                                                                           FILED
                           NOT FOR PUBLICATION                              DEC 04 2009

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



In re: FOXHOLLOW TECHNOLOGIES,                   No. 08-16469
INC. SECURITIES LITIGATION,
                                                 D.C. No. 3:06-cv-04595-PJH


MATTHEW ROBERTS, individually and                MEMORANDUM *
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,



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
              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



       **
            The Honorable Lyle E. Strom, Senior U.S. District Judge for District
of Nebraska, sitting by designation.

                                           2
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


                                           3
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



      1
       Because we conclude that these statements were not misleading, we need
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.

                                           4
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

                                           5
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.




      2
        Because we conclude that none of the cited statements were materially false
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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