                           NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS
                                                                           FILED
                            FOR THE NINTH CIRCUIT
                                                                            JAN 08 2016
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
In re: FINISAR CORPORATION                       No. 13-17199
SECURITIES LITIGATION,
                                                 D.C. No. 5:11-cv-01252-EJD

OKLAHOMA FIREFIGHTERS
PENSION AND RETIREMENT                           MEMORANDUM*
SYSTEM,

              Plaintiff - Appellant,

 v.

FINISAR CORPORATION; JERRY S.
RAWLS; EITAN GERTEL; KURT
ADZEMA,

              Defendants - Appellees.


                    Appeal from the United States District Court
                      for the Northern District of California
                    Edward J. Davila, District Judge, Presiding

                     Argued and Submitted December 10, 2015
                             San Francisco, California

Before: GRABER, WARDLAW, and MURGUIA, Circuit Judges.



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      Oklahoma Firefighters Pension & Retirement System (“plaintiff”) appeals

the district court’s dismissal of its putative class action brought under Sections

10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 against

Finisar Corporation (“Finisar”), Eitan Gertel, Jerry S. Rawls, and Kurt Adzema

(“defendants”). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we review

the district court’s order de novo. Police Ret. Sys. of St. Louis v. Intuitive Surgical,

Inc., 759 F.3d 1051, 1057 (9th Cir. 2014). For the following reasons, we reverse

and remand for further proceedings.

      Plaintiff alleged that, between September 8, 2010, and March 8, 2011,

defendants made statements denying that they knew that Finisar’s customers were

building inventory beyond actual production demand. The First Amended

Complaint alleged that these denials were materially false and misleading because,

during annual contract negotiations between defendants and Finisar’s customers,

customers would have discussed inventory levels and defendants would have

learned that customers were stockpiling inventory. The district court granted

defendants’ motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for

failure to adequately plead falsity.

      We conclude, however, that plaintiff adequately pleaded falsity even under

the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) and


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the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-

4(b)(1). “To plead falsity, the complaint must ‘specify each statement alleged to

have been misleading, [and] the reason or reasons why the statement is

misleading.’” Reese v. Malone, 747 F.3d 557, 568 (9th Cir. 2014) (alteration in

original) (quoting 15 U.S.C. § 78u-4(b)(1)(B)). The First Amended Complaint

identifies specific statements in which defendants denied their knowledge of an

inventory build-up or otherwise down-played concerns of a looming inventory

bubble.1 And it identifies why those statements were misleading by alleging that

inventory levels would have been disclosed to defendants during the annual

contract negotiations. As a result, the district court erred in dismissing the First

Amended Complaint for failure to plead falsity.

      We remand for the district court to consider in the first instance whether the

complaint states a claim under the remaining elements of a private federal

securities fraud action. See Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, Inc., 552

U.S. 148, 157 (2008) (listing elements). On remand, the district court should allow




      1
        Rawls’s January 11, 2011 and February 10, 2011 statements about the
strength of demand are not actionable, as they amount to corporate puffery. See
Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 2014)
(recognizing as puffery statements that are not capable of objective verification and
would not induce the reliance of a reasonable investor).

                                           3
leave to amend as to scienter in light of our recent discussion of deliberate

recklessness in Reese, 747 F.3d 557.2

      REVERSED and REMANDED.

Each party shall bear its own costs on appeal.




      2
        Reese recognized that a plaintiff adequately pleads scienter if all the facts
alleged, taken collectively, give rise to the strong inference that “the defendant
made false or misleading statements either intentionally or with deliberate
recklessness.” 747 F.3d at 569 (alterations and emphases omitted) (quoting Zucco
Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009)). “An actor is
deliberately reckless if he had reasonable grounds to believe material facts existed
that were misstated or omitted, but nonetheless failed to obtain and disclose such
facts although he could have done so without extraordinary effort.” Id. (alterations
omitted) (quoting Nursing Home Pension Fund, Local 144 v. Oracle Corp. (In re
Oracle Corp. Sec. Litig.), 627 F.3d 376, 390 (9th Cir. 2010)). However, while
“[f]acts showing mere recklessness or a motive to commit fraud and opportunity to
do so provide some reasonable inference of intent, [they] are not independently
sufficient.” Id.

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