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EXHIBIT A
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Case 1:23-cv-06426-DEH Document 34 Filed 11/26/24 Page 1 of 7
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PHUNWARE, INC.,
Plaintiff,
v.
UBS SECURITIES LLC,
Defendant.
DALE E. HO, United States District Judge:
23 Civ. 6426 (DEH)
OPINION AND ORDER
On April 23, 2024, this Court issued an Opinion and Order dismissing Plaintiff
Phunware, Inc.’s Complaint for failure to adequately plead loss causation. See Opinion and
Order (“Order”) at 13-16, ECF No. 30. The parties’ familiarity with the facts and allegations in
this matter is assumed. Now before the Court is Plaintiff’s motion for leave to file an amended
complaint. See Pl.’s Apr. 17, 2024 Letter Mot. (“Pl.’s Mot.”), ECF No. 31. For the reasons
stated below, Plaintiff’s motion is GRANTED.
LEGAL STANDARDS
Under Rule 15(a),1 leave to amend should generally be “freely given when justice so
requires.” Fed. R. Civ. P. 15(a)(2). This is particularly true where, as here, the district court has
granted a defendant’s motion to dismiss. See, e.g., Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d
Cir. 1990) (“When a motion to dismiss is granted, the usual practice is to grant leave to amend
the complaint.”). A court’s refusal to grant leave to amend must be based on a valid ground, such
as where there is “evidence of undue delay, bad faith, [or] undue prejudice to the non-movant.”
Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001); see also Forman v. Davis, 371
1All references to Rules are to the Federal Rules of Civil Procedure. In all quotations from
cases, the Court omits citations, footnotes, emphases, internal quotation marks, brackets, and
ellipses, unless otherwise indicated.
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U.S. 178, 182 (1962). A court may also deny leave “in cases of futility of amendment,” Meyer v.
Seidel, 89 F.4th 117, 140 (2d Cir. 2023), meaning that the proposed amended complaint “fails to
cure prior deficiencies . . . [and] does not contain enough factual allegations, accepted as true, to
state a claim for relief that is plausible on its face.” Dobryakov v. Brickhouse Food LLC, No. 22
Civ. 1390, 2024 WL 218441, at *3 (S.D.N.Y. Jan. 19, 2024).
APPLICATION
Plaintiff alleges that Defendant UBS Securities, LLC engaged in “spoofing” of
Plaintiff’s stock, a practice in which a market participant first places numerous false orders to
artificially inflate or depress a security’s price, then takes advantage of the impact to transact at
the affected price, and finally cancels the initial false orders. See Pl.’s Mot. Plaintiff’s spoofing
claims arise under Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934 as well as
New York common law. See id. For all of Plaintiff’s causes of action, Plaintiff must adequately
plead: (1) a manipulative act, (2) facts to support a strong inference of scienter, and (3) loss
causation. See Order at 4-6; see also Noto v. 22nd Century Grp., Inc., 35 F.4th 95, 102 (2d Cir.
2022) (Section 10(b)); Sharette v. Credit Suisse Int’l, 127 F. Supp. 3d 60, 80 (S.D.N.Y. 2015)
(Section 9(a)); Greentech Rsch. LLC v. Wissman, 961 N.Y.S.2d 406, 407 (App. Div. 2013) (New
York common law). This Court dismissed Plaintiff’s Complaint because, though it adequately
pled a manipulative act and scienter, Plaintiff failed to adequately plead loss causation. See
Order at 6. Thus, the question currently before the Court is whether Plaintiff’s Proposed
Amended Complaint (“PAC”) sufficiently cures the deficiencies in Plaintiff’s loss causation
pleading.
At the outset, the Court notes that the Second Circuit has not decided whether loss
causation pleadings are evaluated under Rule 9(b) or 8(a). See Abramson v. Newlink Genetics
2
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Corp., 965 F.3d 165, 179 n.65 (2d Cir. 2020). If they are evaluated under Rule 9(b)’s
“heightened pleading standard,” id., “[t]he complaint must simply give Defendants some
indication of the actual loss suffered and of a plausible causal link between that loss and the
alleged misrepresentations,” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC, 797 F.3d
160, 187 (2d Cir. 2015). If Rule 9(b)’s “heightened pleading standard” does not apply, Plaintiff’s
allegations must meet the standard articulated in Rule 8(a)(2), which requires only “a short and
plain statement of the claim showing that the pleader is entitled to relief.” See, e.g., Gru v.
Axsome Therapeutics, Inc., No. 22 Civ. 3925, 2023 WL 6214581, at *4 (S.D.N.Y. Sept. 25,
2023). Ultimately, the applicable pleading standard is not dispositive here, because Plaintiff
pleads with enough specificity to satisfy the more rigorous Rule 9(b) standard.
In Gamma Traders, the Second Circuit recognized two ways to plead loss causation in a
spoofing case. Gamma Traders - I LLC v. Merrill Lynch Commodities, Inc., 41 F.4th 71, 80 (2d
Cir. 2022). Plaintiff may plead loss causation under (1) a temporal proximity theory, where “its
trades occurred so close in time to [Defendant’s] spoofing as to permit [the court] to infer as a
matter of common sense that the market prices were artificial when [Plaintiff] traded,” or (2) a
long-term price impact theory, where the market price takes a protracted period of time to “return
to a non-artificial level after a spoof,” justifying an inference of “price artificiality during the
time in which plaintiff was trading.” Id.; accord Nw. Biotherapeutics, Inc. v. Canaccord Genuity
LLC, No. 22 Civ. 10185, 2023 WL 9102400, at *29 (S.D.N.Y. Dec. 29, 2023), report and
recommendation adopted, 2024 WL 620648 (S.D.N.Y. Feb. 14, 2024). Defendant argues that
Plaintiff fails to sufficiently plead loss causation under either theory. Def.’s Apr. 26, 2024 Opp’n
Letter (“Def.’s Opp’n”), ECF No. 33. Plaintiff argues that it sufficiently pleads under both
3
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theories. Pl’s Mot. The Court concludes that Plaintiff has sufficiently alleged loss causation
under the temporal proximity theory.
Plaintiff pleads that on January 26, 2021, Plaintiff sold 36,157 shares of PHUN2 from
09:30:01.265 A.M. to 09:30:51.329 A.M., within seconds of Defendant’s alleged spoofing
activity, at prices ranging from $2.12 to $2.22 per share, a decline of 5% from the pre-spoofing
level of $2.14 per share. Proposed Am. Compl. ¶¶ 118, 139, ECF. No. 31-3. Among these sales,
Plaintiff specifically made one sale transaction at 09:30:01.265 A.M. less than one second from
Defendant’s spoofing activity; six executing sales at 09:30:04 A.M. within four seconds of
Defendant’s spoofing activity; seven executing sales at 09:30:06 A.M. within six seconds of
Defendant’s spoofing activity; and nine executing sales at 09:30:10 A.M. within ten seconds of
Defendant’s spoofing activity. PAC ¶ 118. Plaintiff further pleads that, on October 26, 2021,
three minutes after Defendant’s spoofing activity, Plaintiff sold 1200 shares of PHUN at $6.29
per share, a decline of 8.3% from the pre-spoof level. PAC ¶¶ 144-45.
Viewed in the light most favorable to Plaintiff, the instances of sales within seconds of
Defendant’s spoofing activity are sufficient to plead loss causation under the temporal proximity
theory using a common-sense inference. See Nw. Biotheraputics, Inc., 2023 WL 9102400, at *30
(holding that the 30 instances of trading within an hour of the spoofing activity were temporally
proximate enough to justify a common-sense inference that plaintiff’s stock sales occurred at an
artificially depressed price). In contrast to Gamma Traders, where the plaintiff was unable to
identify when it traded its stocks, here, Phunware states that it traded stocks within seconds of
the spoofing, supporting a common-sense inference of loss. Gamma Traders, 41 F.4th at 80-81.
2PHUN is Phunware, Inc.’s stock symbol on Nasdaq. See https://perma.cc/977Z-5W6R.
4
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Defendant argues that Plaintiff’s PAC does not contain sufficient factual allegations to
substantiate the claim that “the immediate price impact of the spoofing lasted long enough to
have impacted Plaintiff’s Same-Day Sales.” Def.’s Opp’n 2. However, “a factual pleading about
how long the effects of spoofing last” is not required here, because Plaintiff pleaded trades
within seconds of Defendant’s spoofing, which is enough to justify a common-sense inference of
artificial price decline. Gamma Traders, 41 F.4th at 80, see also Irrera v. Humpherys, 859 F.3d
196, 198 (2d Cir. 2017) (explaining that “[j]udges . . . rely on their ‘experience and common
sense’” in “draw[ing] the line between speculative allegations and those of sufficient plausibility
to survive a motion to dismiss” (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009))).
Defendant also argues that Plaintiff has failed to plead loss causation as to any of its sales
because it fails to explain why Plaintiff’s share price declines are not caused by other events,
such as Plaintiff’s sale of its own shares on the same day. Def.’s Opp’n 4. In light of the
discussion above, however, this argument fails because “[t]he effects of spoofing pose questions
of fact,” and a plaintiff at this stage is only required to “allege some facts that support an
inference of actual injury.” Gamma Traders, 41 F.4th at 80. Defendant’s proposed alternative
explanations for PHUN’s share price decline poses a fact question, and a plaintiff need not
disprove alternative theories at this stage.
Defendant further argues that Plaintiff’s factual allegations are internally conflicting and
thus entitled to no weight because Plaintiff alleges the stock price to be “continually declining
yet trending up on the Same-Day sales,” and that Defendant was selling shares when the stock
price was artificially deflated. Def.’s Opp’n 3. However, Plaintiff pleads that Defendant’s
spoofing episodes caused “a price decline followed by a partial reversion that provided
Defendant an opportunity to profit from its purchases (including Executing Purchases) at
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depressed prices. Following the partial reversion, PHUN’s share price stabilized, but at a still
depressed level.” PAC ¶ 125. “In reviewing a decision to dismiss a complaint on Rule 9(b)
grounds, [the court] assume[s] the truth of plaintiffs’ allegations.” O’Brien v. Nat’l Prop.
Analysts Partners, 936 F.2d 674, 676-77 (2d Cir. 1991). Granted, “a court need not feel
constrained to accept as truth conflicting pleadings that make no sense, or that would render a
claim incoherent, or that are contradicted either by statements in the complaint itself or by
documents upon which its pleadings rely, or by facts of which the court may take judicial
notice.” In re Livent, Inc. Noteholders Secs. Litig., 151 F. Supp. 2d 371, 405-06 (S.D.N.Y. 2001).
However, Plaintiff’s partial rebound theory is based on plausible factual allegations, and the
Court’s ability to take notice of conflicting statements does not extend to resolving fact questions
against the Plaintiff at this stage. Plaintiff’s PAC sufficiently pleads loss causation.
Accordingly, because Plaintiff sufficiently pleads loss causation under the temporal
proximity theory, the Court concludes that leave to amend is proper. As this stage, however, the
Court finds it unnecessary to determine whether the Plaintiff sufficiently pleads long-term price
impact. The Court’s decision is therefore without prejudice to motions practice with respect to
any alleged injury under the long-term price impact theory (or any other issues not addressed in
this Opinion).
For the reasons stated above, Plaintiff’s motion for leave to amend is GRANTED.
Plaintiff shall file an Amended Complaint by December 2, 2024. Parties shall appear at an
initial pretrial conference with the Court on January 15, 2025, at 11:00 A.M. EST and shall file
a joint status letter and proposed Civil Case Management Plan by January 8, 2025. A Notice of
Initial Pretrial Conference containing details for joining the conference and directions for the
joint status letter shall issue separately.
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The Clerk of the Court is respectfully directed to terminate ECF No. 31.
Dated: November 26, 2024
New York, New York
DALE E. HO
United States District Judge
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Case 1:22-cv-10185-GHW-GS Document 166 Filed 12/03/24 Page 1 of 5
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
NORTHWEST BIOTHERAPEUTICS, INC.,
Plaintiff, - against-
CANACCORD GENUITY LLC, CITADEL
SECURITIES LLC, G1 EXECUTION
SERVICES LLC, GTS SECURITIES LLC,
INSTINET LLC, LIME TRADING CORP.,
and VIRTU AMERICAS LLC.
Defendants.
Case No: 1:22-cv-10185-GHW-GS
PLAINTIFF’S NOTICE OF SUPPLEMENTAL AUTHORITY IN SUPPORT OF ITS
OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS
THE SECOND AMENDED COMPLAINT
Plaintiff Northwest Biotherapeutics, Inc. (“NWBO” or “Plaintiff”) respectfully submits
this Notice of Supplemental Authority to bring to the Court’s attention the recent decision in
Phunware, Inc. v. UBS Securities LLC, Case No. 1:23-cv-06426-DEH, ECF No. 34 (S.D.N.Y.)
(Ho, J.) (“Opinion,” attached as Exhibit A) (“Phunware II”), which further supports denial of
Defendants’ Motion to Dismiss Second Amended Complaint (ECF No. 156) (“Motion to
Dismiss”).
In briefing their Motion to Dismiss, Defendants repeatedly referred to the allegations in
Phunware as “identical” (Mot. to Dismiss at 1 and 13), and a “mirror image of this case” (Mot. to
Dismiss at 2), urging this Court to follow Phunware’s “on-point precedent” regarding “materially
identical spoofing allegations.” (Reply Br., ECF No. 162 at 2.) At that time, while finding that the
plaintiff had adequately pled manipulative acts and scienter, Judge Ho had dismissed the
1
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Phunware original complaint on the same narrow ground of loss causation on which this Court
granted Defendants’ motion to dismiss the First Amended Complaint. Phunware then amended its
loss causation allegations in nearly identical fashion to how NWBO has amended its allegations
here. Compare Phunware Redlined Version of First Amended Complaint (ECF No. 31-1) at
¶¶ 117-164 with NWBO Second Amended Complaint (ECF No. 150) at ¶¶ 288-330. Judge Ho has
now ruled that the amended complaint in Phunware adequately alleges loss causation under
Gamma Traders– I LLC v. Merrill Lynch Commodities, Inc., 41 F.4th 71, 80 (2d Cir. 2022), and
expressly rejected the same arguments that Defendants raise in their Motion to Dismiss. This Court
should do the same.
First, in Phunware II, Judge Ho held that nearly identical allegations as alleged here were
sufficient to adequately plead loss causation under either the Rule 8 or Rule 9(b) standard. See
Opinion at 2-3 (“At the outset, the Court notes that the Second Circuit has not decided whether
loss causation pleadings are evaluated under Rule 9(b) or 8(a)….Ultimately, the applicable
pleading standard is not dispositive here, because Plaintiff pleads with enough specificity to satisfy
the more rigorous Rule 9(b) standard.”)
Second, in Phunware II, Judge Ho held that the amended complaint sufficiently alleged
loss causation under the temporal proximity theory of Gamma Traders by pleading examples in
which the plaintiff sold its shares shortly after defendant’s spoofing, citing for support this Court’s
opinion that sales within one hour would be “temporally proximate enough to justify” the
“common-sense inference” that the plaintiff’s sales occurred at artificially depressed prices.
Opinion at 4 (citing Nw. Biotherapeutics, Inc. v. Canaccord Genuity LLC, No. 22 Civ. 10185, 2023
WL 9102400, at *30 (S.D.N.Y. Dec. 29, 2023), report and recommendation adopted, 2024 WL 620648
(S.D.N.Y. Feb. 14, 2024)). In so doing, Phunware II directly rejected Defendants’ attempt to limit
Gamma Traders’ temporal proximity theory to trades that occur within seconds, or at most two
2
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minutes, after spoofing episodes. See, e.g., Mot. to Dismiss at 14; Reply Br. at 3 n.3.
Notably, because the Court found that Phunware had sufficiently alleged loss causation
under Gamma Traders’ temporal proximity test for at least some of its sales, the Court held that it
need not rule at the pleading stage on whether it had also sufficiently met Gamma Traders’ long
term price impact test for its other sales, leaving that issue for motion practice at a later stage of
the litigation. Order at 6 (“[B]ecause Plaintiff sufficiently pleads loss causation under the temporal
proximity theory, the Court concludes that leave to amend is proper. As this stage, however, the
Court finds it unnecessary to determine whether the Plaintiff sufficiently pleads long-term price
impact.”).1
Third, in Phunware II, Judge Ho rejected the argument – identical to the core argument
raised by Defendants here – that Phunware’s allegations somehow suffer a fatal contradiction by
alleging both that prices partially rebound following spoofing episodes and that the defendant’s
spoofing caused its losses.2 Judge Ho instead credited Phunware’s well-pleaded factual allegations
that the defendant’s spoofing caused “a price decline followed by a partial reversion that provided
Defendant an opportunity to profit from its purchases (including Executing Purchases) at
depressed prices” and that “[f]ollowing the partial reversion, PHUN’s share price stabilized, but
at a still depressed level.” Opinion at 5-6 (“…Plaintiff’s partial rebound theory is based on
plausible factual allegations, and the Court’s ability to take notice of conflicting statements does
not extend to resolving fact questions against the Plaintiff at this stage.”) Nearly identical
1Like here, in Phunware, the plaintiff alleged that certain sales occurred in close temporal proximity to the defendant’s
spoofing (See, e.g., Phunware First Amended Complaint, ECF No. 35 at ¶¶ 118-119, 124-125, 138-162), and that
other sales were impacted by the long-term impact of defendants’ spoofing (See, e.g., id. at ¶¶ 120-122, 126-137).
2See, e.g., Mot. to Dismiss at 1 (“Indeed, just weeks ago, District Judge Dale E. Ho dismissed identical claims in
Phunware … holding that the very allegations of rapid price reversion that permitted a finding of scienter foreclosed
plaintiff’s attempt to plead loss causation.”); at 2 (“As in Phunware, NWBO’s own price reversion allegations are
fatal to its attempt to plead loss causation under Gamma Traders.”); at 4 (“Faced with the same paradox, Judge Ho
rightly dismissed the complaint in Phunware.”).
3
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allegations regarding the partial reversion of NWBO share prices following Defendants’ spoofing
are made here. See, e.g., ¶ 312 (“Following the partial reversion, NWBO’s share price stabilized,
but at a still depressed level.”); ¶ 321 (“The placement of non-marketable buy orders after the
completion of a Spoofing Episode induced only a partial price reversion that did not fully unwind
the impact of Defendants’ manipulative spoofing. Therefore, prices of NWBO stock did not fully
revert to the market level, even though these partial price reversions provided Defendants an
opportunity to profit from buying additional NWBO shares.”)
Finally, in Phunware II, Judge Ho rejected the defendant’s argument – similar to
Defendants’ argument here3 – that the amended complaint failed to rule out other possible causes
for the plaintiff’s stock price declines because, under Gamma Traders, “the effects of spoofing
pose questions of fact and a plaintiff at this stage is only required to allege some facts that support
an inference of actual injury” and “a plaintiff need not disprove alternate theories at this stage.”
Opinion at 5 (internal quotations omitted).
Accordingly, Judge Ho’s decision in Phunware II further demonstrates why Defendants’
Motion to Dismiss should be denied.
3See, e.g., Mot. to Dismiss at 3 (“…any [NWBO stock price] declines were not the result of fleeting alleged spoofing,
but NWBO’s corporate mismanagement, product failures, securities violations, and dilutive share issuances.”); at 5
(“…declines in NWBO’s stock price during the Relevant Period generally coincided with negative news about the
company. NWBO also depressed its stock price throughout the Relevant Period by more than tripling the number of
shares outstanding….”)
4
Case 1:22-cv-10185-GHW-GS Document 166 Filed 12/03/24 Page 5 of 5
Dated: December 3, 2024
New York, New York
Respectfully submitted,
By: Laura H. Posner
Laura H. Posner
Michael B. Eisenkraft
COHEN MILSTEIN SELLERS & TOLL PLLC
88 Pine Street, 14th Floor
New York, New York 10005
Tel: (212) 838-7797
Fax: (212) 838-7745
lposner@cohenmilstein.com
meisenkraft@cohenmilstein.com
Raymond M. Sarola
COHEN MILSTEIN SELLERS & TOLL PLLC
Two Logan Square
100-120 N. 18th Street, Suite 1820
Philadelphia, PA 19103
Tel: (267) 479-5700
Fax: (267) 479-5701
rsarola@cohenmilstein.com
Counsel for Plaintiff
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