3226701 Canada, Inc., Et Al. V. Qualcomm, Inc., Et Al. 15-CV-02678

Case 3:15-cv-02678-MMA-WVG Document 58 Filed 03/17/17 PageID.1170 Page 1 of 146 1 KESSLER TOPAZ LABATON SUCHAROW LLP MELTZER & CHECK, LLP James W. Johnson (Pro Hac Vice) 2 Eli R. Greenstein (Bar No. 217945) Michael H. Rogers (Pro Hac Vice) Jennifer L. Joost (Bar No. 296164) Matthew J. Hrutkay (Bar No. 297485) 3 Paul A. Breucop (Bar No. 278807) James T. Christie (Pro Hac Vice) Rupa Nath Cook (Bar No. 296130) [email protected] 4 [email protected] [email protected] [email protected] [email protected] 5 [email protected] [email protected] [email protected] 140 Broadway 6 One Sansome Street, Suite 1850 New York, New York 10005 San Francisco, CA 94104 Telephone: (212) 907-0700 7 Telephone: (415) 400-3000 Facsimile: (212) 818-0477 Facsimile: (415) 400-3001 8 -and- 9 Andrew L. Zivitz (Pro Hac Vice) 10 Jonathan F. Neumann (Pro Hac Vice) [email protected] 11 [email protected] 280 King of Prussia Road 12 Radnor, PA 19087 Telephone: (610) 667-7706 13 Facsimile: (610) 667-7056 14 Attorneys for the Public Employees Retirement System of Mississippi and 15 Co-Lead Counsel for the Proposed Class 16 UNITED STATES DISTRICT COURT 17 SOUTHERN DISTRICT OF CALIFORNIA 18 19 3226701 CANADA, INC., Case No. 15-CV-2678-MMA (WVG) Individually and on Behalf of All 20 Others Similarly Situated SECOND AMENDED CLASS 21 Plaintiffs, ACTION COMPLAINT FOR VIOLATIONS OF THE 22 v. FEDERAL SECURITIES LAWS 23 QUALCOMM, INC., STEVEN M. MOLLENKOPF, DEREK K. ABERLE, Judge: Hon. Michael M. Anello 24 GEORGE S. DAVIS, VENKATA S.M. RENDUCHINTALA, CRISTIANO R. 25 AMON, and TIM MCDONOUGH, 26 Defendants. 27 28 Case 3:15-cv-02678-MMA-WVG Document 58 Filed 03/17/17 PageID.1171 Page 2 of 146 1 TABLE OF CONTENTS 2 Page 3 TABLE OF ABBREVIATIONS .............................................................................. v 4 I. NATURE OF THE ACTION ......................................................................... 2 5 II. JURISDICTION AND VENUE .................................................................. 11 6 III. PARTIES ...................................................................................................... 11 7 A. Lead Plaintiff ...................................................................................... 11 8 B. Defendants ......................................................................................... 12 9 C. Relevant Non-Parties ......................................................................... 15 10 1. Confidential Witnesses ............................................................ 15 11 2. Other Relevant Non-Parties ..................................................... 19 12 IV. FACTUAL BACKGROUND AND SUBSTANTIVE 13 ALLEGATIONS .......................................................................................... 20 14 A. Qualcomm Was a Leader in the Telecommunications 15 Industry .............................................................................................. 20 16 1. The Birth of Snapdragon and the “System-on-a-Chip” ........... 22 17 B. Qualcomm’s QCT Chip Business Relied Upon the Success 18 of its Premium-Tier Snapdragon Processors ..................................... 24 19 C. Qualcomm Radically Altered the Design of and Schedule 20 for the 810 Due to Pressure from Samsung and Apple ..................... 25 21 D. The Snapdragon 810’s Accelerated Timeline and Hasty 22 Design Led to Undisclosed Overheating Problems in the 23 Chip .................................................................................................... 27 24 E. Pre-Class Period Testing of the Snapdragon 810 in March 25 2014 First Revealed its Propensity to Overheat ................................ 28 26 F. Despite Design Shortcuts and Initial Tests Showing the 27 810 Was Overheating, Qualcomm Touted the Snapdragon 28 810’s Performance and Functionality in April 2014 ......................... 31 SECOND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS CASE NO. 15-CV-2678-MMA (WVG) Case 3:15-cv-02678-MMA-WVG Document 58 Filed 03/17/17 PageID.1172 Page 3 of 146 1 G. Unprecedented Overheating Problems Continued to Plague 2 the Snapdragon 810 During the Feature Complete Stage .................. 32 3 1. Documented Evidence of Overheating .................................... 32 4 2. Oral Evidence of Overheating ................................................. 34 5 H. The 810’s Overheating Issues Continued Unabated After 6 Limited Commercial Release ............................................................. 36 7 I. Samsung Told Defendants in October 2014 That it Would 8 Not Use the Snapdragon 810 in the Galaxy S6 ................................. 39 9 J. The Snapdragon 810 was Commercially Launched Despite 10 its Known Thermal Issues that Negatively Affected the 11 Chip’s Performance ........................................................................... 43 12 1. Defendants Launch Snapdragon 810 Commercially 13 Despite Known Overheating Problems ................................... 43 14 2. Qualcomm Falsely Denied Rumors of Overheating in 15 the 810 ..................................................................................... 45 16 3. Investors Finally Learned That Samsung Was Not 17 Using the 810 in the Galaxy S6 ............................................... 47 18 4. Premium-Tier Smartphones Launched During the Class 19 Period Overheated Because of the Inclusion of the 810 ......... 48 20 K. While Denouncing Overheating Reports as “False 21 Rumors,” Defendants tried to Fix the 810 and Expedited 22 the Release of the 820 to Replace the 810 ......................................... 68 23 L. Post-Class Period Confirmation that the 810 Overheated 24 and Defendants’ Denials were False .................................................. 71 25 V. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING 26 STATEMENTS AND OMISSIONS OF MATERIAL FACT .................... 72 27 A. The November and December 2014 Misleading Statements 28 Regarding OEM Acceptance of the 810 ............................................ 73 SECOND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS ii CASE NO. 15-CV-2678-MMA (WVG) Case 3:15-cv-02678-MMA-WVG Document 58 Filed 03/17/17 PageID.1173 Page 4 of 146 1 B. December 2014 and January 2015 Statements Misleadingly 2 Denying Rumors of Overheating ....................................................... 76 3 C. The January 28, 2015 False and Misleading Statements and 4 Omissions ........................................................................................... 83 5 D. January 29, 2015 – February 2, 2015 Statements 6 Misleadingly Denying Rumors of Overheating ................................. 85 7 E. Defendants Falsely and Misleadingly State that the 8 Snapdragon 810 is “Cooler than Ever” and Deny 9 Overheating on February 12, 2015 .................................................... 87 10 F. Defendants Continue to Issue False and Misleading 11 Statements in and after April 2015 .................................................... 91 12 VI. LOSS CAUSATION AND THE EMERGENCE OF RELEVANT 13 TRUTH ......................................................................................................... 94 14 A. January 20, 2015 Partial Disclosure .................................................. 96 15 B. January 28, 2015 Partial Disclosure .................................................. 99 16 C. July 22, 2015 Disclosure .................................................................. 101 17 VII. SCIENTER ALLEGATIONS .................................................................... 107 18 A. Renduchintala’s, Mollenkopf’s and Amon’s Actual 19 Knowledge of the Snapdragon 810’s Thermal Issues, 20 Which is Imputed to Qualcomm, Establishes a Strong 21 Inference of Scienter ........................................................................ 108 22 B. The Sheer Amount of Evidence of Overheating from 23 Testing in 2014 and Reports of Overheating in 2015 24 Supports a Strong Inference of Scienter .......................................... 115 25 C. The Individual Defendants’ Senior-Level Positions, 26 Responsibilities, Technical Backgrounds, and Access to 27 Adverse Information Regarding the 810 Support a Strong 28 Inference of Scienter ........................................................................ 117 SECOND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS iii CASE NO. 15-CV-2678-MMA (WVG) Case 3:15-cv-02678-MMA-WVG Document 58 Filed 03/17/17 PageID.1174 Page 5 of 146 1 D. The Individual Defendants Knew or Were Deliberately 2 Reckless in Disregarding Information Concerning the 3 Company’s Core Operations ............................................................ 121 4 1. The Snapdragon 810 Was Central to Qualcomm’s QCT 5 Operations .............................................................................. 121 6 2. The Extent and Frequency of the 810 Testing Process 7 and Sustained Evidence of Overheating Support a 8 Finding of Scienter ................................................................ 122 9 3. The Materiality and Importance of Samsung as a 10 Customer for Qualcomm’s Chips Supports a Strong 11 Inference of Scienter .............................................................. 124 12 E. Amon and McDonough’s Unequivocal Denials of Any 13 Problems With the Snapdragon 810, Which Contradicted 14 Known Information at Qualcomm, Demonstrate A Strong 15 Inference of Scienter ........................................................................ 125 16 VIII. THE STATUTORY SAFE HARBOR

Load more