In re: FOXHOLLOW TECHNOLOGIES, INC. SECURITIES LITIGATION, MATTHEW ROBERTS, individually v. Foxhollow Technologies, Inc.; John B. Simpson; Matthew B. Ferguson

This disposition is not appropriate for publication and is not precedent*
except as provided by 9th Cir. R. 36-3.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: FOXHOLLOW TECHNOLOGIES,
INC. SECURITIES LITIGATION,
MATTHEW ROBERTS, individually and
on behalf of all those similarly situated,
Plaintiff - Appellant,
and
MARGARET KOVARIK,
Plaintiff,
v.
FOXHOLLOW TECHNOLOGIES, INC.;
JOHN B. SIMPSON; MATTHEW B.
FERGUSON,
Defendants - Appellees,
v.
ALI ANKER,
No. 08-16469
D.C. No. 3:06-cv-04595-PJH
MEMORANDUM *
FILED
DEC 04 2009
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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The Honorable Lyle E. Strom, Senior U.S. District Judge for District**
of Nebraska, sitting by designation.
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Third-party-plaintiff.
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, District Judge, Presiding
Argued and Submitted October 6, 2009
San Francisco, California
Before: SCHROEDER and BERZON, Circuit Judges, and STROM, District**
Judge.
Matthew Roberts’ (“Roberts”) putative securities fraud class action against
FoxHollow Technologies, Inc. (“FoxHollow”) alleges various misrepresentations
relating to FoxHollow’s personnel philosophy and plans. Roberts alleges that he
purchased FoxHollow stock in reliance on those statements and suffered losses
when the dismissal of senior executives revealed that they were false. Because the
district court dismissed the Complaint for failure to state a claim, we construe all
factual allegations in the light most favorable to Roberts. Metzler Inv. GMBH v.
Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008).
The required elements of a private securities fraud action under Rule 10b-5
are: (1) a material misrepresentation or omission of fact, (2) scienter, (3) a

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purchase or sale of securities in reliance, (4) loss causation, and (5) economic loss.
Metzler, 540 F.3d at 1061. In securities fraud actions alleging misleading
statements or omissions, the plaintiff must plead falsity with particularity. 15
U.S.C. § 78u-4(b)(1) & (2). Although falsity and materiality are mixed questions
of law and fact, Fecht v. Price Co., 70 F.3d 1078, 1081 (9th Cir. 1995), their
resolution as a matter of law is appropriate if reasonable minds could not differ.
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976); In re Syntex Corp.
Securities Litigation, 95 F.3d 922, 926 (9th Cir. 1996).
The majority of the statements alleged to be misleading deal with
FoxHollow’s general personnel philosophy and predate the alleged effort to purge
the senior management. Roberts does not argue that these statements were false or
misleading when made, but rather urges us to recognize a duty to update true
statements in the event that circumstances change. Because we conclude that
FoxHollow’s statements would not be false or misleading even under a duty to
update, we do not decide that novel question of law.
Those circuits that have recognized a duty to update true statements have
said that it applies only to statements that are clear, factual, and forward-looking,
such that some continuing representation remains alive in the minds of investors
when circumstances change. See In re International Business Machines Corporate

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Because we conclude that these statements were not misleading, we need1
not address whether they fall within the PSLRA’s safe harbor provision, 15 U.S.C.
§ 78u-5(c)(1), an alternative ground for the district court’s ruling as to these
statements.
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Securities Litigation, 163 F.3d 102, 110 (2nd Cir. 1998); In re Burlington Coat
Factories Securities Litigation, 114 F.3d 1410, 1431 (3d Cir. 1997); Backman v.
Polaroid Corp., 910 F.2d 10, 17 (1st Cir. 1990). Here, FoxHollow’s statements
did not contain any clear, factual, forward-looking representation that all senior
management would be left in place. Even the most concrete of the
statements—such as “[t]he loss of any of our senior management team could harm
our business,” and “[our] overall executive compensation strategy [serves to]
attract and retain executives who are critical to Fox-Hollow’s long-term
success”—do not rise to this standard. Therefore, the statements that predate the
alleged efforts to remove senior managers cannot support a securities fraud action.1
Roberts also alleges that FoxHollow’s account of the resignation of its CEO,
Thomas, was materially false or misleading. FoxHollow stated publicly that
Thomas was leaving for personal reasons; Roberts alleges he was forced to resign.
Though Roberts sufficiently alleges that these statements were false, they were not
material. A statement is material for purposes of the securities laws if there is a
“substantial likelihood that, under all the circumstances, [it] would have assumed

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actual significance in the deliberations of the reasonable shareholder.” TSC Indus.,
Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). Pro forma claims that an
executive is leaving a company for personal reasons are ubiquitous and transparent.
Reasonable people usually do not make investment decisions in reliance on them.
In this case, the very facts alleged undermine the materiality of these
statements. Analysts reacted to FoxHollow’s account of the CEO’s resignation
with skepticism, speculated that something was amiss, and predicted that there was
“another shoe to drop.” On the day after FoxHollow claimed the resignation was
for personal reasons, the stock price fell sharply. Under these circumstances, the
allegation that reasonable investors would purchase stock in reliance on these
statements is untenable.
Finally, Roberts seizes on statements made by the Interim CEO, Simpson,
upon the announcement of Thomas’s resignation, such as “I look forward to
leading our outstanding group of senior management until we have named a
replacement.” While a statement need not be literally false to be actionable under
the securities laws, it must at least be reasonably susceptible to an interpretation
that is contrary to the true state of affairs. Brody v. Transitional Hospitals Corp.,
280 F.3d 997, 1006 (9th Cir. 2002). Here, Simpson’s statements may have
supported an inference that he planned to maintain continuity in the senior

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Because we conclude that none of the cited statements were materially false2
or misleading, we do not reach the district court’s alternative ground—that Roberts
failed to allege facts supporting a strong inference of scienter. See 15 U.S.C. §
78u-4(b)(2).
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management team, but he never suggested that each and every senior manager
would be retained. There is no conflict between these statements and the fact that
two senior managers were let go one month later. While the Complaint alleges that
the senior management “included” five people, FoxHollow’s public SEC filings
make clear that the company had seven senior managers in addition to Simpson.
Amendment No. 3 to Registration Statement (Form S-1), at 58 (Oct. 25, 2004).
Removing two out of seven senior managers is perfectly consistent with any
inference of management continuity that can be gleaned from Simpson’s
statements. Therefore, Roberts has not adequately alleged falsity with respect to
these statements either.2
The district court’s order of dismissal is AFFIRMED.

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