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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Warren Metlitzky (CA Bar No. 220758) Courtney C. Aase Case 4:20-cv-03686-HSG Document 40 Filed 11/03/20 Page 1 of 26 1 Warren Metlitzky (CA Bar No. 220758) Steven Kaufhold (CA Bar. No. 157195) Courtney C. Aasen (CA Bar No. 307404) KAUFHOLD GASKIN GALLAGHER LLP 2 CONRAD & METLITZKY LLP 388 Market Street Four Embarcadero Center, Suite 1400 San Francisco, California 94111 3 San Francisco, California 94111 Telephone: (415) 445-4621 4 Telephone: (415) 343-7100 Email: [email protected] Email: [email protected] 5 Email: [email protected] 6 Maeve L. O’Connor (appearance pro hac vice) Jaren Janghorbani (pro hac vice pending) Elliot Greenfield (appearance pro hac vice) Paul Paterson (pro hac vice pending) 7 Morgan A. Davis (appearance pro hac vice) Brady M. Sullivan (pro hac vice pending) 8 DEBEVOISE & PLIMPTON LLP PAUL, WEISS, RIFKIND, WHARTON & 919 Third Avenue GARRISON LLP 9 New York, New York 10022 1285 Avenue of the Americas Telephone: (212) 909-6000 New York, New York 10019 10 Email: [email protected] Telephone: (212) 373-3000 11 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected] 12 Email: [email protected] 13 Attorneys for Defendant THE WE COMPANY Attorneys for Defendant ADAM NEUMANN 14 UNITED STATES DISTRICT COURT 15 NORTHERN DISTRICT OF CALIFORNIA 16 OAKLAND DIVISION 17 18 MALAKYAR VERNET, Individually and Master File 4:20-cv-03686-HSG on Behalf of All Others Similarly Situated, 19 DEFENDANTS THE WE COMPANY AND Plaintiff, ADAM NEUMANN’S NOTICE OF 20 MOTION AND MOTION TO DISMISS CONSOLIDATED AMENDED 21 vs. COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN 22 THE WE COMPANY, et al., SUPPORT THEREOF 23 Defendants. Date: March 18, 2021 24 Time: 2:00 p.m. 25 Judge: Hon. Haywood S. Gilliam, Jr. Ctrm.: Courtroom 2, Fourth Floor 26 27 28 Conrad & Metlitzky NOTICE OF MOTION AND MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT LLP CASE NO. 4:20-CV-03686-HSG Case 4:20-cv-03686-HSG Document 40 Filed 11/03/20 Page 2 of 26 1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE THAT on March 18, 2021, at 2 p.m., or as soon thereafter as the 3 matter may be heard, in Courtroom 2, 4th Floor, 1301 Clay Street, Oakland, CA, 94612, before the 4 Honorable Haywood S. Gilliam, Jr., The We Company (“WeWork” or the “Company”) and Adam 5 Neumann (collectively, “Defendants”) will and hereby do move for an order dismissing the 6 Consolidated Amended Complaint (“CAC”) filed by Malakyar Vernet and Henriette Kockum 7 (“Plaintiffs”). This motion is based upon this Notice of Motion, the Memorandum of Points and 8 Authorities, the Declaration of Morgan A. Davis and exhibits attached thereto, all documents in 9 the Court’s file, and any evidence or argument presented on this matter. 10 Defendants seek a dismissal with prejudice under Federal Rules of Civil Procedure 11 12(b)(1) and 12(b)(6). 12 STATEMENT OF ISSUES TO BE DECIDED 13 The following issues are before the Court in this motion: 14 (1) Whether the CAC should be dismissed against WeWork and Adam Neumann for 15 failure to state a claim. 16 (2) Whether the CAC should be dismissed because Plaintiffs have failed to plead Article 17 III standing. 18 19 20 21 22 23 24 25 26 27 28 Conrad & Metlitzky i LLP NOTICE OF MOTION AND MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT CASE NO. 4:20-CV-03686-HSG Case 4:20-cv-03686-HSG Document 40 Filed 11/03/20 Page 3 of 26 1 TABLE OF CONTENTS 2 PRELIMINARY STATEMENT....................................................................................................... 1 3 BACKGROUND............................................................................................................................... 3 4 I. THE PARTIES...................................................................................................................... 3 5 II. WEWORK’S HIGH-GROWTH BUSINESS MODEL........................................................ 3 6 III. WEWORK’S RELATIONSHIP WITH SOFTBANK AND ITS IMPACT ON THE COMPANY’S VALUATION............................................................................................... 5 7 IV. WEWORK’S JANUARY 2019 GLOBAL SUMMIT. ......................................................... 6 8 V. PLAINTIFFS’ EMPLOYMENT AND EMPLOYEE STOCK OPTIONS........................... 7 9 VI. WEWORK’S CANCELLED IPO......................................................................................... 7 10 VII. PLAINTIFFS’ CLAIMS. ...................................................................................................... 8 11 ARGUMENT .................................................................................................................................... 8 12 I. LEGAL STANDARD. .......................................................................................................... 8 13 II. THE CAC SHOULD BE DISMISSED FOR FAILURE TO PLEAD CAUSATION. ........ 9 14 III. THE CAC SHOULD BE DISMISSED FOR FAILURE TO PLEAD AN 15 ACTIONABLE MISSTATEMENT. .................................................................................. 10 16 A. The June 2016 Statements Are Inactionable Puffery and Were Not False or Misleading When Made. ......................................................................................... 11 17 B. Plaintiffs Do Not Adequately Allege that the January 2019 Statements Were 18 False or Misleading When Made. ........................................................................... 11 19 1. January 2019 Statements About WeWork’s Balance Sheet........................ 12 20 2. January 2019 Statements About WeWork’s Growth. ................................. 13 21 3. January 2019 Alleged Presentations to Employees..................................... 14 22 C. Plaintiffs’ Causes of Action Do Not Cover “Manipulative Transactions.” ............ 15 23 IV. COUNT I SHOULD BE DISMISSED FOR LACK OF SCIENTER. ............................... 16 24 V. COUNT II SHOULD BE DISMISSED BECAUSE NEUMANN’S STATEMENTS WERE NOT PART OF AN “OFFER” TO SELL SECURITIES AND HE WAS 25 NOT A SELLER OF SECURITIES. .................................................................................. 17 26 A. Plaintiffs Do Not Allege That Neumann Made an “Offer” to Sell Securities......... 17 27 B. Neumann Cannot Be Held Liable Because He Did Not Sell Securities. ................ 18 28 VI. PLAINTIFFS FAIL TO PLEAD CONTROL PERSON LIABILITY................................ 19 Conrad & Metlitzky i LLP NOTICE OF MOTION AND MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT CASE NO. 4:20-CV-03686-HSG Case 4:20-cv-03686-HSG Document 40 Filed 11/03/20 Page 4 of 26 1 TABLE OF AUTHORITIES 2 CASES 3 Alameda v. Nuveen Mun. High Income Opportunity Fund, 4 No. 08-cv-3137, 2009 WL 1424529 (N.D. Cal. May 20, 2009)............................................. 18 5 B.C. Turf & Country Club v. Daugherty, 210 P.2d 760 (Cal. Dist. Ct. App. 1949) ................................................................................. 18 6 7 Bains v. Moores, 172 Cal. App. 4th 445 (Cal. App. Ct. 2009) ........................................................................... 16 8 Bowden v. Robinson, 9 67 Cal. App. 3d 705 (1977)....................................................................................................... 9 10 Cal. Amplifier v. RLI Ins. Co., 94 Cal. App. 4th 102 (2001).................................................................................................... 16 11 Curry v. Yelp Inc., 12 875 F.3d 1219 (9th Cir. 2017)................................................................................................. 16 13 Daniels-Hall v. Nat’l Educ. Ass’n, 14 629 F.3d 992 (9th Cir. 2010)..................................................................................................... 4 15 Goodworth Holdings, Inc. v. Suh, 239 F. Supp. 2d 947 (N.D. Cal. 2002) .................................................................................... 16 16 Hodges v. Akeena Solar, Inc., 17 No. 09-cv-02147, 2010 WL 3705345 (N.D. Cal. May 20, 2010) ........................................... 10 18 In re Rigel Pharm., Inc. Sec. Litig., 19 697 F.3d 869 (9th Cir. 2012)................................................................................................... 10 20 Irving Firemen’s Relief & Ret. Fund v. Uber Techs., No. 17-cv-05558, 2018 WL 4181954 (N.D. Cal. Aug. 31, 2018) .......................................... 10 21 Irving Firemen’s Relief Ret. Fund v. Uber Techs., 22 398 F. Supp. 3d 549 (N.D. Cal. 2019) ...................................................................................... 9 23 Jackson v. Fischer, 24 931 F. Supp. 2d 1049 (N.D. Cal. 2013) ............................................................................ 18, 19 25 Jackson v. Fischer, No. 11-cv-2753, 2015 WL 1143582 (N.D. Cal. Mar. 13, 2015)............................................. 18 26 Khoja v. Orexigen Therapeutics, Inc., 27 899 F.3d 988 (9th Cir. 2018)..................................................................................................... 3 28 Conrad & Metlitzky ii LLP NOTICE OF MOTION AND MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT CASE NO. 4:20-CV-03686-HSG Case 4:20-cv-03686-HSG Document 40 Filed 11/03/20 Page 5 of 26 1 Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005)................................................................................................... 3 2 Lipton v. Pathogenesis Corp., 3 284 F.3d 1027 (9th Cir. 2002)................................................................................................. 17 4 Lujan v. Defenders of Wildlife,
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