## Facts

- A shareholder trustee sued officers and directors of a public company, alleging false or misleading statements and omissions in proxy solicitations and related public communications intended to influence shareholder voting.
- The complaint asserted violations of § 14(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9 based on alleged intentional proxy-statement misrepresentations and omissions.
- The action originally also included a § 10(b)/Rule 10b-5 claim; the district court dismissed that claim with prejudice, and it was not revived on appeal.
- After prior amendment, the plaintiff filed a second amended complaint focused on § 14(a)/Rule 14a-9.
- The district court dismissed the second amended complaint with prejudice under Rule 12(b)(6) for failure to satisfy Rule 9(b) and the PSLRA’s heightened pleading requirements, and denied further leave to amend.

## Issues

1. Whether a § 14(a)/Rule 14a-9 claim alleging intentional proxy fraud must satisfy Rule 9(b) and the PSLRA’s heightened pleading requirements, including particularized facts supporting a strong inference of the required state of mind.
2. Whether the second amended complaint adequately identified misleading statements or omissions, explained why they were misleading when made, and pleaded particularized facts supporting a strong inference of scienter.
3. Whether the district court properly dismissed with prejudice and denied further leave to amend after repeated pleading deficiencies.

## Decision

- The Ninth Circuit affirmed the dismissal with prejudice of the second amended complaint.
- The court held that the claims sounded in fraud and therefore were subject to Rule 9(b) and the PSLRA’s heightened pleading standards.
- The court concluded the complaint failed to plead, with sufficient specificity, the allegedly misleading statements, the reasons they were misleading, and particularized facts supporting a strong inference that defendants acted with the requisite state of mind.
- The court affirmed denial of further leave to amend based on repeated failure to cure deficiencies and the determination that further amendment would be futile.

## Legal Principles

- When a securities claim alleges intentional misrepresentations or omissions and sounds in fraud, Rule 9(b) requires pleading with particularity.
- Under the PSLRA, a complaint must specify each allegedly misleading statement, state why it is misleading, and plead with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.
- Heightened pleading standards may apply to § 14(a)/Rule 14a-9 proxy-fraud claims when the theory is intentional deception.
- Dismissal with prejudice and denial of further leave to amend are proper where a plaintiff has had multiple opportunities to amend and still fails to remedy identified pleading defects, indicating futility.

## Conclusion

The Ninth Circuit affirmed dismissal with prejudice of a shareholder’s § 14(a)/Rule 14a-9 proxy-fraud suit because the allegations, framed as intentional deception, did not meet Rule 9(b) and PSLRA requirements to plead specific misleading statements, reasons for falsity, and particularized facts supporting a strong inference of the required state of mind, and further amendment was properly denied as futile.


Desaigoudar v. Meyercord, 223 F.3d 1020 (9th Cir. 2000)