Eminence Capital, LLC v. Aspeon, Inc.

Summary

The Ninth Circuit affirmed dismissal with prejudice of Eminence Capital’s securities-fraud complaint against Aspeon, Inc. under Federal Rule of Civil Procedure 12(b)(6). The court held that the allegations concerning audit obstruction, GAAP violations, deficient internal controls, restatements, and insider stock purchases did not create a strong inference of scienter under the PSLRA. Because the § 10(b) claim was dismissed, the related § 20(a) controlling-person claim was also dismissed.

Holdings

1. The complaint failed to allege particularized facts giving rise to a strong inference that the defendants acted with deliberate or conscious recklessness in issuing Aspeon's financial statements.
2. The § 20(a) claim was dismissed because the underlying § 10(b) claim was properly dismissed.

Questions Presented

1. Whether the third amended complaint pleaded facts giving rise to a strong inference that Aspeon's defendants acted with deliberate or conscious recklessness, as required for a Securities Exchange Act § 10(b) securities-fraud claim under the PSLRA.
2. Whether the § 20(a) controlling-person liability claim could survive after dismissal of the underlying § 10(b) claim.

Disposition

affirmed