In re Stem, Inc. Securities Litigation

Summary

The document is a United States District Court for the Northern District of California order addressing defendants’ motion to dismiss the First Amended Consolidated Complaint in securities litigation involving Stem, Inc. The court analyzes claims under Sections 10(b), 14(a), 20(a), and 20A of the Securities Exchange Act, focusing on alleged misstatements concerning Stem’s Athena software and its success in front-of-the-meter energy markets. The excerpt discusses pleading standards under Rules 8(a), 9(b), and 12(b)(6), as well as the reliability and personal knowledge of confidential witnesses.

Holdings

1. The amended complaint failed to plead that any challenged statement was false or misleading when made. Statements describing particular automated functions of Athena did not represent that all of Athena's functions were automated, and the allegations based on confidential witnesses, a later statement by Carrington, and Stem's financial results did not establish contemporaneous falsity.
2. The amended complaint failed to state a claim for scheme liability under Rules 10b-5(a) and (c). The alleged conduct either depended on the failed false-statement theory or was not adequately alleged to have occurred outside defendants' normal course of business or to have created a false appearance of fact.
3. The amended complaint failed to state a section 14(a) and Rule 14a-9 claim because it relied on the same allegedly false or misleading statements underlying the section 10(b) claim, and those statements were not pleaded with Rule 9(b) particularity.
4. The section 20(a) and section 20A claims failed because plaintiffs did not adequately plead an independent underlying violation of the Exchange Act.
5. Dismissal was without further leave to amend because plaintiffs had previously been advised of the pleading deficiencies and failed to correct them in the amended complaint.

Questions Presented

1. Whether the amended complaint plausibly alleged that defendants made false or misleading statements actionable under Exchange Act section 10(b) and Rule 10b-5.
2. Whether the amended complaint adequately pleaded scheme liability under Rules 10b-5(a) and (c).
3. Whether plaintiffs adequately pleaded a section 14(a) and Rule 14a-9 claim with the particularity required by Rule 9(b).
4. Whether plaintiffs' section 20(a) control-person and section 20A insider-trading claims could proceed absent an adequately pleaded independent Exchange Act violation.
5. Whether the complaint should be dismissed without further leave to amend.

Disposition

dismissed