Ferris et al v. Wynn Resorts Limited et al, No. 2:2018cv00479 - Document 119 (D. Nev. 2020)

Court Description: ORDER Granting 67 and 71 Motions to Dismiss; and Granting 105 , 107 , 111 , and 116 Motions for Leave to Submit Supplemental Authority. Plaintiffs are Granted Leave to Amend within 21 days. Signed by Judge Gloria M. Navarro on 5/27/2020. (Copies have been distributed pursuant to the NEF - DRS)

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Ferris et al v. Wynn Resorts Limited et al Doc. 119 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 1 of 37 1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 JOHN V. FERRIS, et al., ) ) ) ) ) ) ) ) ) 4 Plaintiffs, 5 vs. 6 WYNN RESORTS LIMITED, et al., 7 Defendants. 8 Case No.: 2:18-cv-00479-GMN-DJA ORDER 9 10 Pending before the Court is the Motion to Dismiss the Amended Class Action 11 Complaint, (ECF No. 67), filed by Defendant Kimmarie Sinatra. 1 Plaintiffs John V. Ferris, 12 JoAnn M. Ferris, and Jeffrey Larsen (collectively, “Plaintiffs”) filed a Response, (ECF No. 13 96), 2 and Sinatra filed a Reply, (ECF No. 98). 14 Also pending before the Court is the Motion to Dismiss, (ECF No. 71), filed by 15 Defendants Wynn Resorts Limited (“Wynn Resorts” or the “Company”); John J. Hagenbuch, 16 Robert J. Miller, Patricia Mulroy, Clark T. Randt Jr., Alvin Shoemaker, Daniel B. Wayson, Jay 17 L. Johnson, Ray R. Irani, and J. Edward Virtue, Matthew O. Maddox, and Craig Scott Billings 18 (collectively, “Wynn Resorts Defendants”). 3 Defendants Stephen Cootey and Stephen A. 19 Wynn filed Joinders, (ECF Nos. 73, 75). 4 Plaintiffs filed a Response, (ECF No. 96), to the 20 21 22 23 24 25 1 Sinatra additionally filed a Request for Judicial Notice, (ECF No. 68), and the Declaration of Christine E. Hanley, (ECF No. 69), in support of Sinatra’s Motion to Dismiss, (ECF No. 67). 2 Plaintiffs also filed a Request for Judicial Notice, (ECF No. 68). 3 Additionally, Wynn Resorts Defendants filed the Declaration of V.R. Bohman, (ECF No. 72), a Request for Judicial Notice, (ECF No. 86), and several volumes of exhibits, (ECF Nos. 76–85), in support of their Motion to Dismiss, (ECF No. 71). 4 Wynn Resorts Defendants’ Motion to Dismiss, (ECF No. 71), is also joined by Defendant Sinatra. (Sinatra Mot. Dismiss at 1, ECF No. 67) (“In moving to dismiss the Amended Complaint, Ms. Sinatra joins the Motion to Dismiss filed by [Wynn Resorts Defendants].”). Page 1 of 37 Dockets.Justia.com Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 2 of 37 1 Motion to Dismiss. Wynn Resorts Defendants filed a Reply, (ECF No. 99). 5 Defendants 2 Cootey and Wynn filed individual Replies, (ECF Nos. 102, 103). 3 Also pending before the Court is Wynn Resorts Defendants’ Motion for Leave to Submit 4 Supplemental Authority, (ECF No. 105), in Support of the Motion to Dismiss, (ECF No. 71). 5 Sinatra filed a Joinder, (ECF No. 106). 6 Also pending before the Court is Wynn Resorts Defendants’ Motion for Leave to Submit 7 Supplemental Authority, (ECF No. 107), in Support of the Motion to Dismiss, (ECF No. 71). 8 Plaintiffs filed a Response, (ECF No. 108). 9 Also pending before the Court is Wynn Resorts Defendants’ Motion for Leave to Submit 10 Supplemental Authority, (ECF No. 111), in Support of the Motion to Dismiss, (ECF No. 71). 11 Plaintiffs filed a Response, (ECF No. 112), and Wynn Resorts Defendants filed a Reply, (ECF 12 No. 113). 13 Also pending before the Court is Wynn Resorts Defendants’ Motion for Leave to Submit 14 Supplemental Authority, (ECF No. 116), in Support of the Motion to Dismiss, (ECF No. 71). 15 Defendant Wynn filed a Joinder, (ECF No. 117). Plaintiffs filed a Response, (ECF No. 118). 6 16 I. 17 BACKGROUND Plaintiffs bring this putative securities class action against Wynn Resorts and certain of 18 its directors and executive officers, on behalf of all persons who purchased or otherwise 19 acquired Wynn Resorts’ securities between February 28, 2014, and February 12, 2018 (the 20 “Class Period”). 7 (First Am. Compl. (“FAC”) ¶ 1, ECF No. 52). Plaintiffs claim that during the 21 22 23 24 25 5 Additionally, Wynn Resorts Defendants’ filed the Declaration of Michael Shipley, (ECF No. 100), and a Request for Judicial Notice, (ECF No. 101), in support of their Reply, (ECF No. 99). 6 Good cause appearing, the Motions for Leave to Submit Supplemental Authority, (ECF Nos. 105, 107, 111, 116), are granted. 7 The Court accepts Plaintiffs’ factual allegations as true. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (“[F]aced with a Rule 12(b)(6) motion to dismiss a § 10(b) action, courts must, as with any motion to dismiss for failure to plead a claim on which relief can be granted, accept all factual allegations in the complaint as true.”); In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1136 (9th Cir. 2017) (“We take as true the complaint’s plausible and properly pleaded allegations[.]”). Page 2 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 3 of 37 1 Class Period, Defendants made several misleading statements and omissions, thereby 2 concealing the alleged sexual misconduct of then Chief Executive Officer, Defendant Stephen 3 Wynn. (See id. ¶¶ 1, 3). As a result, Wynn Resorts’ securities traded at an inflated price during 4 the Class Period. (See, e.g., id. ¶¶ 238, 249, 253). Plaintiffs allege that news of Defendant 5 Wynn’s alleged sexual misconduct caused Wynn Resorts’ share prices to decline, resulting in a 6 financial loss to class members. (Id. ¶¶ 10, 239). 7 A. 8 Plaintiffs are persons who purchased the Company’s securities at allegedly inflated 9 10 The Parties prices during the Class Period. (Id. ¶¶ 15, 16). Wynn Resorts is a developer, owner, and operator of casino resorts that integrate hotel 11 accommodations and a wide range of amenities. (Id. ¶ 2). It owns and operates Wynn Las 12 Vegas and Encore in Las Vegas, Nevada, and Wynn Macau and Wynn Palace in Macau, China. 13 (Id.). Wynn Resorts is currently constructing a new $2.4 billion property in Massachusetts. 14 (Id.). Its securities trade on NASDAQ under the ticker symbol “WYNN.” (Id. ¶ 17). 15 Defendant Stephen Wynn is the founder of Wynn Resorts and served as its CEO and 16 Chairman from 2002 to 2018. (Id. ¶ 18). Defendant Matthew Maddox joined Wynn Resorts in 17 2002, served as its President since November 2013, and served as its CEO since February 2018. 18 (Id. ¶ 19). Defendant Kimmarie Sinatra served as Executive Vice President, General Counsel, 19 and Secretary of Wynn Resorts from February 2006 until her resignation in July 2018. (Id. 20 ¶ 22). Defendant Stephen Cootey served as the Company’s CFO and Senior Vice President 21 from 2014 to 2017. (Id. ¶ 18). Defendant Craig Billings has served as Wynn Resorts’ CFO 22 since March 2017. (Id. ¶ 25). 23 Defendants John Hagenbuch, Dr. Ray Irani, Jay Johnson, Robert Miller, Patricia 24 Mulroy, Clark Randt, Alvin Shoemaker, Edward Virtue, and Boone Wayson are former and 25 current directors of Wynn Resorts. (Id. ¶¶ 29–41). Page 3 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 4 of 37 1 B. 2 Beginning in 2012 and throughout the Class Period, Wynn Resorts was party to a major The Okada Litigation 3 lawsuit in Nevada state court. (Id. ¶ 96). The lawsuit, styled as Wynn Resorts, Limited v. Kazuo 4 Okada, et al., No. A-12-656710-B (the “Okada Litigation”), involved the Company and some 5 of its largest shareholders, including Elaine Wynn, 8 ex-wife of Defendant Stephen Wynn. (Id. 6 ¶¶ 96, 156); (Elaine Wynn Counterclaim, Ex. 11 to Bohman Decl., ECF No. 77-1). 7 On March 28, 2016, Elaine Wynn filed the First Amended Answer of Elaine P. Wynn to 8 Aruze and Universal’s Fourth Amended Counterclaim; Fifth Amended Counterclaim and 9 Crossclaim of Elaine P. Wynn (the “Elaine Wynn Counterclaim”) in the Okada Litigation. 10 (FAC ¶ 156); (Elaine Wynn Counterclaim, Ex. 11 to Bohman Decl.). The Elaine Wynn 11 Counterclaim contained various allegations and described a “multi-million-dollar payment” by 12 Defendant Stephen Wynn following allegations that he engaged in “serious misconduct” “on 13 company property against an employee.” (FAC ¶ 157). It also detailed a “pattern of reckless 14 risk-taking” behavior by Defendant Wynn that “left the directors and the Company vulnerable 15 to potential liability and regulatory exposure.” (Id.). As discussed further below, Wynn Resorts 16 subsequently issued press releases denying Elaine Wynn’s allegations. 17 C. 18 On January 26, 2018, the Wall Street Journal (“WSJ”) published an article titled 19 “Dozens of People Recount Pattern of Sexual Misconduct by Las Vegas Mogul Steve Wynn,” 20 alleging that in 2005, Defendant Wynn paid a Wynn Resorts employee $7.5 million after the 21 employee accused Defendant Wynn of forcing her to have sex with him. (Id. ¶¶ 4, 196). The 22 WSJ article detailed additional sexual misconduct allegations by Wynn Resorts employees. 23 (Id.). Wall Street Journal Article and Regulatory Investigations 24 25 8 Elaine Wynn is not a party to the instant action. Page 4 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 5 of 37 1 The day the article was published, Wynn Resorts’ share price fell $20.31, or 2 10.12 percent, to close at $180.29 on January 26, 2018. (Id. ¶ 197). The stock’s high trading 3 volume and price decline continued for several days, and the stock closed at $163.48 on 4 January 29, 2018. (Id.). 5 Defendant Wynn denied the WSJ article’s allegations stating that the “idea that I ever 6 assaulted any woman is preposterous. The instigation of these accusations is the continued 7 work of my ex-wife, Elaine Wynn, with whom I am involved in a terrible and nasty lawsuit in 8 which she is seeking a revised divorce settlement.” (Id. ¶ 198). On February 6, 2018, the 9 Company announced that Defendant Wynn had resigned as CEO and Chairman of the Board, 10 11 effective immediately. (Id. ¶¶ 8, 208). Moreover, shortly after the WSJ article’s publication, both the Nevada Gaming Control 12 Board and the Massachusetts Gaming Commission commenced investigations into the article’s 13 sexual misconduct allegations. (Id. ¶ 6). 14 Then, on February 12, 2018, the Las Vegas Metropolitan Police Department (LVMPD) 15 revealed that two women had recently filed reports against Defendant Wynn alleging that he 16 had sexually assaulted them in the 1970s. (Id. ¶¶ 63, 215). On this news, Wynn Resorts’ share 17 price closed at $162.92 on February 12, 2018. (Id. ¶ 216). Compared to the February 9, 2018 18 closing price ($166.22), this was a drop of $3.30, or 2 percent. (Id.). Compared to its January 19 25, 2018 closing price ($200.60), this was a drop of $37.68, or 18.8 percent. (Id.). 20 D. 21 On January 25, 2019, the Nevada Gaming Control Board (the “NGCB”) filed a Nevada Gaming Control Board Complaint and Settlement 22 disciplinary complaint (the “NGCB Complaint”) and accompanying settlement against the 23 Company and Wynn Las Vegas, LLC, relating to the NGCB’s investigation of the response of 24 certain Wynn Resorts employees to sexual misconduct allegations against Defendant Stephen 25 Wynn. (Id. ¶ 222). Page 5 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 6 of 37 1 The NGCB Complaint alleged that, “[i]n 2005, Employee 1, employed in the WYNN 2 Salon, alleged to various individuals at the WYNN that she had been raped by Mr. Wynn and 3 that she became pregnant as a result.” (Id. ¶ 224). Subsequently, “Mr. Wynn reached a private, 4 confidential settlement with Employee 1 in which she and her husband were paid $7.5 million 5 through a separate legal entity funded personally by Mr. Wynn.” (Id.). 6 The NGCB Complaint alleged eight instances of sexual harassment claims by employees 7 against Defendant Wynn that were not investigated by the Company, and further stated that 8 certain former executives knew of sexual harassment allegations made by female employees 9 and did not investigate. (Id. ¶ 223). Moreover, pursuant to the accompanying settlement, the 10 NGCB Complaint’s respondents 9 admitted nearly all of the allegations set forth in the NGCB 11 Complaint. (Id.). In February 2019, the Company was fined $20 million by Nevada gaming 12 regulators for failing to investigate claims of sexual misconduct against Defendant Wynn. (Id. 13 ¶ 234). 14 E. 15 Plaintiffs allege that during the Class Period, Defendants made several materially Alleged False and Misleading Statements 16 misleading statements and omissions in SEC filings, earnings calls, and press releases. These 17 statements fall into the following categories: 18 1. 19 Code of Conduct statements Up to and throughout the Class Period, Wynn Resorts made available to investors its 20 Code of Business Conduct and Ethics (“Code of Conduct” or “Code”). (Id. ¶ 88). The Code’s 21 stated purposes were “to comply with federal securities laws” and “to reinforce and enhance the 22 Company’s commitment to an ethical way of doing business.” (Id. ¶ 89). The Code stated, in 23 relevant part, that “[a]ll reported violations . . . will be taken very seriously and promptly 24 investigated,” and that “[h]arassment or discrimination of any sort will not be tolerated.” (Id. 25 9 Plaintiffs’ Amended Complaint does not name or otherwise identify the NGCB Complaint’s respondents. Page 6 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 7 of 37 1 ¶¶ 92, 93). Additionally, the Code of Conduct purported to apply to “all employees, officers, 2 directors, agents, and representatives of the Company and its affiliates.” (Id. ¶ 91). The 3 Company’s annual reports on Form 10-K from 2013 to 2016 each contained a similar assertion: 4 “As part of the Company’s commitment to integrity, the Board of Directors has adopted a Code 5 of Business Conduct and Ethics applicable to all directors, officers and employees of the 6 Company and its subsidiaries.” (Id. ¶¶ 107, 124, 146, 173). 7 Plaintiffs allege the Code of Conduct and references thereto were materially false and 8 misleading, because the Code was not applied to “all employees, officers, directors and 9 officers . . . .” (See, e.g., id. ¶¶ 95, 108, 125, 147). Instead, Defendants “turned a blind eye” to 10 Defendant Stephen Wynn’s alleged sexual misconduct. (Id.). Plaintiffs claim that Defendants 11 did not take seriously or promptly investigate the alleged sexual misconduct. (Id. ¶ 95). 12 Additionally, Defendants “failed to report these incidents to the applicable gaming regulators, 13 as required by law, thus jeopardizing the Company’s critically needed gaming licenses.” (Id.). 14 Lastly, Plaintiffs allege that “contrary to the Code’s statement that ‘[h]arassment’ and 15 ‘discrimination of any sort will not be tolerated’ and its requirement that violators will be 16 disciplined, in fact such conduct by Defendant Wynn was tolerated and condoned at the highest 17 levels of management, and he was never disciplined” until the WSJ article “revealed the extent 18 of his egregious conduct and forced his ouster from the Company.” (Id.). 19 20 21 22 23 24 25 2. statements regarding compliance with applicable laws Several of Wynn Resorts’ SEC filings made during the Class Period provided the following statements regarding compliance: On February 18, 2012, the Board of Directors of Wynn Resorts received a report from Freeh, Sporkin & Sullivan, LLP detailing numerous instances of conduct constituting prima facie violations of the Foreign Corrupt Practices Act (the “FCPA”) by Kazuo Okada (formerly the largest beneficial owner of our shares) and certain of his affiliates . . . . The Company has provided the Freeh Report to applicable regulators and has been cooperating with related investigations of such regulators. The conduct of Mr. Okada and his affiliates and the outcome of any Page 7 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 8 of 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 resulting regulatory findings could have adverse consequences to the Company. A finding by regulatory authorities that Mr. Okada violated the FCPA on Company property and/or otherwise involved the Company in criminal or civil violations could result in actions by regulatory authorities against the Company. Relatedly, regulators have and may pursue separate investigations into the Company’s compliance with applicable laws in connection with the Okada matter . . . . While the Company believes that it is in full compliance with all applicable laws, any such investigations could result in actions by regulators against the Company, which could negatively affect the Company’s financial condition or results of operations. .... (Id. ¶¶ 122, 148, 175); (quoting 2014 10-K); (2015 10-K); (2016 10-K). Other regulators may pursue separate investigations into the Company’s compliance with applicable laws arising from the allegations in the matters described above and in response to the Counterclaim and other litigation filed by Mr. Okada suggesting improprieties in connection with the Company’s donation to the University of Macau. While the Company believes that it is in full compliance with all applicable laws, any such investigations could result in actions by regulators against the Company. (Id. ¶¶ 101, 113, 115, 117, 122); (see also id. ¶ 111) (alleging similar statement). Plaintiffs maintain these statements were “false and/or misleading” because Defendants 16 knew that the Company was not “in full compliance with all applicable laws” because 17 Defendant Wynn was “in violation of gaming regulations due to his ‘unsuitability,’ and in turn, 18 the Company had violated Nevada gaming regulations by failing to report the incidents 19 involving Defendant Wynn to regulators, as required,” and “covering up” the alleged 20 misconduct. (Id. ¶¶ 102, 118, 123, 136, 139, 144). 21 3. statements disclosing regulatory risks 22 During the Class Period, several of the Company’s SEC filings explained the 23 consequences of violating gaming laws in Nevada and Massachusetts. For example, if the 24 Nevada Gaming Commission or the Massachusetts Gaming Commission determined that Wynn 25 Page 8 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 9 of 37 1 Resorts violated the particular state’s gaming regulations, the Company’s registrations and 2 gaming licenses could be limited, suspended, or revoked. (See, e.g., id. ¶¶ 105, 128). Further, 3 4 5 6 7 Any person who fails or refuses to apply for a finding of suitability . . . after being ordered to do so by the Nevada Gaming Commission . . . or who refuses or fails to pay the investigative costs incurred by the Nevada Gaming Authorities in connection with the investigation of its application, may be found unsuitable. . . . Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any voting security or debt security of a registered company beyond the period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a criminal offense. 8 9 10 11 12 13 (Id.). Additionally, the SEC filings provided the following regarding Massachusetts company registration requirements and “qualifiers”: the following entities and person are deemed to be “qualifiers” subject to investigation: all members, transferees of a member’s interest, directors and managers of the licensee . . . . As a result, Wynn Resorts, its key employees and its directors were therefore subject to a suitability investigation. Wynn Resorts and all individual qualifiers were found suitable by the MGC. 14 15 (See, e.g., id. ¶¶ 128, 152, 179). Moreover, during an earnings call on July 25, 2017, Defendant 16 Wynn said the following regarding the licensing process in Massachusetts: 17 18 19 20 21 22 23 24 25 I remember when we were being licensed to Massachusetts, the question was, well, Macau has a reputation that may be questionable in some quarters, especially in Massachusetts. . . . we said, wait a minute, let’s put this matter to rest. We told each of our operators that, in addition to being licensed in Macau, they had to go to the organized crime criminal division of the Hong Kong Police Department and get certificates of clean bill of health certificates. They actually would investigate someone and then come to a conclusion and make a statement in writing that that person was free of any criminal association. And every one of our operators went instantly and did it without hesitation. And that impressed the folks in Boston. We were happy to do it because we wouldn’t want to do business with anybody that couldn’t pass such an examination. So, the regulatory issue is the one that I think is at stake here. (Id. ¶ 188). Page 9 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 10 of 37 1 Plaintiffs allege these statements were “false and/or misleading” because, while 2 informing investors that Defendant Wynn and all “individual qualifiers” were found “suitable”; 3 “warning investors generally of the consequences of violating gaming laws”; and implying that 4 the Company would not do business with unsuitable individuals, the statements “failed to 5 disclose that Defendant Wynn had engaged in a pattern of sexual misconduct (rendering him 6 ‘unsuitable’ under applicable gaming regulations and jeopardizing the Company’s critical 7 gaming licenses), and that senior Wynn Resorts management was aware of this conduct” yet 8 failed to investigate or report this alleged misconduct to gaming regulators although required to 9 do so under gaming regulations. (See, e.g., id. ¶¶ 106, 129, 153, 189). 10 4. 11 statements regarding Defendant Wynn’s skills and possible departure from the Company 12 Wynn Resorts’ annual reports on Form 10-K contained statements emphasizing 13 Defendant Wynn’s skills and the consequences of his possible departure from the Company: 14 15 16 We believe that Steve Wynn is the preeminent designer, developer and operator of destination casino resorts and has developed brand name status. Mr. Wynn’s involvement with our casino resorts provides a distinct advantage over other gaming enterprises. .... 17 18 19 20 21 22 The loss of Stephen A. Wynn could significantly harm our business. Our ability to maintain our competitive position is dependent to a large degree on the efforts, skills and reputation of Stephen A. Wynn, the Chairman of the Board, Chief Executive Officer and one of the principal stockholders of Wynn Resorts. Mr. Wynn’s employment agreement expires in October 2020. However, we cannot assure you that Mr. Wynn will remain with Wynn Resorts, Limited. If we lose the services of Mr. Wynn, or if he is unable to devote sufficient attention to our operations for any other reason, our business may be significantly impaired. 23 24 (See, e.g., id. ¶¶ 103, 126); (see also id. ¶ 177) (alleging the Company’s 2016 10-K contained 25 similar statements). Page 10 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 11 of 37 1 In 2014, the Company’s Proxy Statement described Defendant Wynn as the “founder 2 and creative and organizational force of Wynn Resorts” and “the preeminent designer, 3 developer and operator of destination casino resorts.” (Id. ¶ 109). Further, the 2014 Proxy 4 Statement indicated, inter alia: “Mr. Wynn’s involvement with our casino resorts provides a 5 distinct advantage over other gaming enterprises. As founder, Chairman and Chief Executive 6 Officer, he has a unique perspective into the operations and vision for the Company.” (Id.). 7 The Company’s 2015, 2016, and 2017 Proxy Statements contained identical or nearly identical 8 statements. (Id. ¶¶ 130, 154, 181). 9 Plaintiffs characterize these statements as “false and/or misleading” because, while 10 touting the “distinct advantage” Defendant Wynn provided and warning investors generally of 11 the risks of the possible loss of Defendant Wynn, Defendants failed to disclose that “Defendant 12 Wynn had engaged in a pattern of sexual misconduct (rendering him ‘unsuitable’ under 13 applicable gaming regulations and jeopardizing the Company’s critical gaming licenses),” and 14 that “senior Wynn management was aware of this conduct” yet failed to investigate or report 15 this alleged misconduct to regulators although required to do so under gaming regulations. (See, 16 e.g., id. ¶¶ 104, 110, 131, 182). 17 5. 18 statements about corporate culture On March 24, 2015, the Company filed a Schedule 14A attaching a presentation from 19 the Board to the Company’s shareholders. (Id. ¶ 132). The presentation included the following 20 statements regarding the Company’s commitment to diversity: 21 WYNN RESORTS HAS A TRACK RECORD OF PROMOTING DIVERSITY 22 Wynn Resorts’ commitment to diversity is reflected by the number of women in senior leadership roles throughout the Company. In fact, 34% of employees at the Vice President and above level and 38% of employees at the Executive Director or Assistant Vice President level are women. 23 24 25 (Id.). Page 11 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 12 of 37 1 Plaintiffs contend this statement was false and misleading because “while boasting about 2 the Company’s ‘track record’ and ‘commitment’ to diversity, Defendants failed to disclose that 3 Defendant Wynn had created a hostile work environment for Wynn’s female employees, which 4 was known to, but condoned by, senior management.” (Id.). Plaintiffs further allege the 5 statement was misleading “because Defendant Wynn had placed his own interests ahead of his 6 duty to the Board by repeatedly violating company policy and Nevada law.” (Id. ¶ 133). 7 8 9 10 11 12 13 On October 15, 2015, the Company held an earnings call, during which Defendant Wynn stated: In 45 years, I’ve never had a layoff. I think we once dropped 100 people in this company. 45 years. We don’t do layoffs. People come to work for us. They get job security. And I’ve never broken a promise about job security to my employees in my entire career, and I don’t like facing that possibility one bit. (Id. ¶ 140). Plaintiffs claim this statement was “false and/or misleading because it failed to disclose 14 that Defendant Wynn had engaged in a pattern of sexual misconduct towards female Wynn 15 employees which created a hostile work environment and undermined their job security.” (Id.). 16 17 6. press release statements concerning allegations by Elaine Wynn On March 28, 2016, following the filing of the Elaine Wynn Counterclaim in the Okada 18 Litigation, Wynn Resorts issued a press release titled “Statement from Wynn Resorts in 19 Response to Elaine Wynn’s Recent Filing” stating, in relevant part: 20 21 22 Ms. Wynn’s latest allegations regarding our Board, its composition and its independence are simply not true and are rehashed from her previous, unfounded statements made during her proxy campaign. Our company has nine distinguished directors, seven of whom are independent under NASDAQ standards. 23 24 25 Throughout her campaign, in which she directly communicated with shareholders via numerous personal letters, she never once raised the new allegations set forth in her recent complaint. Her allegations regarding the use of company assets are without merit. The use of company assets is governed by many internal policies and is closely supervised both by the Audit Committee, which is comprised solely Page 12 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 13 of 37 1 2 3 of independent directors, and our external auditors. As outlined in recent proxy statements, Mr. Wynn reimburses the Company for his accommodations at the hotel, his personal use of corporate aircraft and all other company assets subject to company policy. These policies and any perquisites he receives have always been set forth in our proxy statements. 4 5 6 As a leader in a highly regulated industry, Wynn Resorts prides itself on its transparency and full disclosure to regulators and shareholders. Allegations made by Ms. Wynn that the company would hide any relevant activities from our regulators are patently false. 7 8 9 10 By any measure, Wynn Resorts has ascended to a position of unrivaled stature and it is a symbol of unquestioned excellence and quality the world over. None of what Wynn Resorts has accomplished would be possible without its extraordinary employees and the sense of family and community that Mr. Wynn has created. Ms. Wynn’s actions today run counter to the culture of everything Mr. Wynn has worked so hard to create. 11 12 (Id. ¶ 158). Plaintiffs contend that this statement was false and misleading because the 13 Company was not transparent with regulators, and Defendant Wynn had not created a “sense of 14 family and community” at Wynn Resorts. (Id. ¶ 159). Instead, Plaintiffs allege he created a 15 coercive and hostile work environment for Wynn’s female employees. (Id.). 16 On April 4, 2016, Elaine Wynn issued a press release reiterating accusations that 17 Defendant Wynn “engaged in reckless, risk-taking behavior, leaving himself vulnerable to 18 allegations of serious wrongdoing—that he made a multi-million-dollar payment and used 19 Company resources to silence,” “that he did not properly disclose to the Board of Directors,” 20 and that Defendant Sinatra acted as his co-conspirator. (Id. ¶ 160). 21 The following day, Wynn Resorts issued a press release titled “Statement from Wynn 22 Resorts in response to Elaine Wynn’s news release of April 4, 2016” once again denying Elaine 23 Wynn’s allegations: 24 25 Elaine Wynn continues to rehash the same accusations she has made, accusations which will be fully adjudicated when heard by the court early next year. Neither her nor the company’s recent filings contain any new facts or revelations, as she so passionately claims. Ms. Wynn’s comments regarding our Board of Directors, Page 13 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 14 of 37 1 2 3 4 5 6 their independence and their actions in this matter are false. Our company has nine distinguished directors, seven of whom are independent under NASDAQ standards, each deeply committed to the best interests of our shareholders. Ms. Wynn’s allegations about Mr. Schorr’s departure from the company are not true. Her previous allegations that Mr. Wynn applied company resources for personal use are false; Mr. Wynn’s use of company assets is fully audited by both the Board and our external auditors, as well as completely outlined in our proxy statements. 7 (Id. ¶ 161). Plaintiffs allege this press release was false and misleading because it implied that 8 Elaine Wynn’s allegations regarding Defendant Stephen Wynn were “not credible” and 9 “motivated by improper reasons.” (Id. ¶ 162). 10 11 7. other statements During an earnings call on February 3, 2015, Defendant Stephen Wynn made statements 12 indicating that the Company “worked very hard to compete for the right to operate in 13 Massachusetts, . . . it was expensive to do that process, and time-consuming.” (Id. ¶ 119). 14 Defendant Wynn stated, inter alia: 15 16 17 18 Our promises for that, that are separate and apart from the construction and that project budget. We are going to be the one of the top five private employers in the history of the State of Massachusetts. We’re going to be responsible for $50 million a month in revenue for the state, probably another $50 million in related revenues to all the surrounding communities. We’re going to employ thousands and thousands of people. 19 (Id.). Further, on April 25, 2017, the Company held an earnings call. (Id. ¶ 183). During that 20 call, Defendant Stephen Wynn stated: 21 22 23 24 25 [T]hen we’re going to open this place in Boston in two dozen months, and we’re going to have a case study of how a grand hotel, built in a major metropolitan city, can change the neighborhood for the better. And be the largest private investment in the Commonwealth of Massachusetts and the second largest employer in the Commonwealth of Massachusetts, behind Mass General Hospital. So I’d like the direction we’re in and I’m feeling comfortable about the pace of our growth. And, you know, I don’t feel like anybody’s after us. I think we’re Page 14 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 15 of 37 1 moving along exactly the way we should be. And my colleagues join me in that confidence. 2 3 (Id.). Plaintiffs allege that these statements were “false and/or misleading” because 4 5 Defendants failed to disclose that at the time the statements were made, Defendant Wynn “had 6 engaged in a pattern of sexual misconduct,” and that senior Wynn management was aware of 7 this conduct but did not investigate or report this misconduct to regulators although required to 8 do so under gaming regulations.” (Id. ¶¶ 120, 184). F. 9 Procedural History 10 On February 20, 2018, Plaintiffs John V. Ferris and JoAnn M. Ferris brought this 11 securities class action against Defendants in the U.S. District Court for the Southern District of 12 New York. (Compl., ECF No. 1). On March 13, 2018, this case was transferred to the District 13 of Nevada. (Transfer Order, ECF No. 14). On December 4, 2018, John V. Ferris and Joann M. 14 Ferris were named lead plaintiffs. (Order on Mot. Lead Pls., ECF No. 45). Plaintiffs 15 subsequently filed an Amended Complaint, (ECF No. 52), which alleges two causes of action: 16 (1) Violation of Section 10(b) of the Exchange Act and Rule 10b-5 against all Defendants; and 17 (2) Violation of Section 20(a) of the Exchange Act against Defendants Wynn, Maddox, Sinatra, 18 Cootey, and Billings. Defendants now move to dismiss the Amended Complaint. 19 II. JUDICIAL NOTICE 20 Before reaching the merits, the Court first addresses the parties’ respective requests for 21 judicial notice. Defendant Sinatra requests the Court take judicial notice of ten Statements of 22 Changes in Beneficial Ownership on Form 4 filed with the SEC. (Def. Sinatra Req. Judicial 23 Notice (“RJN”), ECF No. 68). 24 25 Wynn Resorts Defendants request that the Court judicially notice 45 exhibits in support of their Motion to Dismiss. (Wynn Resorts Defs. RJN, ECF No. 86). These exhibits include several news articles; Forms 8-K filed with the SEC; a Complaint filed in Arrowsmith, et al. v. Page 15 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 16 of 37 1 Mirage Hotel Casino, No. 2:97-cv-00638-RLH-LRL; a May 24, 2018 pleading filed in In re 2 Wynn Resorts Deriv. Litig., No. A-18-769630-B (Dist. Ct. Nev.); press releases; Form 10-K 3 annual reports filed with the SEC; the Elaine Wynn Counterclaim filed in Wynn Resorts, Ltd. v. 4 Kazuo Okada, Case No. A-12-656710-B (Dist. Ct. Nev.); Statements of Changes in Beneficial 5 Ownership on Form 4 filed with the SEC; Schedule 14As filed with the SEC; Wynn Resorts’ 6 Code of Conduct; Wynn Resorts’ Share Pricing from January 2, 2018, to May 30, 2018; Form 7 10-Q quarterly reports filed with the SEC; and several exhibits attached to SEC 8-K filings. 8 (Id.); (see also ECF Nos. 76–85) (containing numerous volumes of exhibits). 9 Further, Wynn Resorts Defendants request that the Court take judicial notice of six 10 exhibits used to support their Reply. (Wynn Resorts Defs. Reply RJN, ECF No. 101); (Shipley 11 Decl., ECF No. 100). These exhibits include a February 26, 2019 settlement between the 12 Nevada Gaming Control Board and Wynn Resorts; Wynn Resorts’ Code of Ethics, adopted 13 November 2003 and filed publicly with the SEC; Hewlett Packard’s Code of Ethics, pulled 14 from the docket in Retail Wholesale & Department Store Union Local 338 Retirement Fund v. 15 Hewlett-Packard Co., 845 F.3d 1268 (9th Cir. 2017); a January 25, 2019 Complaint filed by the 16 Nevada Gaming Control Board; and a May 2019 Wynn Resorts press release. (Id.). Plaintiffs 17 do not object to Defendants’ requests for judicial notice. 18 Generally, district courts may not consider material outside the pleadings when 19 assessing the sufficiency of a complaint under Federal Rule of Civil Procedure 12(b)(6). Lee v. 20 City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). When matters outside the pleadings are 21 considered, the 12(b)(6) motion converts into a motion for summary judgment. Khoja v. 22 Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). This rule does not apply to the 23 incorporation by reference doctrine and judicial notice under Federal Rule of Evidence 201. 24 Khoja, 899 F.3d at 998. 25 Page 16 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 17 of 37 1 Rule 201 permits a court to take judicial notice of an adjudicative fact “not subject to 2 reasonable dispute,” that is “generally known” or “can be accurately and readily determined 3 from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 4 Specifically, a court may take judicial notice: (1) of matters of public record, Khoja, 899 F.3d 5 at 999; (2) that the market was aware of information contained in news articles, Heliotrope 6 Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 n.18 (9th Cir. 1999); and (3) publicly 7 accessible websites whose accuracy and authenticity is not subject to dispute, Daniels-Hall v. 8 Nat’l Educ. Ass’n, 629 F.3d 992, 998–99 (9th Cir. 2010). 9 Incorporation by reference treats certain documents as though they are part of the 10 complaint itself. Daniels-Hall, 629 F.3d at 998. These are situations where the complaint 11 “necessarily relies” upon a document or where the complaint alleges the contents of the 12 document and the documents authenticity and relevance is not disputed. Coto Settlement v. 13 Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). A defendant may seek to incorporate a 14 document into the complaint “if the plaintiff refers extensively to the document or the 15 document forms the basis of the plaintiff’s claim.” Khoja, 899 F.3d at 1002. 16 Upon review and consideration, the Court grants Defendants’ Requests for Judicial 17 Notice, (ECF Nos. 68, 86, 101). Defendants’ exhibits consist of SEC filings, matters of public 18 record, and news articles, each of which the Court may properly judicially notice. See Dreiling 19 v. Am. Express Co., 458 F.3d 942, 946 n.2 (9th Cir. 2006); Heliotrope Gen., Inc., 189 F.3d at 20 981 n.18. Moreover, several of the exhibits are excerpted or referenced in Plaintiffs’ Amended 21 Complaint. As such, these documents are incorporated by reference. Khoja, 899 F.3d at 1002. 22 The Court now turns to Plaintiffs’ Request for Judicial Notice, (ECF No. 97). In support 23 of their Response, Plaintiffs request that the Court judicially notice four Wynn Resorts Proxy 24 Statements filed with the SEC and two exhibits attached to SEC 10-K annual reports. (Exs. 1–6 25 to Pls.’ RJN, ECF No. 97). Defendants do not oppose Plaintiffs’ request as to these six Page 17 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 18 of 37 1 exhibits. “SEC filings are judicially noticeable documents which may be considered on a 2 motion to dismiss.” Richardson v. Oppenheimer & Co. Inc., No. 2:11-cv-02078-GMN, 2014 3 WL 1304343, at *3 (D. Nev. Mar. 31, 2014) (citing Dreiling, 458 F.3d at 946 n.2). Therefore, 4 Plaintiffs’ request for judicial notice is granted as to these documents. 5 Plaintiffs also request judicial notice of an April 30, 2019 Order issued by the 6 Massachusetts Gaming Commission’s Investigations and Enforcement Bureau (the “MGC 7 Order”). (Ex. 7 to Pls.’ RJN, ECF No. 97). Plaintiffs submit that “it is a matter of public record 8 whose accuracy is not in dispute.” (Pls.’ Resp. to Mots. Dismiss (“Resp.”) at 17 n.2, ECF No. 9 96) (citing Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360, 1364 10 (9th Cir. 1998)). Plaintiffs further request that “[t]o the extent that the MGC Order may be 11 noticeable only for the fact of its publication and not for its contents, Plaintiffs respectfully 12 request leave to amend the complaint to address this newly issued decision.” (Id.). 13 Wynn Resorts Defendants do not dispute the authenticity of the MGC Order. Thus, the 14 Court will take judicial notice of its existence and publication. Indeed, judicial notice is limited 15 to the existence and terms of the record; it does not extend to the truth of statements quoted in 16 the record or to factual findings. Wyatt v. Terhune, 315 F.3d 1108, 1114 n.5 (9th Cir. 2003), 17 overruled on other grounds by Albino v. Baca, 747 F.3d 1162 (9th Cir. 2014). “[T]aking 18 judicial notice of findings of fact from another case exceeds the limits of Rule 201.” Id. 19 at 1114. As such, the Court’s judicial notice does not extend to the MGC Order’s findings of 20 fact for their truth. Nevertheless, as stated in Part IV.C infra, Plaintiffs will have leave to 21 amend their complaint. Thus, Plaintiffs’ request for “leave to amend the complaint to address 22 this newly issued decision” is granted. Further, Plaintiffs’ Request for Judicial Notice, (ECF 23 No. 97), is granted consistent with the foregoing. 24 /// 25 Page 18 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 19 of 37 1 III. LEGAL STANDARD 2 A. 3 Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action Rule 12(b)(6) Motion to Dismiss 4 that fails to state a claim upon which relief can be granted. See N. Star Int’l v. Ariz. Corp. 5 Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 6 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not 7 give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. 8 See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the 9 complaint is sufficient to state a claim, the Court will take all material allegations as true and 10 construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 11 F.2d 896, 898 (9th Cir. 1986). 12 The Court, however, is not required to accept as true allegations that are merely 13 conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden 14 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action 15 with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a 16 violation is plausible, not just possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing 17 Twombly, 550 U.S. at 555). 18 If the court grants a motion to dismiss, it must then decide whether to grant leave to 19 amend. The court should “freely give” leave to amend when there is no “undue delay, bad 20 faith[,] dilatory motive on the part of the movant . . . undue prejudice to the opposing party by 21 virtue of . . . the amendment, [or] futility of the amendment . . . .” Fed. R. Civ. P. 15(a); Foman 22 v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear 23 that the deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow 24 Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). 25 /// Page 19 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 20 of 37 1 B. 2 Beyond meeting the demands of Rule 12(b)(6), a plaintiff asserting securities fraud Rule 9(b) and the PSLRA Pleading Standard 3 claims must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 4 9(b) and the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4(b), in 5 order to survive a motion to dismiss. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 6 308, 321–24 (2007). 7 Under Rule 9(b), “a party must state with particularity the circumstances constituting 8 fraud . . . .” Fed. R. Civ. P. 9(b). To comply with the rule, the complaint must state with 9 particularity the circumstances constituting the fraud, including an account of the “time, place, 10 and specific content of the false representations as well as the identities of the parties to the 11 misrepresentation.” Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004). 12 “[A]llegations of fraud must be ‘specific enough to give defendants notice of the particular 13 misconduct which is alleged to constitute the fraud charged so that they can defend against the 14 charge and not just deny that they have done anything wrong.’” Bly–Magee v. California, 236 15 F.3d 1014, 1019 (9th Cir. 2001) (internal punctuation omitted). Where several defendants are 16 alleged to be part of the fraud, “Rule 9(b) ‘does not allow a complaint to . . . lump multiple 17 defendants together but require[s] plaintiffs to differentiate their allegations when suing more 18 than one defendant.’” Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011). 19 The PSLRA requires that a complaint must “specify each statement alleged to have been 20 false or misleading, the reason or reasons why the statement is misleading, and, if an allegation 21 regarding the statement or omission is made on information and belief, the complaint shall state 22 with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u–4(b)(2). Further, 23 where recovery is dependent on a showing that defendant acted with a particular state of mind, 24 “the complaint shall, with respect to each act or omission alleged . . . state with particularity 25 Page 20 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 21 of 37 1 facts giving rise to a strong inference that the defendant acted with the required state of mind.” 2 Id. 3 IV. DISCUSSION 4 Defendants argue that Plaintiffs’ Section 10(b) and Rule 10b-5 claim should be 5 dismissed because Plaintiffs fail to adequately plead actionable false statements, scienter, and 6 loss causation. (See Def. Sinatra’s Mot. Dismiss (“Sinatra MTD”) at 11–16, ECF No. 67); 7 (Wynn Resorts Defs.’ Mot. Dismiss (“Wynn Resorts MTD”) at 2, ECF No. 71). Defendants 8 further argue that because Plaintiffs fail to state a claim for a predicate primary violation of 9 Section 10(b) against any Defendant, the Section 20(a) claim necessarily fails. (Sinatra MTD at 10 17–19); (Wynn Resorts MTD at 24). The Court addresses each of Plaintiffs’ claims in turn. 11 A. 12 Section 10(b) makes it unlawful “for any person . . . [t]o use or employ, in connection Claim 1 - Section 10(b) and Rule 10b-5 13 with the purchase or sale of any security . . . any manipulative or deceptive device or 14 contrivance in contravention of such rules and regulations as the Commission may prescribe as 15 necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. 16 § 78j. Rule 10b–5 promulgated by the Securities and Exchange Commission (SEC) under the 17 authority of Section 10(b), in turn makes it unlawful for any person, 18 19 20 21 22 (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 23 17 C.F.R. § 240.10b–5. To avoid dismissal of a claim for relief under § 10(b), a plaintiff must 24 allege: (1) defendant made a material misrepresentation or omission, (2) with scienter or intent 25 to defraud, (3) in connection with the purchase or sale of a security, (4) plaintiff relied on that Page 21 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 22 of 37 1 misrepresentation, (5) plaintiff suffered economic loss, and (6) that loss was caused by the 2 misrepresentation or omission. See Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341 (2005). 3 1. 4 false statements and omissions To adequately plead a material misrepresentation or omission under § 10(b), the PSLRA 5 requires plaintiffs to “specify each statement alleged to have been misleading, the reason or 6 reasons why the statement is misleading, and, if an allegation regarding the statement or 7 omission is made on information and belief, the complaint shall state with particularity all facts 8 on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1)(B); see In re Tesla Motors, Inc. Sec. 9 Litig., 75 F. Supp. 3d 1034, 1041–42 (N.D. Cal. 2014). “[A] statement is misleading if it would 10 give a reasonable investor the ‘impression of a state of affairs that differs in a material way 11 from the one that actually exists.’” Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985 (9th 12 Cir. 2008) (quoting Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002)). 13 To be misleading, a statement must be “capable of objective verification.” Or. Pub. Emps. Ret. 14 Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 2014). 15 A material misrepresentation differs from corporate puffery. Puffery is an expression of 16 opinion, while a misrepresentation is a knowingly false statement of fact. Id.; Grossman v. 17 Novell, Inc., 120 F.3d 1112, 1119 (10th Cir. 1997) (finding that puffery includes statements 18 “not capable of objective verification”). “[V]ague, generalized, and unspecific assertions” of 19 corporate optimism or statements of “mere puffing” cannot state actionable material 20 misstatements of fact under federal securities laws. See Glen Holly Entertainment, Inc. v. 21 Tektronix. Inc., 352 F.3d 367, 379 (9th Cir. 2003). Moreover, the Ninth Circuit has noted that 22 investors do not rely on puffery when making investment decisions. In re Cutera Sec. Litig., 23 610 F.3d 1103, 1111 (9th Cir. 2010). Finally, “mildly optimistic, subjective 24 assessment[s] . . . [do not] amount[ ] to a securities violation.” Id. 25 /// Page 22 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 23 of 37 1 2 (a) statements regarding corporate culture and other statements Here, Defendants argue that many of the allegedly false statements are inactionable 3 puffery. (Wynn Resorts MTD at 14 n.10). The Court agrees with Defendants that the 4 statements Defendant Wynn made during earnings calls expressing that he “like[d] the 5 direction we’re in,” was “feeling comfortable about the pace of our growth,” and touting the 6 Company’s newly earned right to operate in Massachusetts are examples of puffery and 7 corporate optimism. (FAC ¶¶ 119, 183). These statements are not definitive positive 8 projections. Indeed, courts have previously rejected similar statements projecting “excellent 9 results,” a “blowout winner” product, “significant sales gains,” and “10% to 30% growth rate 10 over the next several years.” In re Cornerstone Propane Partners, L.P., 355 F. Supp. 2d 1069, 11 1087 (N.D. Cal. 2005) (citing Grossman, 120 F.3d at 1119). 12 Defendants further argue that culture statements regarding the Company’s commitment 13 to diversity, (FAC ¶ 132), and employee job security, (id. ¶ 140), are similarly inactionable as 14 they constitute puffery. (Wynn Resorts MTD at 15). Defendants rely on Footbridge Ltd. v. 15 Countrywide Home Loans, Inc., No. 09-CIV-4050 (PKC), 2010 WL 3790810, at *24 (S.D.N.Y. 16 Sept. 28, 2010), for the proposition that “[s]tatements about corporate culture and integrity are 17 typically considered to be inactionable puffery.” (Id.). Plaintiffs did not respond to this 18 argument and thus have consented to granting that portion of the Motion. See D. Nev. Local 19 Rule 7-2(d); Gayle v. Bank of Am., N.A., No. 2:18-cv-913-APG-NJK, 2019 WL 1410889, at *2 20 (D. Nev. Mar. 27, 2019). 21 22 (b) Code of Conduct statements Here, Defendants maintain that the Code of Conduct and references to the Code of 23 Conduct contained in the Company’s annual reports are “inherently aspirational,” and 24 therefore, cannot support a claim for securities fraud. (Wynn Resorts MTD at 9–10). In making 25 this argument, Defendants primarily rely on Retail Wholesale & Department Store Union Local Page 23 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 24 of 37 1 338 Retirement Fund v. Hewlett-Packard Co., 845 F.3d 1268 (9th Cir. 2017). There, the 2 defendant-organization’s code of conduct contained statements regarding honesty, using good 3 judgment, reporting misconduct, treating others with respect, avoiding unlawful discrimination, 4 and refusing to tolerate harassment. Id. at 1273. The Ninth Circuit found that the code of 5 conduct statements were not objectively verifiable and were inherently inspirational. Id. at 6 1276. “Such a code expresses opinions as to what actions are preferable, as opposed to 7 implying that all staff, directors, and officers always adhere to its aspirations.” Id. (citing 8 Andropolis v. Red Robin Gourmet Burgers, Inc., 505 F. Supp. 2d 662, 685–86 (D. Colo. 2007)). 9 In response to Defendants’ argument, Plaintiffs contend that statements that the Code of 10 Conduct applied to “all” employees; that “[a]ll reported violations of the Code will be taken 11 seriously and promptly investigated”; and that “[h]arassment . . . of any sort will not be 12 tolerated” are nevertheless actionable under Hewlett-Packard Co. because they are specific 13 factual assertions which could be established or disproved through discovery and capable of 14 objective verification. (Resp. at 31) (citing Salazar v. Honest Tea, Inc., 74 F. Supp. 3d 1304 15 (E.D. Cal. 2014)). However, as noted above, these are precisely the type of statements which 16 the Hewlett-Packard court deemed aspirational. 17 Moreover, as Defendants point out, “[l]ike every publicly traded company, Wynn 18 Resorts is required to ‘[d]isclose whether [it] has adopted a code of ethics’ and, if so, publish 19 it.” (Wynn Resorts MTD at 10) (citing 17 C.F.R. § 229.406(a), (c)); (see Wynn Resorts Reply 20 at 7, ECF No. 99). And pursuant to NASDAQ Rule 5610, “[e]ach Company shall adopt a code 21 of conduct applicable to all directors, officers and employees, which shall be publicly 22 available.” (Id. at 7 n.16) (emphasis added). Thus, “it simply cannot be that every time a 23 violation of that code [of conduct] occurs, a company is liable under federal law for having 24 chosen to adopt the code at all, particularly when the adoption of such a code is effectively 25 Page 24 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 25 of 37 1 mandatory.” Andropolis, 505 F. Supp. 2d at 686. Plaintiffs’ arguments are unavailing. 2 Accordingly, the Code of Conduct statements are inactionable. 3 (c) statements regarding compliance with all applicable laws 4 Defendants argue that statements indicating “the Company believes that it is in full 5 compliance with all applicable laws,” when read in context, are not false or misleading as 6 Plaintiffs claim. (Wynn Resorts MTD at 10–11). Relying on the Company’s 2013 10-K annual 7 report, Defendants explain as follows: 8 9 10 11 12 13 14 15 16 17 18 19 Plaintiffs excerpt the italicized language in the Amended Complaint, but omit the language directly above, stripping the statement of crucial context: In the U.S. Department of Justice’s Motion to Intervene and for Temporary and Partial Stay of Discovery in the Redemption Action, the Department of Justice states in a footnote that the government also has been conducting a criminal investigation into the Company’s donation to the University of Macau discussed above. The Company has not received any target letter or subpoena in connection with such an investigation. The Company intends to cooperate fully with the government in response to any inquiry related to the donation to the University of Macau. Other regulators may pursue separate investigations into the Company’s compliance with applicable laws arising from the allegations in the matters described above and in response to the Counterclaim and other litigation filed by Mr. Okada suggesting improprieties in connection with the Company’s donation to the University of Macau. While the Company believes that it is in full compliance with all applicable laws, any such investigations could result in actions by regulators against the Company. 20 (Id. at 11) (citing 2013 10-K, Ex. 10 to Bohman Decl., ECF No. 76-10); (FAC ¶ 101). Thus, 21 Defendants submit that the reference to “all applicable laws” refers to laws implicated in the 22 Okada Litigation; more specifically, “Mr. Okada’s alleged violations of the Foreign Corrupt 23 Practices Act and the Department of Justice’s investigation into the Macau donation.” (Id.). 24 Defendants also point to similar language preceding compliance statements in the Company’s 25 10-K annual reports for 2014, 2015, and 2016. (Id.); (see also FAC ¶¶ 122, 148, 175). Page 25 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 26 of 37 1 Plaintiffs counter that “nothing in the wording [of the compliance statements] suggests 2 such a limitation.” (Resp. at 34). But Plaintiffs offer no facts or analysis to back their 3 contention. While Plaintiffs argue that the MGC Order rejected Defendants’ exact argument by 4 dismissing it is as an “overly narrow interpretation,” said order reveals no such thing. (Id. at 34) 5 (citing “supra at 15” without any additional information); (see generally MGC Order, Ex. 7 to 6 Pls.’ RJN, ECF No. 97-7). 10 7 The Court agrees with Defendants that the compliance statements, when viewed in 8 context, are not misleading. A court evaluates alleged false statements in the context in which 9 they were made, especially with respect to contemporaneous qualifying or clarifying language. 10 Xu v. Chinacache Int’l Holdings Ltd., No. 2:15-CV-7952-CAS-RAOX, 2016 WL 4370030, at 11 *5 (C.D. Cal. Aug. 15, 2016) (citing In re Syntex Corp. Sec. Litig., 95 F.3d 922, 929 (9th Cir. 12 1996) (finding statements non-actionable where the “statement in full and in context at the 13 time” acknowledged uncertainty)). Here, the statements contained in numerous SEC filings 14 which provide that “the Company believes that it is in full compliance with all applicable 15 laws,” immediately follow language discussing the Okada Litigation. Noticeably absent is any 16 reference to Defendant Wynn or his alleged sexual misconduct. Indeed, “a statement is 17 misleading if it would give a reasonable investor the ‘impression of a state of affairs that differs 18 in a material way from one that actually exists.’” Hewlett-Packard, 845 F.3d at 1275. When 19 read in context, no reasonable investor would infer from the challenged compliance statements 20 that Defendant Wynn had not engaged in sexual misconduct. Nor can the statement be 21 reasonably construed as an assurance regarding Defendant Wynn’s suitability under gaming 22 regulations. 23 24 25 10 To be sure, page 19 of the Massachusetts Gaming Commission’s order states that Defendant Sinatra’s interpretation of a document request from the Massachusetts Gaming Commission’s counsel was “an overly narrow interpretation.” (MGC Order at 19). However, the Court cannot discern how this would be related to the compliance statements at issue and Plaintiffs make no attempt to establish such a connection. (See also Part II supra) (addressing judicial notice of MGC Order). Page 26 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 27 of 37 1 Defendants and Plaintiffs also disagree as to which pleading standard should be applied 2 when addressing falsity and the compliance statement allegations. In Omnicare, Inc. v. 3 Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175 (2015), the U.S. Supreme 4 Court established three standards for pleading falsity of opinion statements: 5 First, when a plaintiff relies on a theory of material misrepresentation, the plaintiff must allege both that “the speaker did not hold the belief she professed” and that the belief is objectively untrue. Second, when a plaintiff relies on a theory that a statement of fact contained within an opinion statement is materially misleading, the plaintiff must allege that “the supporting fact [the speaker] supplied [is] untrue.” Third, when a plaintiff relies on a theory of omission, the plaintiff must allege “facts going to the basis for the issuer’s opinion . . . whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context.” 6 7 8 9 10 11 City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605, 12 615–16 (9th Cir. 2017) (citing Omnicare, 575 U.S. at 1327, 1332). 11 Defendants argue that the 13 first standard applies, while Plaintiffs contend the third applies. Looking at the Amended 14 Complaint, Plaintiffs maintain these statements were “false and/or misleading” because 15 Defendants knew that the Company was not “in full compliance with all applicable laws[.]” 16 (See FAC ¶¶ 118, 123). Thus, Plaintiffs’ allegations fall under a theory of material 17 misrepresentation, and the applicable standard is the first standard—Plaintiffs must allege both 18 that the speaker did not hold the belief the speaker professed, and that the belief is objectively 19 untrue. However, Plaintiffs only offer conclusory allegations and fail to provide any particular 20 facts showing that Defendants did not hold the belief that the Company was in compliance with 21 all applicable laws or facts showing that said belief was objectively untrue (i.e., that the 22 Company was in fact not in compliance with all applicable laws). As such, the Court grants the 23 Motions to Dismiss as to the compliance statements. 24 25 11 In City of Dearborn Heights, the Ninth Circuit explained that even though “Omnicare concerned Section 11 claims, . . . the Supreme Court’s reasoning is equally applicable to Section 10(b) and Rule 10b-5 claims.” 856 F.3d at 616. Page 27 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 28 of 37 1 2 (d) statements disclosing regulatory risks Plaintiffs’ Amended Complaint alleges that Defendants’ statements regarding gaming 3 regulations, the consequences of violating gaming regulations, suitability requirements, 4 qualifiers, and other regulatory risk statements were “false and/or misleading” because while 5 informing and warning investors, Defendants “failed to disclose” Defendant Wynn’s alleged 6 sexual misconduct, which rendered him unsuitable under gaming regulations. (See, e.g., id. 7 ¶¶ 106, 129, 153, 189). Plaintiffs also allege that Defendants failed to disclose that senior 8 Wynn Resorts management was aware of this conduct yet failed to report it to regulators. (Id.). 9 Defendants, however, argue that these statements do not give rise to a securities fraud 10 claim because Defendants had no duty to disclose Defendant Wynn’s alleged conduct. (Wynn 11 Resorts MTD at 7). It is well-settled that Section 10(b) and Rule 10b–5 “do not create an 12 affirmative duty to disclose any and all material information.” Matrixx Initiatives, Inc. v. 13 Siracusano, 563 U.S. 27, 44 (2011). Disclosure is required only when “necessary . . . to make 14 statements made, in light of the circumstances under which they were made, not misleading.” 15 17 C.F.R. § 240.10b–5(b). “In other words, a duty to provide information exists only where 16 statements were made which were misleading in light of the context surrounding the 17 statements.” Hewlett-Packard Co., 845 F.3d at 1278. 18 On this basis, Defendants argue that “[e]ven assuming the Directors and Officers were 19 aware of these [sexual misconduct] accusations before the market,” Defendants did not have a 20 duty to disclose them because none of the challenged statements suggested there would be no 21 misconduct by Defendant Wynn or anyone else. (Wynn Resorts MTD at 7–8). Indeed, none of 22 the statements addressed Defendant Wynn’s behavior, and instead provided a general 23 discussion of applicable gaming regulations, suitability, etc. Azar v. Yelp, Inc., No. 18-CV- 24 00400-EMC, 2018 WL 6182756, at *10 (N.D. Cal. Nov. 27, 2018) (“Where a defendant ‘said 25 nothing about’ the subject of the alleged omission, ‘there is no duty to disclose, as [§ 10(b)] Page 28 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 29 of 37 1 does not contain a freestanding completeness requirement.’”) (quoting In re Yahoo! Inc. Sec. 2 Litig., No. C 11-02732 CRB, 2012 WL 3282819, at *9 (N.D. Cal. Aug. 10, 2012), aff’d, 611 F. 3 App’x 387 (9th Cir. 2015)); see also Matrixx, 563 U.S. at 45 (noting that information that a 4 reasonable investor might consider material need not always be disclosed; companies can 5 control “what they have to disclose under [§ 10(b)] by controlling what they say to the 6 market.”). 7 Defendants further contend that they did not have a duty to disclose the alleged 8 misconduct because the allegations were “uncharged, unadjudicated wrongdoing.” (Wynn 9 Resorts MTD at 9) (citing In re Paypal Holdings, Inc. S’holder Derivative Litig., No. 17-CV- 10 00162-RS, 2018 WL 466527, at *3 (N.D. Cal. Jan. 18, 2018)); see also Veal v. LendingClub 11 Corp., 423 F. Supp. 3d 785, 806 (N.D. Cal. 2019) (“Defendants were not required to ‘confess’ 12 to the uncharged allegation.”); In re Facebook, Inc. Sec. Litig., 405 F. Supp. 3d 809, 836 (N.D. 13 Cal. 2019) (“[C]ompanies are not required to engage in ‘self-flagellation’ by disclosing 14 unproven allegations.”). Plaintiffs disagree and provide caselaw supporting the proposition that 15 a company “may be compelled to disclose uncharged wrongdoing if its statements are or 16 become materially misleading in the absence of disclosure.” (Resp. at 9–10) (citing Menaldi v. 17 Och-Ziff Capital Mgmt. Grp. LLC, 164 F. Supp. 3d 568, 581 (S.D.N.Y. 2016)); (Singer v. 18 Reali, 883 F.3d 425, 441 (4th Cir. 2018)). Plaintiffs nevertheless fail to allege sufficient facts 19 showing that the regulatory risk disclosure statements became materially misleading due to the 20 non-disclosure of the alleged sexual misconduct. 21 To be actionable, “an omission must be misleading; in other words it must affirmatively 22 create an impression of a state of affairs that differs in a material way from the one that actually 23 exists.” Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002) (citing 24 McCormick v. The Fund American Cos., 26 F.3d 869, 880 (9th Cir. 1994)). If an omission does 25 not make the statement misleading, “a company need not supplement the statement ‘even if Page 29 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 30 of 37 1 investors would consider the omitted information significant.’” In re Facebook, 405 F. Supp. 2 3d at 833 (quoting In re Rigel Pharm., Inc. Sec. Litig., 697 F.3d 869, 880 n.8 (9th Cir. 2012)). 3 Thus, for example, the statement indicating “[a]ny person found unsuitable and who holds, 4 directly or indirectly, any beneficial ownership of any voting security or debt security of a 5 registered company beyond the period of time as may be prescribed by the Nevada Gaming 6 Commission may be guilty of a criminal offense,” (FAC ¶ 128), is not misleading because it 7 does not affirmatively intimate that Defendant Wynn had never been accused of sexual 8 misconduct by a Wynn Resorts employee. See Brody, 280 F.3d at 1006 (“Often a statement will 9 not mislead even if it is incomplete or does not include all relevant facts.”). For these reasons, 10 the statements regarding regulatory risk did not create a duty to disclose Defendant Wynn’s 11 alleged misconduct. As such, the statements are inactionable. 12 13 14 (e) statements regarding Defendant Wynn’s skills and his possible departure The Amended Complaint alleges that statements emphasizing Defendant Wynn’s skills 15 and warning of his possible departure from the Company are “false and/or misleading” because 16 in making these statements, Defendants failed to disclose that “Defendant Wynn had engaged 17 in a pattern of sexual misconduct[.]” (See, e.g., FAC ¶¶ 104, 110, 131). As discussed in 18 Part IV.A.1.d supra, Section 10(b) and Rule 10b–5 “do not create an affirmative duty to 19 disclose any and all material information.” Matrixx Initiatives, Inc., 563 U.S. at 44. Disclosure 20 is required only when “necessary . . . to make statements made, in light of the circumstances 21 under which they were made, not misleading.” 17 C.F.R. § 240.10b–5(b). 22 Defendants argue that statements regarding Defendant Wynn’s skills and qualifications 23 are not actionable or misleading because nothing about Defendant Wynn’s alleged misconduct 24 suggests that he lacked “entrepreneurial and managerial skills” or was not a “unique and 25 integral component[]” of the Company’s success. (Wynn Resorts Reply at 1–2); (Wynn Resorts MTD at 7–9, 12–13). To support this argument, Defendants rely on Fries v. N. Oil & Gas, Inc., Page 30 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 31 of 37 1 285 F. Supp. 3d 706 (S.D.N.Y. 2018). There, a company’s CEO was investigated by the SEC 2 for securities laws violations and was subsequently ordered to make disgorgement and penalty 3 payments. Id. at 712. The plaintiff challenged prior statements concerning the CEO’s 4 qualifications and expertise, including a statement that the CEO gave the company 5 “advantages.” Id. at 719. The plaintiff argued that investors had been misled by emphasizing 6 the CEO’s importance to the company while failing to disclose the CEO’s misconduct. Id. at 7 718. However, the court disagreed, explaining that “the omitted facts do not show that [the 8 company] did not rely on [the CEO’s] knowledge and expertise in the industry, that [he] did not 9 have the pedigree [the company] represented, or that [his] experience and expertise did not give 10 [the company] certain early advantages.” Id. at 719. Moreover, the statements did not suggest 11 that the CEO was not engaged in the undisclosed improper activities. Id. (citing In re ITT Educ. 12 Servs., Inc. Sec. & S’holder Derivatives Litig., 859 F. Supp. 2d 572, 579 (S.D.N.Y. 2012) 13 (finding that defendants’ “statements are not misleading because they do not suggest that the 14 undisclosed improper activity alleged by [p]laintiff was not occurring.”)). Thus, the court 15 found that the statements were inactionable. Id. 16 The rationale in Fries is instructive regarding the present case. Like in Fries, Plaintiffs 17 challenge statements concerning the skills and qualifications of the Company’s CEO (i.e., 18 Defendant Wynn), arguing that the statements were misleading because they emphasized 19 Defendant Wynn’s importance to the Company without disclosing his alleged misconduct. 20 However, the omitted fact of Defendant Wynn’s alleged sexual misconduct does not show that 21 Wynn Resorts did not rely on Defendant Wynn’s skills and expertise or that Defendant Wynn 22 did not provide a “distinct advantage over other gaming enterprises.” (FAC ¶ 130). What is 23 more, the statements did not suggest that Defendant Wynn had not engaged in the undisclosed 24 misconduct. Because the alleged omissions did not make the statements regarding Defendant 25 Wynn’s skills, talent, and experience misleading, the statements are inactionable. Page 31 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 32 of 37 1 As to the statements contained in the Company’s 10-K annual reports, which warned of 2 the consequences of Defendant Wynn’s possible departure, Defendants contend that they are 3 “forward-looking” statements protected by the PSLRA’s safe harbor provision and are 4 therefore inactionable. (Wynn Resorts MTD at 13 n.8). The Court agrees. 5 The safe harbor provision exempts, under certain circumstances, a forward-looking 6 statement, which is “any statement regarding (1) financial projections, (2) plans and objectives 7 of management for future operations, (3) future economic performance, or (4) the assumptions 8 underlying or related to any of these issues.” No. 84 Emp’r–Teamster Joint Council Pension 9 Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 936 (9th Cir. 2003) (internal quotation 10 marks omitted). Fraud liability for making a forward-looking statement cannot arise if the 11 statement is (1) “identified as a forward-looking statement, and is accompanied by meaningful 12 cautionary statements identifying important factors that could cause actual results to differ 13 materially from those in the forward-looking statement”; (2) “immaterial”; or (3) not made 14 “with actual knowledge . . . that the statement was false or misleading.” 15 U.S.C. § 78u- 15 5(c)(1)–(2); In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1141 (9th Cir. 2017). 16 Here, Plaintiffs submit that safe harbor is inapplicable because Defendants “fail to 17 identify any ‘meaningful cautionary statements identifying important factors that could cause 18 actual results to differ materially from those in the forward-looking statement.’” (Resp. at 24, 19 n.5) (quoting 15 U.S.C. § 78u–5(c)(1)(A)(i)). However, as Defendants explain, the Company’s 20 10-K annual reports listed dozens of risk factors “that could cause actual results to differ 21 materially from those we express in these forward-looking statements . . . .” (Wynn Resorts 22 Reply at 3 n.7). The first of many factors listed is “our dependence on Stephen A. Wynn.” 23 (2013 10-K at 16–17, Ex. 10 to Bohman Decl., ECF No. 76-10); (2014 10-K at 16, Ex. 20 to 24 Bohman Decl., ECF No. 78-1); (2015 10-K at 15, Ex. 22 to Bohman Decl., ECF No. 80-1); 25 (2016 10-K at 15, Ex. 23 to Bohman Decl., ECF No. 81-1). “The loss of Stephen A. Wynn Page 32 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 33 of 37 1 could significantly harm our business,” is further identified as a risk factor. (2013 10-K at 18); 2 (2014 10-K at 17); (2015 10-K at 16); (2016 10-K at 16). And as alleged in the Amended 3 Complaint, the 10-K annual reports went on to warn that: “Our ability to maintain our 4 competitive position is dependent to a large degree on the efforts, skills and reputation of 5 Stephen A. Wynn, the Chairman of the Board, Chief Executive Officer and one of the principal 6 stockholders of Wynn Resorts.” (Id.); (FAC ¶¶ 103, 126, 150, 177). Thus, as Defendants 7 correctly point out, the challenged statements regarding the consequences of Defendant Wynn’s 8 possible departure are precisely the “meaningful cautionary statements” required under 15 9 U.S.C. § 78u–5(c)(1). As such, these statements are protected by the safe harbor provision and 10 are therefore inactionable. 12 11 (f) press release statements concerning allegations by Elaine Wynn 12 Defendants argue that some of the challenged statements contained in the Company’s 13 press releases are inherently aspirational, and therefore inactionable. “[V]ague, generalized, 14 and unspecific assertions” of corporate optimism or statements of “mere puffing” cannot state 15 actionable material misstatements of fact under federal securities laws. See Glen Holly 16 Entertainment, Inc., 352 F.3d at 379. “It is well-established that general statements about 17 reputation, integrity, and compliance with ethical norms are inactionable ‘puffery,’ meaning 18 that they are ‘too general to cause a reasonable investor to rely upon them.’” City of Pontiac 19 Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 183 (2d Cir. 2014). An 20 actionable statement must be capable of objective verification. In re Facebook, Inc. Sec. Litig., 21 22 23 24 25 12 Defendants also argue that statements regarding Defendant Wynn’s skills and possible departure are risk disclosures, which are not verifiable statements of fact, and are therefore per se inactionable. (Wynn Resorts MTD at 12) (citing In re LeapFrog Enterprises, Inc. Sec. Litig., 527 F. Supp. 2d 1033, 1048 (N.D. Cal. 2007)); (see also Wynn Resorts Reply at 2). Plaintiffs counter that “this is not the law.” (Resp. at 24) (citing Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167, 1181 (9th Cir. 2009), aff’d, 563 U.S. 27 (2011)). This issue need not be resolved in order to determine whether these statements are actionable. Therefore, the Court will not address this argument. Page 33 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 34 of 37 1 405 F. Supp. 3d at 833 (citing Hewlett-Packard Co., 845 F.3d at 1275 (“To be misleading, a 2 statement must be ‘capable of objective verification.’”)). 3 That “Wynn Resorts prides itself on its transparency and full disclosure to regulators and 4 shareholders” is not a statement capable of objective verification. Moreover, the assertion that 5 none of what the Company has accomplished would be possible without “the sense of family 6 and community that Mr. Wynn has created,” is a statement too general to cause reliance by a 7 reasonable investor and is also incapable of objective verification. Thus, the Court agrees with 8 Defendants that these statements are inactionable. 9 Regarding the remainder of the challenged statements denying Elaine Wynn’s 10 allegations, the Court finds that Plaintiffs fail to plead falsity with particularity. 13 To illustrate, 11 Plaintiffs assert that “[a]llegations made by Ms. Wynn that the company would hide any 12 relevant activities from our regulators are patently false” was a misleading and false statement 13 because the Company “had unlawfully withheld from [regulators] material information 14 regarding serious allegations of sexual misconduct by Defendant Wynn.” Plaintiffs, however, 15 fail to identify what each Defendant knew at the time this statement was made. Plaintiffs are 16 reminded that where several defendants are alleged to be part of the fraud, “Rule 9(b) ‘does not 17 allow a complaint to . . . lump multiple defendants together but require[s] plaintiffs to 18 differentiate their allegations when suing more than one defendant.’” Destfino v. Reiswig, 630 19 F.3d 952, 958 (9th Cir. 2011). Accepting the allegations as true at the pleading stage, all they 20 tend to establish is that at the time the statement was made, Defendants Sinatra and Wynn were 21 aware of the alleged misconduct and the accompanying settlement. 14 Furthermore, Plaintiffs 22 23 13 24 25 Defendants assert this statement referred to Elaine Wynn’s allegations about the circumstances of a former director’s departure from the Company, and had nothing to do with Defendant Wynn. While it is plausible that the statement concerned a former director’s departure, the statement could also be interpreted as a response to the allegations against Defendant Wynn. Therefore, this argument fails under Rule 12(b)(6). 14 In Plaintiffs’ Response, Plaintiffs assert that “Defendant Maddox learned about the 2005 Settlement in ‘2016 after Ms. Wynn filed her amended cross-claim in the Okada litigation.’” (Resp. at 26). However, this is not Page 34 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 35 of 37 1 fail to plead “specific facts indicating why” the statement at issue was false. Metzler Inv. 2 GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1070 (9th Cir. 2008); Ronconi v. Larkin, 253 3 F.3d 423, 434 (9th Cir. 2001). The Amended Complaint only indicates that the statement was 4 false because the Company had “unlawfully withheld from [regulators] material information 5 regarding serious allegations of sexual misconduct,” but it does not specify what was allegedly 6 withheld, why it was “unlawful,” why it was “material,” or who withheld it. “The PSLRA has 7 exacting requirements for pleading ‘falsity,’” and here, Plaintiffs have failed to meet those 8 requirements. Metzler, 540 F.3d at 1070. Plaintiffs have not adequately pled any actionable 9 false or misleading statement and therefore, Plaintiffs’ claim for violations of Section 10(b) 10 Rule 10b-5 is dismissed. 15 11 2. scienter and loss causation 12 Because the Court holds that Plaintiffs have not adequately pled any actionable false or 13 misleading statement under Section 10(b) or Rule 10b-5, the Court has no occasion to address 14 Defendants’ alternative grounds for dismissal based on alleged deficiencies in Plaintiffs’ 15 pleadings as to scienter and loss causation. 16 B. 17 To adequately state a claim under § 20(a) of the Exchange Act, a plaintiff must plead Claim 2 - Section 20(a) of the Exchange Act 18 facts that show (1) a primary violation of the federal securities laws and (2) that the defendant 19 was a control person. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 20 2009). A control person is a person or entity that has actual power or influence over the 21 22 23 24 25 alleged in the Amended Complaint. As such, the Court does not accept this statement as true. (See also Part II supra) (addressing judicial notice of MGC Order). 15 Defendant Sinatra also argues that the Section 10(b) claim against her fails as a matter of law because Plaintiffs fail to allege that Sinatra made any alleged misstatement, or that any of the alleged misstatements were otherwise attributed to her. (Sinatra MTD at 7–16); see Janus Capital Grp., Inc. v. First Derivative Traders, 564 U.S. 135, (2011) (“Under Rule 10b–5, it is unlawful for any person, directly or indirectly, . . . [t]o make any untrue statement of a material fact’ in connection with the purchase or sale of securities.” (internal quotations omitted)). Having found that Plaintiffs fail to allege any actionable false or misleading statements, the Court need not reach this issue. Page 35 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 36 of 37 1 primary violator. See id. “Section 20(a) claims may be dismissed summarily . . . if a plaintiff 2 fails to adequately plead a primary violation of [S]ection 10(b).” Id. 3 Because Plaintiffs have not stated a claim for a primary violation of the Exchange Act 4 by any control person, Plaintiffs’ claims against Defendants Wynn, Maddox, Sinatra, Cootey, 5 and Billings based on control person liability under § 20(a) are also incapable of surviving 6 Defendants’ Motions to Dismiss. 7 C. 8 Rule 15(a)(2) of the Federal Rules of Civil Procedure permits courts to “freely give Leave to Amend 9 leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Ninth Circuit “ha[s] 10 held that in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should 11 grant leave to amend even if no request to amend the pleading was made, unless it determines 12 that the pleading could not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 13 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 14 1995)). 15 The Court finds that Plaintiffs may be able to plead additional facts to support their first 16 and second causes of action. Accordingly, the Court will grant Plaintiff leave to file an 17 amended complaint. The Court, however, cautions that an amended complaint must plead 18 facts, with particularity, as to why statements were false or misleading at the time they were 19 made. Additionally, any allegations of scienter must be specific to a Defendant’s state of mind 20 at the time he or she made the statements. Moreover, Plaintiffs must differentiate their 21 allegations as to each Defendant and refrain from lumping multiple Defendants together. 22 Destfino v. Reiswig, 630 F.3d at 958. 23 Plaintiffs shall file their amended complaint within twenty-one (21) days of the date of 24 this Order if they can allege sufficient facts that plausibly establish Plaintiffs’ first and second 25 Page 36 of 37 Case 2:18-cv-00479-GMN-DJA Document 119 Filed 05/27/20 Page 37 of 37 1 causes of action. Failure to file an amended complaint by this date shall result in the Court 2 dismissing these claims with prejudice. 3 V. 4 5 6 7 CONCLUSION IT IS HEREBY ORDERED that Wynn Resorts Defendants’ Motions for Leave to Submit Supplemental Authority, (ECF Nos. 105, 107, 111, 116), are GRANTED. IT IS FURTHER ORDERED that Defendants’ Motions to Dismiss, (ECF Nos. 67, 71), are GRANTED. 8 IT IS FURTHER ORDERED that Plaintiffs are GRANTED leave to amend consistent 9 with the foregoing. Plaintiffs shall have twenty-one (21) days from the date of this Order to file 10 an amended complaint. Failure to file an amended complaint by this date shall result in the 11 Court dismissing Plaintiffs’ claims with prejudice. 12 27 day of May, 2020. DATED this _____ 13 14 15 ___________________________________ Gloria M. Navarro, District Judge United States District Court 16 17 18 19 20 21 22 23 24 25 Page 37 of 37

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