On October 25, 2022, Judge Maxine M. Chesney of the United States District Court for the Northern District of California granted a motion to dismiss a putative class action against an enterprise data cloud platform company (the “Company”).  In re Cloudera, Inc. Securities Litigation, No. 19-CV-03221-MMC, 2022 WL 14813896 (N.D. Cal. Oct. 25, 2022).  Plaintiffs alleged that the Company misled investors in its characterization of the Company’s platform in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5.  The Court, having dismissed an earlier complaint, dismissed the claims without further leave to amend, finding that the Company’s statements were not false or misleading.

In 2017, the Company announced an Initial Public Offering (“IPO”) and Secondary Public Offering (“SPO”).  Plaintiffs alleged that during and after this offering period, the Company misled investors with claims about its “original cloud native architecture” and “cloud-native platform” even though the Company lacked any of the key features of “effective cloud computing.”  The key point of contention was whether the terms “cloud native” and “cloud architecture,” which the Company used in its communications with investors, had meaning beyond non-actionable corporate puffery.  Plaintiffs alleged that the terms had a specific meaning, which they drew from an article published by the Company several months after the close of the Class Period and years after most of the challenged statements were made.  According to plaintiffs, investors would have understood “cloud-native” and “cloud architecture” to refer to specific attributes that the Company’s product actually lacked.  Additionally, plaintiffs alleged that statements made during an April 3, 2018, earnings call were misleading because they “suggested that the Company’s weak guidance and results” were attributable to mistakes in how the Company allocated sales resources rather than “the market’s shift to cloud offerings which the Company then lacked.”

The Court rejected plaintiffs’ arguments.  First, the Court held that the article published by the Company did not prove that the Company made misrepresentations because the “article never use[d] the term ‘cloud native’ or ‘cloud architecture.’”  Moreover, even if the article had used such terms, the Court found the article to be too far removed in time from the challenged statements to be determinative.  The Court also rejected plaintiffs’ allegations regarding how reasonable investors might understand “cloud native” or “cloud architecture,” holding that plaintiffs failed to adequately allege that “cloud native” or “cloud architecture” had “distinctive” meanings.  Instead, the Court held that these statements were puffery.

Second, the Court rejected plaintiffs’ argument that the Company’s statements during its earnings call regarding its disappointing guidance and results were misleading.  Specifically, the Court held that there was no factual support for plaintiffs’ allegation that the Company had disappointing results because it “lacked cloud-native services and [the Company] could not provide public cloud services comparable to its competitors.”

The Court dismissed the complaint without further leave to amend because plaintiffs had already amended their complaint and had failed to cure deficiencies identified in a decision dismissing the prior complaint.