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CASE CAPTION     In re Qualcomm/Broadcom Merger Securities Litigation
COURT United States District Court for the Southern District of California
JUDGE Honorable Cathy A. Bencivengo
PLAINTIFF Gatubhai Mistry, Gerald L. Koenig, Leonard Brenner, and Vanessa D. Washington
DEFENDANTS Qualcomm Incorporated. (“Qualcomm” or “the Company”), Steven M. Mollenkopf, Paul E. Jacobs, Donald J. Rosenberg, and Thomas W. Horton
CLASS PERIOD January 29, 2018 through March 12, 2018, inclusive

This securities fraud class action arises out of Defendants’ representations and omissions regarding the potential merger with one of Qualcomm’s biggest competitors—Broadcom Ltd. (“Broadcom”), and Defendants’ covert efforts to prevent the merger from happening.  Publicly during the Class Period, Qualcomm and the individuals directing it told the market they prioritized investor value, including the potential Broadcom merger that was enthusiastically embraced by the market.  But privately, Defendants worked covertly with federal regulators— Committee on Foreign Investment in the United States (“CFIUS”)—to kill the merger and to maintain their own control of Qualcomm.

Plaintiffs filed a 146-page amended complaint in May 2020 on behalf of a putative class of investors alleging that Qualcomm and its executives, including Steven M. Mollenkopf (CEO), Paul E. Jacobs (former Executive Chairman and Chairman of the Board), Donald J. Rosenberg (Executive Vice President, General Counsel, and Corporate Secretary), and Thomas W. Horton (member and Presiding Director of the Board), violated Section 10(b) of the Securities Exchange Act by making false and misleading statements and concealing material facts about Qualcomm’s potential merger with Broadcom.  As alleged, while publicly touting their support for the merger, Defendants covertly wrote to CFIUS to urge the regulators to block the merger on national security grounds.  Eventually, this led to a Presidential Order blocking the merger.  Qualcomm’s stock price dropped in direct response, causing significant losses and damages to the Company’s investors.

Initially, this action was assigned to the Honorable Anthony J. Battaglia.  On March 10, 2020, Judge Battaglia dismissed Plaintiffs’ First Amended Complaint in part for failure to adequately allege scienter or loss causation, but concluded that Plaintiffs had adequately alleged that the Defendants’ statements to the market were materially misleading.  He then recused himself, and the action was reassigned to the Honorable Cathy A. Bencivengo on March 24, 2020.  Plaintiffs then filed the Second Amended Class Complaint on May 11, 2020 to address the Court’s perceived deficiencies with regard to scienter and loss causation. 

On June 25, 2020, Defendants moved to dismiss Plaintiffs’ Second Amended Complaint, which was granted on October 9, 2020.  In that option, Judge Bencivengo disagreed with Judge Battaglia’s ruling on falsity and also held that Plaintiffs failed to adequately allege scienter, and loss causation.  Specifically, according to the Court, Plaintiffs failed to adequately plead that Qualcomm had a duty to disclose that they were lobbying CFIUS to block the merger as in the Court’s view, their boilerplate risk disclosures that CFIUS review was possible were sufficient notice to the market.  The Court also found that the Complaint did not adequately plead the Defendants’ scienter or that the stock price declines were a foreseeable consequence of any omitted or misleading information Plaintiffs’ alleged.   Plaintiffs then appealed to the Ninth Circuit Court of Appeals on November 7, 2020, where this action is currently pending. Oral argument is scheduled for November 16, 2021.