Howard Welgus v. Trinet Group, Inc.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HOWARD WELGUS,
Plaintiff-Appellant,
v.
TRINET GROUP, INC.; BURTON M.
GOLDFIELD; WILLIAM PORTER;
MARTIN BABINEC; H. RAYMOND
BINGHAM; DAVID C. HODGSON;
GENERAL ATLANTIC, LLC;
KATHERINE AUGUST-DEWILDE;
KENNETH GOLDMAN; JOHN KISPERT;
WAYNE LOWELL; J.P. MORGAN
SECURITIES, LLC; MORGAN STANLEY
& CO. LLC; DEUTSCHE BANK
SECURITIES, INC.; JEFFERIES, LLC;
STIFEL, NICOLAUS & COMPANY,
INCORPORATED; WILLIAM BLAIR &
COMPANY, LLC,
Defendants-Appellees.
No. 18-15084
D.C. No. 5:15-cv-03625-BLF
MEMORANDUM*
Appeal from the United States District Court
for the Northern District of California
Beth Labson Freeman, District Judge, Presiding
Argued and Submitted March 14, 2019
San Francisco, California
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FILED
MAR 26 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Before: M. SMITH, WATFORD, and HURWITZ, Circuit Judges.
Howard Welgus appeals the district court’s dismissal of this putative class
action under Rule 12(b)(6). The operative second amended complaint alleged that
TriNet Group, Inc., its officers, directors, majority shareholder, and underwriters
(collectively “TriNet”) made false or misleading statements in connection with an
initial public offering (“IPO”) and a secondary public offering (“SPO”).
We review the dismissal for failure to state a claim de novo. Metzler Inv.
GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). Applying
the heightened pleading standards of the Private Securities Litigation Reform Act of
1995 (“PSLRA”), 15 U.S.C. § 78u–4(b), we affirm. See Or. Pub. Emp. Ret. Fund
v. Apollo Grp. Inc., 774 F.3d 598, 604 (9th Cir. 2014).
1. The operative complaint failed to plausibly allege that TriNet made
materially false or misleading statements. At least one statement claimed to be false,
that TriNet’s “risk management is a core competency,” is an opinion, and thus only
actionable for “subjective falsity.” See City of Dearborn Heights Act 345 Police &
Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605, 615 (9th Cir. 2017). But rather than
citing “contemporaneous” evidence that TriNet did not believe this statement to be
true when made, the operative complaint refers only to subsequent evidence casting
doubt on whether TriNet’s subsequent risk management was competent. Those
allegations do not suffice to plausibly allege subjective falsity. See Ronconi v.

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Larkin, 253 F.3d 423, 432 (9th Cir. 2001).
2. To the extent the operative complaint alleges that statements of fact were
untrue when made, it also does not meet the PSLRA heightened pleading standards.
Contrary to Welgus’ assertions, TriNet did not state that it had access to data for all
its claims; rather it stated that it received “claims data” and had access to analytics
on claims. Similarly, the IPO and SPO disclosures state only that TriNet assesses
risk on an individual client (employer) basis, not, as Welgus claims, for each
individual claim. TriNet’s statements that it offered “fully-insured” plans were not
misleading, because both disclosures expressly described TriNet’s risk exposure.
Nor were TriNet's later statements that it did not have aggregate stop losses in place
enough to suggest that TriNet did not previously have any stop losses in place, so as
to render its earlier statements misleading. Finally, TriNet’s CFO’s statement that
“we are able to predict pretty accurately . . . exactly how we are going to do” was
explicitly described as a consequence of “the law of large numbers,” and did not
suggest that TriNet employed unusual risk management practices.
3. Because the operative complaint failed to plausibly allege any materially
false or misleading statements or omissions, the district court did not err in
dismissing each of its claims. We therefore need not consider whether the complaint
adequately pleaded scienter or whether the claims against the underwriters were
barred by the applicable statute of limitations.

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AFFIRMED.

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