James M. Kelley; v. Rambus, Inc.;

This disposition is not appropriate for publication and is not precedent*
except as provided by Ninth Circuit Rule 36-3.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES M. KELLEY; et al.,
Plaintiffs - Appellants,
v.
RAMBUS, INC.; et al.,
Defendants - Appellees,
PAUL MICHAEL FARMWALD,
Defendant - Appellee,
and
JOHN DANFORTH; et al.,
Defendants.
No. 08-17720
D.C. No. 5:07-cv-01238-JF
MEMORANDUM *
Appeal from the United States District Court
for the Northern District of California
Jeremy D. Fogel, District Judge, Presiding
FILED
JUN 16 2010
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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The panel unanimously concludes this case is suitable for decision**
without oral argument. See Fed. R. App. P. 34(a)(2).
2
Submitted January 2, 2010**
San Francisco, California
Before: HUG, BEEZER and HALL, Circuit Judges.
Plaintiffs-appellants James M. Kelley, Miki W. Larson and Douglas
B. Kelley (collectively “Kelley”) appeal pro se the district court’s dismissal of their
suit in favor of defendants-appellees Rambus, Inc. (“Rambus”) and several others
(collectively “the Defendants”). Kelley sued the Defendants under Sections 10(b),
14(a), 18(a) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange
Act”), 17 C.F.R. § 240.10b-5 (“Rule 10b-5”) and California common law, alleging
that the Defendants had engaged in and concealed an extensive scheme of
backdated options, understated compensation expenses and deceptive patent
strategies.
We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
The facts of this case are known to the parties. We do not repeat them.
I
We review the dismissal of a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6) de novo. Gibson v. Office of Atty. Gen., 561 F.3d 920, 925 (9th
Cir. 2009). We may affirm “on any proper ground, even if the district court did not

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3
reach the issue or relied on different grounds or reasoning.” Steckman v. Hart
Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998).
We review the denial of leave to amend a complaint for an abuse of
discretion. Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1072
(9th Cir. 2008). We also review the dismissal of a complaint pursuant to Rule 8 of
the Federal Rules of Civil Procedure (“Rule 8”) for an abuse of discretion.
McHenry v. Renne, 84 F.3d 1172, 1177 (9th Cir. 1996).
II
The district court properly exercised its discretion by ordering that Kelley
limit the original 227-page Consolidated Complaint to 50 pages so as to not impose
a “wholly unnecessary strain on [the] defendants and on the court system.” In re
GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1553–54 (9th Cir. 1994) (en banc)
(deeming a 113-page complaint “unwieldy in the extreme”).
III
Kelley raised numerous issues in the Consolidated Complaint that were not
included in the Consolidated Amended Complaint or any complaint thereafter.
Kelley “waive[d] all claims dismissed with leave to amend by failing to reallege
those claims in his amended complaint.” Parrino v. FHP, Inc., 146 F.3d 699, 704
(9th Cir. 1998).

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IV
The district court properly dismissed all of Kelley’s claims under Sections
14(a), 18(a), 10(b) and 20(a) of the Exchange Act, 17 C.F.R. § 240.10b-5 (“Rule
10b-5”) and California state law.
A
The district court properly concluded that Kelley failed to sufficiently allege
the elements of a Section 14(a) claim. See Desaigoudar v. Meyercord, 223 F.3d
1020, 1022 (9th Cir. 2000). All of Kelley’s assertions regarding alleged material
misstatements or omissions fail to “set forth a belief that certain unspecified
sources will reveal, after appropriate discovery, facts that will validate [the] claim.”
See South Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 783 (9th Cir. 2008). Kelley
has also failed to show an “essential link” between Rambus’ allegedly false proxy
statements and corporate actions that occurred years before those proxy statements
were released. See In re Asyst Tech., Inc. Deriv. Litig., No. C-06-04669 EDL,
2008 WL 2169021, at *9 (N.D. Cal. May 23, 2008) (rejecting a Section 14(a)
claim premised on the failure to disclose options backdating).
B
The district court properly concluded that Kelley failed to sufficiently allege
actual reliance on Rambus’ financial and proxy statements. See Howard v. Everex

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Because Kelley’s claim for a Rule 10b-5 violation was insufficiently1
pleaded, Kelley’s Section 20(a) controlling person claim was also insufficiently
pleaded due to the lack of underlying securities fraud.
5
Sys., Inc., 228 F.3d 1057, 1063 (9th Cir. 2000) (noting that “courts have required a
purchaser’s actual reliance on the fraudulent statement under § 18(a), as opposed to
the constructive reliance”). Kelley failed to allege that the actual purchase or sale
of shares in reliance on the statements, and any allegation of reliance in the
complaint is strongly contradicted by Kelley’s buying and shorting of Rambus’
stock both before and after the relevant statements were made.
C
Kelley’s claims under Section 10(b) and Rule 10b-5 fail to sufficiently
allege “particular facts giving rise to a strong inference of deliberate
recklessness.” See In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 979 (9th1
Cir. 1999).
D
Kelley’s state law claims for common law fraud and negligent
misrepresentation fail to meet the heightened pleading standards of Rule 9(b) of the
Federal Rules of Civil Procedure. See Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 576 n.3 (2007). Moreover, Kelley has failed to adequately allege reliance as
to both claims.

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V
The district court acted within its discretion in denying Kelley further leave
to amend the Second Revised Consolidated Amended Complaint. See Metzler, 540
F.3d at 1072 (holding that a “district court’s discretion to deny leave to amend is
particularly broad where [a plaintiff] has previously amended the complaint”).
VI
Kelley’s other arguments are without merit.
AFFIRMED.

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