackson Meets Mr. Fischer. Ms. Jackson met Mr. Fischer through a mutual acquaintance around October 2006. Ex. 12 (Jackson Dep Tr.) at 21:22-22:23, 24:18-25:11. Ms. Jackson almost immediately became “personal friends” with Mr. Fischer, for whom she had at least a “platonic love.” Id. at 39:10-25, 190:9-19. Mr. Fischer sent Ms. Jackson “racy, salacious poetry” that “spew[ed] from . . . his vivid imagination.”3 Id. at 189:19-191:2. Ms. Jackson denies that they had a sexual relationship, but she never asked him to stop the suggestive language that he repeatedly used. Id. at 190:23-191:2. As 1 The Court has warned Ms. Jackson that she must “establish Fischer’s primary liability as to specific transactions involving specific defendants in this case” and cannot simply seek to establish Mr. Fischer’s primary liability by way of any settlement Mr. Fischer might have made with Ms. Jackson in another proceeding. See ECF No. 298 (Sept. 21, 2015 Order) at 29. Mr. Rosen accordingly does not re-address the issue of whether the settlement has any preclusive effect here. Mr. Rosen will address that issue in his reply brief, if necessary, if Ms. Jackson for some reason seeks to ignore the Court’s directive. 2 Unless otherwise specified, all references to numbered exhibits are to exhibits to the concurrently filed declaration of Mark D. Petersen in support of this Motion, and all references to lettered exhibits are to exhibits to the declaration of Mr. Rosen. 3 For example, on December 9, 2006, Mr. Fischer sent Ms. Jackson an email entitled “a goodnight to Suzanna,” which he signed “Yours lovingly, William,” that included the following lines: “I lick the salt of the Earth off your shimmering skin, between your thighs, taste divine nectar.” Ex. 3. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 6 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 3 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 their relationship deepened, Mr. Fischer “turned into” an informal “investment advisor of sorts.” Ex. 6 (Jackson Dep. Tr.) at 452:5-18. From December 2006 through July 2008, Ms. Jackson allegedly made $3 million in loans to and investments in various companies that Mr. Fischer brought to her attention. See 4thAC ¶ 37. B. Mr. Fischer Introduces Ms. Jackson To Notebookz And Mr. Rosen. Mr. Rosen and Mr. Fischer met sometime in 2006, when the latter asked Mr. Rosen for advice about how best to maximize a grant from Google. Rosen Decl. ¶ 3. Later, Mr. Rosen met with Mr. Fischer and demonstrated Notebookz’s product, a collaborative search engine called iLeonardo. Id. ¶ 3. In February 2007, Mr. Fischer invited Mr. Rosen to meet with Mr. Fischer and Ms. Jackson to demonstrate iLeonardo to her. Id. ¶ 4; Ex. 6 (Jackson Dep. Tr.) at 461:11-464:6. Mr. Rosen discussed what iLeonardo provided to potential users and how it worked, answered questions about the company’s milestones, and identified the company’s existing investors. Rosen Decl. ¶ 4. Ms. Jackson alleges that during this February 2007 meeting, Mr. Fischer (or maybe Mr. Rosen) told her that “it sounded like a very great likelihood that [Google] might buy” Notebookz. See, e.g., Ex. 6 (Jackson Dep. Tr.) at 456:5-12; see also 4thAC ¶ 99. After the February 2007 meeting, Ms. Jackson paid $50,000 for a promissory note that could convert into Notebookz stock. See 4thAC ¶ 96(a). Soon thereafter, Mr. Rosen was again invited to meet with Mr. Fischer and Ms. Jackson. See Rosen Decl. ¶ 6; 4thAC ¶ 99-100. This meeting occurred in late March 2007, at Ms. Jackson’s home. Id. ¶ 6; Ex. 6 (Jackson Dep. Tr.) at 466:9-471:1. It remains unclear what was discussed, but Ms. Jackson on April 2, 2007, paid Notebookz $200,000 for another convertible promissory note. See 4thAC ¶ 96(b). The notes converted to preferred stock effective October 15, 2007. See Rosen Decl. ¶ 8. Other than during these meetings with Mr. Fischer and Mr. Rosen, Ms. Jackson asked no one about Notebookz, and she never conducted any type of independent research into the company or Mr. Rosen. Ex. 6 (Jackson Dep. Tr.) at 452:22-453:21, 474:15-476:23. In addition to the statement about the potential Google acquisition, Ms. Jackson alleges that during one or both of the meetings she had with Mr. Fischer and Mr. Rosen, one (or both) of the men also told her that Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 7 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 4 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 the company (1) had “already raised sufficient capital to develop and commercialize its product and generate revenues within 1-2 years,” and (2) “was preparing a new securities offering and had experienced investors ready to add additional capital for expansion.” See 4thAC ¶ 100(a)-(b). C. Ms. Jackson Learns That Notebookz Needs Additional Funds To Continue Operations, And Waits Nearly Four Years To Sue. On November 21, 2007, Mr. Rosen informed Ms. Jackson and the other existing Notebookz investors that the company needed to raise $500,000 to help fund the company while it sought to issue its “Series ‘B’” offering. Ex. B (Nov. 21, 2007 e-mail to investors) at 1. And he specifically urged the investors to “contact me if you would like to discuss Series ‘B’, or if you have questions.” Id. at 2. A few weeks later, on December 12, 2007, Mr. Rosen’s Notebookz co- founder followed up, explaining that the company needed to close the $500,000 bridge loan in the next month to ensure the company could “continue basic development operations (rent, salary, payroll, etc.) . . . through August 2008.” Ex. D (Dec. 12, 2007 e-mail to investors) at 1. Despite knowing that the company needed the money to continue operations through August 2008, Ms. Jackson did not participate in the bridge loan progam. Rosen Decl. ¶ 13; Ex. 6 (Jackson Dep. Tr.) at 601:21-604:11. Ultimately, Notebookz was unable to raise enough to sustain the company during the historic economic downturn. Rosen Decl. ¶ 14. The company ceased operations in October 2009. Id. Ms. Jackson sued Mr. Rosen on June 6, 2011. The suit as a whole represents Ms. Jackson’s effort to recover $3 million she allegedly invested in several companies, including Notebookz, on Mr. Fischer’s supposedly misleading advice. See generally 4thAC. Over the last several years, Ms. Jackson amended her complaint four times, filing the operative Fourth Amended Complaint on April 24, 2015. See ECF No. 269. IV. LEGAL STANDARD Summary judgment is proper if Mr. Rosen can show “that there is no genuine dispute as to any material fact” and that he “is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). If he can show that no reasonable dispute exists, the burden falls on Ms. Jackson to provide competent evidence of the existence of a genuine issue of material fact. See Matsushita Elec. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 8 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 5 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In so opposing Mr. Rosen’s Motion, Ms. Jackson “must do more than simply show that there is some metaphysical doubt as to the material facts.” Id. V. ARGUMENT “The elements of a private securities fraud action under Section 10(b) and Rule 10b-5 are: (1) a material misrepresentation or omission by the defendant; (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.” Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1206 (9th Cir. 2016) (citation omitted). Ms. Jackson’s claim is flawed in all respects. But summary judgment should be granted in Mr. Rosen’s favor in particular because (1) the undisputed facts establish that the statements at issue are not actionable, (2) there is no evidence that Mr. Fischer (or Mr. Rosen) acted with the required scienter, (3) Ms. Jackson’s reliance on the alleged statements, if any, was not reasonable under the circumstances, and (4) the statute of limitations bars Ms. Jackson’s claim because she knew or should have known the facts constituting the alleged violation nearly four years before initiating this action. A. None Of The Alleged Statements Are Actionable. “The fact that a prediction ends up being incorrect does not render the statement untrue when made.” See ECF No. 268 (March 13, 2015 Order) at 15 (citing In re Syntex Corp. Sec. Litig., 95 F.3d 922, 929 (9th Cir. 1996)). Thus, “vague, generalized assertions of corporate optimism or statements of ‘mere puffing’ are not actionable material misrepresentations under federal securities laws” because no reasonable investor would rely on such statements. See In re Impac Mortg. Holdings, Inc. Sec. Litig., 554 F. Supp. 2d 1083, 1096 (C.D. Cal. 2008) (citations omitted); see also In re Daou Sys., Inc., 411 F.3d 1006, 1021 (9th Cir. 2005) (“Although these projections might have been overly optimistic when made, they do not rise to the level of a material misrepresentation actionable” under the securities laws.). Certain forward-looking statements are statutorily exempt from supporting a securities- fraud claim. Specifically, the PSLRA provided a “safe harbor” for statements “regarding (1) Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 9 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 6 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 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.” See Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1058 (9th Cir. 2014) (“Intuitive Surgical”) (citation omitted). The safe harbor applies in either of two scenarios. The first is where the material statement itself 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.”4 15 U.S.C. § 78u– 5(c)(1)(A)(i). The second is where the statement is neither identified as a forward-looking statement nor accompanied by cautionary language, but the plaintiff has not proved that the statement “was made with actual knowledge . . . that the statement was false or misleading.’” Id. § 78u–5(c)(1)(B). Finally, statements that involve a mix of representations about present facts with predictions about future performance can still be considered “forward-looking” and protected by the safe harbor. In such cases of “mixed statements,” the Court must examine “as a whole, the challenged statements related to future expectations and performance.” Intuitive Surgical, 759 F.3d at 1058 (citation omitted). The case against Mr. Rosen turns on three purported misrepresentations.5 Ms. Jackson alleges that sometime between February 2007 through March 2007, Mr. Fischer (or Mr. Rosen): • “[S]pecifically mentioned the likelihood that Google would be a likely acquirer in the near to intermediate future[;]” • Told Jackson that Notebookz “had, independently of Jackson’s investment, already raised sufficient capital to develop and commercialize its product and generate revenues within 1-2 years[;]” and 4 Immaterial forward-looking statements are also protected. See 15 U.S.C. § 78u-5(c)(1)(A)(ii). 5 Ms. Jackson alleges that Mr. Fischer (or Mr. Rosen) made other false statements about her own due diligence and about her future receipt of certain financial information. See 4thAC at ¶¶ 97, 100(c)-(d), 101. The Court has previously explained, however, that none of those allegations can support a claim for federal securities fraud. See ECF No. 268 (March 13, 2015 Order) at 26-27 (finding that “Jackson cannot credibly claim to have relied on an alleged misrepresentation regarding her own due diligence investigation” and that any claim arising from the statements in the documents would be for breach of contract rather than securities fraud); ECF No. 298 (Sept. 15, 2015 Order) at 22 (similar). Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 10 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 7 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 • Told Jackson that Notebookz “was preparing a new securities offering and had experienced investors ready to add additional capital for expansion[.]” See 4thAC ¶¶ 99-100. None of these statements can support Ms. Jackson’s claim. They are all vague statements of Notebookz’ optimism for its future prospects and fall under the PSLRA’s safe harbor provision. 1. The Google Statement Mr. Fischer allegedly told Ms. Jackson that Google “would be a likely acquirer [of Notebookz] in the near to intermediate future.”6 See 4thAC ¶ 99. Mr. Rosen concedes that Google did not, in fact, acquire Notebookz.7 But Ms. Jackson did not claim, and has never explained, how this particular alleged representation was false when she heard it. Meanwhile, it is clear—from both the allegations in the 4thAC and Ms. Jackson’s deposition testimony—that the most anyone ever told her about a Google acquisition is that it might happen: Q Okay. What is it exactly that Mr. Fischer told you [about Google acquiring Notebookz]? . . . A Yes. It was something to the effect of Google was—had been looking at iLeonardo and Notebookz and was in the—a great possibility in the near future that they would acquire or buy the company. . . . Q When you met Mr. Rosen the first time in February of 2007, did you ask him anything about Google? A I believe that—well, I know Google was brought up and I believe it was something that I know had been told to me by Mr. Fischer; but Mr. Rosen may have also mentioned it in that—in that meeting and it sounded like a very great likelihood that [Google] might buy [Notebookz]. . . . Q What did Mr. Rosen tell you about Notebookz being acquired? . . . 6 The 4thAC does not specify whether Mr. Fischer or Mr. Rosen made the allegedly false statements to Ms. Jackson. The Court’s September 15, 2015, Order makes it clear that the only claims for primary liability remaining in this case are against Mr. Fischer. See ECF No. 298 at 34. While Ms. Jackson should have specifically pleaded the facts surrounding the misrepresentations, the analysis here remains the same regardless of who she believes said what she alleges. 7 The fact that a prediction ends up being incorrect does not render the statement untrue when made. See In re Syntex Corp. Sec. Litig., 95 F.3d 922, 929 (9th Cir. 1996). Ms. Jackson never alleged that the statement was false at the time, and she has no evidence to support any such accusation. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 11 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 8 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 A It’s my recollection that he told me that in—that Google was looking at Notebookz and in the near future, within a couple of years, would more than likely purchase—there was a good chance. See Ex. 6 (Jackson Dep. Tr.) at 455:3-15, 456:5-12, 477:21-478:1 (emphases added). Such predictions cannot support a claim for securities fraud. In any event, Ms. Jackson has acknowledged that she was warned that the potential Google acquisition was only speculative: I was told that . . . the backup for their business plan was if Google did not purchase them, then there would be another round of investors coming in and their—the investors they did have were venture capitalists, so they would put—you know, do their investigations into the company. See id. at 486:10-21. The statements about the potential Google acquisition are forward-looking, speculative, and vague. They are either nonactionable statements of corporate optimism or they are protected by the PSLRA safe harbor as forward-looking statements made with caution and without knowledge of falsity. The statements cannot support Ms. Jackson’s claim for primary liability. 2. The “Develop And Commercialize” Statement Ms. Jackson also alleges that Mr. Fischer falsely said that Notebookz had “raised sufficient capital to develop and commercialize its product and generate revenues within 1-2 years.” See 4thAC ¶ 100(a). While this statement possibly contains a representation of present fact—i.e., that Notebookz had raised a some vague amount of money—it is on the whole forward-looking. The gist was not that Notebookz investors had contributed X dollars to the venture, but that, “within 1- 2 years” the product would be developed, commercialized, and generating revenue. This is a classic forward-looking prediction of Notebookz’ future and is thus shielded by the PSLRA’s safe harbor provision. Moreover, there is no evidence that the statement was a false representation of present fact when made—because no such evidence exists—much less that Mr. Fischer or Mr. Rosen knew the statement was false. By the time Ms. Jackson invested in Notebookz, five others had already invested $550,000 in the company, through investments made on similar terms as // // Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 12 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 9 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 those Ms. Jackson herself approved. See Ex. A (Stock Purchase Agreement) at ROSEN000058- 59. Ms. Jackson has no evidence that that amount was insufficient or that the man (or men) who made the statement knew it to be so. The statement cannot support her claim. 3. The “Ready To Add Capital” Statement Ms. Jackson alleges that Mr. Fischer falsely said that Notebookz “was preparing a new securities offering and had experienced investors ready to add additional capital.” See 4thAC ¶ 100(b). She testified that she was told that if the potential Google acquisition did not come about, “then there would be another round of investors coming in and . . . the investors they did have were venture capitalists, so they would . . . you know, do their investigations into the company.” See Ex. 6 (Jackson Dep. Tr.) at 486:16-21. The fact that Notebookz was “preparing a new” offering, in connection with which investors were potentially “ready to add” money, makes the statement forward-looking on its face. Further, the added suggestion that the investors would “do their investigations into the company” carries with it the implicit acknowledgment that the investigation might lead to a decision not to invest in Notebookz. There is nothing about this forward-looking statement that is false, and there is no evidence that Mr. Fischer or Mr. Rosen knew it to be a lie in February 2007 through April 2007. The statement cannot support Ms. Jackson’s claim. B. Ms. Jackson Has No Evidence That Mr. Fischer (Or Mr. Rosen) Acted With Scienter. Ms. Jackson must show that Mr. Fischer acted with “a mental state embracing an intent to deceive, manipulate, or defraud” her. See In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 975 (9th Cir. 1999) (citation omitted). Thus, to defeat this motion, Ms. Jackson must set forth facts to reasonably suggest that Mr. Fischer either actually knew he was deceiving Ms. Jackson or that he was acting with “deliberate recklessness.” See id. at 976-77. Generally, the issue of scienter is a question of fact for the jury’s determination. But the issue is appropriate for summary judgment “where there is no rational basis in the record for concluding that any of the challenged statements was made with the requisite scienter.” See, e.g., In re REMEC Inc. Sec. Litig., 702 F. Supp. 2d 1202, 1236 (S.D. Cal. 2010) (citation omitted). Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 13 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 10 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Here, Ms. Jackson has no evidence that Mr. Fischer (or Mr. Rosen) actually knew that what he (allegedly) said was untrue or that he acted with “deliberate recklessness” in saying what he supposedly said. And the bald allegations that the statements were false when made to her is insufficient in and of itself to create an issue of fact. See 4thAC ¶ 123 (alleging, in short and without any specificity, that the various representations would not have been made absent scienter). Setting aside her inability to establish that the statements were false, such a conclusory assertion is insufficient to create any reasonable inference that Mr. Fischer (or Mr. Rosen) made them with the intent to defraud Ms. Jackson. See In re REMEC, 702 F. Supp. 2d at 1237 (separating “rhetoric from evidence” and finding that “[n]one of [plaintiffs’] allegations are supported by the proof presented”). Because Ms. Jackson cannot provide any facts to establish scienter, her claim for primary liability fails. Mr. Rosen cannot be liable for a secondary violation, and his Motion should be granted. C. Ms. Jackson Could Not Justifiably Rely On Any Of The Three Statements. “Justifiable reliance must be evaluated in light of the facts surrounding the transaction.” See, e.g., Bull v. Chandler, No. C-86-5710 MHP, 1992 WL 103686, at *7 (N.D. Cal. March 12, 1992) (citation omitted). To determine whether Ms. Jackson’s reliance was justified, the Court should consider several factors, including but not limited to her experience and sophistication in financial investing; the duration of her relationship with Mr. Fischer and the presence or absence of a fiduciary relationship; the availability of relevant and truthful information; the opportunity Ms. Jackson had to discover the fraud; which party initiated or expedited the transaction; and the specificity of the alleged misrepresentations at issue.” Id. (citations omitted). The undisputed facts here support only one conclusion: Ms. Jackson could not justifiably have relied on any of the statements at issue. First, as already discussed, each of the statements was vague, forward-looking, and couched in obviously speculative terms. Meanwhile, Ms. Jackson has testified that she did not bother to conduct even the slightest independent research into Notebookz. She did not discuss the company with her actual investment adviser. Ex. 1 (Jackson Dep. Tr.) at 12:17-13:8, 14:4-15:20, 54:14-55:3; 55:16-56:6; 207:4-23. She did not ask her employee, who helped with such tasks, to conduct any online research into the company or Mr. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 14 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 11 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Rosen. Ex. 6 (Jackson Dep. Tr.) at 474:14-476:1. And she did not contact or speak with any of the existing investors. Id. at 472:25-473:17. Instead, swayed by her apparent infatuation with Mr. Fischer, whom she described in her deposition as “fascinating,” see Ex. 1 (Jackson Dep. Tr.) at 39:20-25, and whom she referred to in e-mail as, among other things, “Apollo . . . my hero, my muse, my inspiration,” see Ex. 4 (Jan. 18- 23, 2007 e-mail), and as her “dearest William,” see Ex. 5 (Feb. 14, 2007 e-mail), Ms. Jackson “placed blind faith” in Mr. Fischer and “stuck [her] head in the sand[,]” investing in an Internet company on the hopes that it would be bought by Google.8 See Bull, 1992 WL 103686, at *8. Ms. Jackson, as a matter of law, could not justifiably have relied on the alleged statements. The Court should grant Mr. Rosen’s motion. D. The Statute Of Limitations Bars Ms. Jackson From Basing Her Claim On The Alleged Statements. An action for securities fraud generally must be filed within two years of “the discovery of the facts constituting the violation.”9 See 28 U.S.C. § 1658(b). The two-year clock began to run on Ms. Jackson’s claims when she either “did in fact discover . . . the facts constituting the violation” or when a “reasonably diligent plaintiff would have discovered [them].” Merck & Co. v. Reynolds, 559 U.S. 633, 637 (2010). Ms. Jackson testified that she was told that if any potential Google acquisition fell through, Notebookz would have to look to other investors to survive. See Ex. 6 (Jackson Dep. Tr.) at 486:10-21. She also alleges that she was told that the company (1) had “sufficient capital” already raised and (2) had investors lined up “ready to add additional capital for expansion.” See 4thAC ¶¶ 99-100. 8 The reliance is all the more unreasonable given that Ms. Jackson had personally never conducted a Google search, an activity related to the one Notebookz sought to market and, of course, the main service provided by the company she thought would buy Notebookz. See Ex. 6 at 475:24- 476:4. 9 Though not applicable here, the time to file a complaint could in some cases be less than two years. See 28 U.S.C. § 1658(b) (setting deadline to file at the “earlier of” two years after discovery of the facts or “5 years after” the violation actually occurred, i.e., regardless of when the facts were discovered). Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 15 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 12 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 It cannot be disputed that Notebookz needed and sought additional funds just a few months after Ms. Jackson obtained her convertible notes. See Rosen Decl. ¶¶ 9-12; Exs. B-D (e-mails to investors). On November 21, 2007, Mr. Rosen informed Notebookz investors, including Ms. Jackson, that the company needed to raise $500,000 to fund the company while it sought to issue its “Series ‘B’” offering. Rosen Decl. ¶ 9; Ex. B (Nov. 21, 2007 e-mail to investors) at 1. He specifically urged the investors, including Ms. Jackson, to “contact me if you would like to discuss Series ‘B’, or if you have questions.” Ex. B at 2. A few weeks later, on December 12, 2007, Mr. Rosen’s Notebookz co-founder wrote to the same investors, including Ms. Jackson, explaining that the company needed to close the $500,000 bridge loan in the next month to ensure the company could “continue basic development operations (rent, salary, payroll, etc.) . . . through August 2008.” Ex. D (Dec. 12, 2007 e-mail to investors) at 1. These statements at least call into question the (vague) projections that Ms. Jackson alleges she understood to be sure bets. Again, Ms. Jackson alleges that she was led to believe that (1) such fund-raising would be needed only if the potential Google acquisition did not occur, (2) such capital would not be needed because the company had “sufficient capital” to generate revenues in “1-2 years,” and (3) that investors already were lined up “ready to add” money, if such a infusion was necessary. Any reasonable investor in her shoes would immediately be concerned, no later than the fall 2007 e-mails from Notebookz about the veracity of those statements and begin to inquire about them. Ms. Jackson did nothing. Until, that is, nearly four years later when she sued Mr. Rosen. Because she filed suit more than two years after December 2007, when a reasonable investor would have been on notice that the alleged statements (as Ms. Jackson interpreted them), were not true, the claims are barred. Mr. Rosen is entitled to judgment as a matter of law. E. Mr. Rosen Acted In Good Faith And Did Not Induce Any Primary Violation. Finally, and regardless of whether there are any facts to support a primary violation by Mr. Fischer, Mr. Rosen cannot be liable for a violation of Section 20(a). It cannot be disputed that he “acted in good faith and did not directly or indirectly induce the act or acts constituting the [alleged] violation” by Mr. Fischer. See 15 U.S.C. § 78t(a). Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 16 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 13 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Mr. Rosen has sworn under penalty of perjury that he did not direct Mr. Fischer to make any false or misleading statements about Notebookz and would not have allowed any statement to be made in his presence. See Rosen Decl. ¶ 16. Instead, Mr. Rosen sought truthfully to explain his company’s product and its prospects, and he ensured that he spoke cautiously and dutifully listened to what Mr. Fischer. Id. ¶ 15. Mr. Rosen remains unaware of any misleading or false statement made, by anyone, to Ms. Jackson about Notebookz, and he encouraged both potential and existing investors to ask him questions to avoid any confusion. See id. ¶¶ 15-16, Ex. B (Dec. 12, 2007 e-mail to investors) at 3. Ms. Jackson has no evidence to rebut this sworn statement and create an issue of fact as to whether Mr. Rosen acted in good faith and induced Mr. Fischer to commit any violations of securities law. He therefore is entitled to summary judgment. See Kaplan v. Rose, 49 F. 3d 1363, 1383 (9th Cir. 1994) (“[A]n uncontradicted declaration of good faith can establish a lack of scienter” and thus shield a Section 20(a) defendant from secondary liability.) VI. CONCLUSION Ms. Jackson’s claim depends entirely on statements that are not actionable. She has no evidence that the statements were false when made. Nor does Ms. Jackson have any evidence to suggest that Mr. Fischer and Mr. Rosen acted with the requisite scienter. She could not justifiably have relied on the statements. There can be no genuine dispute about these facts, nor can it be disputed that Mr. Rosen acted in good faith and did not direct Mr. Fischer to make material misrepresentations. Ms. Jackson’s claim is entirely without merit, and Mr. Rosen is entitled to judgment as a matter of law. Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 17 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM ISO JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 14 33508\5655560.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 Dated: October 26, 2016 FARELLA BRAUN + MARTEL LLP By: /s/ Mark D. Petersen _______ Mark D. Petersen (SBN 111956) mpetersen@fbm.com Matthew S.L. Cate (SBN 295546) mcate@fbm.com Farella Braun + Martel LLP 235 Montgomery Street, 17th Floor San Francisco, CA 94104 Telephone: (415) 954-4400 Facsimile: (415) 954-4480 Attorneys for Defendant JOSHUA ROSEN Case 4:11-cv-02753-PJH Document 408 Filed 10/26/16 Page 18 of 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 [PROPOSED] ORDER GRANTING JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 33508\5656598.1Farella Braun + Martel LLP 235 Montgomery Street, 17 th Floor San Francisco, California 94104 (415) 954-4400 Mark D. Petersen (State Bar No. 111956) mpetersen@fbm.com Matthew S.L. Cate (State Bar No. 295546) mcate@fbm.com Farella Braun + Martel LLP 235 Montgomery Street, 17th Floor San Francisco, California 94104 Telephone: (415) 954-4400 Facsimile: (415) 954-4480 Attorneys for Defendant JOSHUA ROSEN UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION SUZANNE D. JACKSON, Plaintiff, vs. WILLIAM FISCHER, et al., Defendants. Case No. 4:11-cv-02753-PJH [PROPOSED] ORDER GRANTING JOSHUA ROSEN’S MOTION FOR SUMMARY JUDGMENT_________ Date: November 30, 2016 Time: 9:00 a.m. The Hon. Phyllis J. Hamilton Trial Date: None set Defendant Joshua Rosen moves for summary judgment on Plaintiff Suzanne Jackson’s claim against him for alleged violations of Section 20(a) of the Securities Exchange Act of 1934 (the “Act”). The Court has considered the parties’ briefing, Ms. Jackson’s Fourth Amended Complaint (“4thAC”), and the applicable law, and finds as follows: 1. Mr. Rosen’s Motion for Summary Judgment on Plaintiff’s Claims is GRANTED. 2. There are no genuine issues of material fact as to whether the alleged material misrepresentations are in fact actionable, and Mr. Rosen is entitled to judgment in his favor as a matter of law on the cause of action asserted against him in the 4thAC. The three statements that Ms. Jackson alleges were made to her in connection with her investments in Mr. Rosen’s company, Notebookz.com, Inc., are not actionable misrepresentations. They therefore cannot Case 4:11-cv-02753-PJH Document 408-1 Filed 10/26/16 Page 1 of 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 2 33508\5656598.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 establish a primary violation of the Act by Defendant William Fischer. For one, Ms. Jackson has never established how the statements were anything other than “vague, generalized assertions of corporate optimism.” See In re Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 2010); see also In re Daou Sys., Inc., 411 F.3d 1006, 1021 (9th Cir. 2005) (“Although these projections might have been overly optimistic when made, they do not rise to the level of a material misrepresentation actionable” under the securities laws.). Moreover, all three statements were on their face forward-looking statements, and they were accompanied by meaningful cautionary statements explaining that the actual results could materially differ than the predictions Ms. Jackson alleges to have been told. See 15 U.S.C. § 78u- 5(c)(1)(A)(i). The record is indisputably clear that Ms. Jackson was told, at most, that the company might be acquired in the future, and that, barring such an acquisition, Notebookz investors would be called upon to ensure the company’s continued operations. Moreover, the statements that the company would be generating revenues “within 1-2 years” are forward-looking on their face, and even if Ms. Jackson could establish that the statements were not made with accompanying cautionary warnings, she has set forth no evidence that the statements were made despite Mr. Fischer’s knowledge of their falsity—indeed Ms. Jackson has no provided any evidence that the statements were false or misleading when they were made. The three statements cannot support Ms. Jackson’s claim. See 15 U.S.C. § 78u-5(c)(1)(B). 3. There are no genuine issues of material fact as to whether Mr. Fischer acted with scienter, and Mr. Rosen is thus entitled to judgment in its favor as a matter of law on this basis as well. Ms. Jackson has failed to provide any evidence that Mr. Fischer acted with the requisite intent to “deceive, manipulate, or defraud” Ms. Jackson. See In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 975 (9th Cir. 1999) (citation omitted). Meanwhile, Mr. Rosen has stated in a sworn declaration that he acted in good faith, was present when Mr. Fischer allegedly made the supposedly actionable statements, and would have prevented any misleading statements from being made. Mr. Rosen thus has offered evidence that Mr. Fischer (as well as Mr. Rosen) acted in good faith and without the scienter required to support Ms. Jackson’s claim. Ms. Jackson has not rebutted this evidence with anything more than conclusory rhetoric. Accordingly, she has failed to Case 4:11-cv-02753-PJH Document 408-1 Filed 10/26/16 Page 2 of 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 3 33508\5656598.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 establish an issue of fact on this element of her claim. 4. There are no genuine issues of material fact as to whether Ms. Jackson justifiably relied on the statements Mr. Fischer allegedly made, and Mr. Rosen is thus entitled to judgment in its favor as a matter of law on this alternative ground. Considering the multiple factors the Court must consider to determine as a matter of law whether Ms. Jackson justifiably relied on the statements, there can be only one reasonable conclusion. Ms. Jackson blindly followed whatever advice Mr. Fischer would have given her and failed to conduct even the most basic independent research into the company in which she invested $250,000. Ms. Jackson has failed to provide any explanation, much less evidence, justifying her blind reliance on a man she had known for just a few months. Therefore, her claim fails as a matter of law on this basis as well. 5. There is no genuine dispute as to when Ms. Jackson was on notice that the statements about Notebookz, as she allegedly interprets them today, were false and misleading and had improperly caused her to invest $250,000. Because she was on notice more than two years before she filed this action against Mr. Rosen on June 6, 2011, her claim is barred. Mr. Rosen is entitled to judgment as a matter of law. An action for securities fraud generally must be filed within two years of “the discovery of the facts constituting the violation.” See 28 U.S.C. § 1658(b). The clock began to run on Ms. Jackson’s claims when she either “did in fact discover . . . the facts constituting the violation” or when a “reasonably diligent plaintiff would have discovered [them].” Merck & Co. v. Reynolds, 559 U.S. 633, 637 (2010). Even assuming that the statements were actionable, false, and not protected by the safe harbor provided by the Private Securities Litigation Reform Act (“PSLRA”), see 15 U.S.C. § 78u-5(c)(1), the undisputed evidence shows that Ms. Jackson learned—or that any reasonable investor in her position would have learned—that Notebookz was seeking additional funds shortly after she had invested and needed them to survive for the next several months. Ms. Jackson alleges that she was told that Notebookz was fully funded and poised to either be acquired by Google or to generate revenues “within 1-2 years.” Assuming that interpretation, the investor updates of November 2007 and December 2007 would have put her on notice that she had been misled. Yet Ms. Jackson did not investigate. Instead, she waited nearly four years to bring this Case 4:11-cv-02753-PJH Document 408-1 Filed 10/26/16 Page 3 of 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOSHUA ROSEN’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Case No. 4:11-cv-02753-PJH 4 33508\5656598.1Farella Braun + Martel LLP235 Montgomery Street, 17th Floor San Francisco, California 94104 (415) 954-4400 action. Accordingly, the statute of limitations bars the claim. 6. Finally, there is no dispute as to whether Mr. Rosen controlled Mr. Fischer, directed him to make misleading statements, and otherwise acted in bad faith. Mr. Rosen is therefore entitled to judgment as a matter of law, even assuming that Ms. Jackson could establish a primary violation of Section 10(b) and Rule 10b-5. See 15 U.S.C. § 78t(a). Mr. Rosen declared under penalty of perjury that he did not direct Mr. Fischer to make any misrepresentations that Mr. Rosen knew to be misleading and that he otherwise acted in good faith at all times during his meetings with Ms. Jackson. Ms. Jackson has not provided any evidence to rebut that sworn declaration. She thus has failed to overcome this defense, and her claim for secondary liability under Section 20(a) fails as a matter of law. 7. For the foregoing reasons, Ms. Jackson’s claims against Mr. Rosen are dismissed with prejudice, and judgment shall be entered accordingly. IT IS SO ORDERED. Date: Honorable Phyllis J. Hamilton United States Chief District Judge Case 4:11-cv-02753-PJH Document 408-1 Filed 10/26/16 Page 4 of 4