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Before the Court is 39 MOTION to Dismiss 38 Amended Complaint filed by Grocery Outlet Holding Corp. Securities Litigation, Robert Joseph Sheedy, Charles C. Bracher. Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds the matter suitable for disposition without oral argument. The hearing on this matter that is currently scheduled for 03/19/2026 at 2:00PM PST is hereby VACATED. (This is a text-only entry generated by the court. There is no document associated with this entry.) (dms, COURT STAFF) (Filed on 3/16/2026) (Entered: 03/16/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/481581449/","id":481581449,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/497329594/","id":497329594,"tags":[],"absolute_url":"/docket/69592783/45/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2026-10-14T22:05:50.915204-07:00","date_modified":"2026-10-14T22:05:50.940308-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"45","attachment_number":null,"pacer_doc_id":"035027793003","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Amended Complaint","acms_document_guid":""}],"date_created":"2026-10-14T22:05:50.879927-07:00","date_modified":"2026-10-15T06:57:01.412575-07:00","date_filed":"2026-10-14","time_filed":"21:32:01","entry_number":45,"recap_sequence_number":"2026-10-14.001","pacer_sequence_number":149,"description":"AMENDED COMPLAINT Second Amended Complaint against Charles C. Bracher, Grocery Outlet Holding Corp. Securities Litigation, Robert Joseph Sheedy. Filed by Casey Cavanaugh. (Baker, Joshua) (Filed on 10/14/2026) (Entered: 10/14/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/478194619/","id":478194619,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/493814617/","id":493814617,"tags":[],"absolute_url":"/docket/69592783/44/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2026-09-16T08:35:41.254348-07:00","date_modified":"2026-10-16T05:00:18.832673-07:00","sha1":"a2774d4e32bb71a32db8048dd56dfeef0e113023","page_count":18,"file_size":336043,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.44.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.44.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 1 of 18\n\n\n\n\n 1\n\n 2\n\n 3\n\n 4 UNITED STATES DISTRICT COURT\n\n 5 NORTHERN DISTRICT OF CALIFORNIA\n\n 6\n\n 7 GENRICCIO LIBERATO, Case No. 25-cv-00957-JST\n Plaintiff,\n 8\n ORDER GRANTING MOTION TO\n v. DISMISS\n 9\n\n 10 GROCERY OUTLET HOLDING CORP. Re: ECF No. 39\n SECURITIES LITIGATION, et al.,\n 11 Defendants.\n 12\nNorthern District of California\n United States District Court\n\n\n\n\n 13 Before the Court is Defendant Grocery Outlet\u2019s motion to dismiss the amended complaint,\n\n 14 a putative class action alleging violations of federal securities laws. ECF No. 39. The Court will\n\n 15 grant the motion.\n\n 16 I. BACKGROUND\n\n 17 The following facts are drawn from the amended complaint, ECF No. 38. Grocery Outlet\n\n 18 is an \u201cextreme value retailer of consumables and fresh products sold via a network of\n\n 19 independently owned and operated stores,\u201d with most of its locations operated by independent,\n\n 20 third-party operators, referred to as \u201cIOs.\u201d Id. \u00b6 27. Grocery Outlet generally shares half of its\n\n 21 store-level profits with its IOs, paid as \u201ccommissions\u201d based on store margins. Id. \u00b6 27, 100.\n\n 22 While IOs handle local operations, Grocery Outlet handles inventory procurement, distribution,\n\n 23 and information systems. Id. \u00b6 28. Defendant Robert Joseph Sheedy was the Company\u2019s CEO\n\n 24 from January 2023 to October 29, 2024, and Defendant Charles Bracher was the Company\u2019s CFO\n\n 25 from August 2012 until March 1, 2024. Id. \u00b6\u00b6 21, 22.\n\n 26 In 2021, Defendants decided to modernize and overhaul Grocery Outlet\u2019s internal\n\n 27 enterprise resource planning (\u201cERP\u201d) and information technology systems (the \u201cSystems\n\n 28 Transition\u201d). Id. \u00b6 2. Its financial ledger, inventory management platform, and product data\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 2 of 18\n\n\n\n\n 1 warehouse system were all implicated. Id. The company developed and tested the new software\n\n 2 (manufactured by a company called SAP) in 2021 and 2022 with the goal of rolling it out in\n\n 3 March 2023, although the rollout was ultimately pushed back to August 2023. Id. \u00b6\u00b6 3\u20136, 46\u201349.\n\n 4 At the time of the rollout, Defendants had still not conducted \u201cend-to-end User Acceptance\n\n 5 Testing (\u2018UAT\u2019),\u201d in which the company\u2019s actual end-users, like IOs, planners and buyers, and\n\n 6 accounting personnel, test the new systems using real-world applications and data. Id. \u00b6\u00b6 50\u201355.\n\n 7 Plaintiff alleges that this testing would have confirmed the full functional flow of information\n\n 8 needed to effectively conduct the Company\u2019s operations. Id. \u00b6\u00b6 54\u201355.\n\n 9 When the company went \u201clive\u201d with its new SAP ERP systems in late August 2023, it\n\n 10 immediately encountered widespread disruptions caused by problems with inventory visibility and\n\n 11 management, end-user errors, and data integrity. Id. \u00b6\u00b6 56\u201360. These disruptions impacted the\n\n 12 company\u2019s procurement, distribution, accounting, and financial reporting. Id. \u00b6\u00b6 2, 56\u201360, 86\u201389,\nNorthern District of California\n United States District Court\n\n\n\n\n 13 99\u2013100.\n\n 14 On the November 2023 earnings call for Q3 2023, Defendants disclosed that the Systems\n\n 15 Transition had caused significant disruptions and material impacts to the Company\u2019s financials,\n\n 16 describing \u201cordering and inventory disruptions that have impacted third and fourth quarter\n\n 17 results,\u201d including \u201cinventory visibility . . . challenges.\u201d Id. \u00b6\u00b6 86, 89, 99. Bracher listed an\n\n 18 approximately 150-basis-point impact to store sales and a 50-basis-point impact to gross margin\n\n 19 stemming from inventory inefficiencies. Id. \u00b6 87. He stated his expectation that the Systems\n\n 20 Transition would \u201csignificantly impact financial results in the fourth quarter and to a greater\n\n 21 degree than the third quarter.\u201d Id. Sheedy stated \u201cthat we did expect some disruption during this\n\n 22 transition. It was factored into our previous guidance, just not to the degree that we\u2019ve been\n\n 23 experiencing it.\u201d Id. \u00b6 89; see also id. \u00b6 91 (Sheedy stating \u201cwe\u2019ve always known how large [the\n\n 24 Systems Transition] was and complex. We did expect as a result, some disruption\u201d). And Bracher\n\n 25 further stated that \u201cas disappointed as we are with the magnitude of the impact in the fourth\n\n 26 quarter, we do expect and believe that it will be largely behind us by the end of the year.\u201d Id. \u00b6 91.\n\n 27 Following these disclosures, \u201cthe price of Grocery Outlet stock fell $1.31, or 4.6%, to close at\n\n 28 $27.15.\u201d Id. \u00b6 102.\n 2\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 3 of 18\n\n\n\n\n 1 Bracher announced his resignation on December 11, 2023, effective March 1, 2024. Id.\n\n 2 \u00b6 104. On that news, \u201cthe price of Grocery Outlet stock fell $1.83, or 6.2%, to close at $27.91 on\n\n 3 December 12, 2023.\u201d Id. \u00b6 106.\n\n 4 On February 27, 2024, the company issued a press release disclosing its Q4 2023 financial\n\n 5 results, ECF No. 38 \u00b6 107, explaining that \u201c[a]s previously disclosed, the Company experienced\n\n 6 disruptions as a result of the implementation of new technological platforms in late August 2023,\u201d\n\n 7 id. \u00b6 108. During the earnings call the same day, Sheedy explained that \u201cdata integration efforts\n\n 8 [were] taking longer than expected and [were] still impacting [Grocery Outlet\u2019s] business results.\u201d\n\n 9 Id. \u00b6 111. Bracher further acknowledged that \u201cthe system transition impacted comp sales by\n\n 10 approximately 200 basis points for the quarter\u201d and \u201cthe margin impact of our system integration\n\n 11 . . . was approximately 130 basis points in the quarter.\u201d Id. \u00b6 110. Bracher also disclosed that, as\n\n 12 a result of the systems transition, Grocery Outlet will \u201ccontinue to experience [Profit & Loss, or\nNorthern District of California\n United States District Court\n\n\n\n\n 13 P&L] impacts during the first quarter\u201d of 2024, while expressing optimism that its issues would\n\n 14 \u201cbe resolved soon, after which the P&L impact will be behind us.\u201d ECF No. 39-9 at 8; ECF No.\n\n 15 38 \u00b6 116. Following these disclosures, \u201cthe price of Grocery Outlet stock fell $0.32, or 1.2%, to\n\n 16 close at $26.15.\u201d Id. \u00b6 119. After Grocery Outlet filed its Form 10-K Annual Report, which\n\n 17 provided additional detail about the impacts of the Systems Transition, the \u201cthe price of Grocery\n\n 18 Outlet stock fell another $0.36, or 1.4%, to close at $25.79 on February 29, 2024.\u201d Id. \u00b6\u00b6 120\u201323.\n\n 19 In May 2024, the company revealed that the Q1 2024 results had been impacted by the\n\n 20 Systems Transition to a greater extent than the prior quarter\u2014more than double their prior\n\n 21 estimate\u2014with impacts lingering into the second quarter. Id. \u00b6\u00b6 124\u201325. Lindsay Gray, the\n\n 22 company\u2019s interim CFO, also admitted on the Q1 2024 earnings call that the Systems Transition\n\n 23 had impaired the company\u2019s ability to forecast financial results due to poor visibility from\n\n 24 business reporting systems and tools, as well as data integration issues and new processes within\n\n 25 the new applications. Id. \u00b6 126. The company also explained that the lingering impacts in the\n\n 26 next quarter were attributable to the costs of IO margin payments, which could not be made until\n\n 27 physical inventory counts were completed after the end of the quarter. Id. \u00b6 118. Following these\n\n 28 disclosures, \u201cGrocery Outlet stock fell $5.02 per share, or 19.4%, to close at $20.88.\u201d Id. \u00b6 130.\n 3\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 4 of 18\n\n\n\n\n 1 In October 2024, Sheedy was fired by the Board of Directors based on the company\u2019s\n\n 2 struggles to effectively implement the Systems Transition. Id. \u00b6\u00b6 136\u201339. \u201cOn this news, the\n\n 3 price of Grocery Outlet stock fell $2.71 per share, or 16.3%, to close at $13.90 per share on\n\n 4 October 30, 2024.\u201d Id. \u00b6 137.\n\n 5 The amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities\n\n 6 Exchange Act of 1934 (\u201cExchange Act\u201d) and Securities and Exchange Commission (\u201cSEC\u201d) Rule\n\n 7 10b-5, individually and on behalf of a class defined as all persons and entities who purchased\n\n 8 Grocery Outlet common stock between August 9, 2023 and May 7, 2024. Id. \u00b6 1.\n\n 9 Defendants filed this motion to dismiss on October 21, 2025. ECF No. 39. Plaintiff\n\n 10 opposed on December 23, 2025. ECF No. 40. Defendants replied on January 30, 2026. ECF No.\n\n 11 41.\n\n 12 II. JURISDICTION\nNorthern District of California\n United States District Court\n\n\n\n\n 13 The Court has jurisdiction under 28 U.S.C. \u00a7 1331.\n\n 14 III. LEGAL STANDARD\n\n 15 SEC Rule 10b\u20135 makes it unlawful to, among other things, \u201cmake any untrue statement of\n\n 16 a material fact or to omit to state a material fact necessary in order to make the statements made, in\n\n 17 the light of the circumstances under which they were made, not misleading.\u201d 17 C.F.R.\n\n 18 \u00a7 240.10b\u20135(b). \u201cThere are six elements to a securities fraud claim under \u00a7 10(b) and Rule 10b\u20135:\n\n 19 (1) a material misrepresentation or omission; (2) scienter (i.e., a wrongful state of mind); (3) a\n\n 20 connection between the misrepresentation and the purchase or sale of a security; (4) reliance upon\n\n 21 the misrepresentation (often established in \u2018fraud-on-the-market\u2019 cases via a presumption that the\n\n 22 price of publicly-traded securities reflects all information in the public domain); (5) economic\n\n 23 loss; and (6) loss causation.\u201d Loos v. Immersion Corp., 762 F.3d 880, 886\u201387 (9th Cir. 2014), as\n\n 24 amended (Sept. 11, 2014) (citing Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341\u201342\n\n 25 (2005)); see also In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012).\n\n 26 Such claims must meet the \u201cheightened pleading requirements\u201d of Federal Rule of Civil\n\n 27 Procedure 9(b) and the Private Securities Litigation Reform Act (\u201cPSLRA\u201d). Id. at 876; 15 U.S.C.\n\n 28 \u00a7 78u-4(b)(1)\u2013(2). These requirements have \u201cteeth\u201d and \u201cpresent[] no small hurdle for the\n 4\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 5 of 18\n\n\n\n\n 1 securities fraud plaintiff.\u201d Nguyen v. Endologix, Inc., 962 F.3d 405, 414 (9th Cir. 2020). Rule\n\n 2 9(b) requires a plaintiff to \u201cstate with particularity the circumstances constituting fraud or\n\n 3 mistake\u201d by pleading the \u201cwho, what, when, where, and how\u201d of the alleged fraud. Vess v. Ciba-\n\n 4 Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The PSLRA imposes even \u201cmore\n\n 5 exacting pleading requirements.\u201d Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d\n\n 6 1051, 1057\u201358 (9th Cir. 2014). It requires the plaintiff to (i) \u201cspecify each statement alleged to\n\n 7 have been misleading [and] the reason or reasons why the statement is misleading,\u201d and (ii) \u201cstate\n\n 8 with particularity facts giving rise to a strong inference that the defendant acted with the required\n\n 9 state of mind\u201d for each act or omission. 15 U.S.C. \u00a7 78u-4(b)(1)(B), 78u-4(b)(2)(A).\n\n 10 Section 20(b) of the PSLRA holds jointly and severally liable \u201c[e]very person who,\n\n 11 directly or indirectly, controls any person liable under\u201d the Act. 15 U.S.C. \u00a7 78t(a). To prevail on\n\n 12 a claim for a violation of Section 20(a), \u201ca plaintiff must first allege a violation of \u00a7 10(b) or Rule\nNorthern District of California\n United States District Court\n\n\n\n\n 13 10b-5.\u201d Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1035 n.15 (9th Cir. 2002).\n\n 14 IV. DISCUSSION\n\n 15 A. Material Misrepresentation or Omission (Falsity)\n\n 16 Plaintiff has not identified a false or misleading statement. A statement is false or\n\n 17 misleading if it (1) directly contradicts what the defendant knew at the time or (2) omits material\n\n 18 information. In re Cloudera, Inc., 121 F.4th 1180, 1186 (9th Cir. 2024). Even literally true\n\n 19 statements may mislead, due to their context and manner of presentation. Miller v. Thane Int\u2019l,\n\n 20 Inc., 519 F.3d 879, 886 (9th Cir. 2008). Statements are misleading by omission only if they\n\n 21 \u201caffirmatively create an impression of a state of affairs that differs in a material way from the one\n\n 22 that actually exists.\u201d Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002).\n\n 23 The securities laws do not prohibit statements that are merely incomplete because \u201cno matter how\n\n 24 detailed and accurate disclosure statements are, there are likely to be additional details that could\n\n 25 have been disclosed but were not.\u201d Intuitive Surgical, 759 F.3d at 1061. In addition, there is no\n\n 26 firm rule that \u201conce a disclosure is made, there is a duty to make it complete and accurate.\u201d\n\n 27 Brody, 280 F.3d at 1006. Falsity claims may not rely on hindsight; rather, they \u201cmust explain\n\n 28 \u2018why the statements were false or misleading at the time they were made.\u2019\u201d Cloudera, 121 F.4th\n 5\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 6 of 18\n\n\n\n\n 1 at 1187 (quoting In re Rigel Pharms., 697 F.3d at 876).\n\n 2 Plaintiff argues that the complaint alleges \u201cparticularized facts plausibly demonstrating that\n\n 3 Defendants concealed from investors: (1) material risks of prematurely implementing the Systems\n\n 4 Transition; (2) a material weakness in the Company\u2019s internal controls; and (3) that Defendants\n\n 5 had no reasonable factual basis for assuring investors that the disruptions from the Systems\n\n 6 Transition were under control.\u201d ECF No. 40 at 13. Each of these arguments fails.\n\n 7 1. Statements About the Then-Forthcoming Systems Transition\n\n 8 Plaintiff first argues that Defendants made statements in August 2023 fraudulently framing\n\n 9 certain risks of the Systems Transition as hypothetical and generalized when those risks had in fact\n\n 10 already materialized. ECF No. 40 at 15\u201316; ECF No. 38 \u00b6\u00b6 67, 68, 72, 74. In the company\u2019s\n\n 11 quarterly report for the second quarter of 2023 (\u201cAugust 2023 10-Q\u201d), Defendants stated that there\n\n 12 had been \u201cno material changes to our risk factors since the 2022 Form 10-K.\u201d ECF No. 38 \u00b6 68.\nNorthern District of California\n United States District Court\n\n\n\n\n 13 The 2022 Form 10-K stated: \u201cIt is possible that we could experience implementation, operational\n\n 14 and functionality issues, delays, higher than expected costs and other issues during the course of\n\n 15 implementing and utilizing these improvements,\u201d and \u201cWith any update or replacement of our\n\n 16 systems and infrastructure there is a risk of business disruption, liability and reputational damage\n\n 17 associated with these actions, including from not accurately capturing and maintaining data,\n\n 18 efficiently testing and implementing changes, realizing the expected benefit of the change and\n\n 19 managing the potential disruption of the actions and diversion of internal teams\u2019 attention as the\n\n 20 changes are implemented.\u201d Id. \u00b6 67.\n\n 21 Courts find such hypothetical or speculative statements about future risks to be misleading\n\n 22 where the risks have already \u201ccome to fruition,\u201d Berson v. Applied Signal Tech., Inc., 527 F.3d\n\n 23 982, 985\u201387 (9th Cir. 2008), or where defendants \u201cdid not meaningfully update the risk\n\n 24 disclosure\u201d after learning new information that made the risk significantly more likely to occur,\n\n 25 Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc., 63 F.4th 747, 781 (9th Cir. 2023). See also In\n\n 26 re Alphabet, Inc. Sec. Litig., 1 F.4th 687, 696, 703\u2013704 (9th Cir. 2021) (statement that public\n\n 27 concerns about privacy and security \u201ccould\u201d harm company\u2019s reputation was misleading where\n\n 28 company already discovered a bug that had been threatening thousands of user\u2019s personal data for\n 6\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 7 of 18\n\n\n\n\n 1 the past three years); In re SunPower Corp. Sec. Litig., 769 F. Supp. 3d 1042, 1055\u201356 (N.D. Cal.\n\n 2 2025) (\u201cboilerplate risk disclosures did not meaningfully convey the significant risk that had\n\n 3 already materialized,\u201d namely, \u201cthat SunPower was in a severe liquidity crisis\u201d).\n\n 4 Plaintiff\u2019s fraud claims fail because he does not allege that any risks had already come to\n\n 5 fruition nor that any new information had come to light. Indeed, the rollout had not yet begun.\n\n 6 ECF No. 38 \u00b6 6. He faults Defendants for stating that \u201cit was \u2018possible\u2019 the Systems Transition\n\n 7 \u2018could\u2019 cause implementation issues and disruptions, when in fact Defendants had chosen to\n\n 8 undertake a specific risky tactic by rushing out the Systems Transition before the Company was\n\n 9 adequately prepared.\u201d ECF No. 40 at 16. But no particular circumstances made the disruption\n\n 10 risk more likely to materialize except for Defendants\u2019 failure, in Plaintiffs\u2019 view, to adequately\n\n 11 mitigate it. On this theory, a securities fraud claim would lie any time a corporation prepared\n\n 12 poorly or otherwise erred in implementing a change. Poor preparation is not the same thing as\nNorthern District of California\n United States District Court\n\n\n\n\n 13 fraud.\n\n 14 In addition, Plaintiff fails to sufficiently allege that Defendants were unprepared for the\n\n 15 transition. See ECF No. 40 at 16\u201317. The complaint cites allegations from Former Employee 1\n\n 16 (\u201cFE1\u201d) that \u201cend-to-end user acceptance testing (\u201cUAT\u201d) had not been completed before the\n\n 17 August 2023 launch,\u201d and that such testing could have caught the problems that later materialized.\n\n 18 ECF No. 38 \u00b6\u00b6 50\u201355, 61. Plaintiff\u2019s position appears to be that Defendants could only have\n\n 19 avoided securities fraud liability by telling investors in August 2023 that the company had not\n\n 20 completed end-to-end UAT testing and that as such, the transition would be disruptive. But this\n\n 21 would only be true if end-to-end UAT testing were so obviously and critically essential to an IT\n\n 22 systems transition that (1) the transition was likely to go poorly in its absence and (2) executives\n\n 23 are likely to have been aware that the transition was highly likely to go poorly in its absence. In\n\n 24 other words, there must be something special about end-to-end UAT testing setting it apart from\n\n 25 routine preparatory measures that company leadership might decide to take (or not). Plaintiffs\n\n 26 allege none of these facts. One employee\u2019s speculation that a particular type of testing could have\n\n 27 averted certain risks does not show that Defendants were so unprepared that their unpreparedness\n\n 28 can be equated to fraud. This is especially so given that Defendants did disclose the possibility of\n 7\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 8 of 18\n\n\n\n\n 1 disruption in the August 2023 10-Q and 2022 Form 10-K.\n\n 2 Plaintiff also complains that, during the company\u2019s earnings conference call for the same\n\n 3 quarter (Q2 2023), Sheedy touted the benefits of the new store portal component of the Systems\n\n 4 Transition, including \u201cprovid[ing] operators with better analytics and easier access to\n\n 5 information,\u201d and \u201callow[ing] [IOs] to operate even more efficiently, . . . or operate the P&L more\n\n 6 efficiently.\u201d Id. \u00b6 72, 74. But he does not adequately allege that these statements were false or\n\n 7 misleading. The decision to postpone the launch to August 2023 suggests prudence, not\n\n 8 deception. Id. \u00b6\u00b6 73, 75 (asserting that the delay decision shows why the August 2023 statements\n\n 9 were misleading). Sheedy\u2019s later admission that he knew the transition carried risks of disruptions\n\n 10 to operational efficiencies and data visibility, id. \u00b6\u00b6 89, 93, likewise do not show that his earlier\n\n 11 statements were false or misleading. Rather, it was consistent to explain the benefits sought\n\n 12 through a systems upgrade despite the risk of disruption during upgrade process. And as\nNorthern District of California\n United States District Court\n\n\n\n\n 13 discussed above, those risks were also disclosed to investors.\n\n 14 That makes this case unlike Schueneman v. Arena Pharmaceuticals, Inc., on which\n\n 15 Plaintiff relies. 840 F.3d 698, 705\u201306 (9th Cir. 2016); ECF No. 40 at 117. Noting that\n\n 16 \u201ccompanies can control what they have to disclose under these provisions by controlling what they\n\n 17 say to the market,\u201d the court held that \u201c\u2018once defendants cho[o]se to tout\u2019 positive information to\n\n 18 the market, \u2018they [are] bound to do so in a manner that wouldn't mislead investors,\u2019 including\n\n 19 disclosing adverse information that cuts against the positive information.\u201d Id. at 705\u201306 (first\n\n 20 quoting Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 45 (2011); then quoting Berson, 527\n\n 21 F.3d at 987). But disruption risks from implementation do not necessarily \u201ccut against\u201d the\n\n 22 benefits of new systems once implemented. In Schueneman, the defendants touted the safety and\n\n 23 high likelihood of securing approval of a drug in part by reference to favorable animal studies,\n\n 24 while failing to disclose a particularly unfavorable animal study suggesting the drug caused\n\n 25 several cancers. Id. at 704. \u201cDefendants went ahead and told investors about their confidence in\n\n 26 lorcaserin\u2019s approval being based on \u2018the preclinical studies that [were] done, [and] all the animal\n\n 27 studies that have been completed.\u2019\u201d Id. at 707. \u201cThe public was assured that lorcaserin\u2019s \u2018long-\n\n 28 term safety and efficacy\u2019 (and thus the likelihood of its imminent approval) were \u2018demonstrated\u2019\n 8\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 9 of 18\n\n\n\n\n 1 through \u2018long-term preclinical toxicity and carcinogenicity studies.\u2019\u201d Id. The unfavorable study\n\n 2 that the defendants failed to disclose thus directly contradicted their representations about the\n\n 3 drug\u2019s safety based on animal studies, and its existence made certain of those statements literally\n\n 4 false. Schueneman does not apply here, where Defendants merely failed to pair positive\n\n 5 statements about the Systems Transition\u2019s benefits once implemented with additional warnings\n\n 6 about the disruption risks of the transition itself\u2014particularly given that the transition risks were\n\n 7 disclosed.\n\n 8 Similarly in Matrixx, cited in Schueneman, the defendants made public statements\n\n 9 promoting their belief in a certain pharmaceutical drug\u2019s market growth in the upcoming months\n\n 10 while concealing researchers\u2019 concerns and pending lawsuits concerning the drug\u2019s potential to\n\n 11 damage consumers\u2019 sense of smell. 563 U.S. at 23\u201333 (2011). The growing evidence of\n\n 12 permanent loss of the sense of smell cut directly against the drug\u2019s potential for growth. Michel v.\nNorthern District of California\n United States District Court\n\n\n\n\n 13 Sumo Logic, Inc., also cited by Plaintiff, does not apply for the same reason. 779 F. Supp. 3d\n\n 14 1038, 1051 (N.D. Cal. 2025). That case faulted \u201crepresentations that state the truth only so far as\n\n 15 it goes, while omitting critical qualifying information\u201d but transition risks do not qualify the\n\n 16 benefits of a new system. Id. And the transition risks were not omitted, but disclosed.\n\n 17 Under these circumstances, Plaintiff has not shown that the August 2023 statements about\n\n 18 the soon-to-be underway Systems Transition were false or misleading.\n\n 19 2. Statements About Grocery Outlet\u2019s Internal Controls\n\n 20 Plaintiff next purports to locate falsity in Grocery Outlet\u2019s November 2023 statements\n\n 21 concerning its internal controls. In its quarterly report filed in November 2023 (\u201cNovember 2023\n\n 22 10-Q\u201d), Grocery Outlet explained that it had replaced certain components of its ERP system,\n\n 23 \u201cmodified certain existing internal controls, as well as implemented new controls and procedures\n\n 24 impacted by the implementation of these new systems.\u201d ECF No. 38 \u00b6 79. As the report stated:\n\n 25 \u201cExcept for the implementation of these new systems, there was no change in our internal control\n\n 26 over financial reporting identified.\u201d Id. The November 2023 10-Q was also accompanied by\n\n 27 certifications pursuant to the Sarbanes-Oxley Act of 2002 (\u201cSOX\u201d) attesting to the disclosure of\n\n 28 any material changes to (or material weaknesses in) the Company\u2019s internal control over financial\n 9\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 10 of 18\n\n\n\n\n 1 reporting. Id. \u00b6\u00b6 81\u201382.\n\n 2 Plaintiff argues that \u201c[t]hese statements were false and misleading because they failed to\n\n 3 disclose the existing material weakness in the Company\u2019s internal control over financial reporting\n\n 4 caused by the rampant disruptions from the Systems Transition during the third quarter of 2023.\u201d\n\n 5 ECF No. 40 at 19. He bases this allegation primarily on revelations in the 2023 10-K, released in\n\n 6 February 2024. The 10-K disclosed that the Systems Transition had increased the volume of \u201cuser\n\n 7 access, program change management, and IT operations\u201d transactions that Grocery Outlet\u2019s\n\n 8 existing controls were not designed to address, such that certain dependent business controls were\n\n 9 also rendered ineffective. ECF No. 40 at 19; ECF No. 38 \u00b6 122. It stated that \u201cthese control\n\n 10 deficiencies . . . created a reasonable possibility that a material misstatement to the consolidated\n\n 11 financial statements would not be prevented or detected on a timely basis.\u201d Id. The company\u2019s\n\n 12 \u201cinternal control over financial reporting was not effective as of December 30, 2023.\u201d Id.\nNorthern District of California\n United States District Court\n\n\n\n\n 13 But Plaintiff has not shown anything other than the normal process of company leadership\n\n 14 discovering over time and timely disclosing adverse information. In other words, that Defendants\n\n 15 knew by February 2024 that their business controls were ill-equipped to manage the volume of\n\n 16 new transactions does not suggest that their November 2023 statement that \u201cthere was no change\n\n 17 in our internal control over financial reporting identified\u201d was false. See Davoli v. Costco\n\n 18 Wholesale Corp., 854 F. App\u2019x 116, 118 (9th Cir. 2021) (\u201c[T]he inferences raised by the\n\n 19 complaint\u2019s allegations are not as compelling as the opposing innocent inference that Costco did\n\n 20 not know that its internal control was ineffective until the more rigorous internal review performed\n\n 21 in advance of the October 2018 Form 10-K.\u201d). Plaintiff has not alleged that Defendants\u2019\n\n 22 November 2023 statements about their internal controls were false or misleading.\n\n 23\n 3. Statements About Defendants\u2019 Visibility Into the Financial Impacts of\n 24 the Systems Transition Disruptions\n 25 Plaintiff also alleges that Defendants misled investors by repeatedly suggesting that the\n\n 26 negative impacts of the Systems Transition would shortly be resolved, which was misleading\n\n 27 because Defendants knew that \u201cpoor reporting visibility and data integration issues had hindered\n\n 28 their ability to make accurate forecasts\u201d and because \u201ccommission expense calculations materially\n 10\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 11 of 18\n\n\n\n\n 1 affecting the next quarter\u2019s results could not be made until the current quarter\u2019s end.\u201d ECF No. 40\n\n 2 at 20. ECF No. 40 at 20.\n\n 3 During the November 2023 earnings call, Bracher reassured investors that \u201cwe do expect\n\n 4 and believe that [the impacts of the Systems Transition] will be largely behind us by the end of the\n\n 5 year. And so our view at this point is we will enter the new year without any lingering cost\n\n 6 impacts or otherwise related to the transition.\u201d ECF No. 38 \u00b6 91; see also id. \u00b6 97. On the same\n\n 7 call, Sheedy stated that \u201cin terms of impact looking forward . . . we do [expect] the transitional\n\n 8 impact to be contained to this year . . . . And then largely behind us at the end of the year. So you\n\n 9 should think about us reverting back to previous performance . . . for both gross margin and\n\n 10 bottom-line profit.\u201d Id. \u00b6 93; see also id. \u00b6 95. Then, in February 2024, after revealing that the\n\n 11 disruptions and impacts of the Systems Transition had persisted into the first quarter of 2024, id.\n\n 12 \u00b6\u00b6 107\u201315, Defendants again reassured investors that the end was near. Bracher stated that \u201cOur\nNorthern District of California\n United States District Court\n\n\n\n\n 13 current guidance assumes that we . . . are back to steady state operations and conclude the elective\n\n 14 commission support by the end of the first quarter.\u201d Id. \u00b6 115. And Sheedy stated that \u201c[w]e\n\n 15 expect these [data integration issues] to be resolved soon, after which the P&L impact will be\n\n 16 behind [us].\u201d Id. \u00b6 116.\n\n 17 In seeking to establish that Defendants knew their forecasting ability was limited, Plaintiff\n\n 18 cites May 2024 statements by the company\u2019s interim CFO to the effect that \u201c[f]orecasting has\n\n 19 been difficult during the system transition as we have not had good visibility to our normal\n\n 20 business reporting and tools. Compounding this have been data integration issues and new\n\n 21 processes that we and our operators are adapting to within new applications.\u201d ECF No. 38 \u00b6 127;\n\n 22 see also id. \u00b6 129 (Sheedy explaining that \u201cthe gross margin and the systems issues\u201d persisted into\n\n 23 the second quarter in part because of \u201climited data visibility for how we manage and forecast\n\n 24 margin,\u201d which was \u201ca bigger issue in the first quarter than it was in the fourth quarter because of\n\n 25 the amount of time that we've been managing the business with limited data\u201d).\n\n 26 These May 2024 admissions do not establish the falsity of Defendants\u2019 November 2023\n\n 27 and February 2024 predictions that the Systems Transition disruption would soon end for several\n\n 28 reasons. First, Sheedy\u2019s comment suggests a problem that was present in the fourth quarter but\n 11\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 12 of 18\n\n\n\n\n 1 ramped up in the first quarter, meaning that only Defendants\u2019 February 2024 statements\n\n 2 (pertaining to Q4 2023) could be expected to have accounted for the forecasting issue, which in\n\n 3 any event was apparently still minor. Second, and more fundamentally, Plaintiff does not explain\n\n 4 why margin forecasting accuracy bears directly on Defendants\u2019 ability to know whether and when\n\n 5 the Systems Transition disruption would end. Defendants may have reasonably believed that as\n\n 6 deficiencies in the new IT systems were resolved or abated, recovery of the company\u2019s margins\n\n 7 would naturally follow. That prediction would not necessarily rely on the usual margin\n\n 8 forecasting tools.\n\n 9 Plaintiff also argues that these statements were misleading because \u201ccommission expense\n\n 10 calculations materially affecting the next quarter\u2019s results could not be made until the current\n\n 11 quarter\u2019s end.\u201d ECF No. 40 at 20. He points to Interim CFO Lindsay Gray\u2019s statement that the\n\n 12 company \u201chad to complete \u2018catch-up invoice processing and final margin reconciliation and the\nNorthern District of California\n United States District Court\n\n\n\n\n 13 end of the quarter\u2019 in order to calculate store margins and IO commissions, which \u2018can only be\n\n 14 calculated after a full inventory period has been completed.\u2019\u201d Id. at 21 (citing ECF No. 38 \u00b6 118).\n\n 15 It is not clear, however, why the absence of final store margin calculations undermined\n\n 16 Defendants\u2019 ability to make predictions about the end of the disruption caused by the Systems\n\n 17 Transition.1 Plaintiff has not adequately alleged falsity.\n\n 18 Additionally, Defendants correctly aver that these statements are forward-looking and\n\n 19 therefore immune from liability. ECF No. 39 at 15\u201316. Forward-looking statements are\n\n 20 nonetheless actionable if they were made with actual knowledge of their misleading nature. 15\n\n 21 U.S.C. \u00a7 78u\u20135(c)(1)(B)(i); see In re Twitter, Inc. Sec. Litig., 506 F. Supp. 3d 867, 882 (N.D. Cal.\n\n 22 2020), aff\u2019d sub nom. Weston Fam. P\u2019ship LLLP v. Twitter, Inc., 29 F.4th 611 (9th Cir. 2022).\n\n 23 But here, for the reasons set forth above, Plaintiff has alleged no facts suggesting that Defendants\n\n 24 predicted the impending end of the Systems Transition disruption with actual knowledge that such\n\n 25 statements were misleading.\n\n 26\n 27 1\n For the same reason, the Court rejects Plaintiff\u2019s argument that the non-final nature of IO\n 28 commission data establishes Sheedy and Brascher\u2019s scienter for the falsity of these reassuring\n statements. ECF No. 40 at 26.\n 12\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 13 of 18\n\n\n\n\n 1 * * *\n\n 2 Plaintiff remarks that \u201c[c]ourts routinely sustain claims at the pleading stage based on\n\n 3 misrepresentations about a company\u2019s problematic ERP implementation.\u201d ECF No. 40 at 13. His\n\n 4 cited cases, however, highlight the deficiencies in the instant complaint. For instance, in\n\n 5 Employees Retirement System of Puerto Rico Electric Power Authority v. Conduent Inc., the\n\n 6 defendants stated that they had \u201caddressed our sub-optimized IT-related workforce and vendor\n\n 7 relationships\u201d and \u201cinventoried the company\u2019s legacy IT systems,\u201d but the complaint alleged that\n\n 8 defendants had in fact done neither. No. CV 19-8237 (SDW) (SCM), 2020 WL 3026536, at *2\n\n 9 (D.N.J. June 5, 2020). Other materially false statements included \u201cinforming investors that the\n\n 10 initial phase of the Strategic Transformation was complete, and failing to disclose that the lack of\n\n 11 systems inventory and ensuing problems with the data migration were causing significant\n\n 12 problems with Conduent\u2019s tolling business.\u201d Id.\nNorthern District of California\n United States District Court\n\n\n\n\n 13 Likewise in Hall v. Rent-A-Ctr., Inc., the complaint alleged that the defendants failed to\n\n 14 disclose that \u201cthe rollout of its proprietary point-of-sale (\u2018POS\u2019) management information system\n\n 15 . . . was an abject failure fraught with stability and functionality problems that directly affected the\n\n 16 Company\u2019s ability to complete sales and collect rental income.\u201d No. 4:16CV978, 2017 WL\n\n 17 6379334, at *1 (E.D. Tex. Dec. 14, 2017); see also id. at *6 (noting that \u201cthe complaint alleges\n\n 18 Defendants repeatedly misrepresented and omitted the severe problems the Company was\n\n 19 encountering in the development and implementation of its POS system\u201d). And In re Towne\n\n 20 Servs., Inc. Sec. Litig. denied a motion to dismiss on similar grounds. 184 F. Supp. 2d 1308, 1319\n\n 21 (N.D. Ga. 2001). That court found plausible the theory that \u201cthe Prospectus\u2019s open-ended,\n\n 22 general, and future-oriented warnings about Towne\u2019s computer systems (and the possibility of\n\n 23 customer attrition) are misleading in light of severe, discrete problems Towne had already suffered\n\n 24 in this regard.\u201d Id.\n\n 25 Here, Plaintiff has not identified any material misrepresentation and Defendants have\n\n 26 consistently disclosed the issues caused by the Systems Transition. As Defendants argue,\n\n 27 \u201cPlaintiff\u2019s theory boils down to the claim that Defendants should have disclosed more detail or\n\n 28 sounded more pessimistic when describing the progress and challenges associated with the\n 13\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 14 of 18\n\n\n\n\n 1 systems upgrade.\u201d ECF No. 39 at 14\u201315. But this is not sufficient to state a claim for a violation\n\n 2 of the securities laws. The fact that Defendants were allegedly wrong in some of their predictions\n\n 3 is likewise insufficient. \u201c[L]later, sobering revelations do not by themselves make the earlier,\n\n 4 cheerier statement a falsehood.\u201d Cloudera, 121 F.4th at 1189 (cleaned up). The complaint does\n\n 5 not state a claim under Section 10(b) and Rule 10b\u20135 because it identifies no material\n\n 6 misrepresentation or omission.\n\n 7 B. Scienter\n\n 8 Plaintiff likewise fails to allege scienter. \u201cScienter is \u2018a mental state embracing intent to\n\n 9 deceive, manipulate, or defraud.\u2019\u201d Intuitive Surgical, 759 F.3d at 1061 (quoting Ernst & Ernst v.\n\n 10 Hochfelder, 425 U.S. 185, 193 n.12 (1976)). To plead scienter, the complaint must \u201c\u2018state with\n\n 11 particularity facts giving rise to a strong inference\u2019 that defendants acted with the intent to deceive\n\n 12 or with deliberate recklessness as to the possibility of misleading investors.\u201d Berson, 527 F.3d at\nNorthern District of California\n United States District Court\n\n\n\n\n 13 987 (quoting 15 U.S.C. \u00a7 78u\u20134(b)(2)); see also Vernazza v. S.E.C., 327 F.3d 851, 860 (9th Cir.\n\n 14 2003) (scienter \u201cmay be supported by knowing or reckless conduct, without a showing of willful\n\n 15 intent to defraud\u201d (cleaned up)). \u201cReckless conduct may be defined as a highly unreasonable\n\n 16 omission, involving . . . an extreme departure from the standards of ordinary care, and which\n\n 17 presents a danger of misleading buyers or sellers that is either known to the defendant or is so\n\n 18 obvious that the actor must have been aware of it.\u201d Hollinger v. Titan Capital Corp., 914 F.2d\n\n 19 1564, 1569 (9th Cir. 1990) (en banc). This is a \u201chigh burden.\u201d Prodanova v. H.C. Wainwright &\n\n 20 Co., LLC, 993 F.3d 1097, 1108 (9th Cir. 2021). The relevant inquiry \u201cis whether all of the facts\n\n 21 alleged, taken collectively, give rise to a strong inference of scienter.\u201d Tellabs, Inc. v. Makor\n\n 22 Issues & Rts., Ltd., 551 U.S. 308, 310 (2007).\n\n 23 Here, Plaintiff does not identify any facts suggesting that Defendants were aware of or\n\n 24 reckless about the possibility of deceiving investors.\n\n 25 In endeavoring to establish Defendants\u2019 knowledge that the Systems Transition would\n\n 26 result in disruption and financial impact, Plaintiff points to Sheedy\u2019s statement in November 2023\n\n 27 that \u201cwe did expect some disruption,\u201d ECF No. 38 \u00b6\u00b6 89, 93, but that possibility of disruption was\n\n 28 disclosed in the August 2023 10-Q and 2022 Form 10-K. Plaintiff also points to evidence from\n 14\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 15 of 18\n\n\n\n\n 1 FE1 that the Project Steering Committee for the Systems Transition held weekly meetings\n\n 2 attended by Bracher to discuss \u201ccritical issues\u201d with the transition and what was \u201cready and not\n\n 3 ready,\u201d maintaining \u201ctracking documents\u201d to track ongoing issues and readiness, which the\n\n 4 Accounting and Finance departments discussed during weekly meetings. Id. \u00b6\u00b6 43\u201345. But this\n\n 5 only suggests routine planning and preparation for a major infrastructure change\u2014not Defendants\u2019\n\n 6 knowledge of their own unpreparedness. Similarly, Former Employee evidence that the company\n\n 7 made the decision to launch the systems transition without having tested the system using live data\n\n 8 or completed end-to-end UAT likewise suggests, at worst, poor preparation. ECF No. 40 at 24.\n\n 9 Under these circumstances, the failure to complete a certain kind of testing falls short of\n\n 10 establishing that Defendants knew an unsuccessful and disruptive transition was likely. Plaintiff\n\n 11 also cites Former Employees\u2019 statements that the company was unprepared for the launch and that\n\n 12 most colleagues felt the launch was premature, ECF No. 40 at 24 (citing ECF No. 38 \u00b6\u00b6 48\u201349),\nNorthern District of California\n United States District Court\n\n\n\n\n 13 but this testimony does not establish Defendants\u2019 knowledge or state of mind.2\n\n 14 Plaintiff is similarly unable to establish scienter concerning the company\u2019s lack of\n\n 15 visibility into its financials and inventory or the ineffectiveness of its internal controls during the\n\n 16 Systems Transition. Plaintiff points to Defendants\u2019 May 2024 disclosures that \u201c[f]orecasting has\n\n 17 been difficult during the system transition as we have not had good visibility to our normal\n\n 18 business reporting and tools,\u201d ECF No. 38 \u00b6 126, and that \u201climited data visibility for how we\n\n 19 manage and forecast margin\u201d caused margin and systems issues to persist, id. \u00b6 129. Those\n\n 20 statements, however, do not specify when Defendants became aware of the extent of the data\n\n 21 visibility challenges. And the underlying alleged fraudulent statements, in any case, are\n\n 22\n 2\n 23 Defendants argue that the Court should also disregard these Former Employee allegations for the\n additional reason that Plaintiff has not established that the Former Employees are \u201cin a position to\n 24 know\u201d that the launch was premature. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981,\n 996 (9th Cir. 2009), as amended (Feb. 10, 2009); Forescout, 63 F.4th at 767 (complaint may rely\n 25 on confidential witness testimony if it provides \u201can adequate basis for determining that the\n witnesses in question have personal knowledge of the events they report\u201d). The Former\n 26 Employees were a Director of Financial Planning and Analysis, a grocery buyer, and an assistant\n planner in charge of buying and allocating products. ECF No. 38 \u00b6\u00b6 38\u201340. Defendants\u2019\n 27 objection is well-taken as to FE2 and FE3. As to FE1, however, the complaint alleges that FE1\n worked on a team \u201cdedicated to the implementation of the SAP systems.\u201d Id. \u00b6 41. As such, FE1\n 28 may have held an educated opinion that the launch was premature. That opinion nonetheless does\n not establish Defendants\u2019 scienter.\n 15\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 16 of 18\n\n\n\n\n 1 Defendants\u2019 bullish predictions that the Systems Transition disruption would soon end.\n\n 2 Defendants\u2019 awareness of margins forecasting difficulties does not establish scienter as to those\n\n 3 statements.\n\n 4 Plaintiff also points to Defendant\u2019s 2023 10-K, released in February 2024, which disclosed\n\n 5 pervasive control deficiencies rendering ineffective as of December 30, 2023 the company\u2019s\n\n 6 internal control over financial reporting. ECF No. 38 \u00b6 122. But as the Court already observed,\n\n 7 evidence of what Defendants knew in February 2024 sheds little light on what they knew in\n\n 8 November 2023 when they signed SOX certifications asserting that internal controls remained\n\n 9 effective. Id. \u00b6\u00b6 79\u201382.\n\n 10 Finally, FE1\u2019s account of inventory visibility challenges commencing immediately in\n\n 11 August 2023 and FE3\u2019s vague statement that the Systems Transition \u201cbroke all the functionality of\n\n 12 everything\u201d do not speak to Defendants\u2019 knowledge. Id. \u00b6\u00b6 58, 60; see Zucco Partners, LLC v.\nNorthern District of California\n United States District Court\n\n\n\n\n 13 Digimarc Corp., 552 F.3d 981, 995 (9th Cir. 2009), as amended (Feb. 10, 2009) (\u201c[T]hose\n\n 14 statements which are reported by confidential witnesses with sufficient reliability and personal\n\n 15 knowledge must themselves be indicative of scienter.\u201d).\n\n 16 That Sheedy and Bracher\u2019s held high-ranking positions at the company and therefore may\n\n 17 have been aware of the company\u2019s core operations is also insufficient to establish scienter under\n\n 18 these circumstances. Plaintiff argues that \u201c[t]he Systems Transition was \u2018such a central\n\n 19 component of [the Company\u2019s] operations that Defendants can be presumed to have knowledge of\n\n 20 the problems with [it].\u2019\u201d ECF No. 40 at 26 (quoting Azar v. Yelp, Inc., No. 18-cv-00400-EMC,\n\n 21 2018 WL 6182756, at *20 (N.D. Cal. Nov. 27, 2018)). But that Defendants were aware of\n\n 22 problems with the Systems Transition does not suggest they were aware of the misleading nature\n\n 23 of their own statements. For instance, one underlying fact of which Sheedy and Bracher were\n\n 24 supposedly aware is that the company had not conducted end-to-end UAT testing. As the Court\n\n 25 has explained, this fact did not necessarily suggest that the transition would be unsuccessful.\n\n 26 The same is true of Bracher\u2019s departure in December 2023 and Sheedy\u2019s termination in\n\n 27 October 2024; those facts falls woefully short of establishing that Defendants \u201cacted with the\n\n 28 intent to deceive or with deliberate recklessness as to the possibility of misleading investors.\u201d\n 16\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 17 of 18\n\n\n\n\n 1 Berson, 527 F.3d at 987. In fact, neither the complaint nor Plaintiff\u2019s briefing explains why the\n\n 2 departures suggest Defendants committed fraud, rather than simply executing the IT systems\n\n 3 transition poorly. See ECF No. 40 at 27; ECF No. 138 \u00b6\u00b6 104\u201306, 138\u201339. It is Plaintiff\u2019s burden\n\n 4 to \u201callege sufficient information to differentiate between a suspicious change in personnel and a\n\n 5 benign one.\u201d Zucco, 552 F.3d at 1002; see In re Cornerstone Propane Partners, L.P., 355 F.\n\n 6 Supp. 2d 1069, 1093 (N.D. Cal. 2005) (\u201cMost major stock losses are often accompanied by\n\n 7 management departures, and it would be unwise for courts to penalize directors for these\n\n 8 decisions.\u201d).\n\n 9 The complaint fails to allege scienter as to any misrepresentation.\n\n 10 C. Loss Causation\n\n 11 Pleading loss causation requires allegations of \u201ca causal connection between the material\n\n 12 misrepresentation and the loss.\u201d Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342 (2005). \u201cAt the\nNorthern District of California\n United States District Court\n\n\n\n\n 13 pleading stage, a plaintiff need only allege that the \u2018revelation of fraudulent activity,\u2019 rather than\n\n 14 changing market conditions or other unrelated factors, proximately caused the decline in\n\n 15 defendant\u2019s stock price.\u201d Grigsby v. BofI Holding, Inc., 979 F.3d 1198, 1204\u201305 (9th Cir. 2020).\n\n 16 \u201cOne way to prove loss causation is to show that the defendant\u2019s fraud was revealed to the market\n\n 17 through one or more \u2018corrective disclosures\u2019 and that the company\u2019s stock price declined as a\n\n 18 result.\u201d In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 786 (9th Cir. 2020). Plaintiff may also\n\n 19 plead \u201cmaterialization of the risk,\u201d alleging \u201cthat \u2018the very facts about which defendant lied\u2019\n\n 20 caused the injuries.\u201d In re WageWorks, Inc., Sec. Litig., No. 18-CV-01523-JSW, 2020 WL\n\n 21 2896547, at *5 (N.D. Cal. June 1, 2020) (quoting Mineworkers\u2019 Pension Scheme v. First Solar\n\n 22 Inc., 881 F. 3d 750, 753 (9th Cir. 2018)). Plaintiff argues that concealed risk gradually\n\n 23 materialized as the company partially revealed the true impacts of the Systems Transition,\n\n 24 resulting in \u201csix separate stock declines.\u201d ECF No. 40 at 30. Because the Court has concluded\n\n 25 that that the complaint does not sufficiently allege concealment of risk, this argument fails. See\n\n 26 Yaron v. Intersect ENT, Inc., No. 19-cv-02647-JSW, 2020 WL 6750568, at *10 (N.D. Cal June 19,\n\n 27 2020) (no loss causation where there were no allegations of \u201cany hidden risk\u201d).\n\n 28 ///\n 17\n\f Case 4:25-cv-00957-JST Document 44 Filed 09/16/26 Page 18 of 18\n\n\n\n\n 1 CONCLUSION\n\n 2 The motion to dismiss is granted. ECF No. 39. Plaintiffs may file an amended complaint\n\n 3 addressing the deficiencies identified herein within 28 days of the date of this order.\n\n 4 IT IS SO ORDERED.\n\n 5 Dated: September 16, 2026\n ______________________________________\n 6\n JON S. TIGAR\n 7 United States District Judge\n\n 8\n\n 9\n\n 10\n\n 11\n\n 12\nNorthern District of California\n United States District Court\n\n\n\n\n 13\n\n 14\n\n 15\n\n 16\n\n 17\n\n 18\n 19\n\n 20\n\n 21\n\n 22\n\n 23\n\n 24\n\n 25\n\n 26\n 27\n\n 28\n 18\n\f","ocr_status":2,"date_upload":"2026-09-17T15:42:50.509981-07:00","document_number":"44","attachment_number":null,"pacer_doc_id":"035027655822","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Order on Motion to Dismiss","acms_document_guid":""}],"date_created":"2026-09-16T08:35:41.229011-07:00","date_modified":"2026-10-16T05:00:18.815656-07:00","date_filed":"2026-09-16","time_filed":"08:09:24","entry_number":44,"recap_sequence_number":"2026-09-16.001","pacer_sequence_number":147,"description":"ORDER GRANTING MOTION TO DISMISS by Judge Jon S. Tigar granting 39 Motion to Dismiss. Amended Complaint due by 10/14/2026. (dms, COURT STAFF) (Filed on 9/16/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/470030118/","id":470030118,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/485387920/","id":485387920,"tags":[],"absolute_url":"/docket/69592783/43/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2026-07-07T15:33:24.729569-07:00","date_modified":"2026-07-07T15:33:24.739448-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"43","attachment_number":null,"pacer_doc_id":"035027349782","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Notice (Other)","acms_document_guid":""}],"date_created":"2026-07-07T15:33:24.662814-07:00","date_modified":"2026-10-15T06:57:01.320219-07:00","date_filed":"2026-07-07","time_filed":"15:20:38","entry_number":43,"recap_sequence_number":"2026-07-07.001","pacer_sequence_number":145,"description":"NOTICE by Casey Cavanaugh of Firm Name Change (Schall, Brian) (Filed on 7/7/2026) (Entered: 07/07/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/457274765/","id":457274765,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/472255177/","id":472255177,"tags":[],"absolute_url":"","date_created":"2026-03-16T08:33:38.530066-07:00","date_modified":"2026-03-16T08:33:38.538653-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Clerk's Notice","acms_document_guid":""}],"date_created":"2026-03-16T08:33:38.507664-07:00","date_modified":"2026-03-16T08:33:38.507691-07:00","date_filed":"2026-03-16","time_filed":"08:01:39","entry_number":null,"recap_sequence_number":"2026-03-16.001","pacer_sequence_number":null,"description":"","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/452232668/","id":452232668,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/467094691/","id":467094691,"tags":[],"absolute_url":"/docket/69592783/41/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2026-01-30T14:36:30.106597-08:00","date_modified":"2026-05-14T06:45:11.491525-07:00","sha1":"d9688d87ed87679ab849200a9e547356b8f3c671","page_count":20,"file_size":268796,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.41.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.41.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 1 of 20\n\n\n\n1 GIBSON, DUNN & CRUTCHER LLP\n CRAIG VARNEN, SBN 172603\n2 cvarnen@gibsondunn.com\n 333 South Grand Avenue\n3 Los Angeles, California 90071-3197\n Telephone: 213.229.7000\n4 Facsimile: 213.229.7520\n5\n JEFF LOMBARD, SBN 285371\n6 jlombard@gibsondunn.com\n 310 University Avenue\n7 Palo Alto, California 94301-1744\n Telephone: 650.849.5300\n8 Facsimile: 650.849.5333\n9 Attorneys for Defendants\n Grocery Outlet Holding Corp., Robert Joseph\n10 Sheedy, and Charles C. Bracher\n11\n IN THE UNITED STATES DISTRICT COURT\n12\n FOR THE NORTHERN DISTRICT OF CALIFORNIA\n13\n OAKLAND DIVISION\n14\n15\n IN RE GROCERY OUTLET HOLDING CASE NO. 4:25-cv-957-JST\n16 CORP. SECURITIES LITIGATION\n17 CLASS ACTION\n\n18 Hon. Jon S. Tigar\n Courtroom 6\n19\n20 DEFENDANTS\u2019 REPLY IN SUPPORT OF\n MOTION TO DISMISS AMENDED\n21 COMPLAINT\n\n22 Date: March 19, 2026\n Time: 2:00 p.m.\n23\n24 Action Filed: January 30, 2025\n25\n26\n27\n28\n\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 2 of 20\n\n\n\n1 TABLE OF CONTENTS\n2 Page\n3 I. INTRODUCTION ......................................................................................................................1\n4 II. ARGUMENT ..............................................................................................................................2\n5\n A. Plaintiff Fails to Plead Falsity ......................................................................................... 2\n6\n 1. Defendants\u2019 August 2023 statements were not false or misleading. ..................2\n7\n a. Plaintiff fails to plead a false or misleading statement. .......................... 2\n8\n b. The challenged statements are not actionable. ........................................ 5\n9\n 2. Defendants\u2019 internal control statements were not false or misleading. ..............7\n10\n 3. Defendants\u2019 November 2023 and February 2024 statements were not false or\n11 misleading. ..........................................................................................................7\n12 a. Plaintiff fails to plead a false or misleading statement. .......................... 7\n13 b. The challenged statements are not actionable. ........................................ 9\n14 B. Plaintiff Fails to Plead Scienter ..................................................................................... 10\n15 1. Plaintiff\u2019s confidential witnesses do not establish scienter. ..............................10\n16\n 2. The circumstantial allegations of purported knowledge do not support an\n17 inference of scienter. .........................................................................................12\n\n18 3. The most plausible inference is that Defendants acted in good faith. ...............13\n\n19 C. Plaintiff Fails to Plead Loss Causation ......................................................................... 14\n20 III. CONCLUSION .........................................................................................................................15\n21\n22\n23\n24\n25\n26\n27\n28\n i\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 3 of 20\n\n\n\n1 TABLE OF AUTHORITIES\n2 Page(s)\n Cases\n3\n In re Accuray, Inc. Sec. Litig.,\n4 757 F. Supp. 2d 936 (N.D. Cal. 2010) ............................................................................................11\n5 In re Alphabet, Inc. Sec. Litig.,\n 1 F.4th 687 (9th Cir. 2021) ...............................................................................................................4\n6\n Azar v. Yelp, Inc.,\n7 2018 WL 6182756 (N.D. Cal. Nov. 27, 2018)................................................................................12\n8 Berson v. Applied Signal Tech., Inc.,\n 527 F.3d 982 (9th Cir. 2008).............................................................................................................4\n9\n Bhangal v. Hawaiian Elec. Indus., Inc.,\n10 2024 WL 4505465 (N.D. Cal. Oct. 15, 2024) .................................................................................14\n11 Brendon v. Allegiant Travel Co.,\n 412 F. Supp. 3d 1244 (D. Nev. 2019) .............................................................................................13\n12\n City of Sunrise Firefighters\u2019 Pension Fund v. Oracle Corp.,\n13 2019 WL 6877195 (N.D. Cal. Dec. 17, 2019) ................................................................................11\n14 In re Cloudera, Inc.,\n 121 F.4th 1180 (9th Cir. 2024) .................................................................................................3, 8, 9\n15\n In re Cutera Sec. Litig.,\n16 610 F.3d 1103 (9th Cir. 2010).......................................................................................................6, 8\n17 Davoli v. Costco Wholesale Corp.,\n 854 F. App\u2019x 116 (9th Cir. 2021) .....................................................................................................7\n18\n Emps. Ret. Sys. of P.R. Elec. Power Auth. v. Conduent Inc.,\n19 2020 WL 3026536 (D.N.J. June 5, 2020) .........................................................................................5\n20 In re Facebook, Inc. Sec. Litig.,\n 84 F.4th 844 (9th Cir. 2023) .............................................................................................................4\n21\n In re FibroGen, Inc. Sec. Litig.,\n22 2022 WL 2793032 (N.D. Cal. July 15, 2022) .................................................................................12\n23 Glazer Capital Mgmt., L.P. v. Forescout Technologies, Inc.,\n 63 F.4th 747 (9th Cir. 2023) .........................................................................................................4, 6\n24\n Hall v. Rent-A-Ctr., Inc.,\n25 2017 WL 6379334 (E.D. Tex. Dec. 14, 2017) ..................................................................................5\n26 HRSA-ILA Funds v. Adidas AG,\n 745 F. Supp. 3d 1127 (D. Or. 2024), aff\u2019d, 2025 WL 3471703 (9th Cir. Dec. 3,\n27 2025) .................................................................................................................................................4\n28\n ii\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 4 of 20\n\n\n\n1 Janus Cap. Grp., Inc. v. First Derivative Traders,\n 564 U.S. 135 (2011) ........................................................................................................................12\n2\n Lloyd v. CVB Fin. Corp.,\n3 811 F.3d 1200 (9th Cir. 2016).........................................................................................................14\n4 Lomingkit v. Apollo Educ. Grp. Inc.,\n 275 F. Supp. 3d 1139 (D. Ariz. 2017)...............................................................................................3\n5\n Loos v. Immersion Corp.,\n6 762 F.3d 880 (9th Cir. 2014)...........................................................................................................15\n7 Macquarie Infrastructure Corp. v. Moab Partners, L.P.,\n 601 U.S. 257 (2024) ..........................................................................................................................4\n8\n Mallen v. Alphatec Holdings, Inc.,\n9 861 F. Supp. 2d 1111 (S.D. Cal. 2012) ...........................................................................................13\n10 In re Maxwell Techs., Inc. Sec. Litig.,\n 18 F. Supp. 3d 1023 (S.D. Cal. 2014) .............................................................................................12\n11\n Metzler Inv. GMBH v. Corinthian Colleges, Inc.,\n12 540 F.3d 1049 (9th Cir. 2008)...................................................................................................14, 15\n13 Nguyen v. Endologix, Inc.,\n 962 F.3d 405 (9th Cir. 2020).....................................................................................................11, 14\n14\n In re NVIDIA Corp. Sec. Litig.,\n15 768 F.3d 1046 (9th Cir. 2014)...................................................................................................12, 13\n16 Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund,\n 575 U.S. 175 (2015) ......................................................................................................................6, 9\n17\n In re Oracle Corp. Sec. Litig.,\n18 627 F.3d 376 (9th Cir. 2010).............................................................................................................8\n19 Oregon Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,\n 774 F.3d 598 (9th Cir. 2014)...........................................................................................................12\n20\n Prodanova v. H.C. Wainwright & Co., LLC,\n21 993 F.3d 1097 (9th Cir. 2021).....................................................................................................2, 14\n22 In re Quality Sys., Inc. Sec. Litig.,\n 865 F.3d 1130 (9th Cir. 2017)...........................................................................................................7\n23\n In re Rigel Pharm., Inc. Sec. Litig.,\n24 697 F.3d 869 (9th Cir. 2012).............................................................................................................4\n25 Shnayder v. Allbirds, Inc.,\n 2025 WL 1745596 (N.D. Cal. June 23, 2025) ................................................................................12\n26\n In re SunPower Corp. Sec. Litig.,\n27 769 F. Supp. 3d 1042 (N.D. Cal. 2025) ........................................................................................4, 6\n28\n iii\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 5 of 20\n\n\n\n1 In re Syntex Corp. Sec. Litig.,\n 95 F.3d 922 (9th Cir. 1996)...............................................................................................................6\n2\n Tellabs, Inc. v. Makor Issues & Rts., Ltd.,\n3 551 U.S. 308 (2007) ..................................................................................................................10, 13\n4 In re Towne Servs., Inc. Sec. Litig.,\n 184 F. Supp. 2d 1308 (N.D. Ga. 2001) .............................................................................................5\n5\n In re VeriFone Sec. Litig.,\n6 11 F.3d 865 (9th Cir. 1993)...........................................................................................................1, 5\n7 Wochos v. Tesla, Inc.,\n 985 F.3d 1180 (9th Cir. 2021).......................................................................................................6, 9\n8\n Zucco Partners LLC v. Digimarc Corp.,\n9 552 F.3d 981 (9th Cir. 2009)...........................................................................................................13\n10 Regulations\n11 17 C.F.R. \u00a7 229.308(a) ............................................................................................................................7\n12\n13\n14\n15\n16\n17\n18\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n iv\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 6 of 20\n\n\n\n1 I. INTRODUCTION\n2 This case is a textbook attempt to repackage\u2014entirely after the fact\u2014a disclosed and evolving\n3 business challenge as fraud.1 Plaintiff\u2019s Opposition (\u201cOpp\u201d; ECF No. 40) confirms as much. Unable\n4 to plead facts showing that any challenged statement was false or misleading when made\u2014as required\n5 by the PSLRA\u2014Plaintiff relies instead on hindsight, speculation, and snippets of Defendants\u2019\n6 statements taken out of context in an attempt to transform a difficult but transparently disclosed IT\n7 systems transition (the \u201cSystems Transition\u201d) into a securities fraud claim. The PSLRA forbids that\n8 tactic.\n9 From the outset, Defendants told investors exactly what they knew, when they knew it. They\n10 warned that the Systems Transition was complex, carried risk, and could disrupt operations and thereby\n11 impact the Company\u2019s financial results. As challenges emerged, Defendants updated the market about\n12 what they were seeing, how they were responding, and how their expectations were evolving. That is\n13 the model of corporate transparency the securities laws were designed to encourage. The fact that the\n14 Systems Transition ultimately proved more challenging than Grocery Outlet expected is not fraud; it is\n15 evidence that Grocery Outlet operates in the real world where challenging business initiatives\n16 sometimes lead to disappointing outcomes. The Complaint should be dismissed because it lacks any\n17 particularized allegations establishing contemporaneous falsity or a strong inference of scienter.\n18 The falsity allegations collapse under scrutiny. Plaintiff does not identify a single fact known\n19 at the time of any challenged statement that contradicted anything Defendants said. Instead, he\n20 advances classic \u201cfraud by hindsight\u201d theories, claiming Defendants \u201cmust have known\u201d the magnitude\n21 of disruptions that later materialized, mischaracterizing comments acknowledging risk as purported\n22 admissions of certainty, and relying on later disclosures to infer earlier knowledge. The Ninth Circuit\n23 rejects precisely this type of pleading. See, e.g., In re VeriFone Sec. Litig., 11 F.3d 865, 871 (9th Cir.\n24 1993).\n25 Scienter presents another insurmountable obstacle. Plaintiff does not allege any motive for\n26 fraud and concedes there is none. Plaintiff, instead, offers a grab bag of weak circumstantial theories\n27 1\n Capitalized terms used but not defined herein shall have the meaning ascribed to them in Defendants\u2019\n28 Motion (\u201cMot.,\u201d ECF No. 39). Unless stated otherwise, all emphasis is added and all internal citations\n and quotations are omitted.\n 1\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 7 of 20\n\n\n\n1 that courts have long deemed insufficient: confidential witnesses that cannot speak to Defendants\u2019\n2 state of mind regarding the alleged misstatements, vague invocations of \u201ccore operations,\u201d routine\n3 executive departures, and hindsight criticism of disclosures regarding evolving challenges. As the\n4 Ninth Circuit has made clear, the absence of any plausible motive is a \u201csubstantial hurdle\u201d to pleading\n5 scienter and requires \u201ccompelling and particularized facts showing fraudulent intent or deliberate\n6 recklessness.\u201d Prodanova v. H.C. Wainwright & Co., LLC, 993 F.3d 1097, 1103, 1108 (9th Cir. 2021).\n7 Plaintiff pleads no such facts here.\n8 In short, this case presents the exact fact pattern the PSLRA was enacted to prevent: a hindsight-\n9 driven attempt to convert business challenges\u2014openly disclosed and based on Defendants\u2019 then-best\n10 assessment of the facts on the ground\u2014into securities \u201cfraud.\u201d As discussed further below, the\n11 Amended Complaint should be dismissed in its entirety and with prejudice.\n12 II. ARGUMENT\n13 A. Plaintiff Fails to Plead Falsity\n14 Plaintiff\u2019s Opposition does not cure the fundamental pleading failure identified in Defendants\u2019\n15 Motion. It still does not allege with particularity that any challenged statement was false or misleading\n16 when made.2 See Mot. at 5\u201310. Instead, Plaintiff relies on hindsight, speculation about internal\n17 processes, and distorted quotations to recast a difficult but disclosed Systems Transition as securities\n18 fraud. He falls well short of his stringent pleading burden.\n19 Plaintiff challenges three sets of statements: (1) Defendants\u2019 early August 2023 statements\n20 about the forthcoming launch of the Systems Transition; (2) Defendants\u2019 Q3 2023 internal controls\n21 statements and certifications; and (3) Defendants\u2019 November 2023 and February 2024 statements\n22 regarding progress and expectations for the Systems Transition.\n23 1. Defendants\u2019 August 2023 statements were not false or misleading.\n24 a. Plaintiff fails to plead a false or misleading statement.\n25 Plaintiff\u2019s August 2023 falsity theory fails because it ignores a basic timing problem. As\n26 Defendants explained, the challenged statements were made on August 8 and 9, 2023\u2014before the\n27 2\n Notably, Plaintiff does not respond to Defendants\u2019 showing that the allegations attributed to the three\n28 former employees (\u201cFEs\u201d) do not contradict any challenged statement. Compare Mot. at 7, with Opp.\n at 7\u201316.\n 2\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 8 of 20\n\n\n\n1 Systems Transition launched weeks later. Mot. at 7. Plaintiff ignores this timing, see Opp. at 9\u201311,\n2 asserting that those statements (App\u2019x Statement Nos. 1\u20134) were misleading because the warned-of\n3 \u201crisks\u201d had \u201calready materialized.\u201d Opp. at 12. That assertion defies logic. A risk cannot have \u201calready\n4 materialized\u201d before the underlying event even occurs.\n5 This timing defect is fatal. Plaintiff pleads no facts showing that, as of August 8 and 9, 2023,\n6 Defendants knew the Systems Transition would cause the magnitude or duration of disruption later\n7 experienced, or that any specific operational failure had already occurred or was certain to occur.\n8 Securities fraud requires a contradiction between what was said and what was known then\u2014not\n9 speculation based on how events later unfolded. See In re Cloudera, Inc., 121 F.4th 1180, 1187, 1189\n10 (9th Cir. 2024). For instance, in Lomingkit, the court dismissed Section 10(b) claims challenging\n11 statements about a university\u2019s online classroom system upgrade where the defendants \u201cannounced\n12 technical difficulties and the negative effects of these difficulties\u201d as they arose and the plaintiffs failed\n13 to allege that later problems were known when the challenged statements were made. Lomingkit v.\n14 Apollo Educ. Grp. Inc., 275 F. Supp. 3d 1139, 1161\u201362 (D. Ariz. 2017); see also id. at 1156. Plaintiff\u2019s\n15 allegations regarding Defendants\u2019 August 2023 statements suffer from the same defect.\n16 Unable to plead contemporaneous falsity, Plaintiff pivots to Defendants\u2019 August 2023 risk\n17 disclosures,3 claiming they were misleading because Defendants allegedly \u201cskipped\u201d end-to-end user\n18 acceptance testing (\u201cUAT\u201d) and did not disclose that fact. Opp at 11. That theory fails for two\n19 independent reasons. First, the Amended Complaint does not adequately plead that UAT was\n20 \u201cskipped\u201d at all. Plaintiff identifies no report, meeting, or communication showing what testing\n21 allegedly did not occur, who made that decision, or when. To the contrary, Plaintiff concedes that the\n22 Company tested the system using \u201cdummy data.\u201d Opp. at 18; \u00b6 55. Second, and more fundamentally,\n23 even if Plaintiff had plausibly alleged some deficiency in testing, that allegation is irrelevant because\n24\n 3\n25 Defendants\u2019 August 2023 risk disclosures, which incorporated the risk factors from the 2022 Form\n 10-K, warned that the Systems Transition was complex and could cause operational disruption.\n26 Specifically, Defendants disclosed that \u201c[i]t is possible that we could experience implementation,\n operational and functionality issues, delays, higher than expected costs and other issues during the\n27 course of implementing and utilizing these improvements,\u201d along with \u201ca risk of business disruption,\n28 liability and reputational damage associated with these actions, including from not accurately capturing\n and maintaining data.\u201d App\u2019x Statement Nos. 1, 2.\n 3\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 9 of 20\n\n\n\n1 Defendants had no duty to disclose details about internal testing and project management. Neither the\n2 risk factor nor any other challenged August 2023 statement says anything about UAT or any other\n3 testing that was or was not done. See Mot. at 7; App\u2019x Statements Nos. 1\u20134. Defendants warned that\n4 the Systems Transition was complex and could cause disruption; they did not represent or imply that\n5 testing was complete, exhaustive, or risk-free. Absent such a statement, there is no actionable omission.\n6 Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. 257, 263 (2024); In re Rigel Pharm.,\n7 Inc. Sec. Litig., 697 F.3d 869, 880 n.8 (9th Cir. 2012). Ultimately, Plaintiff\u2019s UAT theory is simply\n8 another way of arguing that Defendants should have predicted, in early August 2023 (i.e., pre-launch),\n9 that disclosed risks would materialize post-launch in a manner that was more severe than anyone could\n10 have predicted. But the securities laws do not impose liability for failure to foresee, months in advance,\n11 how a disclosed risk would ultimately unfold.4 See HRSA-ILA Funds v. Adidas AG, 745 F. Supp. 3d\n12 1127, 1142\u201344 (D. Or. 2024), aff\u2019d, 2025 WL 3471703 (9th Cir. Dec. 3, 2025) (risk disclosures not\n13 misleading where plaintiffs failed to allege defendants knew, at the time of disclosure, that Kanye West\n14 would engage in future antisemitic behavior; later fallout did not retroactively render earlier risk\n15 warnings misleading).\n16 Plaintiff\u2019s reliance on Sheedy\u2019s November 2023 remarks to plead falsity of the August 2023\n17 statements also fails because it rests on a false premise\u2014that Defendants led investors to believe from\n18 the outset that the Systems Transition had no specter of risk. That theory is specious. As discussed\n19 above, Defendants expressly warned in August 2023 that the Systems Transition was complex, carried\n20 4\n Plaintiff\u2019s cases are inapposite. Each involved allegations that defendants framed risks as\n21 hypothetical despite possessing undisclosed, concrete facts showing that the warned-of harm had\n already occurred\u2014a critical feature absent here. See In re Facebook, Inc. Sec. Litig., 84 F.4th 844, 859\n22 (9th Cir. 2023) (risk disclosures misleading where defendants allegedly learned of a \u201cdataset\n Cambridge Analytica had compiled\u201d and \u201cthat the firm had violated Facebook\u2019s user data policies\u201d);\n23 In re Alphabet, Inc. Sec. Litig., 1 F.4th 687, 704 (9th Cir. 2021) (risk disclosures misleading where\n defendants allegedly knew of \u201csoftware glitch for a three-year period, which exposed the private\n24\n information of hundreds of thousands of Google+ users\u201d); Berson v. Applied Signal Tech., Inc., 527\n25 F.3d 982, 985\u201387 (9th Cir. 2008) (explanations of future revenue expectations misleading where\n defendants allegedly knew government \u201cstop-work\u201d orders regarding important contracts were already\n26 issued); Glazer Capital Mgmt., L.P. v. Forescout Technologies, Inc., 63 F.4th 747, 778\u201379 (9th Cir.\n 2023) (risk disclosures misleading where defendants allegedly knew merger had already failed); In re\n27 SunPower Corp. Sec. Litig., 769 F. Supp. 3d 1042, 1055 (N.D. Cal. 2025) (risk warnings inadequate\n28 \u201cgiven defendants\u2019 allegedly specific knowledge about SunPower\u2019s existing inability to meet its\n financial obligations\u201d).\n 4\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 10 of 20\n\n\n\n1 operational risk, and could disrupt operations and affect results. See supra at 3 n.3. Against that\n2 backdrop, Plaintiff cherry-picks fragments of Sheedy\u2019s later statement acknowledging that\n3 management \u201cdid expect\u201d some disruption and claims this shows Defendants \u201calways knew\u201d the extent\n4 of the problems that ultimately occurred. Opp. at 2, 5, 11, 17, 20. But Plaintiff omits the critical\n5 qualifier that defeats the argument: \u201cWe did expect as a result, some disruption, certainly not to this\n6 degree or this magnitude.\u201d \u00b6 93 (emphasis added). Read in context, Sheedy\u2019s statement confirms the\n7 severity of the disruption exceeded management\u2019s expectations\u2014not that Defendants concealed known\n8 risks in August 2023.\n9 At bottom, Plaintiff\u2019s falsity theory reduces to post-hoc disagreement with Defendants\u2019\n10 judgment and execution of a complex Systems Transition. But the securities laws do not impose\n11 liability for imperfect execution or outcomes that prove worse than expected absent contemporaneous\n12 contradictory facts, which are not pled here. See In re VeriFone, 11 F.3d at 871.5\n13 b. The challenged statements are not actionable.\n14 In any event, most of the August 2023 statements are also inactionable as a matter of law.\n15 Forward-Looking Statements. Plaintiff effectively concedes that three of the August 2023\n16 statements\u2014App\u2019x Statements Nos. 1, 3, 4\u2014were forward-looking. Opp. at 12. That concession is\n17 dispositive. Forward-looking statements are subject to absolute immunity under federal securities laws\n18 absent particularized allegations that Defendants made them with actual knowledge of falsity or\n19 without meaningful cautionary language. Mot. at 8\u20139. Plaintiff satisfies neither requirement.\n20 Plaintiff argues that Sheedy\u2019s August 2023 statements\u2014including that (1) the store portal \u201cwill\n21 provide operators with better analytics and easier access to information,\u201d App\u2019x Statement No. 3, and\n22\n23 5\n Plaintiff\u2019s out-of-Circuit \u201cERP implementation\u201d cases do not change the analysis. Opp. at 7\u20138. Each\n involved allegations that defendants affirmatively misrepresented the current status or functionality of\n24\n IT systems while concealing known, concrete failures that had already occurred. See Emps. Ret. Sys.\n25 of P.R. Elec. Power Auth. v. Conduent Inc., 2020 WL 3026536, at *2 (D.N.J. June 5, 2020) (allegations\n of overstated progress despite known modernization failures); Hall v. Rent-A-Ctr., Inc., 2017 WL\n26 6379334, at *2 (E.D. Tex. Dec. 14, 2017) (failure to disclose \u201clong history of stability and functionality\n problems\u201d); In re Towne Servs., Inc. Sec. Litig., 184 F. Supp. 2d 1308, 1314 (N.D. Ga. 2001)\n27 (misstatements about system reliability despite known disruption where \u201csystem shut down completely\n28 for some period of time\u201d). Plaintiff alleges no comparable misstatements or concealed system failures\n here.\n 5\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 11 of 20\n\n\n\n1 \u201cwill allow them to operate even more efficiently,\u201d App\u2019x Statement No. 4\u2014fall outside the safe harbor\n2 because Sheedy supposedly knew the Systems Transition was \u201cpremature\u201d and that disruption had\n3 already \u201cmaterialized.\u201d Opp. at 12. That argument fails. Awareness that a complex ERP rollout entails\n4 operational risk does not establish actual knowledge that forward-looking expectations will prove false.\n5 Nor are public companies required to concede that disclosed risks will unfold in their worst-case form.\n6 See Wochos v. Tesla, Inc., 985 F.3d 1180, 1193\u201394 (9th Cir. 2021).\n7 Plaintiff\u2019s fallback contention\u2014that cautionary language was not \u201cmeaningful\u201d\u2014is similarly\n8 misguided. Opp. at 12, 16. Plaintiff pleads no facts showing that, by early August 2023 (several weeks\n9 before launch), specific disruptions had already occurred in a manner that rendered Defendants\u2019 risk\n10 warnings misleading. See supra at 3\u20134. To the contrary, Defendants consistently warned that the\n11 Systems Transition was complex, that disruption could persist, and that results could be adversely\n12 affected. See Mot. at 3\u20134. Plaintiff relies on cases holding that cautionary language was inadequate\n13 where defendants framed risks as merely hypothetical despite knowing the warned-of harm had already\n14 occurred. But those cases presuppose well-pleaded facts showing that the risk had already materialized\n15 in a concrete way known to the speaker.6 Plaintiff pleads no such facts here. See supra at 3.\n16 Opinion. The August 2023 statements discussing potential disruptions, anticipated benefits,\n17 and expected improvements were also nonactionable opinions. Mot. at 9\u201310; App\u2019x Statement Nos.\n18 1, 3, 4. To plead falsity of an opinion statement, Plaintiff must allege particularized facts showing\n19 Defendants did not genuinely believe what they said or possessed information fundamentally\n20 inconsistent with those views at the time. Omnicare, Inc. v. Laborers Dist. Council Constr. Indus.\n21 Pension Fund, 575 U.S. 175, 184 (2015). Plaintiff alleges neither. Opp. at 11\u201312.\n22 Optimism. Defendants\u2019 early August 2023 statements touting the Systems Transition\u2019s\n23 anticipated improvements are paradigmatic corporate optimism. App\u2019x Statements Nos. 3, 4; see In re\n24 Cutera Sec. Litig., 610 F.3d 1103, 1111 (9th Cir. 2010); In re Syntex Corp. Sec. Litig., 95 F.3d 922,\n25 933 (9th Cir. 1996). Indeed, Plaintiff concedes these remarks were merely \u201cSheedy boast[ing].\u201d Opp.\n26 at 9. And Plaintiff identifies no concrete, verifiable representation in these statements that could\n27\n 6\n28 Plaintiff again relies on Forescout and SunPower, Opp. at 12, which fail here for the same reasons\n described above. See supra at 4 n.4.\n 6\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 12 of 20\n\n\n\n1 transform them into actionable misstatements. Plaintiff\u2019s reliance on Quality Systems is misplaced:\n2 optimism is actionable only where the speaker knows the relevant aspect of the business \u201cto be\n3 performing poorly,\u201d In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1143 (9th Cir. 2017)\u2014a\n4 limitation Plaintiff omits from his Opposition. Opp. at 12. Plaintiff does not and cannot plead such\n5 facts, because the Systems Transition had not yet launched when these statements were made. See\n6 supra at 3.\n7 2. Defendants\u2019 internal control statements were not false or misleading.\n8 Plaintiff\u2019s attack on Defendants\u2019 internal control statements, App\u2019x Statement Nos. 5, 6, fails\n9 because it rests entirely on speculation. Plaintiff does not allege that Defendants knew, at the time of\n10 their certifications on November 8, 2023, that the Systems Transition had resulted in an identified\n11 material weakness in internal controls over financial reporting. Instead, Plaintiff asks the Court to infer\n12 earlier knowledge solely from the fact that a material weakness was later disclosed in February 2024,\n13 claiming \u201cit is reasonable to infer that the material weakness was known by November 2023 because\n14 it was caused by the rampant disruptions from the Systems Transition.\u201d Opp. at 13. But Plaintiff\n15 identifies no contemporaneous facts\u2014no FE allegations, no internal reports, no communications with\n16 Grocery Outlet\u2019s auditors\u2014suggesting that Defendants had concluded, or even believed, that the\n17 operational challenges then experienced required recognition of a \u201cmaterial weakness\u201d\u2014which is a\n18 term of art reflecting the outcome of a formal evaluation process, including management assessment\n19 and auditor review. See 17 C.F.R. \u00a7 229.308(a); PCAOB Auditing Standard 2201 \u00b6\u00b6 1, A7. That the\n20 Systems Transition caused challenges does not mean Defendants were required to conclude, much less\n21 knew, that a material weakness existed on November 8, 2023. Plaintiff cannot plead falsity by\n22 reasoning backward from a later lack of internal controls determination absent allegations\u2014not present\n23 here\u2014of contemporaneous knowledge. See Davoli v. Costco Wholesale Corp., 854 F. App\u2019x 116, 118\n24 (9th Cir. 2021). That pleading gap is fatal.\n25 3. Defendants\u2019 November 2023 and February 2024 statements were not false\n or misleading.\n26\n a. Plaintiff fails to plead a false or misleading statement.\n27\n Plaintiff\u2019s challenge to the November 2023 and February 2024 statements, App\u2019x Statement\n28\n 7\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 13 of 20\n\n\n\n1 Nos. 7\u201311, rests on a fundamental mischaracterization. Plaintiff repeatedly recasts Defendants\u2019\n2 statements as firm \u201cassurances.\u201d Opp. at 14\u201316. They were not. The challenged statements reflected\n3 management\u2019s expectations and judgments as the Systems Transition unfolded\u2014often expressly\n4 qualified by uncertainty and ongoing implementation challenges. Defendants spoke in terms of what\n5 they \u201cexpect[ed],\u201d \u00b6\u00b6 91, 116, the predicted \u201cimpact looking forward,\u201d \u00b6 93, and how they\n6 \u201canticipate[d] the transitional impacts\u201d to evolve, \u00b6 95, while continuing to warn that disruption could\n7 persist and forecasting uncertainty. Mot. at 3\u20134. These statements were not guarantees, and they do\n8 not become false simply because later events proved worse than anticipated. See In re Cutera, 610\n9 F.3d at 1112\u201313.\n10 Plaintiff\u2019s reliance on later disclosures\u2014particularly May 2024 remarks by non-defendant\n11 interim CFO Lindsay Gray regarding forecasting visibility\u2014illustrates the same hindsight defect.\n12 Plaintiff argues backward from Gray\u2019s later comments to claim Defendants must have known months\n13 earlier that forecasting visibility was materially impaired. Opp. at 15. But Plaintiff pleads no facts\n14 showing that, at the time of the November 2023 or February 2024 statements, Defendants lacked a\n15 reasonable basis for their assessments or believed they were unable to forecast at all. Gray\u2019s later\n16 statements reflected an evolving understanding as implementation challenges persisted, not the\n17 revelation of concealed facts that existed earlier. Using subsequent developments to infer prior falsity\n18 is classic fraud by hindsight. See Cloudera, 121 F.4th at 1189.\n19 Plaintiff\u2019s commission calculation theory fails for the same reason. Plaintiff asserts that\n20 because certain commission expenses were finalized after quarter-end, Defendants could not\n21 reasonably discuss trends or expectations beforehand. Opp. at 15. But final reconciliation occurring\n22 later does not mean earlier statements or directional assessments were false, nor does Plaintiff plead\n23 facts showing that Defendants believed their statements lacked a reasonable basis when made.\n24 Assertions that Defendants \u201ccould not possibly know\u201d certain figures, Opp. at 15, are speculation,\n25 which does not state a claim under the PSLRA. See In re Oracle Corp. Sec. Litig., 627 F.3d 376, 389\n26 (9th Cir. 2010) (rejecting speculation about what defendants must have known as \u201cappealing in the\n27 abstract\u201d but \u201cunsupported by the record\u201d).\n28 Plaintiff\u2019s theory, taken to its logical end, would convert evolving management judgments\n 8\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 14 of 20\n\n\n\n1 during a complex Systems Transition into actionable misstatements whenever later adjustments prove\n2 necessary. The Ninth Circuit has squarely rejected that approach. See Wochos, 985 F.3d at 1193\u201394\n3 (rejecting attempt to transform later difficulties into proof earlier statements were knowingly false\n4 where plaintiffs \u201cfailed to plead that Defendants knew their year\u2019s end goal was impossible to\n5 achieve\u201d). The fact that forecasting became more difficult or projections required revision does not\n6 substitute for a lack of contemporaneous allegations showing that Defendants\u2019 earlier assessments were\n7 false or unattainable when made.\n8 b. The challenged statements are not actionable.\n9 The November 2023 and February 2024 statements are also inactionable.\n10 Forward-Looking Statements. Plaintiff concedes the November 2023 and February 2024\n11 statements were \u201cfacially forward-looking.\u201d Opp. at 16. That concession largely resolves the issue.\n12 Plaintiff does not plead particularized allegations of actual knowledge of falsity or the absence of\n13 meaningful cautionary language. Mot. at 8\u20139. Plaintiff\u2019s attempt to defeat the safe harbor by arguing\n14 risks had already \u201cmaterialized\u201d is unpersuasive and fails for the reasons discussed above. See supra\n15 at 4 n.4.7\n16 Opinion. The November 2023 and February 2024 statements are also inactionable opinions.\n17 Plaintiff claims the challenged statements\u2014App\u2019x Statements Nos. 7\u201311\u2014were misleading because\n18 Defendants allegedly knew the Systems Transition entailed risk or lacked a reasonable basis to expect\n19 resolution within particular quarters. Opp. at 16. But Plaintiff does not allege particularized facts\n20 showing that Defendants did not actually believe what they said or possessed contemporaneous\n21 information fundamentally inconsistent with those views. Omnicare, 575 U.S. at 186\u201387. General\n22 awareness that a complex Systems Transition involved operational risk\u2014which was obvious to any\n23 reasonable investor\u2014does not render Defendants\u2019 opinions misleading, and Plaintiff\u2019s reliance on later\n24 course corrections to infer earlier disbelief is precisely the hindsight pleading the Ninth Circuit rejects.\n25\n26 7\n Plaintiff\u2019s argument about commission expense risk warnings is a red herring. Opp. at 16. None of\n the challenged forward-looking statements purport to \u201cassess future commission expenses,\u201d let alone\n27 provide precise calculations for those expenses. See App\u2019x Statements Nos. 1, 3, 4, 7\u201311. Plaintiff\n28 cannot manufacture falsity by demanding cautionary disclosures about a subject Defendants did not\n speak on.\n 9\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 15 of 20\n\n\n\n1 See Cloudera, 121 F.4th at 1189 (\u201c[L]ater, sobering revelations do not by themselves make the earlier,\n2 cheerier statement a falsehood.\u201d).\n3 B. Plaintiff Fails to Plead Scienter\n4 Plaintiff\u2019s Opposition underscores his failure to plead a strong inference of scienter. The\n5 Amended Complaint contains no particularized allegations that Defendants acted with intent to deceive\n6 or deliberate recklessness, and critically alleges no motive (e.g., insider trading, unusual compensation,\n7 or any concrete personal benefit) at all. Instead, Plaintiff relies on generalized allegations, speculation\n8 about access to information, and hindsight criticism of later developments. Taken individually or\n9 collectively, those allegations fall well short of the \u201ccogent and compelling\u201d inference required.\n10 Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 324 (2007).\n11 1. Plaintiff\u2019s confidential witnesses do not establish scienter.\n12 Plaintiff leans heavily on allegations attributed to three FEs, but those allegations do not support\n13 a strong inference of scienter.\n14 Plaintiff effectively concedes that the allegations attributed to FE2 and FE3 are inadequate,\n15 arguing only that he \u201cadequately alleges details about FE2 and FE3\u2019s experience, positions, and the\n16 basis for their relevant knowledge.\u201d Opp. at 22. But Plaintiff, tellingly, does not respond to\n17 Defendants\u2019 arguments explaining why these witnesses lack the role, access, and foundation necessary\n18 to speak to Defendants\u2019 state of mind. Mot. at 11\u201312. FE2 (a regional grocery buyer) and FE3 (an\n19 assistant planner) were far removed from the Systems Transition or executive deliberations related\n20 thereto. Mot. at 11. Plaintiff does not identify any facts showing otherwise, does not explain how\n21 either witness would have personal knowledge of Defendants\u2019 mental state, and does not identify any\n22 information allegedly conveyed to Defendants contradicting their public statements. FE2 and FE3 are\n23 unreliable and irrelevant. Zucco Partners LLC v. Digimarc Corp., 552 F.3d 981, 996 (9th Cir. 2009).\n24 The allegations attributed to FE1 are no better. Plaintiff emphasizes that FE1 was a Director of\n25 Financial Planning and Analysis responsible for forecasting and the \u201cfull P&L.\u201d Opp. at 21. But that\n26 role underscores the defect: FE1 was a finance employee, not an IT or systems implementation lead,\n27 and there is nothing pled about his finance role that suggests he has any personal knowledge regarding\n28 ERP testing decisions, pre-launch readiness, or the operational risks associated with particular testing\n 10\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 16 of 20\n\n\n\n1 methodologies. For that reason, FE1\u2019s \u201cassess[ment] that by July 2023, the Company was still not\n2 ready to implement the SAP systems\u201d lacks the foundation required by Zucco and does nothing for\n3 scienter. Opp. at 18.\n4 Most critically, none of the FEs interacted with Sheedy or Bracher about the challenged\n5 statements, Mot. at 11, or identify a single piece of specific information that was allegedly conveyed\n6 to any Defendant and explain how it contradicted a challenged public statement when made. See Opp.\n7 at 21\u201322. And while Plaintiff asserts that \u201cFE1 personally reviewed the tracking documents,\u201d Opp. at\n8 22, he never alleges what those documents said, when they were reviewed, or how they undermine any\n9 public statement. Plaintiff\u2019s pleading by implication is insufficient. See, e.g., Nguyen v. Endologix,\n10 Inc., 962 F.3d 405, 416\u201317 (9th Cir. 2020) (rejecting FE\u2019s allegations that were \u201chigh on alarming\n11 adjectives\u201d but \u201cshort on the facts\u201d).\n12 Even if credited, the FE allegations amount to nothing more than disagreement with\n13 management\u2019s business judgment. No FE alleges that any Defendant believed the Company was\n14 underprepared for launch, received warnings that the Systems Transition should not proceed, or was\n15 told that the absence of any particular testing could expose the Company to the specific disruptions that\n16 later occurred. At most, Plaintiff alleges that FE1 believed implementation challenges existed pre-\n17 launch but there is no allegation that he ever voiced his concerns to any Defendant or otherwise alerted\n18 anyone else in management. \u00b6\u00b6 43\u201348, 50\u201355. Courts routinely reject attempts to plead scienter based\n19 on former employees\u2019 hindsight opinions or second-guessing of executive decisions. See, e.g., In re\n20 Accuray, Inc. Sec. Litig., 757 F. Supp. 2d 936, 949 (N.D. Cal. 2010) (\u201c[I]t is difficult to surmise how\n21 the opinions and observations of the CWs could support a reasonable inference about what the[]\n22 Defendants knew or did not know\u201d). Absent allegations that Defendants received concrete warnings\n23 or specific information tying alleged readiness gaps to the risks that ultimately materialized, Plaintiff\u2019s\n24 FE allegations do not support a strong inference of scienter. See City of Sunrise Firefighters\u2019 Pension\n25 Fund v. Oracle Corp., 2019 WL 6877195, at *19 (N.D. Cal. Dec. 17, 2019) (no scienter inference from\n26 FE allegations because \u201c[m]ore specific facts must be pled\u201d about what executives \u201cknew at the time\u201d).\n27\n28\n 11\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 17 of 20\n\n\n\n1 2. The circumstantial allegations of purported knowledge do not support an\n inference of scienter.\n2\n Because the Complaint pleads no facts showing that any Defendant had actual knowledge that\n3\n the challenged statements were false when made, Plaintiff falls back on several circumstantial theories:\n4\n (1) mischaracterizing Sheedy\u2019s November 2023 comments; (2) invoking \u201ccore operations\u201d; (3)\n5\n pointing to routine executive departures; and (4) repackaging failed falsity theories. Each fails.\n6\n Sheedy\u2019s November 2023 Comment. Plaintiff again argues that Defendants \u201calways knew\u201d the\n7\n Systems Transition would cause disruptions, relying on Sheedy\u2019s November 2023 remarks. That\n8\n theory fails to establish a strong inference of scienter for the same reason it fails on falsity.8 See supra\n9\n at 4\u20135.\n10\n Core Operations. Plaintiff\u2019s \u201ccore operations\u201d theory also fails because Plaintiff still never\n11\n identifies what specific adverse facts should be imputed to Defendants. Although Plaintiff\n12\n acknowledges the doctrine requires \u201callegations of specific information . . . conveyed to management,\u201d\n13\n he offers none\u2014only vague references to Bracher\u2019s supposed \u201caccess to the information.\u201d9 Opp. at 19.\n14\n That is precisely the sort of conclusory pleading the Ninth Circuit rejects. See In re NVIDIA Corp. Sec.\n15\n Litig., 768 F.3d 1046, 1064 (9th Cir. 2014) (rejecting core operations theory where \u201cPlaintiffs never\n16\n plausibly allege that specific information was conveyed\u201d to management). Allegations that executives\n17\n attended meetings or were \u201chands on\u201d during a complex business initiative do not establish scienter as\n18\n a matter of law. See Shnayder v. Allbirds, Inc., 2025 WL 1745596, at *22 (N.D. Cal. June 23, 2025).\n19\n Executive Departures. Plaintiff\u2019s reliance on Sheedy\u2019s and Bracher\u2019s departures is equally\n20\n 8\n21 It is also irrelevant to Bracher because scienter must be specifically pleaded \u201cwith respect to each of\n the individual defendants.\u201d Oregon Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 607 (9th\n22 Cir. 2014). Buried in a footnote, Plaintiff concedes the statement \u201cis not attributed to Bracher,\u201d which\n effectively ends the inquiry, but nonetheless attempts to impute scienter to him based on Sheedy\u2019s\n23 remarks. Opp. at 18 n.8. That mismatch theory is foreclosed by Supreme Court precedent because\n Plaintiff pleads no facts showing that Bracher exercised ultimate authority over the statement, approved\n24\n it, or otherwise controlled its content. See Janus Cap. Grp., Inc. v. First Derivative Traders, 564 U.S.\n25 135, 142 (2011). Nor may Plaintiff bootstrap scienter by imputing one executive\u2019s alleged state of\n mind to another. In re Maxwell Techs., Inc. Sec. Litig., 18 F. Supp. 3d 1023, 1032\u201333 (S.D. Cal. 2014).\n26 9\n For that reason, Plaintiff\u2019s cases\u2014involving allegations of specific contradictory information\u2014are\n inapposite. See Azar v. Yelp, Inc., 2018 WL 6182756, at *20 (N.D. Cal. Nov. 27, 2018) (internal\n27 metrics contradicting public statements about advertising performance); In re FibroGen, Inc. Sec.\n28 Litig., 2022 WL 2793032, at *30 (N.D. Cal. July 15, 2022) (internal clinical data contradicting public\n statements about trial results).\n 12\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 18 of 20\n\n\n\n1 unavailing. Plaintiff argues that Bracher\u2019s departure and Sheedy\u2019s later exit \u201clend support\u201d to scienter\n2 because they occurred amid operational challenges and were viewed by analysts as \u201csurprising.\u201d\n3 Opp. at 21. But timing alone does not support a strong inference of scienter. Zucco, 552 F.3d at 1002.\n4 And here, the timing undermines Plaintiff\u2019s fraud theory. As Defendants explained, Bracher\u2019s\n5 resignation was announced on December 8, 2023, effective nearly three months later, and was disclosed\n6 as a \u201cpersonal decision,\u201d and accompanied by a consulting agreement to \u201csupport the transition.\u201d10\n7 Mot. at 14\u201315. Plaintiff does not dispute these facts, instead speculating about \u201cPR spin.\u201d Opp. at 21.\n8 But that is not alleged in the Amended Complaint so cannot be considered. And by Plaintiff\u2019s own\n9 allegations, Sheedy departed five months after the alleged problems were fully disclosed to investors\n10 and pursuant to a mutually agreed decision with the Board. \u00b6\u00b6 12, 136\u201339. Conclusory assertions that\n11 he was \u201cheld responsible\u201d for being \u201cwoefully unprepared\u201d do not establish scienter. See Zucco, 552\n12 F.3d at 1002; Mallen v. Alphatec Holdings, Inc., 861 F. Supp. 2d 1111, 1138\u201339 (S.D. Cal. 2012).11\n13 Repackaged Falsity Theories. Plaintiff\u2019s final scienter gambit\u2014relabeling his failed falsity\n14 theories about forecasting visibility and internal controls as evidence of scienter, Opp. at 20\u201321\u2014adds\n15 nothing. See supra at 12. Plaintiff pleads no facts showing that Defendants actually knew, at the time\n16 of the challenged statements, that they lacked adequate visibility to forecast results or that a reportable\n17 material weakness existed. Allegations that forecasting later became more difficult, that estimates were\n18 revised, or that a material weakness was later identified do not establish deliberate recklessness, much\n19 less contemporaneous knowledge. See In re NVIDIA, 768 F.3d at 1058\u201359.\n20 3. The most plausible inference is that Defendants acted in good faith.\n21 Scienter, here, is foreclosed by the lack of plausibility. Under Tellabs, Plaintiff must plead facts\n22 giving rise to a strong inference of fraudulent intent that is \u201ccogent and at least as compelling as any\n23 opposing inference one could draw from the facts alleged.\u201d Tellabs, 551 U.S. at 324. Plaintiff\u2019s\n24 10\n Perplexingly, Plaintiff argues that the Company\u2019s explanation for Bracher\u2019s departure\u2014contained in\n25 the Company\u2019s December 11, 2023 Form 8-K, ECF No. 39-8 at 1\u2014is \u201cevidence that should not be\n considered at this stage.\u201d Opp. at 21. But Plaintiff does not challenge Defendants\u2019 Request for Judicial\n26 Notice, ECF No. 39-12, let alone that exhibit, which is incorporated by reference. Id. at 3\u20134.\n 11\n Plaintiff\u2019s reliance on Brendon v. Allegiant Travel Co., 412 F. Supp. 3d 1244 (D. Nev. 2019), is\n27 misplaced. There, the court relied on allegations that an executive resigned immediately after public\n28 revelations of previously concealed safety violations and that the departure was tied to those\n disclosures. Id. at 1263. Plaintiff pleads no comparable facts here.\n 13\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 19 of 20\n\n\n\n1 allegations fall well short of that demanding standard.\n2 At its core, Plaintiff\u2019s theory defies common sense. Why would Sheedy and Bracher\u2014both\n3 well-respected, long-tenured executives\u2014risk their careers to commit fraud? Plaintiff has no answer\n4 to that foundational question. The Amended Complaint pleads no possible motive, and Plaintiff\n5 concedes there is none. Opp. at 23. That omission is decisive. As the Ninth Circuit has explained,\n6 where a complaint alleges no motive, a plaintiff faces \u201ca substantial hurdle in establishing scienter,\u201d\n7 and \u201c[o]nly where a complaint otherwise asserts compelling and particularized facts showing\n8 fraudulent intent or deliberate recklessness will we overlook the failure to allege a plausible motive.\u201d\n9 Prodanova, 993 F.3d at 1103, 1108. Plaintiff comes nowhere close to clearing that \u201csubstantial\n10 hurdle.\u201d See also Nguyen, 962 F.3d at 415 (scienter allegations without motive did \u201cnot resonate in\n11 common experience\u201d). Bhangal v. Hawaiian Elec. Indus., Inc., 2024 WL 4505465 (N.D. Cal. Oct. 15,\n12 2024) is illustrative. There, \u201cthe lack of alleged motive . . . tip[ped] the scale in favor of Defendants\n13 on scienter\u201d where the plaintiffs, like here, relied on generalized assertions of executive access to\n14 information rather than \u201cparticularized facts\u201d showing contemporaneous knowledge of falsity.\n15 Id. at *15\u201316.\n16 The innocent inference is not only more cogent and compelling, it is obvious. Defendants\n17 undertook a complex Systems Transition, warned investors about the risks, disclosed challenges as\n18 they emerged, and revised expectations as their understanding evolved. That pattern of conduct is\n19 fundamentally at odds with an intent to commit fraud; instead, it is fully consistent with good-faith\n20 efforts to manage and disclose a difficult operational initiative that ultimately proved more challenging\n21 than the Company originally expected. Plaintiff\u2019s contrary theory\u2014that Defendants knowingly misled\n22 investors while simultaneously disclosing disruptions and course-correcting in real time, with no skin\n23 in the game\u2014is implausible.\n24 C. Plaintiff Fails to Plead Loss Causation\n25 Finally, Plaintiff\u2019s claim independently fails because he has not pleaded loss causation. To do\n26 so, Plaintiff must allege that a later disclosure revealed a previously concealed \u201ctruth\u201d that relates back\n27 to an earlier misstatement\u2014i.e., information Defendants knew, but allegedly failed to disclose, when\n28 they spoke\u2014and that this revelation, rather than mere materialization of a disclosed risk, caused the\n 14\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 41 Filed 01/30/26 Page 20 of 20\n\n\n\n1 stock price decline. See, e.g., Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1210\u201311 (9th Cir. 2016);\n2 Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1063\u201364 (9th Cir. 2008). Plaintiff\n3 does not satisfy that requirement.\n4 Plaintiff identifies no disclosure that revealed a fact Defendants allegedly knew but previously\n5 concealed. Instead, Plaintiff points to later announcements that the Systems Transition proved more\n6 disruptive and longer lasting than initially expected. That is not loss causation. Later-developing\n7 difficulties do not \u201crelate back\u201d to earlier statements unless they reveal those statements were false\n8 when made. Loos v. Immersion Corp., 762 F.3d 880, 887 (9th Cir. 2014). As explained above and in\n9 the Motion, Defendants disclosed what they knew at each point in time and updated investors as their\n10 understanding evolved. See supra at \u00a7 II.A.3; Mot. at 2\u20134. Plaintiff alleges no corrective disclosure,\n11 only subsequent bad news that was not, and could not have been, known earlier. Opp. at 24\u201325. That\n12 theory fails to plead loss causation as a matter of law. See Metzler, 540 F.3d at 1063\u201364.12\n13 III. CONCLUSION\n14 The Court should dismiss the Amended Complaint in its entirety and with prejudice.\n15\n DATED: January 30, 2026 Respectfully submitted,\n16\n GIBSON, DUNN & CRUTCHER LLP\n17\n18 By: /s/ Craig Varnen\n Craig Varnen\n19\n Attorneys for Defendants Grocery Outlet Holding\n20 Corp., Robert Joseph Sheedy, and Charles C.\n Bracher\n21\n22\n23\n24\n25\n26\n27 12\n Plaintiff concedes his Section 20(a) claim is entirely derivative of his primary Exchange Act claim.\n28 Opp. at 25. Accordingly, because there is no Section 10(b) violation, the Section 20(a) claim must also\n be dismissed.\n 15\n DEFENDANTS\u2019 REPLY IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f","ocr_status":2,"date_upload":"2026-05-12T03:10:27.443459-07:00","document_number":"41","attachment_number":null,"pacer_doc_id":"035026708734","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Reply to Opposition/Response","acms_document_guid":""}],"date_created":"2026-01-30T14:36:30.034268-08:00","date_modified":"2026-10-15T06:57:01.122732-07:00","date_filed":"2026-01-30","time_filed":"14:21:41","entry_number":41,"recap_sequence_number":"2026-01-30.001","pacer_sequence_number":140,"description":"REPLY in Support (re 39 MOTION to Dismiss 38 Amended Complaint ) filed by Charles C. Bracher, Grocery Outlet Holding Corp. Securities Litigation, Robert Joseph Sheedy. (Varnen, Craig) (Filed on 1/30/2026) Modified on 2/3/2026 (kmg, COURT STAFF). (Entered: 01/30/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/448317300/","id":448317300,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/463089936/","id":463089936,"tags":[],"absolute_url":"","date_created":"2025-12-25T19:20:11.883735-08:00","date_modified":"2025-12-30T21:29:24.595951-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-25T19:20:11.865687-08:00","date_modified":"2025-12-30T21:29:24.570704-08:00","date_filed":"2025-10-22","time_filed":null,"entry_number":null,"recap_sequence_number":"2025-10-22.001","pacer_sequence_number":null,"description":"Set/Reset Hearing as to 39 MOTION to Dismiss due to incorrect year. Motion Hearing set for 3/19/2026 at 02:00 PM - Videoconference Only before Judge Jon S. Tigar. This proceeding will be held via a Zoom webinar. The briefing schedule remains in effect. Webinar Access: All counsel, members of the public, and media may access the webinar information at https://www.cand.uscourts.gov/jst Court Appearances: Advanced notice is required of counsel or parties who wish to be identified by the court as making an appearance or will be participating in the argument at the hearing. One list of names of all counsel appearing for all parties must be sent in one email to the CRD at jstcrd@cand.uscourts.gov no later than 03/18/2026 at 2:00PM PST.Civ LR 77-3(b): Persons granted access to court proceedings held by telephone or videoconference are reminded that photographing, recording, and rebroadcasting of court proceedings, including screenshots or other visual copying of a hearing, is absolutely prohibited.Zoom Guidance and Setup: https://www.cand.uscourts.gov/zoom/. (dms, COURT STAFF) (Filed on 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/448223044/","id":448223044,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462992370/","id":462992370,"tags":[],"absolute_url":"/docket/69592783/40/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-12-23T14:32:06.071651-08:00","date_modified":"2025-12-31T02:54:40.886313-08:00","sha1":"a061770246d9139343d9276b6de68d29c855adc1","page_count":32,"file_size":457362,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.40.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.40.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 1 of 32\n\n\n\n\n 1 Laurence M. Rosen, Esq. (SBN 219683)\n THE ROSEN LAW FIRM, P.A.\n 2 355 South Grand Avenue, Suite 2450\n Los Angeles, CA 90071\n 3\n Telephone: (213) 785-2610\n 4 Facsimile: (213) 226-4684\n Email: lrosen@rosenlegal.com\n 5\n Lead Counsel for Lead Plaintiff and the Class\n 6\n 7 [Additional Counsel on Signature Page]\n 8 UNITED STATES DISTRICT COURT\n NORTHERN DISTRICT OF CALIFORNIA\n 9\n10\n In re Grocery Outlet Holding Corp. Securities Master File No: 4:25-cv-957-JST\n11 Litigation\n CLASS ACTION\n12\n PLAINTIFF\u2019S MEMORANDUM\n13\n OF POINTS AND AUTHORITIES IN\n14 OPPOSITION TO DEFENDANTS\u2019\n MOTION TO DISMISS\n15\n JUDGE: Hon. Jon. S. Tigar, U.S.D.J.\n16 DATE: March 19, 2026\n17 TIME: 2:00 p.m.\n CTRM: 6\n18\n This Document Relates To: All Actions\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n\n\n\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 2 of 32\n\n\n\n\n 1 TABLE OF CONTENTS\n 2\n I. PRELIMINARY STATEMENT .........................................................................................1\n 3\n II. STATEMENT OF FACTS ..................................................................................................2\n 4\n A. The Company and the Systems Transition ..............................................................2\n 5 B. Grocery Outlet Was Not Prepared to Launch the Systems Transition,\n 6 Risking and Causing Rampant Disruptions to Critical Operations .........................3\n\n 7 C. Disruptions Persisted Even as Defendants Recklessly Assured Investors the\n Disruptions Were Nearly Over ................................................................................5\n 8\n III. ARGUMENT .......................................................................................................................6\n 9\n A. The Complaint Adequately Alleges Falsity as to Each Challenged\n10 Statement..................................................................................................................7\n\n11 1. The Complaint is Not Puzzle Pleading ........................................................8\n\n12 2. Misleading Statements About the Systems Transition ................................8\n\n13 a. The August 2023 Statements Were Misleading...............................9\n\n14 b. The August 2023 Statements Are Actionable ................................11\n\n15 3. False Statements About Grocery Outlet\u2019s Internal Controls .....................13\n 4. Misleading Statements About Defendants\u2019 Visibility Into the\n16\n Financial Impacts of the Systems Transition Disruptions .........................14\n17\n a. Defendants\u2019 Assurances Were Misleading ....................................15\n18 b. Defendants\u2019 Statements Are Actionable ........................................16\n19 B. The Complaint Alleges a Cogent and Compelling Inference of Scienter ..............17\n20 1. Sheedy and Bracher Knew or Recklessly Disregarded that Their\n21 Statements Would Mislead Investors.........................................................17\n\n22 2. The FE Allegations Are Sufficiently Pled .................................................21\n 3. Plaintiff\u2019s Inference of Scienter is the Most Plausible...............................22\n23\n C. The Complaint Adequately Alleges Loss Causation .............................................24\n24\n D. The Complaint Adequately Alleges a Claim under \u00a7 20(a) of the\n25 Exchange Act .........................................................................................................25\n26 IV. CONCLUSION ..................................................................................................................25\n27\n28\n\n -i-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 3 of 32\n\n\n\n\n 1 TABLE OF AUTHORITIES\n\n 2 Cases\n 3 Amgen Inc. v. Conn. Ret. Plans and Tr. Funds,\n 4 568 U.S. 455 (2013) .................................................................................................................... 25\n\n 5 Ashcroft v. Iqbal,\n 556 U.S. 662 (2009) ...................................................................................................................... 6\n 6\n Azar v. Yelp, Inc.,\n 7 2018 WL 6182756 (N.D. Cal. Nov. 27, 2018) ........................................................................... 20\n 8\n Berson v. Applied Signal Tech., Inc.,\n 9 527 F.3d 982 (9th Cir. 2008) ................................................................................................ 10, 17\n\n10 Brendon v. Allegiant Travel Co.,\n 412 F. Supp. 3d 1244 (D. Nev. 2019) ......................................................................................... 21\n11\n Cement & Concrete Workers Dist. Council Pension Fund v. Hewlett Packard Co.,\n12 964 F. Supp. 2d 1128 (N.D. Cal. 2013) ...................................................................................... 25\n13\n Cho v. UCBH Holdings, Inc.,\n14 890 F. Supp. 2d 1190 (N.D. Cal. 2012) ...................................................................................... 23\n\n15 City of Sunrise Firefighters\u2019 Pension Fund v. Oracle Corp.,\n 2019 WL 6877195 (N.D. Cal. Dec. 17, 2019) ............................................................................ 22\n16\n Davoli v. Costco Wholesale Corp.,\n17\n 854 F. App\u2019x 116 (9th Cir. 2021) ............................................................................................... 13\n18\n Dura Pharms., Inc. v. Broudo,\n19 544 U.S. 336 (2005) .................................................................................................................... 24\n\n20 Eminence Cap., LLC v. Aspeon, Inc.,\n 316 F.3d 1048 (9th Cir. 2003) .................................................................................................... 25\n21\n22 Emps. Ret. Sys. of Puerto Rico Elec. Power Auth. v. Conduent Inc.,\n 2020 WL 3026536 (D.N.J. June 5, 2020) ..................................................................................... 7\n23\n Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc.,\n24 63 F.4th 747 (9th Cir. 2023) ................................................................................................ passim\n25 Grigsby v. BofI Holding, Inc.,\n 979 F.3d 1198 (9th Cir. 2020) .................................................................................................... 24\n26\n27 Hall v. Rent-A-Ctr., Inc.,\n 2017 WL 6379334 (E.D. Tex. Dec. 14, 2017) .............................................................................. 8\n28\n\n - ii -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 4 of 32\n\n\n\n\n Hefler v. Wells Fargo & Co.,\n 1\n 2018 WL 1070116 (N.D. Cal. Feb. 27, 2018) ............................................................................ 25\n 2\n In re Alphabet, Inc. Sec. Litig.,\n 3 1 F.4th 687 (9th Cir. 2021) ................................................................................................... 10, 16\n\n 4 In re Apple Inc. Sec. Litig.,\n 2020 WL 6482014 (N.D. Cal. Nov. 4, 2020) ............................................................................. 23\n 5\n In re Autodesk, Inc. Sec. Litig.,\n 6\n 132 F. Supp. 2d 833 (N.D. Cal. 2000) .......................................................................................... 8\n 7\n In re BofI Holding, Inc. Sec. Litig.,\n 8 977 F.3d 781 (9th Cir. 2020) ...................................................................................................... 24\n 9 In re ChinaCast Educ. Corp. Sec. Litig.,\n 809 F.3d 471 (9th Cir. 2015) ...................................................................................................... 17\n10\n11 In re Facebook, Inc. Sec. Litig.,\n 84 F.4th 844 (9th Cir. Oct. 18, 2023).................................................................................... 10, 16\n12\n In re Fibrogen, Inc. Sec. Litig.,\n13 2022 WL 2793032 (N.D. Cal. July 15, 2022) ....................................................................... 19, 20\n14 In re Gilead Sci. Sec. Litig.,\n 536 F.3d 1049 (9th Cir. 2008) ................................................................................................ 7, 25\n15\n16 In re Immune Response Sec. Litig.,\n 375 F. Supp. 2d 983 (S.D. Cal. 2005) ......................................................................................... 17\n17\n In re Intuitive Surgical Sec. Litig.,\n18 65 F. Supp. 3d 821 (N.D. Cal. 2014) ............................................................................................ 8\n19 In re NVIDIA Corp. Sec. Litig.,\n20 768 F.3d 1046 (9th Cir. 2014) .............................................................................................. 19, 22\n\n21 In re Quality Sys., Inc. Sec. Litig.,\n 865 F.3d 1130 (9th Cir. 2017) .................................................................................................... 12\n22\n In re Rackable Sys., Inc. Sec. Litig.,\n23 2010 WL 199703 (N.D. Cal. Jan. 13, 2010) ............................................................................... 22\n24\n In re Splash Tech. Holdings, Inc. Sec. Litig.,\n25 160 F. Supp. 2d 1059 (N.D. Cal. 2001) ...................................................................................... 12\n\n26 In re Splunk Inc. Sec. Litig.,\n 592 F. Supp. 3d 919 (N.D. Cal. 2022) ........................................................................................ 18\n27\n In re SunPower Corp. Sec. Litig.,\n28 769 F. Supp. 3d 1042 (N.D. Cal. 2025) ................................................................................ 10, 12\n\n - iii -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 5 of 32\n\n\n\n\n In re VeriFone Holdings, Inc. Sec. Litig.,\n 1\n 704 F.3d 694 (9th Cir. 2012) ...................................................................................................... 17\n 2\n In re WageWorks, Inc., Sec. Litig.,\n 3 2020 WL 2896547 (N.D. Cal. June 1, 2020) .............................................................................. 24\n\n 4 Knollenberg v. Harmonic, Inc.,\n 152 F. App\u2019x 674 (9th Cir. 2005) ............................................................................................... 15\n 5\n Knox v. Yingli Green Energy Holding Co.,\n 6\n 2016 WL 6609210 (C.D. Cal. May 10, 2016) ............................................................................ 14\n 7\n Maiman v. Talbott,\n 8 2010 WL 11421950 (C.D. Cal. Aug. 9, 2010) ............................................................................ 23\n 9 Matrixx Initiatives, Inc. v. Siracusano,\n 563 U.S. 27 (2011) ........................................................................................................................ 7\n10\n11 McGovney v. Aerohive Networks, Inc.,\n 367 F. Supp. 3d 1038 (N.D. Cal. Feb. 5, 2019) .......................................................................... 22\n12\n Metzler Inv. GMBH v. Corinthian Colleges, Inc.,\n13 540 F.3d 1049 (9th Cir. 2008) .................................................................................................... 19\n14 Michel v. Sumo Logic, Inc.,\n 779 F. Supp. 3d 1038 (N.D. Cal. 2025) ...................................................................................... 11\n15\n16 Miller v. Thane Int\u2019l, Inc.,\n 519 F.3d 879 (9th Cir. 2008) ........................................................................................................ 7\n17\n No. 84 Employer-Teamster Joint Council Pension Tr. Fund v. Am. West Holding Corp.,\n18 320 F.3d 920 (9th Cir. 2003) ...................................................................................................... 23\n19 Ohio Pub. Emps. Ret. Sys. v. Meta Platforms, Inc.,\n20 2024 WL 4353049 (N.D. Cal. Sept. 30, 2024) ........................................................................... 25\n\n21 Omnicare, Inc. v. Laborers Dist. Council,\n 575 U.S. 175 (2015) .......................................................................................................... 7, 11, 16\n22\n Pampena v. Musk,\n23 705 F. Supp. 3d 1018 (N.D. Cal. 2023) ...................................................................................... 18\n24\n Police Pension & Ret. Sys. v. LifeLock, Inc.,\n25 780 F. App'x 480 (9th Cir. 2019) .................................................................................................. 9\n\n26 Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc.,\n 759 F.3d 1051 (9th Cir. 2014) .................................................................................................... 22\n27\n Provenz v. Miller,\n28 102 F.3d 1478 (9th Cir. 1996) .................................................................................................... 15\n\n - iv -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 6 of 32\n\n\n\n\n Reese v. BP Expl. (Alaska) Inc.,\n 1\n 643 F.3d 681 (9th Cir. 2011) .................................................................................................. 7, 10\n 2\n S. Ferry LP, No. 2 v. Killinger,\n 3 542 F.3d 776 (9th Cir. 2008) ................................................................................................ 19, 20\n\n 4 Schueneman v. Arena Pharm., Inc.,\n 840 F.3d 698 (9th Cir. 2016) ................................................................................................ 11, 17\n 5\n Special Situations Fund III QP, L.P. v. Brar,\n 6\n 2015 WL 1393539 (N.D. Cal. Mar. 26, 2015) ............................................................................ 25\n 7\n Starr v. Baca,\n 8 652 F.3d 1202 (9th Cir. 2011) ...................................................................................................... 6\n 9 State Teachers Ret. Sys. of Ohio v. ZoomInfo Tech., Inc.,\n 2025 WL 3013683 (W.D. Wash. Oct. 28, 2025) ........................................................................ 23\n10\n11 Tellabs, Inc. v. Makor Issues & Rights, Ltd.,\n 551 U.S. 308 (2007) .......................................................................................................... 7, 17, 23\n12\n Towne Servs., Inc. Sec. Litig.,\n13 184 F. Supp. 2d 1308 (N.D. Ga. 2001) ......................................................................................... 8\n14 Vernazza v. S.E.C.,\n 327 F.3d 851 (9th Cir. 2003) ...................................................................................................... 17\n15\n16 Warshaw v. Xoma Corp.,\n 74 F.3d 955 (9th Cir. 1996) ........................................................................................................ 12\n17\n Weston Fam. P\u2019ship LLLP v. Twitter, Inc.,\n18 29 F.4th 611 (9th Cir. 2022) ....................................................................................................... 12\n19 Wozniak v. Align Tech., Inc.,\n20 850 F. Supp. 2d 1029 (N.D. Cal. 2012) ...................................................................................... 12\n\n21 Wozniak v. Align Tech., Inc.,\n 2011 WL 2269418 (N.D. Cal. June 8, 2011) .............................................................................. 22\n22\n Yaron v. Intersect ENT, Inc.,\n23 2020 WL 6750568 (N.D. Cal. June 19, 2020) ............................................................................ 24\n24\n Zucco Partners, LLC v. Digimarc Corp.,\n25 552 F.3d 981 (9th Cir. 2009) ...................................................................................................... 22\n\n26 Statutes\n27 15 U.S.C. \u00a7 78t(a) ........................................................................................................................... 25\n28 15 U.S.C. \u00a7 78u-5 ........................................................................................................................... 12\n\n -v-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 7 of 32\n\n\n\n\n 1 Lead Plaintiff Casey Cavanaugh (\u201cPlaintiff\u201d) submits this memorandum of points and\n 2 authorities in opposition to Defendants\u2019 motion to dismiss Plaintiff\u2019s Amended Complaint\n 3 (\u201cComplaint,\u201d Dkt. No. 38).1\n 4 I. PRELIMINARY STATEMENT\n 5 In August 2023, Grocery Outlet Holding Corp. (\u201cGrocery Outlet\u201d or the \u201cCompany\u201d)\n 6 prematurely launched an overhaul of its enterprise resource planning (\u201cERP\u201d) and information\n 7 technology systems (the \u201cSystems Transition\u201d). The Systems Transition immediately caused\n 8 massive operational disruptions and materially impacted the Company\u2019s financial results, which\n 9 persisted for nearly a year as Grocery Outlet struggled to implement and troubleshoot the new\n10 systems. Plaintiff alleges that Defendants decided to launch the Systems Transition while knowing\n11 the Company was ill-prepared to implement the new systems, and knowing that doing so would\n12 likely cause significant disruptions and have adverse financial impacts. Defendants closely tracked\n13 each department\u2019s readiness (or lack thereof), and they knew the Company had not even performed\n14 critical end-to-end User Acceptance Testing of the new systems with real data, which was a\n15 significant risk. When they decided in July 2023 to \u201crip off the band-aid\u201d and launch the Systems\n16 Transition anyway, they concealed those critical risks from investors.\n17 After the Company went \u201clive\u201d with its new systems it immediately encountered\n18 widespread disruptions and implementation problems, infecting all aspects of the Company\u2019s\n19 business from inventory management to financial reporting. The disruptions were so rampant they\n20 created a material weakness in the Company\u2019s internal controls. As the disruptions and resulting\n21 impacts on Grocery Outlet\u2019s financial results were gradually revealed to investors over the course\n22 of the following three quarters, and both the CEO and CFO abruptly departed the Company under\n23 suspicious circumstances, the Company\u2019s stock price fell, harming investors.\n24 However, at the same time that Defendants slowly disclosed the impacts of the premature\n25 Systems Transition implementation, they also repeatedly attempted to reassure investors by\n26 misrepresenting that the worst of it was behind them and that they would return to normal\n27\n 1\n References to \u201cMtn.\u201d are to Defendants\u2019 motion to dismiss the Complaint (Dkt. No. 39).\n28 Citations to \u201c\u00b6__\u201d are to the paragraphs of the Complaint.\n\n -1-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 8 of 32\n\n\n\n\n 1 operations and results in the following quarter. Not only were Defendants wrong, they were\n 2 deliberately reckless and misled investors by making those assurances. As they later revealed in\n 3 May 2024, Defendants had no reasonable basis for telling investors during the interim periods that\n 4 the problems would be resolved and the financial impacts would be limited to the then-current\n 5 quarter. Defendants knew when they made those statements that they lacked critical data visibility\n 6 for their business reporting tools and had data integrity issues, which materially impaired their\n 7 ability to make accurate forecasts. Moreover, a substantial part of the financial impact from the\n 8 disruptions was the commission assistance payments Grocery Outlet was making to its\n 9 independent store operators due to the operational disruptions and impaired store margins\n10 stemming from the Systems Transition. As Defendants later acknowledged, those commissions\n11 could not even be calculated until after inventory and margin reconciliation was performed at the\n12 end of each quarter. Thus, Defendants could not possibly know the extent of the financial impact\n13 from the commissions for the next quarter until after the end of the current quarter.\n14 In their motion, Defendants tell a tale of \u201ccorporate transparency, not concealment,\u201d but\n15 they ignore the crux of Plaintiff\u2019s allegations. Defendants are not liable for simply mismanaging\n16 the rollout of new ERP systems and informing investors when it went awry, they are liable for\n17 misleading investors by concealing known material risks about the premature rollout\u2014even\n18 though they later admitted they \u201calways knew\u201d and \u201cdid expect\u201d that the Systems Transition would\n19 cause disruptions and financial impacts\u2014and reassuring investors of a prompt resolution knowing\n20 they had no factual basis upon which to make such assurances. The Complaint adequately alleges\n21 each of the elements of Plaintiff\u2019s claims. Accordingly, the Court should deny Defendants\u2019 motion.\n22 II. STATEMENT OF FACTS\n23 A. The Company and the Systems Transition\n\n24 Grocery Outlet describes itself as an \u201cextreme value retailer of consumables and fresh\n\n25 products sold via a network of independently owned and operated stores.\u201d \u00b627. Grocery Outlet\u2019s\n26 business model is similar to a franchise model, with the vast majority of its stores run by\n27 \u201cindependent operators,\u201d or \u201cIOs\u201d at the local level. Id. Grocery Outlet generally shares 50% of\n28 its store-level gross profits with its IOs, paid as \u201ccommissions\u201d based on store margins. Id. The\n\n -2-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 9 of 32\n\n\n\n\n 1 IOs manage and operate their own store operations, while other business functions like procuring\n 2 inventory, distribution, and information systems, are handled centrally by Grocery Outlet. \u00b628.\n 3 The Company\u2019s information systems were deeply integrated into the Company\u2019s\n 4 centralized procurement, inventory and warehouse management, and supply chain effectiveness.\n 5 \u00b6\u00b629-31. The Company recognized that any disruptions to its information systems could have an\n 6 immediate and substantive impact on the Company\u2019s financial results. \u00b633.\n 7 In 2021, Grocery Outlet decided to overhaul its ERP and information technology systems.\n 8 \u00b6\u00b641-42. As the Company prepared to implement the new systems, it engaged in a months-long\n 9 internal campaign to align the new SAP systems\u2019 functionalities with legacy systems and train its\n10 personnel on the new systems. \u00b637. The new systems would impact how inventory was tracked\n11 and managed, how the Company\u2019s buyers and planners would strategize what goods to purchase,\n12 how the Company\u2019s IOs would view and order inventory from the Company\u2019s warehouses, and\n13 how the Company\u2019s financial and accounting systems would integrate with the new systems. Id.\n14 Defendants spearheaded and oversaw the implementation of the new systems. \u00b6\u00b644, 48, 62.\n15 B. Grocery Outlet Was Not Prepared to Launch the Systems Transition,\n Risking and Causing Rampant Disruptions to Critical Operations\n16\n As the Company worked to prepare its various interconnected information systems for the\n17\n Systems Transition, Defendants kept close tabs on the Company\u2019s progress and readiness. The\n18\n Company\u2019s Chief Information Officer (\u201cCIO\u201d) helmed a Project Steering Committee, which\n19\n tracked each department\u2019s internal readiness to implement the Systems Transition via department-\n20\n specific tracking documents, as well as a \u201cmaster document\u201d maintained on a shared platform on\n21\n the Company\u2019s computer systems. \u00b6\u00b643-45. These documents tracked the various open issues for\n22\n each department to prepare for and implement the Systems Transition, including \u201ccontinuing risk\n23\n levels\u201d for each issue. Id. The master document also rated the open issues by urgency and resources\n24\n needed and identified relevant personnel. \u00b645. The Project Steering Committee held weekly\n25\n meetings, led by the CIO and typically attended by the Company\u2019s top executives, including\n26\n Defendant Bracher and the Company\u2019s \u201cC-suite\u201d and its Executive Vice Presidents, to discuss\n27\n critical issues with implementing the Systems Transition. \u00b644.\n28\n\n -3-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 10 of 32\n\n\n\n\n 1 As the original planned launch date of March 2023 approached, Defendants knew that\n 2 Grocery Outlet was not prepared to effectively implement the new systems. \u00b646. At that point, the\n 3 Company had not even attempted to conduct end-to-end testing of the new systems, i.e., testing\n 4 how the new systems would interact between critical departments and functions like procurement,\n 5 inventory and warehouse management, and store-level reporting, as opposed to simply testing\n 6 within each \u201csilo\u201d as they had done to that point. \u00b647. Defendants postponed the launch date until\n 7 July 2023. \u00b6\u00b646-47.\n 8 As the preparations continued into the summer of 2023, the Company continued to struggle\n 9 with integrating and testing the new system. As of July 2023, the Company was still critically\n10 unprepared to launch the new system. \u00b6\u00b648-49. In fact, it had not even completed crucial User\n11 Acceptance Testing (\u201cUAT\u201d), the final phase of pre-implementation ERP testing, which entails\n12 having the Company\u2019s actual end-users (like IOs, planners and buyers, and accounting personnel)\n13 test the new integrated systems using real-world applications and data. \u00b6\u00b650-54. If performed,\n14 UAT serves to catch usability, data migration, or cross-functionality issues early, helping to\n15 prevent costly disruptions after full deployment. \u00b6\u00b651-52. For Grocery Outlet\u2019s SAP\n16 implementation, UAT would have entailed having IOs attempt to use the new portal and inventory\n17 ordering systems, having planners and buyers attempt to manage warehouse inventory, and having\n18 finance and accounting personnel attempt to make accurate calculations and projections for cost\n19 of goods sold, margins, and other key metrics. \u00b653. By failing to conduct end-to-end UAT with\n20 real data, Grocery Outlet was unable to confirm the full functional flow of information needed to\n21 effectively conduct the Company\u2019s most central operations. \u00b6\u00b654-55. By July 2023, the Company\n22 had also not completed reconciling and scrubbing data from its legacy systems, which created\n23 major issues with inventory control and impacted the Company\u2019s entire operations. \u00b6\u00b656-59.\n24 Despite knowing the Company had not completed UAT and other critical preparations and\n25 testing for the Systems Transition, in July 2023 Sheedy decided to \u201crip off the band-aid\u201d for his\n26 ambitious pet project and proceed with implementation anyway. \u00b648. None of this was disclosed\n27 to investors. When the Company announced that their new system upgrades were being brought\n28 online in August 2023, Sheedy touted the numerous benefits the new systems would provide but\n\n -4-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 11 of 32\n\n\n\n\n 1 concealed from investors that the Company had not completed critical preparations and testing\n 2 before implementing the new SAP systems. \u00b6\u00b665-78. Sheedy later admitted that he \u201calways knew\u201d\n 3 and \u201cdid expect\u201d the transition would cause disruptions and impact financial results. \u00b6\u00b689, 93.\n 4 The Company went \u201clive\u201d with its new SAP systems in late August 2023 and immediately\n 5 encountered widespread disruptions caused by severe problems with inventory visibility and\n 6 management, end-user errors, and data integrity, among others. \u00b6\u00b656-60. These disruptions and\n 7 other problems infected all aspects of the Company\u2019s business, from inventory control and\n 8 ordering by IOs to financial forecasting and reporting. \u00b6\u00b656-60, 86-89, 99-100. The problems were\n 9 so rampant that they created a material weakness in the Company\u2019s internal controls. \u00b6122.\n10 C. Disruptions Persisted Even as Defendants Recklessly Assured Investors the\n Disruptions Were Nearly Over\n11\n Over the next few quarters, Defendants repeatedly assured the market that while they had\n12\n encountered significant disruptions that had materially impacted the Company\u2019s sales, margins,\n13\n and earnings, the worst was behind them and the financial impacts of the Systems Transition\n14\n disruptions were contained. They were wrong. More critically, Defendants never had a reasonable\n15\n basis for making those assurances, contrary to what they implied.\n16\n For example, when the Company disclosed its third quarter results in November 2023, the\n17\n Company reported disappointing financial results and revealed for the first time that the Systems\n18\n Transition had caused significant disruptions and material impacts to the Company\u2019s financials.\n19\n \u00b6\u00b686-87. Defendants even admitted that \u201cwe\u2019ve always known how large [the Systems Transition]\n20\n was and complex. We did expect as a result, some disruption.\u201d \u00b693. At the same time, Defendants\n21\n also reassured investors that the \u201ctransitional impacts\u201d would be \u201clargely behind us by the end of\n22\n the year,\u201d and that investors \u201cshould think about us reverting back to previous performance...\n23\n related to consumer trends, top line sales and how we\u2019ve managed for both gross margin and\n24\n bottom-line profit.\u201d See \u00b6\u00b693, 95, 97. That was not the case.\n25\n When Defendants reported their 2023 fourth quarter financial results in February 2024,\n26\n Defendants revealed not only a much larger fourth quarter impact than previously discussed, but\n27\n also that they expected the 2024 first quarter results to be materially affected by the Systems\n28\n\n -5-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 12 of 32\n\n\n\n\n 1 Transition as well. \u00b6\u00b6108-12. Yet again, Defendants\u2019 disclosure came with the reassurance that the\n 2 disruptions would be \u201cresolved\u201d during the quarter and that \u201cthe P&L impact [from the\n 3 disruptions] will be behind [us].\u201d \u00b6\u00b6115-16. Once again, not so.\n 4 In May 2024, the Company revealed that not only were the 2024 first quarter results\n 5 impacted by the Systems Transition disruptions, but the financial impact was even greater than the\n 6 prior quarter (more than double their prior estimate) and were still lingering in the second quarter.\n 7 \u00b6\u00b6124-29. Defendants also admitted that the Systems Transition had impaired the Company\u2019s\n 8 ability to forecast financial results due to poor visibility from business reporting systems and tools,\n 9 as well as data integration issues and new processes within the new applications. \u00b6126. The\n10 Company also explained that the lingering impacts were due to quarter-end inventory and margin\n11 calculations, upon which commission payments (paid in the next quarter) were based. \u00b6118.\n12 The Company\u2019s stock price repeatedly declined as Defendants provided these piecemeal\n13 admissions of the damage the Systems Transition was inflicting, even as Defendants kept falsely\n14 assuring investors that the worst was behind them. \u00b6\u00b6102, 106, 119, 123, 130. While the direct\n15 financial impacts appeared to finally end after the second quarter of 2024, the fallout from\n16 Defendants\u2019 disclosures and the failed Systems Transition did not. In October 2024, Sheedy was\n17 fired by the Board of Directors for the Company\u2019s struggles to effectively implement the Systems\n18 Transition (\u00b6\u00b6136-39), causing the Company\u2019s stock price to fall again. \u00b6137.\n19 III. ARGUMENT\n20 A motion to dismiss under Rule 12(b)(6) tests only whether the factual allegations in the\n21 complaint \u201cplausibly suggest an entitlement to relief.\u201d Starr v. Baca, 652 F.3d 1202, 1216 (9th\n22 Cir. 2011); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).2 While a securities fraud complaint is\n23 subject to the heightened pleading requirements of Rule 9(b) and the Private Securities Litigation\n24 Reform Act of 1995 (\u201cPSLRA\u201d), a court considering a motion to dismiss must assess the complaint\n25 \u201cin its entirety,\u201d accepting all well-pled factual allegations as true and construing those allegations\n26\n27\n28 2 Internal citations and quotations are omitted unless otherwise indicated.\n\n -6-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 13 of 32\n\n\n\n\n 1 in the light most favorable to the plaintiff. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.\n 2 308, 322 (2007); In re Gilead Sci. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).\n 3 A motion to dismiss a complaint for violation of \u00a7 10(b) of the Securities Exchange Act of\n 4 1934 (\u201cExchange Act\u201d) will be denied if the plaintiff alleges: \u201c(1) a material misrepresentation or\n 5 omission by the defendant [\u201cfalsity\u201d]; (2) scienter; (3) a connection between the misrepresentation\n 6 or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or\n 7 omission; (5) economic loss; and (6) loss causation.\u201d Matrixx Initiatives, Inc. v. Siracusano, 563\n 8 U.S. 27, 37-38 (2011). In their motion, Defendants challenge only the elements of falsity, scienter,\n 9 and loss causation, each of which are adequately alleged in the Complaint.\n10 A. The Complaint Adequately Alleges Falsity as to Each Challenged Statement\n\n11 Statements and omissions of material fact are actionable if they are either false or\n\n12 misleading. Matrixx, 563 U.S. at 37. Falsity can be shown by pointing to a statement that \u201cdirectly\n13 contradict[s] what the defendant knew at that time.\u201d Glazer Cap. Mgmt., L.P. v. Forescout Techs.,\n14 Inc., 63 F.4th 747, 764 (9th Cir. 2023). \u201cA statement or omission is misleading in the securities\n15 fraud context if it would give a reasonable investor the impression of a state of affairs that differs\n16 in a material way from the one that actually exists.\u201d Reese v. BP Expl. (Alaska) Inc., 643 F.3d 681,\n17 691 (9th Cir. 2011). Even literally true statements may mislead, due to their context and manner\n18 of presentation. Miller v. Thane Int\u2019l, Inc., 519 F.3d 879, 886 (9th Cir. 2008); Omnicare, Inc. v.\n19 Laborers Dist. Council, 575 U.S. 175, 192 (2015) (\u201cliteral accuracy is not enough: An issuer must\n20 as well desist from misleading investors by saying one thing and holding back another.\u201d).\n21 The Complaint alleges particularized facts plausibly demonstrating that Defendants\n\n22 concealed from investors: (1) material risks of prematurely implementing the Systems Transition;\n23 (2) a material weakness in the Company\u2019s internal controls; and (3) that Defendants had no\n24 reasonable factual basis for assuring investors that the disruptions from the Systems Transition\n25 were under control. Courts routinely sustain claims at the pleading stage based on\n26 misrepresentations about a company\u2019s problematic ERP implementation. See, e.g., Emps. Ret. Sys.\n27 of Puerto Rico Elec. Power Auth. v. Conduent Inc., 2020 WL 3026536, at *1 (D.N.J. June 5, 2020)\n28 (defendants falsely \u201coverstated to investors the progress that [the company] was making in\n\n -7-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 14 of 32\n\n\n\n\n 1 modernizing the IT infrastructure supporting [the] business.\u201d); Hall v. Rent-A-Ctr., Inc., 2017 WL\n 2 6379334, at *1 (E.D. Tex. Dec. 14, 2017) (defendants misrepresented \u201crollout of [a] proprietary\n 3 [IT] system\u201d and failed to disclose \u201cfunctionality problems that directly affected the Company\u2019s\n 4 ability to complete sales\u201d); IIn re Towne Servs., Inc. Sec. Litig., 184 F. Supp. 2d 1308, 1319\u201320\n 5 (N.D. Ga. 2001)(misrepresentations concerning reliability of IT systems were actionable).\n 6 1. The Complaint is Not Puzzle Pleading\n\n 7 As a preliminary matter, there is no merit to Defendants\u2019 half-hearted argument, buried in\n\n 8 a footnote, that the Complaint engages in \u201cimpermissible puzzle pleading.\u201d Mtn. at 5 n.2.\n 9 Defendants\u2019 assertion that the Complaint identifies only the documents containing the challenged\n10 statements and does not identify the statements themselves, is patently untrue. The Complaint\n11 identifies with particularity each statement\u2014not just the document\u2014that Plaintiff alleges was false\n12 or misleading, underlining the specific part at issue where a longer quotation is included for proper\n13 context. \u00b6\u00b668, 72, 74, 79, 82, 91, 93, 95, 97, 115-16. Each of those statements is followed\n14 immediately by an explanation as to why that statement was false or misleading. \u00b6\u00b669-71, 73, 75,\n15 80, 83, 92, 94, 96, 98, 117-18. Courts in this District routinely find no \u201cpuzzle pleading\u201d warranting\n16 dismissal where, as here, a plaintiff \u201cprecisely detailed each problematic statement, alleged that\n17 each statement is false and misleading, and alleged the reasons as to why each statement was false\n 3\n18 or misleading.\u201d In re Intuitive Surgical Sec. Litig., 65 F. Supp. 3d 821, 831 (N.D. Cal. 2014).\n19 2. Misleading Statements About the Systems Transition\n Defendants made misleading statements in August 2023 that concealed the material risk\n20\n that the Systems Transition would cause widespread disruptions and significantly impact Grocery\n21\n Outlet\u2019s operations and financial results. Plaintiff is not alleging fraud-by-hindsight over a business\n22\n decision that did not work out. Plaintiff alleges that Defendants\u2019 decision to prematurely\n23\n implement the Systems Transition entailed significant risks of major disruptions to the Company\u2019s\n24\n operations with material financial impacts, and that Defendants misled investors as to those risks.\n25\n26 3\n This case is nothing like In re Autodesk, Inc. Sec. Litig., 132 F. Supp. 2d 833, 842 (N.D. Cal.\n27 2000), in which \u201cplaintiffs have left it up to defendants and the court to try to figure out exactly\n what the misleading statements are, and to match the statements up with the reasons they are false\n28 or misleading.\u201d\n\n -8-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 15 of 32\n\n\n\n\n 1 Defendants are liable for securities fraud where, as here, they not only \u201cmismanage their company\u201d\n 2 but \u201clie to investors about that mismanagement.\u201d Okla. Police Pension & Ret. Sys. v. LifeLock,\n 3 Inc., 780 F. App'x 480, 484 n.4 (9th Cir. 2019)\n 4 First, in the Company\u2019s quarterly report for the second quarter of 2023 (\u201cAugust 2023 10-\n 5 Q\u201d), Defendants stated that there had been \u201cno material changes to our risk factors since the 2022\n 6 Form 10-K.\u201d \u00b668. The 2022 Form 10-K stated: \u201cIt is possible that we could experience\n 7 implementation, operational and functionality issues, delays, higher than expected costs and other\n 8 issues during the course of implementing and utilizing these improvements,\u201d including to the\n 9 Company\u2019s \u201ccustomized enterprise resource planning system, components of which ... we are\n10 replacing over the next several years.\u201d \u00b667 (emphasis added). As the 2022 Form 10-K continued:\n11 With any update or replacement of our systems and infrastructure there is a\n risk of business disruption, liability and reputational damage associated\n12 with these actions, including from not accurately capturing and maintaining\n data, efficiently testing and implementing changes, realizing the expected\n13\n benefit of the change and managing the potential disruption of the actions\n14 and diversion of internal teams\u2019 attention as the changes are implemented.\n\n15 Id. (emphasis added). Thus, the August 2023 10-Q incorporated the risk factor from the 2022 Form\n16 10-K and indicated that nothing had changed with respect to those risks.\n17 Second, during the Company\u2019s earnings conference call for the same quarter, Sheedy\n\n18 described the purported benefits of the Company\u2019s new store portal (a key part of the Systems\n19 Transition), including \u201cprovid[ing] operators with better analytics and easier access to\n20 information.\u201d \u00b672. Later during the call, in response to an analyst asking for more details about\n21 \u201c[w]hat will be the most impactful for the IOs,\u201d Sheedy boasted that there were \u201cso many\u201d benefits\n22 for IOs, including \u201ceasier access to information\u201d and that \u201cthis new platform portal will allow [IOs]\n23 to operate even more efficiently, ... or operate the P&L more efficiently.\u201d \u00b674.\n24 a. The August 2023 Statements Were Misleading\n\n25 The statement in the August 2023 10-Q was misleading because in July 2023, Defendants\n\n26 had decided to deploy the new SAP systems despite knowing that the Company was unprepared\n27 and there was a material risk of significant disruptions. The purported risk disclosure, as\n28 incorporated into the August 2023 10-Q, framed these risks as hypothetical and generalized, when\n\n -9-\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 16 of 32\n\n\n\n\n 1 Defendants knew (or recklessly disregarded) by August 2023 that the specific risks from their\n 2 decision to launch with the Systems Transition before the Company was ready were not merely\n 3 hypothetical and had, in fact, already materialized. \u00b6\u00b669-71.4\n 4 Disclosures that warn of risks that \u201ccould\u201d or \u201cmay\u201d occur are misleading when the issuer\n 5 knows that those risks have materialized. In re Facebook, Inc. Sec. Litig., 84 F.4th 844, 859 (9th\n 6 Cir. Oct. 18, 2023); In re Alphabet, Inc. Sec. Litig., 1 F.4th 687, 704 (9th Cir. 2021) (similar);\n 7 Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985\u201387 (9th Cir. 2008) (risk disclosures can\n 8 be misleading to investors when they \u201cspeak[] entirely of as-yet-unrealized risks and\n 9 contingencies\u201d and do not \u201calert[] the reader that some of these risks may already have come to\n10 fruition.\u201d). The risks do not need to have become an absolute certainty for the statement to mislead;\n11 Defendants\u2019 awareness \u201cof a significant likelihood that the risk would materialize\u201d suffices.\n12 Forescout, 63 F.4th at 780-81 (disclosure was misleading where defendants \u201cdid not meaningfully\n13 update the risk disclosure\u201d after learning new information that made the risk significantly more\n14 likely to occur); In re SunPower Corp. Sec. Litig., 769 F. Supp. 3d 1042, 1055-56 (N.D. Cal. 2025).\n15 Here, it was misleading to say it was \u201cpossible\u201d the Systems Transition \u201ccould\u201d cause\n16 implementation issues and disruptions, when in fact Defendants had chosen to undertake a specific\n17 risky tactic by rushing out the Systems Transition before the Company was adequately prepared.\n18 This was akin to saying that replacing a car\u2019s engine \u201ccould\u201d cause the car to drive poorly, without\n19 disclosing that you pulled the engine off of the production line early and never tested it before\n20 installation. Defendants\u2019 failure to disclose that they had launched the Systems Transition while\n21 the Company was inadequately prepared gave \u201creasonable investor[s] the impression of a state of\n22 affairs that differs in a material way from the one that actually exists.\u201d Reese, 643 F.3d at 691.\n23 Moreover, Sheedy\u2019s statements were misleading when made because he admitted that he\n24 knew there was a material risk of significant operational disruptions and material financial impact\n25 from the premature implementation of the new systems that Sheedy touted, particularly with\n26 respect to operational efficiencies and data visibility. \u00b6\u00b673, 75. Indeed, he later admitted that \u201cwe\n27\n 4\n Plaintiff does not allege that the risk disclosure was misleading when filed in March 2023, only\n28 when it was incorporated into the August 2023 10-Q. See \u00b669.\n\n - 10 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 17 of 32\n\n\n\n\n 1 did expect some disruption during this transition,\u201d and \u201calways knew\u201d about the complexities and\n 2 risks of the transition. \u00b6\u00b689, 93. It was misleading for Sheedy to tout the purported benefits of the\n 3 Systems Transition while omitting the likelihood that the Company would experience disruptions\n 4 and reduced visibility into inventory and finances due to being inadequately prepared. Id. Once\n 5 Sheedy chose \u201cto tout positive information to the market\u201d about the purported benefits from the\n 6 Systems Transition, he was \u201cbound to do so in a manner that wouldn\u2019t mislead investors, including\n 7 disclosing adverse information [like the material risks from prematurely launching the Systems\n 8 Transition] that cuts against the positive information.\u201d Schueneman v. Arena Pharm., Inc., 840\n 9 F.3d 698, 705-06 (9th Cir. 2016); see also Michel v. Sumo Logic, Inc., 779 F. Supp. 3d 1038, 1051\n10 (N.D. Cal. 2025) (\u201cHalf-truths\u2014representations that state the truth only so far as it goes, while\n11 omitting critical qualifying information\u2014can be actionable misrepresentations.\u201d).\n12 b. The August 2023 Statements Are Actionable\n13 Sheedy\u2019s statements about the purported benefits of the Systems Transition were not\n14 opinions, but even if they were, they are nonetheless actionable. Opinions are actionable where, as\n15 here, a defendant \u201clacked the basis for making those statements that a reasonable investor would\n16 expect,\u201d or the opinion did not \u201cfairly align[] with the information in [his] possession.\u201d Omnicare,\n17 575 U.S. at 188-89, 196. Sheedy knew that launching the Systems Transition prematurely created\n18 a material risk of operational disruptions that would jeopardize the realization of the very benefits\n19 he touted, thus the statements are actionable even if opinions.\n20 Sheedy\u2019s statements were also not merely inactionable corporate optimism because at issue\n21 is not Sheedy\u2019s \u201cvague, generically positive\u201d characterization of the purported benefits of the\n22 Systems Transition, cf. Mtn. at 10, but the violation of his duty to disclose the material risks to\n23 make his statements not misleading. Moreover, the purported benefits that Sheedy touted, such as\n24 \u201cprovid[ing] operators with better analytics and easier access to information,\u201d \u00b672, and allowing\n25 IOs to \u201coperate the P&L more efficiently,\u201d \u00b674, were exactly the types of issues that the\n26 Company\u2019s new ERP systems were designed to improve. They are also exactly the kinds of\n27 system-wide functionalities that end-to-end UAT with real data\u2014which Sheedy knew was\n28 skipped\u2014is designed to catch and address, if not working properly. See \u00b6\u00b651-62. Those benefits\n\n - 11 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 18 of 32\n\n\n\n\n 1 are not generic, aspirational language. They are specific and verifiable facts in the context of the\n 2 Systems Transition.5 Even \u201c\u2018general statements of optimism, when taken in context, may form a\n 3 basis for a securities fraud claim\u2019 when those statements address specific aspects of a company\u2019s\n 4 operation.\u201d In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1143-44 (9th Cir. 2017) (quoting\n 5 Warshaw v. Xoma Corp., 74 F.3d 955, 959 (9th Cir. 1996)).\n 6 Finally, to the extent Sheedy\u2019s August 2023 statements were forward-looking, they were\n 7 not protected by the PSLRA\u2019s safe harbor. Forward-looking statements are not protected if: (1)\n 8 they were not accompanied by meaningful cautionary language; and (2) they were \u201cmade with\n 9 actual knowledge [] that the statement[s] w[ere] false or misleading.\u201d Forescout, 63 F.4th at 767;\n10 15 U.S.C. \u00a7 78u-5. Here, Sheedy\u2019s statements were made with actual knowledge of their\n11 misleading nature because he knew that the premature rollout of the Systems Transition entailed\n12 significant risks of operational disruptions and material adverse impacts on the Company\u2019s\n13 financial results. His statements were not accompanied by meaningful cautionary language\n14 because, as set forth above, the pertinent risk disclosure misleadingly presented the risks from the\n15 Systems Transition implementation as hypothetical when in fact they had already materialized.\n16 Cautionary language is not meaningful where, as here, the risk disclosures themselves were\n17 misleading and failed to disclose \u201cthe specific risk to which [Defendants] had been\n18 alerted.\u201d Forescout, 63 F.4th at 780-81 (\u201ccautionary language is not \u2018meaningful\u2019 if it discusses as\n19 a mere possibility a risk that has already materialized.\u201d) (emphasis added). \u201cThe safe harbor does\n20 not immunize such conduct,\u201d where boilerplate risk disclosures are not meaningful and\n21 \u201cinsufficient in light of the undisclosed hard facts critical to appreciating the magnitude of the risks\n22 described.\u201d SunPower, 769 F. Supp. 3d at 1055-56.\n23\n24\n25 5 Sheedy\u2019s statements are thus nothing like those at issue in the cases cited by Defendants (Mtn. at\n26 10). Weston Fam. P\u2019ship LLLP v. Twitter, Inc., 29 F.4th 611, 621 (9th Cir. 2022) (statement that\n the company\u2019s overall program was \u201con track\u201d); Wozniak v. Align Tech., Inc., 850 F. Supp. 2d\n27 1029, 1036\u201337 (N.D. Cal. 2012) (\u201cwe are very pleased with our progress to date\u201d); In re Splash\n Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d 1059, 1077 (N.D. Cal. 2001) (phrases such as\n28 \u201cbetter than expected,\u201d \u201crobust,\u201d \u201cwell positioned,\u201d \u201csolid,\u201d and \u201cimproved\u201d).\n\n - 12 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 19 of 32\n\n\n\n\n 3. False Statements About Grocery Outlet\u2019s Internal Controls\n 1\n Grocery Outlet revealed in February 2024 that the Systems Transition had \u201cled to a\n 2\n significant increase in the volume of transactions across user access, program change management,\n 3\n and IT operations for which [the Company\u2019s] existing controls were not designed to address. As a\n 4\n result, certain of the Company\u2019s related business controls that are dependent upon the affected\n 5\n [information technology general computer controls] were also deemed ineffective.\u201d \u00b6122. The\n 6\n Company also revealed that \u201cthe pervasive impact of these control deficiencies ... created a\n 7\n reasonable possibility that a material misstatement to the consolidated financial statements would\n 8\n not be prevented or detected on a timely basis.\u201d Id. In other words, the cascade of disruptions\n 9\n generated by the rocky Systems Transition rollout overwhelmed certain of the Company\u2019s internal\n10\n controls over financial reporting and rendered them ineffective, representing a material weakness.\n11\n In its quarterly report filed in November 2023 (\u201cNovember 2023 10-Q\u201d), Grocery Outlet\n12\n explained that it had replaced certain components of its ERP system, \u201cmodified certain existing\n13\n internal controls, [and] implemented new controls and procedures impacted by the implementation\n14\n of these new systems.\u201d \u00b679. As the report stated: \u201cExcept for the implementation of these new\n15\n systems, there was no change in our internal control over financial reporting identified....\u201d Id. The\n16\n November 2023 10-Q was also accompanied by certifications pursuant to the Sarbanes-Oxley Act\n17\n of 2002 (\u201cSOX\u201d) attesting to the disclosure of any material changes to (or material weaknesses in)\n18\n the Company\u2019s internal control over financial reporting. \u00b682.\n19\n These statements were false and misleading because they failed to disclose the existing\n20\n material weakness in the Company\u2019s internal control over financial reporting caused by the\n21\n rampant disruptions from the Systems Transition during the third quarter of 2023. \u00b6\u00b680, 83.\n22\n Contrary to Defendants\u2019 argument, Mtn. at 6 n.3, it is reasonable to infer that the material weakness\n23\n was known by November 2023 because it was caused by the rampant disruptions from the Systems\n24\n Transition which manifested in the third quarter, well before November 2023. \u00b6\u00b680, 122.6\n25\n26 6\n Unlike in Davoli v. Costco Wholesale Corp., 854 F. App\u2019x 116, 118 (9th Cir. 2021), where there\n27 were insufficient allegations of the defendants\u2019 knowledge when the statements were made, here\n there is little question that Defendants knew of the operational disruptions from the Systems\n28 Transition by November 2023, which created the material weakness. \u00b6122.\n\n - 13 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 20 of 32\n\n\n\n\n 4. Misleading Statements About Defendants\u2019 Visibility Into the\n 1\n Financial Impacts of the Systems Transition Disruptions\n 2 Defendants began to reveal the widespread disruption and impacts from the Systems\n 3 Transition in November 2023, but as they did so, they also misleadingly reassured investors (in\n 4 November 2023 and again in February 2024) that they had a good handle on the problems and that\n 5 they had reason to expect the issues would be limited to the then-current quarter. Defendants were\n 6 wrong each time, as the disruptions and impacts persisted through the second quarter of 2024. The\n 7 reason their statements were misleading, however, is because they failed to disclose that they knew\n 8 poor reporting visibility and data integration issues had hindered their ability to make accurate\n 9 forecasts in the first place, despite their confident assurances to investors. Moreover, they knew\n10 that commission expense calculations materially affecting the next quarter\u2019s results could not be\n11 made until the current quarter\u2019s end. This is not fraud-by-hindsight (Mtn. at 6), which \u201csimply\n12 contrast[s] a defendant\u2019s past optimism with less favorable actual results.\u201d Knox v. Yingli Green\n13 Energy Holding Co., 2016 WL 6609210, at *8 (C.D. Cal. May 10, 2016). The Complaint alleges\n14 Defendants\u2019 statements were misleading due to facts known when those statements were made.\n15 First, during a November 2023 earnings call where Defendants first revealed that the\n16 Systems Transition had caused significant operational disruptions and material adverse financial\n17 impacts, Bracher reassured investors that \u201cwe do expect and believe that [the impacts of the\n18 Systems Transition] will be largely behind us by the end of the year. And so our view at this point\n19 is we will enter the new year without any lingering cost impacts or otherwise related to the\n20 transition.\u201d \u00b691. Likewise, Sheedy stated that \u201cin terms of impact looking forward... we do [expect]\n21 the transitional impact to be contained to this year.... And then largely behind us at the end of the\n22 year. So you should think about us reverting back to previous performance ... for both gross margin\n23 and bottom-line profit.\u201d \u00b693. Sheedy also stated twice that Grocery Outlet \u201canticipate[s] the\n24 transitional impacts to be largely behind us as we get to the end of the year.\u201d \u00b695. Bracher also\n25 stated: \u201cwe do feel confident in being able to resolve these outstanding issues to the point where\n26 the impact is then largely behind us by the end of the year.\u201d \u00b697.\n27 Then, in February 2024, Defendants revealed that the disruptions and impacts of the\n28 Systems Transition had persisted into the first quarter of 2024. \u00b6\u00b6107-15. However, undeterred by\n\n - 14 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 21 of 32\n\n\n\n\n 1 their prior failure to ascertain the scope and severity of the disruptions, Defendants once again\n 2 assured investors that the end of their troubles was nigh. Bracher stated that \u201cOur current guidance\n 3 assumes that we ... are back to steady state operations and conclude the elective commission\n 4 support by the end of the first quarter.\u201d \u00b6115. Sheedy stated: \u201cWe expect these [data integration\n 5 issues] to be resolved soon, after which the P&L impact will be behind [us].\u201d \u00b6116.\n 6 a. Defendants\u2019 Assurances Were Misleading\n 7 Each of these statements falsely conveyed that Defendants had a reasonable basis for\n 8 claiming that the disruptions and resulting financial impacts would be resolved during, and not\n 9 persist beyond, the quarter in which each statement was made. See \u00b6\u00b692, 94, 96, 98, 117-18. The\n10 truth was revealed in May 2024, when the Company\u2019s interim CFO, Lindsay Gray, admitted that\n11 \u201c[f]orecasting has been difficult during the system transition as we have not had good visibility to\n12 our normal business reporting and tools. Compounding this have been data integration issues and\n13 new processes that we and our operators are adapting to within new applications.\u201d \u00b6127. Sheedy\n14 also confirmed that the Company had \u201climited data visibility for how we manage and forecast\n15 margin,\u201d which persisted through the preceding fourth and first quarters. \u00b6129. Gray also explained\n16 that the Company had to complete \u201ccatch-up invoice processing and final margin reconciliation\n17 and the end of the quarter\u201d in order to calculate store margins and IO commissions, which \u201ccan\n18 only be calculated after a full inventory period has been completed.\u201d \u00b6118. In other words,\n19 Defendants could not possibly know the full impact on the Company\u2019s margins or commission\n20 expenses for the then-current or subsequent quarters until the then-current quarter had ended. Id.\n21 Defendants\u2019 November 2023 and February 2024 statements were thus misleading because\n22 Defendants did not have a reasonable basis for their assurances to investors, contrary to what their\n23 statements implied. Such statements can be \u201cactionably false if \u2018there is no reasonable basis for\n24 the belief\u2019 or \u2018the speaker is aware of undisclosed facts tending seriously to undermine the\n25 statements\u2019 accuracy.\u2019\u201d Knollenberg v. Harmonic, Inc., 152 F. App\u2019x 674, 683 (9th Cir. 2005)\n26 (quoting Provenz v. Miller, 102 F.3d 1478, 1487 (9th Cir. 1996)). Defendants\u2019 failure to disclose\n27 that their statements were based on a haphazard foundation of impaired data reporting visibility\n28 and calculations they could not yet make rendered their statements materially misleading.\n\n - 15 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 22 of 32\n\n\n\n\n 1 b. Defendants\u2019 Statements Are Actionable\n 2 First, to the extent Defendants\u2019 November 2023 and February 2024 statements were\n 3 opinions, they were nonetheless actionable. Defendants had no reasonable basis to say that the\n 4 disruptions would be resolved during the then-current quarters\u2014even more so in February 2024\n 5 when they had already seen how the same deficiencies marred their projections in November 2023.\n 6 \u00b6117. Thus, Defendants \u201clacked the basis for making those statements that a reasonable investor\n 7 would expect,\u201d and the statements did not \u201cfairly align[] with the information in [Defendants\u2019]\n 8 possession.\u201d Omnicare, 575 U.S. at 188-89, 196.\n 9 Second, while these statements were facially forward-looking, they are not protected by\n10 the PSLRA\u2019s safe harbor. Plaintiff alleges that by November 2023 and February 2024, Defendants\n11 knew that they lacked adequate visibility for business reporting and forecasting, as compounded\n12 by \u201cdata integration issues\u201d due to the Systems Transition, and that they could not make\n13 calculations of store margins or commission expenses for the then-ongoing or subsequent quarters\n14 when they made the assurances to investors. \u00b6\u00b6118, 127, 129. With respect to purported\n15 meaningful cautionary language, Defendants point only to the March 2023 risk disclosure, which\n16 Plaintiff alleges was misleading and not meaningful by August 2023. See supra, \u00a7III(A)(2). Stating\n17 that ERP modernization \u201ccould result in implementation, operational and functionality issues,\u201d\n18 \u00b666 (emphasis added), did not meaningfully apprise investors of the specific risks that, by\n19 November 2023 and February 2024, the rampant disruptions from the Systems Transition had\n20 already materialized and hampered Defendants\u2019 data visibility for business reporting and\n21 forecasting. Facebook, 84 F.4th at 859; Alphabet, 1 F.4th at 704. Similarly, the disclosure that\n22 \u201cwith any update or replacement of our systems and infrastructure there is a risk of business\n23 disruption,\u201d \u00b666 (emphasis added), is a generic statement that does nothing to apprise investors of\n24 the specific risks from the ongoing Systems Transition of impaired data visibility and difficulty\n25 forecasting. Forescout, 63 F.4th at 780-81. Defendants identify no risk warning that meaningfully\n26 disclosed that commission expenses could not be calculated until the end of the quarter and thus\n27 any statements purporting to assess future commission expenses were inherently specious.\n28\n\n - 16 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 23 of 32\n\n\n\n\n B. The Complaint Alleges a Cogent and Compelling Inference of Scienter\n 1\n At the pleading stage, Plaintiff need only \u201c\u2018state with particularity facts giving rise to a\n 2\n strong inference\u2019 that defendants acted with the intent to deceive\u201d or, at minimum, \u201cwith deliberate\n 3\n recklessness as to the possibility of misleading investors.\u201d Berson, 527 F.3d at 987 (quoting\n 4\n PSLRA); see also Vernazza v. S.E.C., 327 F.3d 851, 860 (9th Cir. 2003) (scienter \u201cmay be\n 5\n supported by knowing or reckless conduct, without a showing of willful intent to defraud\u201d).\n 6\n \u201cReckless conduct may be defined as a highly unreasonable omission, involving ... an extreme\n 7\n departure from the standards of ordinary care, and which presents a danger of misleading buyers\n 8\n or sellers that is either known to the defendant or is so obvious that the actor must have been aware\n 9\n of it.\u201d In re VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 694, 702 (9th Cir. 2012). The relevant\n10\n inquiry \u201cis whether all of the facts alleged, taken collectively, give rise to a strong inference of\n11\n scienter.\u201d Tellabs, 551 U.S. at 322-23. The inference of knowing or reckless fraud \u201cneed not be\n12\n irrefutable, i.e., of the smoking-gun genre,\u201d and it need only be at least equally as likely as any\n13\n non-culpable explanation for the alleged conduct. Id. at 314, 324. Here, the Complaint alleges a\n14\n strong inference of scienter as to each of the Defendants.\n15\n 1. Sheedy and Bracher Knew or Recklessly Disregarded that Their\n16 Statements Would Mislead Investors\n17 Defendants do not even attempt to address many of the allegations in the Complaint which\n18 support the inference that Defendants knew their statements were false and acted with deliberate\n19 recklessness. See Schueneman, 840 F.3d at 707 (scienter adequately alleged where defendants had\n20 knowledge of facts that made their statements misleading); also In re Immune Response Sec. Litig.,\n21 375 F. Supp. 2d 983, 1022 (S.D. Cal. 2005) (\u201c[T]hat the defendants published statements when\n22 they knew facts suggesting the statements were inaccurate \u2026 is classic evidence of scienter.\u201d).7\n23 Knowledge of Disruptions and Financial Impact. First, the Complaint alleges that\n24 Defendants \u201calways knew\u201d that the Systems Transition would cause disruptions and affect the\n25 Company\u2019s financial statements but failed to disclose it. \u00b6\u00b689, 93. In the November 2023 Earnings\n26 Call, Sheedy admitted that when transitioning to the new system \u201cwe did expect some disruption\u201d\n27\n 7\n Defendants do not dispute that Sheedy and Bracher\u2019s scienter is properly imputed to Grocery\n28 Outlet. In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471, 476 (9th Cir. 2015).\n\n - 17 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 24 of 32\n\n\n\n\n 1 which would negatively impact the Company\u2019s financials, and the Company had even adjusted its\n 2 financial guidance in the prior period to account for those expected disruptions.8 Id. See In re\n 3 Splunk Inc. Sec. Litig., 592 F. Supp. 3d 919, 938, 947 (N.D. Cal. 2022) (finding scienter where the\n 4 defendants concealed from investors matters they had discussed previously).\n 5 Detailed allegations from former employees (\u201cFEs\u201d) further support an inference that\n 6 Defendants knew the Company was unprepared to launch the Systems Transition. FE1 detailed\n 7 how the \u201cProject Steering Committee\u201d for the Systems Transition held weekly meetings (attended\n 8 by Bracher) to discuss \u201ccritical issues\u201d with the transition and what was \u201cready and not ready.\u201d\n 9 \u00b6\u00b643-45. Bracher provided \u201creadouts\u201d of these meetings to FE1 and others in regular weekly\n10 meetings. Id. The committee maintained \u201ctracking documents\u201d to track ongoing issues and\n11 readiness, which the Accounting and Finance departments discussed during weekly meetings. Id.\n12 FE1 also explained that when the decision was made to launch the Systems Transition, the\n13 Company had not even tested the system using live data (it had only used \u201cdummy\u201d data) or\n14 completed end-to-end UAT. \u00b6\u00b649-56. This lack of testing was specifically noted in the internal\n15 tracking documents available to Defendants. \u00b650. Based on these details\u2014the same facts made\n16 available to and reviewed by Bracher\u2014FE1 assessed that by July 2023, \u201cthe Company was still\n17 not ready to implement the SAP systems\u201d when it made the launch decision. \u00b648. FE2 corroborated\n18 FE1\u2019s account, stating that FE2 and most colleagues felt the launch was premature. \u00b649. Read\n19 holistically, these allegations support the inference that Defendants were aware of the Company\u2019s\n20 lack of readiness and significant risk of disruptions by July 2023. At a minimum they were reckless\n21 in failing to disclose these facts. See Pampena, 705 F. Supp. 3d at 1048-49 (\u201cgeneral allegations\n22 8\n Although this statement is not attributed to Bracher directly, Bracher was on the earnings call\n23 with Sheedy and it is reasonable to infer that \u201cwe\u201d includes Bracher. It would be \u201cabsurd\u201d to\n suggest that Bracher was not also aware of the expected disruptions that the CEO (among others)\n24 knew about given that he was the CFO, was deeply involved in the Systems Transition, had access\n to key information about outstanding readiness issues (\u00b6\u00b644-45, 91, 97), and that the disruptions\n25 were expected to impact the Company\u2019s financials and had factored into prior guidance, squarely\n26 within Bracher\u2019s domain as CFO (\u00b689). See Pampena v. Musk, 705 F. Supp. 3d 1018, 1048 (N.D.\n Cal. 2023) (inference of scienter supported by \u201callegations regarding a management[ defendant]\u2019s\n27 role in the company ... that suggest that the defendant had actual access to the disputed information,\n and where the nature of the relevant fact is of such prominence it would be absurd to suggest that\n28 management was without knowledge of the matter\u201d).\n\n - 18 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 25 of 32\n\n\n\n\n 1 about a defendant\u2019s involvement\u201d that are \u201cbuttressed with detailed and specific allegations about\n 2 management\u2019s exposure to factual information\u201d support an inference of scienter).\n 3 Unlike Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1068 (9th Cir.\n 4 2008), where allegations of a general data monitoring system were insufficient because the\n 5 complaint failed to identify any specific information in the system or how management received\n 6 it, the Complaint here lays out \u201cadditional allegations of specific information \u2026 conveyed to\n 7 management and related to the fraud.\u201d\n 8 Core Operations. The core operations inference also supports a strong inference of\n 9 scienter. This doctrine \u201callows a court to impute\u201d scienter when \u201cthe nature of the relevant fact is\n10 of such prominence that it would be absurd to suggest that management was without knowledge\n11 of the matter.\u201d In re Fibrogen, Inc. Sec. Litig., 2022 WL 2793032, at *29-31 (N.D. Cal. July 15,\n12 2022). Courts \u201cneed not close their eyes to circumstances that are probative of scienter viewed\n13 with a practical and common-sense perspective.\u201d S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776,\n14 784 (9th Cir. 2008) (applying core operations doctrine).\n15 Citing In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1064 (9th Cir. 2014), Defendants\n16 argue that Plaintiff must allege \u201cspecific information conveyed to management and related to the\n17 fraud....\u201d Mtn. at 14. This is not the full rule or quote. Citing S. Ferry, the court in NVIDIA actually\n18 stated that the core operations doctrine would not apply \u201cabsent some additional allegation of\n19 specific information conveyed to management and related to the fraud or other allegations\n20 supporting scienter....\u201d 768 F.3d at 1063 (emphasis added). While Plaintiff meets the standard\n21 even as Defendants frame it, the Complaint\u2019s core operations allegations support scienter because\n22 they accompany \u201cother allegations that, when read together, raise an inference of scienter that is\n23 cogent and compelling.\u201d S. Ferry, 542 F.3d at 785\u201386.\n24 As discussed above, the Complaint alleges that Bracher not only had access to the\n25 information but that he actually reviewed it. With respect to Sheedy, the Complaint alleges: (1)\n26 that he spoke regularly and fluently on the topic to investors and at company-wide meetings (\u00b6\u00b664,\n27 72-76, 84-86, 89, 93, 111, 116, 125, 129); (2) that he was responsible for and \u201cspearheaded\u201d the\n28 important Company-wide project and emailed the entire Company about its launch (\u00b6\u00b648, 62, 64);\n\n - 19 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 26 of 32\n\n\n\n\n 1 (3) his \u201crole in a corporate structure\u201d as CEO (S. Ferry, 542 F.3d at 785); and (4) his admissions\n 2 that \u201cwe did expect some disruption during this transition,\u201d and he \u201calways knew\u201d about the\n 3 complexities and risks of the transition (\u00b6\u00b689, 93). The Complaint also plainly identifies the\n 4 \u201cimportance of the corporate information.\u201d S. Ferry, 542 F.3d at 785. The Systems Transition was\n 5 \u201csuch a central component of [the Company\u2019s] operations that Defendants can be presumed to\n 6 have knowledge of the problems with [it].\u201d Azar v. Yelp, Inc., 2018 WL 6182756, at *20 (N.D.\n 7 Cal. Nov. 27, 2018) see also Fibrogen, 2022 WL 2793032, at *30-31. These allegations support a\n 8 strong inference of scienter on a holistic basis because they are \u201cmade in conjunction with detailed\n 9 and specific allegations about management\u2019s exposure to factual information.\u201d S. Ferry, 542 F.3d\n10 at 785.\n11 Lack of Visibility Into Financials and Inventory. While Sheedy and Bracher admitted\n12 on the November 2023 earnings call that they knew the Systems Transition had \u201cchallenged\u201d the\n13 Company\u2019s inventory visibility with respect to IOs ordering and managing inventory, \u00b6\u00b689, 99,\n14 they did not disclose until May 2024 that they had impaired visibility into business reporting and\n15 tools throughout the Systems Transition, which directly hindered their forecasting ability. \u00b6\u00b6126,\n16 129. Moreover, when Defendants assured investors the impacts would end during the then-current\n17 quarters (\u00b6\u00b691, 93, 95, 97, 115-16), they could not possibly have known the extent of the financial\n18 impacts on the Company for the then-ongoing or following quarters because IO commissions (a\n19 significant expense resulting from the Systems Transition) were based on store margins, which\n20 could not be calculated until the end-of-quarter inventory counts were completed. \u00b6118.\n21 Defendants thus knew they had no reasonable basis for their assurances to investors.\n22 Internal Controls. The allegations in the Complaint also reflect that Defendants knew\n23 their internal controls were ineffective from the start of the transition because they knew they could\n24 not accurately track inventory, costs of goods sold, commissions, margins and other key metrics\n25 due to the disruptions from the Systems Transition. See \u00b6\u00b657-60, 86, 89, 93, 100, 126. Nonetheless,\n26 in the November 2023 10-Q, Sheedy and Bracher signed SOX certifications falsely asserting that\n27 internal controls remained effective even three months into the tumultuous Systems Transition.\n28 \u00b6\u00b679-82 (also noting that Sheedy and Bracher were responsible for the controls and understood\n\n - 20 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 27 of 32\n\n\n\n\n 1 them, as they represented in the certifications); see also \u00b6\u00b6126-27. Defendants then admitted in\n 2 February 2024 that their internal controls were, and had been, ineffective as a result of \u201cthe\n 3 pervasive impact of these control deficiencies.\u201d \u00b6122.\n 4 Defendants\u2019 Resignations. The departures of Sheedy and Bracher also lend support to\n 5 the overall allegations of scienter. Bracher\u2019s departure in December 2023 was in the midst of the\n 6 crisis, soon after the problems were first partially revealed in November 2023, and was deemed\n 7 \u201csurprising\u201d by analysts. \u00b6\u00b6104-05. Such departures can support an inference of scienter. Brendon\n 8 v. Allegiant Travel Co., 412 F. Supp. 3d 1244, 1263 (D. Nev. 2019). Defendants\u2019 self-serving\n 9 characterization (based on evidence that should not be considered at this stage) that it was a\n10 \u201cpersonal decision\u201d and a long transition period do not negate these allegations and just as\n11 plausibly could be PR spin and accommodations common in such situations. Likewise, the\n12 Complaint plausibly alleges that Sheedy was terminated and \u201cheld responsible because he was\n13 intimately aware that the Company was woefully unprepared to launch the Systems Transition in\n14 August 2023,\u201d and the concomitant risks of his decision to launch it anyway. \u00b6\u00b6138-39; Allegiant,\n15 412 F. Supp. 3d at 1263 (noting an executive departure supported scienter where evidence\n16 suggested it was a result of operational challenges).\n17 2. The FE Allegations Are Sufficiently Pled\n\n18 With respect the FE allegations, the central question is whether the complaint provides \u201can\n\n19 adequate basis for determining that the witnesses in question have personal knowledge of the\n20 events they report.\u201d Forescout, 63 F.4th at 767. For this determination, \u201cthe court considers the\n21 level of detail provided by the confidential witnesses, the plausibility of the allegations, the number\n22 of sources, the reliability of the sources, corroborating facts, and similar indicia of reliability.\u201d Id.\n23 Defendants argue that \u201cnone of the FEs are reliable\u201d and that \u201cthere are no allegations that\n\n24 any worked on SAP integration \u2026 or interacted with Sheedy or Bracher about \u2026 systems\n25 implementation.\u201d Mtn. at 11. Defendants must be reading a different complaint. See \u00b6\u00b637-64. FE1\n26 was a Director of Financial Planning and Analysis responsible for the \u201cfull P&L\u201d and forecasting,\n27 directly reporting one-level below Bracher. The Complaint explains FE1s involvement with the\n28 both the Systems Transition and Bracher. \u00b641. FE1 described the Project Steering Committee\u2019s\n\n - 21 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 28 of 32\n\n\n\n\n 1 weekly meetings attended by Bracher and how FE1 received weekly readouts from Bracher\n 2 regarding outstanding issues with the Systems Transition. \u00b644. The Complaint also alleges that\n 3 FE1 personally reviewed the tracking documents which are described in detail. See \u00b6\u00b642-56, 58-\n 4 59. The Complaint likewise adequately alleges details about FE2 and FE3\u2019s experience, positions,\n 5 and the basis for their relevant knowledge. \u00b6\u00b639-40, 56-57. FE1\u2019s detailed allegations are\n 6 corroborated by FE2 and FE3\u2019s accounts, as well as Defendants\u2019 own admissions of their prior\n 7 knowledge. These are a far cry from the vague, unreliable, and irrelevant FE allegations rejected\n 8 in the cases Defendants cite.9\n 9 Contrary to Defendants\u2019 arguments, the FE allegations do not need to demonstrate firsthand\n10 knowledge of Defendants\u2019 subjective belief to support scienter. In In re Rackable Sys., Inc. Sec.\n11 Litig., 2010 WL 199703, at *8 (N.D. Cal. Jan. 13, 2010), the court merely refused to rely on \u201cvague\n12 assertions\u201d from a witness who had no interactions with the defendants, provided them with no\n13\n information, and said nothing relevant regarding their knowledge of false financial statements.\n14 3. Plaintiff\u2019s Inference of Scienter is the Most Plausible\n15 Defendants knew that prematurely launching the Systems Transition carried significant\n16 risk of operational disruptions and was likely to cause adverse financial impacts. They decided to\n17 \u201crip off the band-aid\u201d anyway. Later, they repeatedly tried to downplay the ongoing impacts and\n18 reassure investors that the worst was over, knowing they had no reasonable basis for doing so.\n19 This was hardly a story of transparency and good faith. Defendants did not reveal any of the\n20\n21 9 See e.g. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 997-98 (9th Cir. 2009) (FEs\n lacked personal knowledge and knowledge was based on \u201cvague hearsay\u201d); McGovney v. Aerohive\n22\n Networks, Inc., 367 F. Supp. 3d 1038, 1053 (N.D. Cal. Feb. 5, 2019) (complaint failed to describe\n23 the FEs\u2019 job responsibilities or allege that they \u201cwere in a position to have the knowledge they\n profess\u201d); Wozniak v. Align Tech., Inc., 2011 WL 2269418, at *12 (N.D. Cal. June 8, 2011) (no\n24 scienter based on FEs who only made vague and conclusory allegations and did not \u201cdescribe[]\n the contents of any of the meetings\u201d); Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759\n25 F.3d 1051, 1063 (9th Cir. 2014) (low-level FE of three months who made an unsubstantiated\n26 statement without substance or context and other FEs who provided only \u201csnippets\u201d of vague\n information); City of Sunrise Firefighters\u2019 Pension Fund v. Oracle Corp., 2019 WL 6877195, at\n27 *19 (N.D. Cal. Dec. 17, 2019) (FEs could not confirm the executives actually received reports);\n NVIDIA, 768 F.3d at 1058-59 (FE at issue failed to explain how management would have received\n28 the information, and the information he was aware of did not even relate to the fraud).\n\n - 22 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 29 of 32\n\n\n\n\n 1 disruptions or impacts until November 2023, three months after the rollout that had immediately\n 2 thrown a wrench into the Company\u2019s operations. Even then, they did not \u201caccurately quantif[y]\n 3 the impact on sales and gross margins,\u201d Mtn. at 15, they baselessly assured investors that\n 4 everything was under control. The fact that Defendants eventually disclosed the internal controls\n 5 weakness six months after the disruptions began, Mtn. at 15, is hardly exculpatory.\n 6 Defendants also argue that Plaintiff does not allege Defendants\u2019 motive. While an\n 7 allegation of motive can help support scienter, it is not required. Tellabs, Inc. 551 U.S. at 310.\n 8 Here, Defendants were motivated to conceal and downplay the foreseeable results of the risks they\n 9 knowingly took on. Defendants also claim that the Company made stock repurchases in 2022,\n10 before the fraud, and then during some unspecified time in 2023, pursuant to a 2021 share\n11 repurchase program. Mtn. at 16, n.6, Ex. 8 at 85. Absent conclusive evidence of exactly when and\n12 why the 2023 repurchases were made, they do not weigh against an inference of scienter.\n13 \u201cDefendants have not provided sufficient context,\u201d and thus \u201csuch purchases would not negate the\n14 strong inference of scienter.\u201d Maiman v. Talbott, 2010 WL 11421950, at *7 (C.D. Cal. Aug. 9,\n15 2010). See also State Teachers Ret. Sys. of Ohio v. ZoomInfo Tech., Inc., 2025 WL 3013683, at\n16 *25 (W.D. Wash. Oct. 28, 2025) (stock repurchases \u201cdo[] not undermine scienter\u201d and are even\n17 \u201cless relevant for individual defendants\u201d) (citing In re Apple Inc. Sec. Litig., 2020 WL 6482014,\n18 at *13 (N.D. Cal. Nov. 4, 2020)).\n19 In any event, the Ninth Circuit has made clear that \u201c[s]cienter can be established even if\n20 the officers who made the misleading statements did not sell stock during the class period.\u201d No.\n21 84 Employer-Teamster Joint Council Pension Tr. Fund v. Am. West Holding Corp., 320 F.3d 920,\n22 928-38, 944 (9th Cir. 2003) (plaintiffs sufficiently pled scienter despite existence of stock\n23 repurchase). \u201c[C]ourts have refused to hold that stock purchases were inconsistent with fraud\n24 where the defendants could have believed they could have continued to hide the fraud.\u201d Cho v.\n25 UCBH Holdings, Inc., 890 F. Supp. 2d 1190, 1202 n.2 (N.D. Cal. 2012). Defendants \u201cmay have\n26 hoped\u201d they could succeed despite the massive risks, but that \u201chope does not justify misleading\n27 investors.\u201d Apple, 2020 WL 6482014 at *13 n.12.\n28\n\n - 23 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 30 of 32\n\n\n\n\n C. The Complaint Adequately Alleges Loss Causation\n 1\n Pleading loss causation requires allegations of \u201ca causal connection between the material\n 2\n [misrepresentations or omissions] and the loss.\u201d Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342\n 3\n (2005). This is a \u201clow bar\u201d at the pleading stage. In re WageWorks, Inc., Sec. Litig., 2020 WL\n 4\n 2896547, at *8 (N.D. Cal. June 1, 2020). Plaintiff needs only to allege a \u201cplausible\u201d inference that\n 5\n the \u201crevelation of fraudulent activity... proximately caused the decline in defendant\u2019s stock price.\u201d\n 6\n Grigsby v. BofI Holding, Inc., 979 F.3d 1198, 1204-06 (9th Cir. 2020). \u201cOne way to prove loss\n 7\n causation is to show that the defendant\u2019s fraud was revealed to the market through one or more\n 8\n corrective disclosures.\u201d In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 786 (9th Cir. 2020).\n 9\n Plaintiff may also plead \u201cmaterialization of the risk,\u201d alleging that discloses revealed the true\n10\n extent of the relevant risk. See WageWorks, 2020 WL 2896547 at *8; Yaron v. Intersect ENT, Inc.,\n11\n 2020 WL 6750568, at *5 (N.D. Cal. June 19, 2020) (\u201cDisclosure of fraud is not a sine qua non of\n12\n loss causation. ... Instead, under a materialization of the risk theory, plaintiff may allege the very\n13\n facts about which defendant lied caused the injuries.\u201d). The disclosures may be partial, spread over\n14\n a series of disclosures revealing the entire issue gradually. In re BofI, 977 F.3d. at 790.\n15\n Defendants assert that they truthfully disclosed all the risks before they materialized, but\n16\n the Complaint alleges otherwise. Supra \u00a7III(A)(2). This argument is entirely derivative of\n17\n Defendants\u2019 falsity arguments, and thus it fails for the same reasons. The Complaint alleges that\n18\n the concealed risk\u2014that prematurely launching the Systems Transition would cause operational\n19\n disruptions and adversely impact Grocery Outlet\u2019s financial results\u2014gradually materialized as the\n20\n Company partially revealed the true impacts of the botched Systems Transition launch, resulting\n21\n in six separate stock declines. See \u00b6102 (upon the first disclosure of disruptions and financial\n22\n impacts), \u00b6106 (upon Bracher\u2019s related departure), \u00b6119 (upon disclosure of continued disruptions\n23\n and impacts), \u00b6123 (upon disclosure of material weakness in internal controls), \u00b6130 (upon\n24\n disclosure of continued financial impacts and facts showing Defendants lacked a reasonable basis\n25\n for their assurances), and \u00b6137 (upon Sheedy\u2019s firing due to the botched Systems Transition).\n26\n Plaintiff alleges that Sheedy\u2019s and Bracher\u2019s purported resignations were a result of their\n27\n roles in bungling the Systems Transition. \u00b6\u00b6106, 137. An executive resignation resulting in a stock\n28\n\n - 24 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 31 of 32\n\n\n\n\n 1 decline alleges loss causation where the resignation was a result of the fraud or materialization of\n 2 the concealed risks such as executive misconduct. Cement & Concrete Workers Dist. Council\n 3 Pension Fund v. Hewlett Packard Co., 964 F. Supp. 2d 1128, 1145-46 (N.D. Cal. 2013).\n 4 Defendants\u2019 arguments that they disclosed the risk, or that the declines were solely the\n 5 result of poor performance, are inherently factual inquiries that cannot be resolved at the pleading\n 6 stage. Amgen Inc. v. Conn. Ret. Plans and Tr. Funds, 568 U.S. 455, 482 (2013) (proof that \u201cnews\n 7 of the truth credibly entered the market and dissipated the effects of prior misstatements\u201d is an\n 8 issue for trial or summary judgment.); Ohio Pub. Emps. Ret. Sys. v. Meta Platforms, Inc., 2024\n 9 WL 4353049, at *19 (N.D. Cal. Sept. 30, 2024) (on a motion to dismiss, rejecting argument that\n10 that the truth was revealed because the facts were disputed by the complaint). In any event, \u201c[t]he\n11 misrepresentation need not be the sole reason for the decline in value of the securities,\u201d it need\n12 only be \u201ca substantial cause.\u201d Gilead, 536 F.3d at 1055; Special Situations Fund III QP, L.P. v.\n13 Brar, 2015 WL 1393539, at *9 (N.D. Cal. Mar. 26, 2015) (loss causation adequately pled where\n14 the market\u2019s recognition of the true level of exposure \u201cplayed some part in diminishing the market\n15 value of [Plaintiff\u2019s] securit[ies].\u201d). Plaintiff alleges a \u201cconnection\u201d between the concealed risks\n16 and the losses incurred upon the materializations of those risks, adequately pleading loss causation.\n17 D. The Complaint Adequately Alleges a Claim under \u00a7 20(a) of the Exchange\n Act\n18\n To state a claim under \u00a7 20(a), Plaintiff must allege: (1) a primary violation of the\n19\n Exchange Act; and (2) that the individual defendants controlled the entity liable for the primary\n20\n violation. 15 U.S.C. \u00a7 78t(a); Hefler v. Wells Fargo & Co., 2018 WL 1070116, at *13 (N.D. Cal.\n21\n Feb. 27, 2018) (Tigar, J.). The Complaint adequately alleges a primary violation by Grocery\n22\n Outlet. Defendants do not contest that the Complaint adequately alleges the control element, Mtn.\n23\n at 17 n.7, thus their motion to dismiss Plaintiff\u2019s \u00a7 20(a) claims must be denied. Id. at *13-14.\n24\n IV. CONCLUSION\n25\n The Court should deny Defendants\u2019 motion to dismiss. If the Court grants any part of the\n26\n motion, Plaintiff respectfully requests leave to amend. Eminence Cap., LLC v. Aspeon, Inc., 316\n27\n F.3d 1048, 1052 (9th Cir. 2003) (leave to replead is routinely granted in securities cases).\n28\n\n - 25 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 40 Filed 12/23/25 Page 32 of 32\n\n\n\n\n 1\n 2 Dated: December 23, 2025 Respectfully submitted,\n 3\n THE ROSEN LAW FIRM, P.A.\n 4\n By: /s/Joshua Baker\n 5 Laurence M. Rosen (SBN 219683)\n 355 S. Grand Avenue, Suite 2450\n 6 Los Angeles, CA 90071\n 7 Telephone: (213) 785-2610\n Email: lrosen@rosenlegal.com\n 8\n Jonathan Stern (pro hac vice)\n 9 Joshua Baker (pro hac vice)\n10 275 Madison Avenue, 40th Floor\n Telephone: (212) 686-1060\n11 Email: jstern@rosenlegal.com\n jbaker@rosenlegal.com\n12\n Lead Counsel for Lead Plaintiff and the Class\n13\n14 THE SCHALL LAW FIRM\n Brian Schall\n15 2049 Century Park East, Suite 2460\n Los Angeles, CA 90067\n16 Telephone: (310) 301-3335\n17 brian@schallfirm.com\n\n18 Additional Counsel for Lead Plaintiff\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n\n - 26 -\n PLAINTIFF\u2019S OPPOSITION TO DEFENDANTS\u2019 MOTION TO DISMISS; 4:25-CV-957-JST\n\f","ocr_status":2,"date_upload":"2025-12-30T21:32:16.886981-08:00","document_number":"40","attachment_number":null,"pacer_doc_id":"035026580061","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Opposition/Response to Motion","acms_document_guid":""}],"date_created":"2025-12-23T14:32:06.028201-08:00","date_modified":"2025-12-30T21:29:24.621892-08:00","date_filed":"2025-12-23","time_filed":"14:03:54","entry_number":40,"recap_sequence_number":"2025-12-23.001","pacer_sequence_number":137,"description":"OPPOSITION/RESPONSE (re 39 MOTION to Dismiss 38 Amended Complaint ) filed byCasey Cavanaugh. (Baker, Joshua) (Filed on 12/23/2025) (Entered: 12/23/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/441708443/","id":441708443,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/456296470/","id":456296470,"tags":[],"absolute_url":"","date_created":"2025-10-22T11:01:06.868918-07:00","date_modified":"2025-10-22T11:01:06.887844-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Set Motion and Deadlines/Hearings AND Terminate Deadlines","acms_document_guid":""}],"date_created":"2025-10-22T11:01:06.794005-07:00","date_modified":"2025-10-22T11:01:06.794024-07:00","date_filed":"2025-10-22","time_filed":"10:58:26","entry_number":null,"recap_sequence_number":"2025-10-22.001","pacer_sequence_number":null,"description":"","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/441620478/","id":441620478,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/456206215/","id":456206215,"tags":[],"absolute_url":"/docket/69592783/39/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-10-21T14:31:43.922666-07:00","date_modified":"2025-12-30T21:29:24.545896-08:00","sha1":"6e97a8fa58e66a444b71753623e76fd059bdc320","page_count":25,"file_size":293203,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.39.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.39.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 1 of 25\n\n\n\n1 GIBSON, DUNN & CRUTCHER LLP\n CRAIG VARNEN, SBN 172603\n2 cvarnen@gibsondunn.com\n 333 South Grand Avenue\n3 Los Angeles, California 90071-3197\n Telephone: 213.229.7000\n4 Facsimile: 213.229.7520\n5\n JEFF LOMBARD, SBN 285371\n6 jlombard@gibsondunn.com\n 310 University Avenue\n7 Palo Alto, California 94301-1744\n Telephone: 650.849.5300\n8 Facsimile: 650.849.5333\n9 Attorneys for Defendants\n Grocery Outlet Holding Corp., Robert Joseph\n10 Sheedy, and Charles C. Bracher\n11\n IN THE UNITED STATES DISTRICT COURT\n12\n FOR THE NORTHERN DISTRICT OF CALIFORNIA\n13\n OAKLAND DIVISION\n14\n15\n IN RE GROCERY OUTLET HOLDING CASE NO. 4:25-cv-957-JST\n16 CORP. SECURITIES LITIGATION\n17 CLASS ACTION\n\n18 Hon. Jon S. Tigar\n Courtroom 6\n19\n20 DEFENDANTS\u2019 NOTICE OF MOTION\n AND MOTION TO DISMISS AMENDED\n21 COMPLAINT\n\n22 Date: March 19, 2026\n Time: 2:00 p.m.\n23\n24 Action Filed: January 30, 2025\n25\n26\n27\n28\n\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 2 of 25\n\n\n\n1 TO PLAINTIFF AND HIS ATTORNEYS OF RECORD:\n2 PLEASE TAKE NOTICE that on March 19, 2026 at 2:00 p.m., or as soon thereafter as the\n\n3 matter may be heard, in the United States District Court for the Northern District of California, located\n\n4 at 1301 Clay Street, Oakland Courthouse, Courtroom 6, Oakland, CA 94612, Defendants Grocery\n\n5 Outlet Holding Corp. (\u201cGrocery Outlet\u201d or the \u201cCompany\u201d), Robert Joseph Sheedy, and Charles C.\n\n6 Bracher will and hereby do move for an order dismissing the Amended Consolidated Complaint for\n\n7 Violations of the Federal Securities Laws (the \u201cAmended Complaint\u201d) pursuant to Federal Rule of\n\n8 Civil Procedure (\u201cRule\u201d) 12(b)(6) (the \u201cMotion\u201d).\n\n9 Defendants move to dismiss the Amended Complaint pursuant to Rule 12(b)(6) for failure to\n\n10 state a claim under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (\u201cExchange Act\u201d).\n\n11 This Motion is based on this Notice, the supporting Memorandum of Points and Authorities, the\n\n12 accompanying Declaration of Jeff Lombard, and the exhibits attached thereto, Defendants\u2019 Request for\n\n13 Judicial Notice, all records in this action, and any additional materials and arguments as may be\n\n14 considered in connection with the hearing on the Motion.\n\n15\n16\n DATED: October 21, 2025 Respectfully submitted,\n17\n GIBSON, DUNN & CRUTCHER LLP\n18\n19 By: /s/ Craig Varnen\n Craig Varnen\n20\n Attorneys for Defendants Grocery Outlet Holding\n21 Corp., Robert Joseph Sheedy, and Charles C.\n Bracher\n22\n23\n24\n25\n26\n27\n28\n 1\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 3 of 25\n\n\n\n1 TABLE OF CONTENTS\n2 Page\n3 I. STATEMENT OF ISSUES TO BE DECIDED .........................................................................1\n4 II. INTRODUCTION ......................................................................................................................1\n5\n III. FACTUAL BACKGROUND .....................................................................................................2\n6\n A. Grocery Outlet Overhauls Its Dated ERP Infrastructure.................................................2\n7\n B. Grocery Outlet Warned Investors of Implementation Risks and Disclosed\n8 Setbacks in Real Time.....................................................................................................3\n9 IV. LEGAL STANDARD .................................................................................................................4\n10 V. ARGUMENT ..............................................................................................................................5\n11 A. Plaintiff\u2019s Rule 10b-5(b) and Exchange Act Claims Must Be Dismissed for\n12 Failure to Plead a Materially False or Misleading Statement .........................................5\n\n13 1. Defendants\u2019 statements were not false or misleading. ........................................5\n\n14 2. The challenged statements are not actionable as a matter of law. ......................8\n\n15 B. Plaintiff\u2019s Section 10(b) Claim Must Be Dismissed for Failure to Plead\n Scienter..........................................................................................................................10\n16\n 1. Plaintiff\u2019s confidential witnesses do not establish scienter. ..............................11\n17\n18 2. The circumstantial allegations of purported knowledge do not support an\n inference of scienter. .........................................................................................13\n19\n 3. The most plausible inference is that Defendants acted in good faith. ...............15\n20\n C. Plaintiff\u2019s Section 10(b) Claims Must Be Dismissed for Failure to Plead Loss\n21 Causation .......................................................................................................................16\n22 VI. CONCLUSION .........................................................................................................................17\n23\n24\n25\n26\n27\n28\n i\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 4 of 25\n\n\n\n1 TABLE OF AUTHORITIES\n2 Page(s)\n Cases\n3\n In re Accuray, Inc. Sec. Litig.,\n4 757 F. Supp. 2d 936 (N.D. Cal. 2010) ............................................................................................13\n5 In re Autodesk, Inc. Sec. Litig.,\n 132 F. Supp. 2d 833 (N.D. Cal. 2000) ..............................................................................................5\n6\n In re Bare Escentuals, Inc. Sec. Litig.,\n7 745 F. Supp. 2d 1052 (N.D. Cal. 2010) ............................................................................................9\n8 Bhangal v. Hawaiian Elec. Indus., Inc.,\n 2024 WL 4505465 (N.D. Cal. Oct. 15, 2024) .................................................................................16\n9\n In re BofI Holding, Inc. Sec. Litig.,\n10 977 F.3d 781 (9th Cir. 2020).......................................................................................................5, 17\n11 Brody v. Transitional Hosps. Corp.,\n 280 F.3d 997 (9th Cir. 2002).........................................................................................................5, 8\n12\n Browning v. Amyris, Inc.,\n13 2014 WL 1285175 (N.D. Cal. Mar. 24, 2014) ................................................................................11\n14 City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.,\n 856 F.3d 605 (9th Cir. 2017)...........................................................................................................10\n15\n City of Pontiac Policemen\u2019s & Firemen\u2019s Ret. Sys. v. UBS AG,\n16 752 F.3d 173 (2d Cir. 2014) ..............................................................................................................8\n17 City of Royal Oak Ret. Sys. v. Juniper Networks, Inc.,\n 880 F. Supp. 2d 1045 (N.D. Cal. 2012) ..........................................................................................15\n18\n In re Cloudera, Inc.,\n19 121 F.4th 1180 (9th Cir. 2024) .....................................................................................................5, 6\n20 In re Cornerstone Propane Partners, L.P.,\n 355 F. Supp. 2d 1069 (N.D. Cal. 2005) ..........................................................................................15\n21\n In re Cutera Sec. Litig.,\n22 610 F.3d 1103 (9th Cir. 2010)...........................................................................................................9\n23 In re Daou Sys., Inc.,\n 411 F.3d 1006 (9th Cir. 2005)...........................................................................................................1\n24\n Davoli v. Costco Wholesale Corp.,\n25 854 F. App\u2019x 116 (9th Cir. 2021) .....................................................................................................6\n26 In re Downey Sec. Litig.,\n 2009 WL 2767670 (C.D. Cal. Aug. 21, 2009) ..................................................................................9\n27\n Dura Pharms., Inc. v. Broudo,\n28 544 U.S. 336 (2005) ........................................................................................................................17\n ii\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 5 of 25\n\n\n\n1 In re Facebook, Inc. Sec. Litig.,\n 405 F. Supp. 3d 809 (N.D. Cal. 2019), rev\u2019d on other grounds, 87 F.4th 934 (9th\n2 Cir. 2023) ..........................................................................................................................................8\n3 Lloyd v. CVB Fin. Corp.,\n 811 F.3d 1200 (9th Cir. 2016).........................................................................................................16\n4\n Loos v. Immersion Corp.,\n5 762 F.3d 880 (9th Cir. 2014).......................................................................................................5, 17\n6 Macomb Cnty. Emps. Ret. Sys. v. Align Tech., Inc.,\n 39 F.4th 1092 (9th Cir. 2022) .........................................................................................................10\n7\n Mallen v. Alphatec Holdings, Inc.,\n8 861 F. Supp. 2d 1111 (S.D. Cal. 2012) ...........................................................................................15\n9 Mazzaferro v. Aruba Networks Inc.,\n 2014 WL 12680773 (N.D. Cal. Aug. 1, 2014)..................................................................................7\n10\n McGovney v. Aerohive Networks, Inc.,\n11 367 F. Supp. 3d 1038 (N.D. Cal. 2019) ..........................................................................................12\n12 Metzler Inv. GMBH v. Corinthian Colleges, Inc.,\n 540 F.3d 1049 (9th Cir. 2008).........................................................................................................14\n13\n In re Nektar Therapeutics,\n14 2020 WL 3962004 (N.D. Cal. July 13, 2020) ...................................................................................8\n15 In re Nektar Therapeutics Sec. Litig.,\n 34 F.4th 828 (9th Cir. 2022) ...........................................................................................................13\n16\n Nguyen v. Endologix, Inc.,\n17 962 F.3d 405 (9th Cir. 2020).............................................................................................4, 7, 11, 13\n18 Nuveen Mun. High Income Opportunity Fund v. City of Alameda, Cal.,\n 730 F.3d 1111 (9th Cir. 2013).........................................................................................................17\n19\n In re NVIDIA Corp. Sec. Litig.,\n20 768 F.3d 1046 (9th Cir. 2014)...................................................................................................14, 17\n21 In re NVIDIA Corp. Sec. Litig.,\n 2011 WL 4831192 (N.D. Cal. Oct. 12, 2011), aff\u2019d, 768 F.3d 1046 (9th Cir. 2014) .....................13\n22\n Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund,\n23 575 U.S. 175 (2015) ........................................................................................................................10\n24 City of Sunrise Firefighters\u2019 Pension Fund v. Oracle Corp.,\n 2019 WL 6877195 (N.D. Cal. Dec. 17, 2019) ................................................................................12\n25\n Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc.,\n26 759 F.3d 1051 (9th Cir. 2014).....................................................................................4, 8, 10, 12, 14\n27 Prodanova v. H.C. Wainwright & Co., LLC,\n 993 F.3d 1097 (9th Cir. 2021)...................................................................................................11, 15\n28\n iii\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 6 of 25\n\n\n\n1 In re Rackable Sys., Inc. Sec. Litig.,\n 2010 WL 3447857 (N.D. Cal. Aug. 27, 2010)................................................................................13\n2\n In re Rigel Pharms., Inc. Sec. Litig.,\n3 697 F.3d 869 (9th Cir. 2012).............................................................................................................4\n4 In re Robinhood Order Flow Litig.,\n 2022 WL 9765563 (N.D. Cal. Oct. 13, 2022) ...................................................................................8\n5\n Ronconi v. Larkin,\n6 253 F.3d 423 (9th Cir. 2001), rev\u2019d on other grounds, Glazer Cap. Mgmt., L.P. v.\n Forescout Techs., Inc., 63 F.4th 747 (9th Cir. 2023) ................................................................12, 13\n7\n S. Ferry LP, No. 2 v. Killinger,\n8 542 F.3d 776 (9th Cir. 2008)...........................................................................................................14\n9 Scheller v. Nutanix, Inc.,\n 450 F. Supp. 3d 1024 (N.D. Cal. 2020) ..........................................................................................11\n10\n In re Splash Tech. Holdings, Inc. Sec. Litig.,\n11 160 F. Supp. 2d 1059 (N.D. Cal. 2001) ..........................................................................................10\n12 Tellabs, Inc. v. Makor Issues & Rts., Ltd.,\n 551 U.S. 308 (2007) ........................................................................................................................15\n13\n In re Tibco Software, Inc.,\n14 2006 WL 1469654 (N.D. Cal. May 25, 2006) ................................................................................16\n15 In re Twitter, Inc. Sec. Litig.,\n 506 F. Supp. 3d 867(N.D. Cal. 2020), aff\u2019d sub nom. Weston Fam. P\u2019ship LLLP v.\n16 Twitter, Inc., 29 F.4th 611 (9th Cir. 2022) ..................................................................................9, 10\n17 In re VeriFone Sec. Litig.,\n 11 F.3d 865 (9th Cir. 1993)...............................................................................................................9\n18\n Vess v. Ciba-Geigy Corp. USA,\n19 317 F.3d 1097 (9th Cir. 2003)...........................................................................................................4\n20 Wozniak v. Align Tech., Inc.,\n 850 F. Supp. 2d 1029 (N.D. Cal. 2012) ....................................................................................10, 12\n21\n Yaron v. Intersect ENT, Inc.,\n22 2020 WL 6750568 (N.D. Cal June 19, 2020) .................................................................................16\n23 Zucco Partners, LLC v. Digimarc Corp.,\n 552 F.3d 981 (9th Cir. 2009)...................................................................................11, 12, 14, 16, 17\n24\n Statutes\n25\n 15 U.S.C. \u00a7 78u-4(b)(1)\u2013(2)....................................................................................................................4\n26\n 15 U.S.C. \u00a7 78u-4(b)(1)(B) .....................................................................................................................5\n27\n 15 U.S.C. \u00a7 78u-4(b)(2)(A) ...............................................................................................................5, 11\n28\n iv\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 7 of 25\n\n\n\n1 Regulations\n2 17 C.F.R. \u00a7 240.10b-5(a) ........................................................................................................................8\n3 17 C.F.R. \u00a7 240.10b-5(c) ........................................................................................................................8\n4\n5\n6\n7\n8\n9\n10\n11\n12\n13\n14\n15\n16\n17\n18\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n v\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 8 of 25\n\n\n\n1 MEMORANDUM OF POINTS AND AUTHORITIES\n2 I. STATEMENT OF ISSUES TO BE DECIDED\n3 1. Whether Plaintiff\u2019s claim under Section 10(b) of the Exchange Act should be dismissed\n4 for failure to plead adequately falsity, scienter, and loss causation.\n5 2. Whether Plaintiff\u2019s claim under Sections 20(a) of the Exchange Act should be dismissed\n6 for failure to plead a primary violation of the Exchange Act.\n7 II. INTRODUCTION\n8 Plaintiff\u2019s Amended Complaint attempts to shoehorn ordinary business challenges regarding a\n9 major corporate initiative into securities fraud. Plaintiff\u2019s theory is that Defendants knew Grocery\n10 Outlet was unprepared to launch its new back-end information technology systems in August 2023 but\n11 nonetheless pushed forward and later experienced disruptions that hurt the Company\u2019s performance.\n12 What Plaintiff alleges is not fraud at all, but hindsight disagreement with how Defendants executed a\n13 complex IT systems transition. The federal securities laws, however, do not punish imperfect execution\n14 or forecasts, or even executive optimism. In fact, far from concealing information, Grocery Outlet\n15 consistently disclosed the very issues Plaintiff claims were hidden, providing quarterly updates that\n16 disclosed then-known execution issues and quantifying the associated financial impact on the\n17 Company\u2019s results and future outlook. A company, like Grocery Outlet, that candidly acknowledges\n18 problems, reports their impact on the company\u2019s bottom-line, and continues to guide investors based\n19 on its best, known expectations for the future is the exact opposite of one attempting to commit \u201cfraud.\u201d\n20 Lacking any allegation of insider trading, personal motive, or even a theory that comports with common\n21 sense, Plaintiff\u2019s claim epitomizes the very \u201cfraud by hindsight\u201d that Congress sought to foreclose\n22 through the Private Securities Litigation Reform Act (\u201cPSLRA\u201d). In re Daou Sys., Inc., 411 F.3d 1006,\n23 1021 (9th Cir. 2005). The Court should dismiss the Amended Complaint because Plaintiff fails to\n24 plead with particularity three required elements of his Section 10(b) claim: falsity, scienter, and loss\n25 causation. And for this reason, his Section 20(a) claim also fails.\n26 Falsity. Plaintiff identifies no contemporaneous facts that contradict Defendants\u2019 statements\n27 when made. Instead, he cherry-picks later developments and attempts to repackage them as \u201cproof\u201d\n28 earlier statements must have been false. Plaintiff cannot retroactively transform acknowledged risks\n 1\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 9 of 25\n\n\n\n1 and later business setbacks into actionable misstatements. Moreover, many of the challenged\n2 statements are independently inactionable as forward-looking statements, opinions, or corporate\n3 optimism.\n4 Scienter. Plaintiff pleads no facts showing that either Individual Defendant knew their\n5 statements were false. Instead, Plaintiff relies on vague anecdotes from disgruntled former employees\n6 who neither interacted with the Individual Defendants about the systems upgrade nor contend that\n7 contradictory information about it was ever provided to them. Because Plaintiff fails to allege any\n8 motive to commit fraud, his scienter theory boils down to the unremarkable assertion that senior\n9 executives were aware of execution challenges they disclosed to the market. This cannot state a claim\n10 under the PSLRA.\n11 Loss Causation. Plaintiff identifies no corrective disclosure revealing the prior falsity of any\n12 challenged statement. Instead, the alleged stock drops followed the materialization of disclosed risks\n13 and disappointing results. The Supreme Court has made clear that these kinds of disclosures do not\n14 reveal any previously undisclosed \u201ctruth,\u201d and thus cannot support loss causation.\n15 For these reasons, as set forth below, the Amended Complaint should be dismissed in its\n16 entirety.\n17 III. FACTUAL BACKGROUND\n18 Grocery Outlet is a discount retailer with more than 500 locations across the United States, with\n19 most of its locations operated by independent, third-party operators.1 See \u00b6 28. Robert Joseph Sheedy\n20 was the Company\u2019s CEO from January 2023 to October 29, 2024, and Charles Bracher was the\n21 Company\u2019s CFO from August 2012 until March 1, 2024. \u00b6\u00b6 21, 22.\n22 A. Grocery Outlet Overhauls Its Dated ERP Infrastructure\n23 In 2021, Grocery Outlet began a multi-year project to replace its outdated legacy AS400 internal\n24 enterprise resource planning (\u201cERP\u201d) and information technology systems with new ERP software\n25 from SAP. \u00b6 2. The upgrade was meant to streamline operations across all facets of the Company,\n26 including product, inventory, financial and reporting platforms. Id. The Company conducted extensive\n27 1\n Citations to \u201c\u00b6__\u201d or \u201c\u00b6\u00b6__\u201d refer to paragraphs of the Amended Complaint. Citations to \u201cEx.__\u201d are\n28 to the Declaration of Jeff Lombard filed concurrently herewith. Unless stated otherwise, all emphasis\n is added and all internal citations and quotations are omitted.\n 2\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 10 of 25\n\n\n\n1 development and testing throughout 2021 and 2022, with the goal of rolling out the new software in\n2 March 2023. \u00b6\u00b6 3, 46. However, in March 2023, the Company determined that the launch date would\n3 be premature and pushed the software\u2019s official implementation to August 2023. \u00b6\u00b6 6, 46\u201350. On\n4 August 8, 2023, the day before the class period began, the Company disclosed on its Q2 2023 earnings\n5 call that it \u201clook[ed] forward to delivering this new application to operators this quarter.\u201d \u00b6 72. A few\n6 weeks later, in late August 2023, SAP went live. \u00b6 5.\n7 B. Grocery Outlet Warned Investors of Implementation Risks and Disclosed\n Setbacks in Real Time\n8\n9 The SAP launch did not progress as smoothly as Grocery Outlet had hoped. During Q3 2023,\n10 it became clear that the systems transition had caused inventory and ordering management issues,\n11 hurting Grocery Outlet\u2019s Q3 results. \u00b6 86. The Company disclosed these challenges in its November\n12 2023 earnings call, stating that it had \u201cexperienced operational disruptions as [it] transition[ed] to\n13 upgraded systems.\u201d Id. The Company also disclosed the impact of these \u201coperational disruptions\u201d on\n14 its Q3 2023 results, telling investors that the \u201csystem upgrades impacted comparable store sales by an\n15 estimated 150 basis points,\u201d and \u201cimpacted gross margin by approximately 50 basis points.\u201d \u00b6 87.\n16 Grocery Outlet also told investors that it expected \u201cthe system implementation disruptions to continue\n17 to impact sales and gross margin\u201d into Q4 2023 and possibly beyond. Ex. 4 at 20. Bracher stated that\n18 the Company \u201cexpect[ed] and believe[d] that [the impact] will be largely behind [it] by the end of the\n19 year.\u201d \u00b6 91. Following these disclosures, \u201cthe price of Grocery Outlet stock fell $1.31, or 4.6%, to\n20 close at $27.15.\u201d \u00b6 102.\n21 On February 27, 2024, the Company disclosed its Q4 2023 financial results. \u00b6 106. Grocery\n22 Outlet explained to investors that \u201c[a]s previously disclosed, the Company experienced disruptions as\n23 a result of the implementation of new technological platforms in late August 2023.\u201d \u00b6 108. The\n24 Company also revealed that, despite its best efforts, \u201cdata integration efforts [were] taking longer than\n25 expected and [were] still impacting [Grocery Outlet\u2019s] business results.\u201d \u00b6 111. As he did on the Q3\n26 earnings call in November 2023, Bracher disclosed the impact of the disruptions on the Company\u2019s\n27 financial performance, noting that \u201cthe system transition impacted comp sales by approximately 200\n28 basis points for the quarter\u201d and \u201cthe margin impact of our system integration . . . was approximately\n 3\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 11 of 25\n\n\n\n1 130 basis points in the quarter.\u201d \u00b6 110. Bracher also disclosed that, as a result of the systems transition,\n2 Grocery Outlet will \u201ccontinue to experience P&L impacts during the first quarter\u201d of 2024, while\n3 expressing optimism that its issues would \u201cbe resolved soon, after which the P&L impact will be behind\n4 [it].\u201d \u00b6 116; Ex. 7 at 7. Following these disclosures, \u201cthe price of Grocery Outlet stock fell $0.32, or\n5 1.2%, to close at $26.15.\u201d \u00b6 119.\n6 As the Company had forecasted during its Q4 2023 earnings call, the impact of the systems\n7 transition difficulties persisted into the first quarter of 2024. \u00b6 124. On the Q1 2024 earnings call on\n8 May 7, 2024, Sheedy updated investors that the Company\u2019s revenues had fallen \u201c110 basis points\n9 below [its] expectations\u201d due to \u201capproximately 210 basis points of impact from [its] systems transition\n10 issues.\u201d \u00b6 125. Sheedy disclosed that the financial impact was the result of both \u201cexpected\u201d impacts,\n11 which had been forecasted when the Company announced its Q4 and fiscal year 2023 earnings in\n12 February 2024, and \u201cunexpected impacts,\u201d which had not been forecasted. Id. The expected impacts\n13 were the result of issues with warehouse and store inventory reporting, which caused 100 basis points\n14 of impact. Id. The unexpected impacts were due to unforeseen accounting issues which were only\n15 \u201cquantified during catch up invoice processing and final margin reconciliation at the end of the [first]\n16 quarter.\u201d Ex. 9 at 4; \u00b6 126. Following these disclosures, \u201cGrocery Outlet stock fell $5.02 per share,\n17 or 19.4%, to close at $20.88.\u201d \u00b6 130. Predictably, this lawsuit soon followed.\n18 IV. LEGAL STANDARD\n19 Securities fraud claims under Rule 10b-5(b) must meet the \u201cdemanding pleading requirements\u201d\n20 of Rule 9(b) and the PSLRA. In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012);\n21 15 U.S.C. \u00a7 78u-4(b)(1)\u2013(2). These requirements have \u201cteeth\u201d and \u201cpresent no small hurdle for the\n22 securities fraud plaintiff.\u201d Nguyen v. Endologix, Inc., 962 F.3d 405, 414 (9th Cir. 2020). Rule 9(b)\n23 requires a plaintiff to \u201cstate with particularity the circumstances constituting fraud or mistake\u201d by\n24 pleading the \u201cwho, what, when, where, and how\u201d of the alleged fraud. Vess v. Ciba-Geigy Corp. USA,\n25 317 F.3d 1097, 1106 (9th Cir. 2003). The PSLRA imposes even \u201cmore exacting pleading\n26 requirements,\u201d Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1057\u201358 (9th Cir.\n27 2014), and requires the plaintiff to (i) \u201cspecify each statement alleged to have been misleading [and]\n28 the reason or reasons why the statement is misleading,\u201d and (ii) \u201cstate with particularity facts giving\n 4\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 12 of 25\n\n\n\n1 rise to a strong inference that the defendant acted with the required state of mind\u201d for each act or\n2 omission. 15 U.S.C. \u00a7 78u-4(b)(1)(B), 78u-4(b)(2)(A); see also In re BofI Holding, Inc. Sec. Litig.,\n3 977 F.3d 781, 791 (9th Cir. 2020).\n4 To state a Section 10(b) claim under these strict standards, the Amended Complaint must allege\n5 facts sufficient to show (1) a material misrepresentation or omission (i.e., falsity); (2) made with\n6 scienter; (3) in connection with the purchase or sale of a security; (4) on which Plaintiff relied; (5)\n7 economic loss; and (6) loss causation. Loos v. Immersion Corp., 762 F.3d 880, 887\u201388 (9th Cir. 2014).\n8 Because Plaintiff\u2019s allegations fall far short of satisfying Rule 9(b) and the PSLRA, the Court must\n9 dismiss the Amended Complaint.\n10 V. ARGUMENT\n11 A. Plaintiff\u2019s Rule 10b-5(b) and Exchange Act Claims Must Be Dismissed for\n Failure to Plead a Materially False or Misleading Statement\n12\n13 Plaintiff has failed to allege adequately a single false or misleading statement.2 A statement is\n\n14 false or misleading only if it (1) directly contradicts what the defendant knew at the time or (2) omits\n\n15 material information necessary to make the statement not misleading. In re Cloudera, Inc., 121 F.4th\n\n16 1180, 1186 (9th Cir. 2024). Statements are misleading by omission only if they \u201caffirmatively create\n\n17 an impression of a state of affairs that differs in a material way from the one that actually exists.\u201d Brody\n\n18 v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002). Here, Plaintiff fails to plead any\n\n19 statement that was false or misleading, and many of the challenged statements are also inactionable as\n\n20 forward-looking statements, opinions, or puffery.\n\n21 1. Defendants\u2019 statements were not false or misleading.\n\n22 The Amended Complaint challenges eleven different statements about Grocery Outlet\u2019s ERP\n\n23 systems upgrade (set forth in full in Appendix A), claiming they were false because Defendants\n\n24 allegedly knew and failed to disclose: (1) the Company launched the systems transition without\n\n25\n26 2\n Although Plaintiff claims certain documents contained the statements he presumably believes were\n false or misleading, he fails to identify the specific statements that are false or misleading therein. See\n27 \u00b6\u00b6 74, 82. This is impermissible puzzle pleading. See In re Autodesk, Inc. Sec. Litig., 132 F. Supp. 2d\n28 833, 842 (N.D. Cal. 2000) (dismissing complaint where \u201cplaintiffs have left it up to defendants and the\n court to try to figure out exactly what the misleading statements are\u201d).\n 5\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 13 of 25\n\n\n\n1 adequate preparation and was already experiencing disruptions across core functions, \u00b6\u00b6 3\u20137, 47\u201349,\n2 58\u201361, 86\u201390; (2) the Company lacked normal visibility into reporting and forecasting tools, \u00b6\u00b6 59,\n3 111\u201312, 126, 129; (3) the disruptions created a material weakness in internal controls, \u00b6\u00b6 80, 122; and\n4 (4) Defendants had underestimated the magnitude of the problems, which remained unsolved when\n5 they offered assurances, \u00b6\u00b6 90, 92\u201394, 117\u201318. But all of the challenged statements were true, and\n6 there were no material omissions. Plaintiff does not identify any contemporaneous facts contradicting\n7 what Defendants told investors. Instead, he strings together later developments and projects them\n8 backwards, faulting management for failing to predict that integration challenges would persist longer\n9 than originally anticipated. That is impermissible fraud-by-hindsight.3\n10 Far from concealing information, Grocery Outlet repeatedly disclosed the very challenges\n11 Plaintiff claims were hidden. Each quarter, management identified transition-related disruptions,\n12 quantified their impact on quarterly results, and updated guidance. See supra at 3\u20134; \u00b6\u00b6 86\u201394, 110\u2013\n13 17, 124\u201330. For instance, on the November 2023 earnings call, Defendants disclosed \u201cordering and\n14 inventory disruptions\u201d that reduced comparable store sales by 150 basis points and gross margin by 50\n15 basis points. \u00b6\u00b6 86, 87. On the February 2024 earnings call, Defendants reported an additional 200-\n16 basis-point sales impact and 130-basis-point margin impact and cautioned that \u201cdata integration efforts\n17 are taking longer than expected and are still impacting our business results.\u201d \u00b6 111; see also \u00b6 108.\n18 And in May 2024, the Company announced a further 210-basis-point margin impact and over $12\n19 million in incremental commission support, while candidly acknowledging that \u201c[f]orecasting has been\n20 difficult during the system transition as we have not had good visibility to our normal business reporting\n21 and tools.\u201d \u00b6\u00b6 125\u201326. Analysts confirmed they understood these disclosures. \u00b6\u00b6 131\u201332. This is\n22 corporate transparency, not concealment: \u201clater, sobering revelations do not by themselves make the\n23 earlier, cheerier statement a falsehood.\u201d Cloudera, 121 F.4th at 1189.\n24 3\n Plaintiff\u2019s attempt to challenge the Q3 2023 Form 10-Q\u2019s internal controls disclosure, \u00b6\u00b6 79\u201382, fails\n25 for similar reasons. The disclosure simply reflected management\u2019s then-current assessment. The fact\n that a later, year-end review (i.e., conducted after the close of the next quarter) identified a material\n26 weakness in internal controls does not retroactively make the earlier disclosure false. Davoli v. Costco\n Wholesale Corp., 854 F. App\u2019x 116, 118 (9th Cir. 2021) (\u201c[T]he inferences raised by the complaint\u2019s\n27 allegations are not as compelling as the opposing innocent inference that Costco did not know that its\n28 internal control was ineffective until the more rigorous internal review performed in advance of the\n October 2018 Form 10-K.\u201d).\n 6\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 14 of 25\n\n\n\n1 Plaintiff leans heavily on three former employees (\u201cFE\u201d), but these allegations are insufficient\n2 under the PSLRA. For example, FE1 claims that end-to-end user acceptance testing (\u201cUAT\u201d) had not\n3 been completed before the August 2023 launch, \u00b6\u00b6 50\u201355, and Plaintiff speculates this means the\n4 Company \u201cwould have\u201d avoided later problems had testing been finished. \u00b6 61. But Defendants never\n5 represented that UAT had been completed, much less that testing was problem-free, so FE1\u2019s\n6 allegations don\u2019t contradict any challenged statement. \u00b6\u00b6 50\u201355. FE2 opines that \u201cmost of us thought\n7 it was premature\u201d to launch and purportedly recalls lingering data issues. \u00b6\u00b6 49, 56\u201357. And FE3\n8 claims the transition \u201cbroke all the functionality of everything.\u201d \u00b6 60. These vague and subjective\n9 views from low-level employees\u2014none of whom worked in IT or had any role in implementing the\n10 systems transition (see infra at 11\u201313)\u2014are \u201cshort on the facts\u201d and, again, do not contradict\n11 Defendants\u2019 contemporaneous public statements warning of operational disruptions and their\n12 associated financial impact. Nguyen, 962 F.3d at 416.\n13 Moreover, Plaintiff has a timing problem\u2014before the new ERP system launched, there were\n14 no materialized issues yet, only risks that the Company accurately disclosed. This defect is most\n15 evident in connection with the challenged statements made on August 8, 2023. See \u00b6\u00b6 68, 72, 74;\n16 App\u2019x Statement Nos. 2, 3, 4. For instance, the August 8, 2023 Form 10-Q accurately stated there were\n17 \u201cno material changes\u201d to the March 2023 Form 10-K\u2019s risk disclosure warning that the systems upgrade\n18 could result in \u201cimplementation, operational and functionality issues, delays, higher than expected costs\n19 and other issues.\u201d \u00b6\u00b6 66, 68. By Plaintiff\u2019s own account, though, that statement was indisputably\n20 true\u2014no such risks had yet materialized because the SAP system had not even launched on August 8,\n21 2023. The transition began weeks later, in late August 2023. \u00b6 6. Defendants could not have concealed\n22 problems that did not yet exist. At most, the FE allegations confirm that problems arose during\n23 rollout\u2014problems the Company disclosed as they occurred\u2014not that earlier statements were false\n24 when made. See Mazzaferro v. Aruba Networks Inc., 2014 WL 12680773, at *1 (N.D. Cal. Aug. 1,\n25 2014) (confidential witness statements \u201cwould not, if true, demonstrate that Aruba\u2019s statements were\n26 false or misleading\u201d).\n27 Ultimately, Plaintiff\u2019s theory boils down to the claim that Defendants should have disclosed\n28 more detail or sounded more pessimistic when describing the progress and challenges associated with\n 7\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 15 of 25\n\n\n\n1 the systems upgrade. But the securities laws \u201cprohibit only misleading and untrue statements, not\n2 statements that are incomplete.\u201d Brody, 280 F.3d at 1006; Intuitive Surgical, 759 F.3d at 1061 (\u201cWe\n3 have expressly declined to require a rule of completeness for securities disclosures because no matter\n4 how detailed and accurate disclosure statements are, there are likely to be additional details that could\n5 have been disclosed but were not.\u201d (cleaned up)). Nor are public companies required to \u201cconfess\u201d\n6 every internal doubt or adopt a gloomy or defeatist tone about unfounded risks. See, e.g., City of\n7 Pontiac Policemen\u2019s & Firemen\u2019s Ret. Sys. v. UBS AG, 752 F.3d 173, 184 (2d Cir. 2014) (\u201cDisclosure\n8 is not a rite of confession, and companies do not have a duty to disclose uncharged, unadjudicated\n9 wrongdoing.\u201d (cleaned up)); In re Facebook, Inc. Sec. Litig., 405 F. Supp. 3d 809, 836 (N.D. Cal. 2019)\n10 (\u201c[C]ompanies are not required to engage in \u2018self-flagellation\u2019 by disclosing unproven allegations.\u201d),\n11 rev\u2019d on other grounds, 87 F.4th 934 (9th Cir. 2023). As the Amended Complaint and the documents\n12 incorporated by reference make clear, Defendants repeatedly acknowledged systems-related\n13 disruptions, accurately quantified their impact on quarterly results, and explained mitigation measures\n14 and their expected impact on the Company\u2019s future results. Plaintiff pleads no facts suggesting any of\n15 these statements were false or misleading when made.4 For that reason, Plaintiff fails to plead falsity\n16 and the Amended Complaint should be dismissed.\n17 2. The challenged statements are not actionable as a matter of law.\n18 The challenged statements are also inactionable for several other reasons.\n19 Forward-Looking Statements. Most of the challenged statements are protected as forward-\n20 looking. See App\u2019x Statements Nos. 1, 3, 4, 7\u201311. Forward-looking statements are immune from\n21 liability under the PSLRA so long as they are either \u201caccompanied by \u2018meaningful cautionary\n22\n 4\n Plaintiff also gestures at a \u201cscheme liability\u201d claim under Rule 10b-5(a) and (c), \u00b6\u00b6 155\u201356, but that\n23 claim fails because the Amended Complaint does not allege any independent deceptive conduct apart\n from the purported misstatements and omissions addressed above. It is well-settled that plaintiffs\n24\n cannot repackage a deficient misrepresentation claim into a viable \u201cscheme\u201d claim merely by relabeling\n25 it. See, e.g., In re Nektar Therapeutics, 2020 WL 3962004, at *13 (N.D. Cal. July 13, 2020) (\u201cTo\n allege a violation of Rule 10b\u20135(a) and (c), 17 C.F.R. \u00a7 240.10b\u20135(a) and (c), a plaintiff must allege\n26 the same elements as a Rule 10b\u20135(b) claim, except that plaintiff\u2019s scheme liability claim cannot be\n based solely on false or misleading statements, but must instead involve deceptive conduct beyond\n27 those misrepresentations or omissions.\u201d (cleaned up)); In re Robinhood Order Flow Litig., 2022 WL\n28 9765563, at *13 (N.D. Cal. Oct. 13, 2022) (scheme claim must \u201cencompass conduct beyond those\n misrepresentations or omissions\u201d).\n 8\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 16 of 25\n\n\n\n1 statements,\u2019 or are \u2018immaterial,\u2019 or were not made \u2018with actual knowledge\u2019 of the falsity or misleading\n2 nature of the statement.\u201d In re Twitter, Inc. Sec. Litig., 506 F. Supp. 3d 867, 882 (N.D. Cal. 2020),\n3 aff\u2019d sub nom. Weston Fam. P\u2019ship LLLP v. Twitter, Inc., 29 F.4th 611 (9th Cir. 2022). Here,\n4 statements predicting that disruptions would be \u201cbehind us\u201d or that margins would \u201crevert\u201d fall squarely\n5 within the PSLRA\u2019s safe harbor. For instance, Sheedy stated during the November 2023 earnings call\n6 that the Company \u201canticipate[s] the transitional impacts to be largely behind us as we get to the end of\n7 the year,\u201d \u00b6 95, and Bracher assured that \u201cwe do feel confident . . . the impact is then largely behind us\n8 by the end of the year.\u201d \u00b6 97. These are quintessential forward-looking statements. Courts repeatedly\n9 hold that projections about a company\u2019s future performance and similar statements of expectation\n10 \u201ceasily meet the definition of a forward-looking statement.\u201d In re Bare Escentuals, Inc. Sec. Litig.,\n11 745 F. Supp. 2d 1052, 1079\u201380 (N.D. Cal. 2010).\n12 Grocery Outlet\u2019s forward-looking statements are protected because they were accompanied by\n13 meaningful cautionary language. For example, among other risks, the March 2023 Form 10-K\n14 specifically warned that ERP modernization \u201ccould result in implementation, operational and\n15 functionality issues, delays, higher than expected costs and other issues during the course of\n16 implementing and utilizing these improvements,\u201d and that \u201cwith any update or replacement of our\n17 systems and infrastructure there is a risk of business disruption, liability and reputational damage . . .\n18 including from not accurately capturing and maintaining data [or] efficiently testing and implementing\n19 changes.\u201d \u00b6 66. The August 2023 Q2 2023 Form 10-Q incorporated these same risk factors. \u00b6 68.\n20 Plaintiff\u2019s theory is nothing more than second-guessing management for not predicting precisely how\n21 long challenges would persist. See In re Downey Sec. Litig., 2009 WL 2767670, at *11 (C.D. Cal.\n22 Aug. 21, 2009) (\u201c[S]econd-guessing of management decisions by confidential witnesses does not\n23 provide a basis for securities fraud.\u201d). But \u201c[t]he fact that the prediction proves to be wrong in hindsight\n24 does not render the statement untrue when made.\u201d In re VeriFone Sec. Litig., 11 F.3d 865, 871 (9th\n25 Cir. 1993); see also In re Cutera Sec. Litig., 610 F.3d 1103, 1112\u201313 (9th Cir. 2010).\n26 Opinion. Many of the challenged statements are also inactionable opinions. See App\u2019x\n27 Statements Nos. 1, 3, 4, 7\u201311. It is well-established that statements prefaced with phrases like \u201cI think\u201d\n28 or \u201cI believe\u201d are nonactionable opinions because they do not \u201cexpress[] certainty about a thing.\u201d\n 9\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 17 of 25\n\n\n\n1 Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175, 183 (2015). Here,\n2 Plaintiff claims many opinion statements are misleading, such as \u201cI think . . . the first thing that comes\n3 to mind is just easier access to information and access to new information,\u201d \u00b6 74, \u201cwe . . . believe that\n4 it will be largely behind us by the end of the year,\u201d \u00b6 91, and \u201c[w]e expect these [issues] to be resolved\n5 soon.\u201d \u00b6 116. But opinions like these are actionable only if: (1) the speaker does not honestly hold\n6 the stated opinion; (2) it includes an \u201cembedded statement[] of fact\u201d that is false; or (3) it omits facts\n7 that are necessary to make the opinion not misleading. Omnicare, 575 U.S. at 184\u201386, 193 (2015);\n8 accord City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605,\n9 616 (9th Cir. 2017). Plaintiff does not allege Defendants did not honestly hold these opinions, nor does\n10 he identify any embedded statements of fact that are false or any omissions of fact that make these\n11 opinions misleading.\n12 Optimism. Finally, Plaintiff challenges generalized statements of corporate optimism. See\n13 App\u2019x Statements Nos. 3, 4. Statements of corporate optimism are not \u201cobjectively verifiable\u201d but,\n14 instead, are \u201cvague, generically positive\u201d statements that investors do not rely upon. Macomb Cnty.\n15 Emps. Ret. Sys. v. Align Tech., Inc., 39 F.4th 1092, 1099 (9th Cir. 2022). Here, Sheedy\u2019s statements\n16 touting that the new store portal would provide \u201cbetter analytics,\u201d \u00b6 72, \u201ceasier access to information,\u201d\n17 \u00b6\u00b6 72, 74, and \u201cefficiencies\u201d that would \u201cgrow sales and improve margin,\u201d \u00b6 74, are textbook puffery.\n18 Such aspirational language is inactionable because no reasonable investor would have relied on it as a\n19 concrete guarantee of performance. See, e.g., Twitter, 29 F.4th at 621 (holding that company did not\n20 have to disclose specific \u201csoftware bugs\u201d when stating that its overall program was \u201con track\u201d);\n21 Wozniak v. Align Tech., Inc., 850 F. Supp. 2d 1029, 1036\u201337 (N.D. Cal. 2012) (\u201cwe are very pleased\n22 with our progress to date\u201d was puffery); In re Splash Tech. Holdings, Inc. Sec. Litig., 160 F. Supp. 2d\n23 1059, 1077 (N.D. Cal. 2001) (phrases such as \u201cbetter than expected,\u201d \u201crobust,\u201d \u201cwell positioned,\u201d\n24 \u201csolid,\u201d and \u201cimproved,\u201d were not actionable).\n25 B. Plaintiff\u2019s Section 10(b) Claim Must Be Dismissed for Failure to Plead Scienter\n26 The Amended Complaint independently fails because Plaintiff does not plead that any\n27 Defendant acted with scienter, i.e., an \u201cintent to deceive, manipulate, or defraud.\u201d Intuitive Surgical,\n28 759 F.3d at 1061. To plead scienter, the complaint must \u201cstate with particularity facts giving rise to a\n 10\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 18 of 25\n\n\n\n1 strong inference that the defendant acted with the required state of mind.\u201d 15 U.S.C. \u00a7 78u-4(b)(2)(A).\n2 This is a \u201chigh burden,\u201d Prodanova v. H.C. Wainwright & Co., LLC, 993 F.3d 1097, 1108 (9th Cir.\n3 2021), which requires a showing of \u201ca highly unreasonable omission, involving not merely simple, or\n4 even inexcusable negligence, but an extreme departure from the standards of ordinary care,\u201d Zucco\n5 Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009). The Amended Complaint pleads\n6 no particularized facts about either Individual Defendant\u2019s state of mind, and Plaintiff does not even\n7 try to allege a motive to defraud. Instead, Plaintiff attempts to raise a roundabout inference of scienter\n8 from three far-removed FEs and a grab-bag of circumstantial allegations. But that is the sort of\n9 placeholder pleading the Ninth Circuit routinely rejects.\n10 1. Plaintiff\u2019s confidential witnesses do not establish scienter.\n11 Plaintiff\u2019s reliance on three FEs does not come close to creating a strong inference of scienter.\n12 To support an inference of fraudulent intent, FE allegations must clear a high hurdle: (1) the FEs \u201cmust\n13 be described with sufficient particularity to establish their reliability and personal knowledge\u201d and (2)\n14 those statements attributed to FEs \u201cwith sufficient reliability and personal knowledge must themselves\n15 be indicative of scienter.\u201d Zucco, 552 F.3d at 995. \u201c[T]he Court may disregard [FE] statements that\n16 are speculative, lack specificity, or are not based on personal knowledge.\u201d Browning v. Amyris, Inc.,\n17 2014 WL 1285175, at *18 (N.D. Cal. Mar. 24, 2014); see also Nguyen, 962 F.3d at 416 (FE allegations\n18 \u201chigh on alarming adjectives\u201d but \u201cshort on the facts\u201d insufficient to plead scienter). Here, Plaintiff\u2019s\n19 FE allegations fail both prongs.\n20 First, none of the FEs are reliable. By Plaintiff\u2019s own telling, the FE witnesses were not in\n21 positions to opine on the ERP integration, much less executive intent related thereto. FE1 worked in\n22 Financial Planning and Analysis and supported forecasting, \u00b6 38, FE2 was a grocery buyer, \u00b6 39, and\n23 FE3 was an assistant planner helping with product purchases and allocation. \u00b6 40. There are no\n24 allegations that any worked on SAP integration, had technical IT systems expertise, or interacted with\n25 Sheedy or Bracher about either the systems implementation or investor-facing statements related\n26 thereto.5 These are precisely the \u201cvague and unreliable\u201d accounts the Ninth Circuit repeatedly rejects\u2014\n27 5\n FE1\u2019s allegation that he \u201cparticipated in monthly business review meetings with Bracher both in\n28 person and by email,\u201d \u00b6 38, is not enough to establish the witness\u2019s reliability\u2014much less that Bracher\n acted with scienter. See, e.g., Scheller v. Nutanix, Inc., 450 F. Supp. 3d 1024, 1041\u201342 (N.D. Cal.\n 11\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 19 of 25\n\n\n\n1 where the FEs were \u201cnot positioned to know the information alleged,\u201d reported \u201conly unreliable\n2 hearsay,\u201d or offered only \u201cconclusory assertions of scienter.\u201d See Zucco, 552 F.3d at 996; see also\n3 McGovney v. Aerohive Networks, Inc., 367 F. Supp. 3d 1038, 1053\u201354 (N.D. Cal. 2019) (failure to\n4 allege that the FEs were in positions to have the knowledge they profess rendered their allegations\n5 unreliable). Courts regularly dismiss similar confidential witness-driven \u201ctechnology rollout\u201d cases\n6 for lack of specificity. For instance, in Wozniak, 850 F. Supp. 2d at 1037, numerous FEs complained\n7 that the company\u2019s CEO was \u201cpersonally informed\u201d a new product \u201ccould not be launched\u201d on\n8 schedule, that the CEO \u201cwas aware that [the product] was ineffective both during its beta testing and\n9 after its commercial launch,\u201d and that \u201cfeedback from beta users was poor.\u201d Id. The court found these\n10 allegations too vague to support scienter: \u201c[T]he [FEs\u2019] conclusory statements that initial feedback\n11 regarding [new software tools] was negative, \u2018poor,\u2019 or that an unspecified number of users found it\n12 \u2018ineffective,\u2019 do not contradict [the CEO\u2019s] optimistic statements,\u201d even if the FEs \u201cha[d] sufficient\n13 knowledge upon which to base\u201d their allegations. Id.\n14 Second, even if the FEs were reliable, nothing attributed to them is indicative of scienter.\n15 Indeed, none provide any \u201cfirst-hand knowledge regarding what the individual defendants knew or did\n16 not know.\u201d Intuitive Surgical, 759 F.3d at 1063; see also City of Sunrise Firefighters\u2019 Pension Fund\n17 v. Oracle Corp., 2019 WL 6877195, at *19 (N.D. Cal. Dec. 17, 2019) (discrediting confidential witness\n18 allegations because they lacked personal knowledge as to whether the defendant read the presentations\n19 sent to his direct report or otherwise heard the information therein). What some employees thought\n20 about \u201creadiness\u201d pre-launch is irrelevant to whether Sheedy and Bracher believed their statements\n21 were true after launch. The FEs\u2019 anecdotes describe internal friction familiar to any large IT\n22 implementation. According to FE2, \u201cmost of us thought it was premature\u201d to go live, \u00b6 49; FE1\n23 complained that UAT was \u201cnot conducted end-to-end,\u201d \u00b6 54; and FE3 believed the upgrade \u201cbroke all\n24 the functionality of everything,\u201d \u00b6 60. These allegations amount to little more than corporate water\n25 cooler talk, not evidence of fraudulent intent. As the Ninth Circuit has explained: \u201cProblems and\n26 difficulties are the daily work of business people. That they exist does not make a lie out of any of the\n27\n28 2020) (\u201cMerely being present at quarterly \u2018all-hands\u2019 meetings does not demonstrate the requisite\n personal knowledge to establish scienter.\u201d).\n 12\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 20 of 25\n\n\n\n1 alleged false statements.\u201d Ronconi v. Larkin, 253 F.3d 423, 434 (9th Cir. 2001), rev\u2019d on other\n2 grounds, Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc., 63 F.4th 747 (9th Cir. 2023). At bottom,\n3 the FEs provide no insight into whether Sheedy or Bracher believed that specific operational problems\n4 meant Grocery Outlet could not successfully implement its systems upgrade. See In re NVIDIA Corp.\n5 Sec. Litig., 2011 WL 4831192, at *11 (N.D. Cal. Oct. 12, 2011), aff\u2019d, 768 F.3d 1046 (9th Cir. 2014)\n6 (\u201cKnowledge of the problem, however, is insufficient to infer that [defendant] acted with the intent to\n7 defraud or with deliberate recklessness in not reporting the issue publicly.\u201d).\n8 Moreover, none of the FEs identify any specific information conveyed to Sheedy or Bracher\n9 that contradicted any challenged statement. In other words, no FE \u201callege[s] contemporaneous facts in\n10 sufficient detail and in a manner that would create a strong inference that the alleged adverse facts were\n11 known at the time of the challenged statements.\u201d In re Rackable Sys., Inc. Sec. Litig., 2010 WL\n12 3447857, at *9 (N.D. Cal. Aug. 27, 2010) (allegations from 22 FEs insufficient where they only raised\n13 general knowledge of problems but \u201c[did] not provide the level of particularity from which to infer that\n14 Rackable knew that it would miss its gross margin and EPS projections\u201d). What some lower-level\n15 employees may have thought about project readiness is irrelevant to whether the executives themselves\n16 knew their public statements were misleading. See, e.g., In re Accuray, Inc. Sec. Litig., 757 F. Supp.\n17 2d 936, 949 (N.D. Cal. 2010) (\u201c[I]t is difficult to surmise how the opinions and observations of the\n18 [FEs] could support a reasonable inference about what the[] Defendants knew or did not know\u201d).\n19 Ultimately, the FEs offer hindsight critiques of the Company\u2019s decision to \u201crip off the band-\n20 aid\u201d and launch SAP before every possible box had been checked. \u00b6 48. But vague and unfounded\n21 allegations of poor planning or operational missteps amount to post-hoc second-guessing, not\n22 fraudulent intent. See, e.g., Nguyen, 962 F.3d at 416\u201317 (no scienter inference where FE referenced \u201ca\n23 stream of complaints and incident reports\u201d but \u201cthe complaint does not plead any details about these\n24 reports\u201d); In re Nektar Therapeutics Sec. Litig., 34 F.4th 828, 837 (9th Cir. 2022) (no scienter inference\n25 where \u201c[FE] #2 relies on vague and hyperbolic allegations\u201d).\n26 2. The circumstantial allegations of purported knowledge do not support an\n inference of scienter.\n27\n28 With no allegations that Sheedy or Bracher knew they were misleading investors, Plaintiff\n 13\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 21 of 25\n\n\n\n1 attempts to plead an indirect inference of fraudulent intent, which also fails.\n2 First, Plaintiff tries to plead that Sheedy and Bracher must have known their statements to\n3 investors were false because of their senior positions at the Company. See \u00b6\u00b6 23, 44, 62, 64. But the\n4 Ninth Circuit regularly rejects such ipse dixit: \u201c[C]orporate management\u2019s general awareness of the\n5 day-to-day workings of the company\u2019s business does not establish scienter\u2014at least absent some\n6 additional allegation of specific information,\u201d not alleged here, \u201cconveyed to management and related\n7 to the fraud.\u201d Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1068 (9th Cir. 2008);\n8 see also Intuitive Surgical, 759 F.3d at 1063 (\u201cMere access to reports containing undisclosed . . . data\n9 is insufficient to establish a strong inference of scienter.\u201d). That reasoning applies here.\n10 Second, a \u201ccore operations\u201d inference fails for similar reasons. The doctrine, in very limited\n11 circumstances, allows a plaintiff to create an inference \u201cthat facts critical to a business\u2019s \u2018core\n12 operations\u2019 or important transactions are known to key company officers.\u201d S. Ferry LP, No. 2 v.\n13 Killinger, 542 F.3d 776, 783\u201385 (9th Cir. 2008). But plaintiffs still must allege \u201cspecific information\n14 conveyed to management and related to the fraud\u201d that gives rise to an inference of fraudulent intent.\n15 In re NVIDIA, 768 F.3d at 1063; see also Intuitive Surgical, 759 F.3d at 1063 (\u201cMissing are allegations\n16 linking specific reports and their contents to the executives, not to mention the link between the\n17 witnesses and the executives.\u201d). Absent here, though, is the key ingredient. Plaintiff identifies no\n18 contemporaneous facts known to either Sheedy or Bracher\u2014or anyone else\u2014that contradicts any\n19 challenged statement when made. In fact, Plaintiff doesn\u2019t identify any contradictory information,\n20 period. See supra at 5\u20138, 12\u201313.\n21 Third, Bracher\u2019s announced resignation in December 2023 and Sheedy\u2019s October 2024\n22 departure do not support scienter. \u00b6\u00b6 21, 20, 104, 136. It is Plaintiff\u2019s burden to \u201callege sufficient\n23 information to differentiate between a suspicious change in personnel and a benign one.\u201d Zucco, 552\n24 F.3d at 1002 (resignation of defendant\u2019s independent accounting firm a month after the restatement\n25 and resignation of other executives \u201cshortly before\u201d restatement not indicative of scienter). Plaintiff\n26 has not done so here; both departures were entirely benign. Bracher\u2019s resignation, announced on\n27 December 8, 2023 but not effective until March 1, 2024, underscores that his departure after twelve\n28 years with the Company was long-planned and innocuous. \u00b6 104. In fact, the Company explained that\n 14\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 22 of 25\n\n\n\n1 Bracher\u2019s departure was a \u201cpersonal decision to pursue another opportunity and was not the result of\n2 any disagreement with the Company on any matter relating to the Company\u2019s operations, policies or\n3 practices\u201d and that Grocery Outlet would \u201center into a consulting agreement with Bracher to support\n4 the transition,\u201d making clear his departure was amicable. Ex. 6 at 1. Plaintiff makes no attempt to\n5 challenge that explanation. Nor does Plaintiff plead facts suggesting Sheedy\u2019s October 2024 departure\n6 was suspicious. Under Plaintiff\u2019s own allegations, Sheedy\u2019s departure occurred five months after the\n7 alleged problems with the systems transition were fully disclosed and was mutually agreed to with the\n8 Board. \u00b6\u00b6 12, 136\u201339. His exit simply reflects the reality that executives often depart a public company\n9 after it experiences disappointing performance. See, e.g., In re Cornerstone Propane Partners, L.P.,\n10 355 F. Supp. 2d 1069, 1093 (N.D. Cal. 2005) (\u201cMost major stock losses are often accompanied by\n11 management departures, and it would be unwise for courts to penalize directors for these decisions.\u201d);\n12 Mallen v. Alphatec Holdings, Inc., 861 F. Supp. 2d 1111, 1138 (S.D. Cal. 2012) (CFO\u2019s resignation\n13 two months after the alleged \u201ccorrective announcement, without any other facts about the resignation,\n14 does not support a strong inference of scienter.\u201d).\n15 3. The most plausible inference is that Defendants acted in good faith.\n16 Even considered holistically, Plaintiff\u2019s allegations do not establish a strong inference of\n17 scienter. A complaint satisfies the PSLRA only if the inference of scienter is \u201ccogent and at least as\n18 compelling as any opposing inference of nonfraudulent intent.\u201d Tellabs, Inc. v. Makor Issues & Rts.,\n19 Ltd., 551 U.S. 308, 314 (2007). \u201cTaken as a whole,\u201d Plaintiff\u2019s allegations \u201cfail to give rise to a strong\n20 inference of scienter in light of competing innocent inferences.\u201d City of Royal Oak Ret. Sys. v. Juniper\n21 Networks, Inc., 880 F. Supp. 2d 1045, 1069 (N.D. Cal. 2012). Here, the far more cogent inference is\n22 that Defendants acted in good faith. Throughout the Class Period, Defendants candidly acknowledged\n23 operational challenges, accurately quantified the associated impact on sales and gross margin,\n24 explained their decision to provide commission support to independent operators, and ultimately\n25 disclosed a material weakness in internal controls. That steady, incremental stream of information to\n26 the market is the exact opposite of concealment and makes clear that Plaintiff\u2019s real grievance is tonal\n27 (i.e., Defendants should have been more pessimistic in describing when the problems would abate).\n28 Tellingly, Plaintiff offers no plausible theory of \u201cwhy\u201d two senior executives would knowingly\n 15\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 23 of 25\n\n\n\n1 mislead investors about problems they were openly and regularly disclosing. There are no allegations\n2 of suspiciously timed stock sales or unique compensation. See, e.g., Prodanova, 993 F.3d at 1108\n3 (\u201c[T]he lack of a plausible motive certainly makes it much less likely that a plaintiff can show a strong\n4 inference of scienter.\u201d); Bhangal v. Hawaiian Elec. Indus., Inc., 2024 WL 4505465, at *16 (N.D. Cal.\n5 Oct. 15, 2024) (no scienter where \u201cPlaintiffs do not allege why Individual Defendants concealed\n6 information regarding the company\u2019s wildfire mitigation efforts and do not allege any Individual\n7 Defendant benefited from the alleged fraud by selling stock at an inflated price\u201d). In fact, the Company\n8 was actively repurchasing stock during the Class Period\u2014stock that Plaintiff claims it knew was\n9 artificially inflated, which makes no sense.6 See In re Tibco Software, Inc., 2006 WL 1469654, at *21\n10 (N.D. Cal. May 25, 2006) (\u201c[S]tock repurchase programs actually negate a finding of scienter.\u201d).\n11 At bottom, the far more compelling inference\u2014and certainly the only cogent one\u2014is that\n12 management underestimated the complexity of the technology systems transition and did the best it\n13 could by disclosing problems as they came into focus. That is ordinary business judgment, not the sort\n14 of \u201cextreme departure from the standards of ordinary care\u201d the PSLRA requires. Zucco, 552 F.3d at\n15 991.\n16 C. Plaintiff\u2019s Section 10(b) Claims Must Be Dismissed for Failure to Plead Loss\n Causation\n17\n18 Plaintiff also fails to plead loss causation, which is independently fatal. \u201c[T]he plaintiff in a\n\n19 securities fraud action must demonstrate that an economic loss was caused by the defendant\u2019s\n\n20 misrepresentations, rather than some intervening event.\u201d Lloyd v. CVB Fin. Corp., 811 F.3d 1200,\n\n21 1209 (9th Cir. 2016). Loss causation is typically satisfied by pleading that the defendant or some other\n\n22 source \u201crevealed the truth [about the defendant\u2019s alleged misstatements] through \u2018corrective\n\n23 disclosures\u2019 which \u2018caused the company\u2019s stock price to drop and investors to lose money.\u2019\u201d Id.\n\n24 Here, though, Plaintiff does not identify any disclosure that revealed a prior statement was false.\n\n25 See supra at 5\u20138. The alleged stock price declines reflect the materialization of known and disclosed\n\n26 risks that the ERP systems upgrade might impact the Company\u2019s operations and financial performance.\n\n27\n 6\n28 During fiscal year 2022, the Company repurchased 139,718 shares for approximately $3.5 million,\n Ex. 1 at 82, and in fiscal year 2023, it repurchased 254,516 shares for ~$6.8 million. Ex. 8 at 85.\n 16\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 24 of 25\n\n\n\n1 But that cannot establish loss causation. See Yaron v. Intersect ENT, Inc., 2020 WL 6750568, at *10\n2 (N.D. Cal June 19, 2020) (no loss causation where there were no allegations of \u201cany hidden risk\u201d).\n3 Grocery Outlet consistently warned that implementing new ERP systems could disrupt operations,\n4 impair inventory visibility, and affect financial reporting. See supra at 3\u20134, 6\u20138. When those very\n5 challenges surfaced, the Company disclosed them\u2014including in its November 2023 and February 2024\n6 earnings calls (disclosing inventory and forecasting headwinds, \u00b6\u00b6 86\u201393, 107\u201318) and its May 2024\n7 earnings release (quantifying residual impacts, \u00b6\u00b6 124\u201330). See supra at 3\u20134, 6\u20138. And because the\n8 Company had already disclosed all of the risks that ultimately materialized, \u00b6\u00b6 33, 66\u201370, the purported\n9 corrective disclosures did not \u201creveal new information to the market that ha[d] not yet been\n10 incorporated into the price.\u201d In re BofI, 977 F.3d at 794. Plaintiff simply assumes that every later\n11 disclosure was a \u201cpartial\u201d corrective revelation yet never explains how. \u00b6 84.\n12 Ultimately, the stock price declines Plaintiff complains about reflect the market\u2019s reaction to\n13 disappointing business performance and leadership changes, which are insufficient to plead loss\n14 causation. Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342\u201346 (2005); see also Loos, 762 F.3d at 887\n15 (\u201c[A]llegations regarding Immersion\u2019s disappointing financial results were insufficient to establish loss\n16 causation as a matter of law.\u201d); Nuveen Mun. High Income Opportunity Fund v. City of Alameda, Cal.,\n17 730 F.3d 1111, 1121\u201323 (9th Cir. 2013). Because the Amended Complaint fails to plead a causal\n18 connection between any alleged misrepresentation and the claimed losses, the Amended Complaint\n19 must be dismissed for failure to plead loss causation.7\n20 VI. CONCLUSION\n21 For the foregoing reasons, the Motion should be granted with prejudice.\n22\n23\n24\n25\n26\n27 7\n Because Plaintiff fails to allege a primary violation of violation of Section 10(b) and Rule 10b-5, the\n28 Section 20(a) claim necessarily fails. See In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1052 (9th\n Cir. 2014); Zucco, 552 F.3d at 990.\n 17\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 4:25-CV-957-JST\n\f Case 4:25-cv-00957-JST Document 39 Filed 10/21/25 Page 25 of 25\n\n\n\n1 DATED: October 21, 2025 Respectfully submitted,\n2 GIBSON, DUNN & CRUTCHER LLP\n3\n By: /s/ Craig Varnen\n4 Craig Varnen\n5 Attorneys for Defendants Grocery Outlet Holding\n Corp., Robert Joseph Sheedy, and Charles C.\n6 Bracher\n7\n8\n9\n10\n11\n12\n13\n14\n15\n16\n17\n18\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n 18\n DEFENDANTS\u2019 NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COMPLAINT\n CASE NO. 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Securities Litigation, Robert Joseph Sheedy, Charles C. Bracher. Motion to Dismiss Hearing set for 3/19/2025 02:00 PM in Oakland, Courtroom 6, 2nd Floor. Responses due by 12/23/2025. Replies due by 1/30/2026. (Attachments: # 1 Appendix, # 2 Declaration of Jeff Lombard, # 3 Exhibit 1, # 4 Exhibit 2, # 5 Exhibit 3, # 6 Exhibit 4, # 7 Exhibit 5, # 8 Exhibit 6, # 9 Exhibit 7, # 10 Exhibit 8, # 11 Exhibit 9, # 12 Request for Judicial Notice, # 13 Proposed Order)(Varnen, Craig) (Filed on 10/21/2025) (Entered: 10/21/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/435222827/","id":435222827,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/449631627/","id":449631627,"tags":[],"absolute_url":"/docket/69592783/38/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-08-19T20:02:41.281421-07:00","date_modified":"2025-12-30T21:29:24.486099-08:00","sha1":"f220e21193722f409971e3499d8a56160c5a2672","page_count":47,"file_size":487605,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.38.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.38.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 1 of 47\n\n\n\n\n 1 Laurence M. Rosen, Esq. (SBN 219683)\n THE ROSEN LAW FIRM, P.A.\n 2 355 South Grand Avenue, Suite 2450\n 3 Los Angeles, CA 90071\n Telephone: (213) 785-2610\n 4 Facsimile: (213) 226-4684\n Email: lrosen@rosenlegal.com\n 5\n 6 Lead Counsel for Lead Plaintiff and the Class\n 7 [Additional Counsel on Signature Page]\n 8 UNITED STATES DISTRICT COURT\n 9 NORTHERN DISTRICT OF CALIFORNIA\n\n10\n In re Grocery Outlet Holding Corp. Securities Master File No: 4:25-cv-957-JST\n11\n Litigation\n12 CLASS ACTION\n\n13 AMENDED COMPLAINT\n14\n JURY TRIAL DEMANDED\n15 This Document Relates To: All Actions\n\n16\n17 Lead Plaintiff Casey Cavanaugh (\u201cPlaintiff\u201d), individually and on behalf of all other persons\n\n18 similarly situated, by Plaintiff\u2019s undersigned attorneys, alleges the following based upon personal\n19 knowledge as to his own acts, and upon facts obtained through an investigation conducted by his\n20 counsel, which included, inter alia: review and analysis of Defendants\u2019 public statements, public\n21 documents, conference calls, and announcements, United States Securities and Exchange\n22 Commission (\u201cSEC\u201d) filings, and wire and press releases published by and regarding Grocery Outlet\n23 Holding Corp. (\u201cGrocery Outlet\u201d or the \u201cCompany\u201d); media and analyst reports and advisories about\n24 the Company; interviews with confidential witnesses; information from related court filings; and\n25 information readily obtainable on the Internet. Plaintiff believes that substantial evidentiary support\n26 will exist for the allegations set forth herein after a reasonable opportunity for discovery. Most of the\n27 facts supporting the allegations contained herein are known only to Defendants (defined below) or\n28 are exclusively within their control.\n\n -1-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 2 of 47\n\n\n\n\n 1 NATURE OF THE ACTION\n 2 1. Plaintiff brings this action as a federal securities class action pursuant to Rules 23(a)\n 3 and 23(b)(3) of the Federal Rules of Civil procedure, on behalf of a Class defined as: all persons and\n 4 entities who purchased Grocery Outlet common stock between August 9, 2023 through May 7, 2024,\n 5 both dates inclusive (\u201cClass Period\u201d) and were damaged thereby.1 Plaintiff brings claims individually\n 6 and on behalf of the Class pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of\n 7 1934 (\u201cExchange Act\u201d) and SEC Rule 10b-5 promulgated thereunder.\n 8 2. In 2021, more than two years before the beginning of the Class Period, Grocery Outlet\n 9 decided to completely overhaul its internal enterprise resource planning (\u201cERP\u201d) and information\n10 technology systems to modernize and expand its capabilities to deal with the needs of the growing\n11 company (\u201cSystems Transition\u201d). The Systems Transition affected all aspects of the Company,\n12 including its financial ledger, inventory management platform, and product data warehouse system,\n13 which impacted the Company\u2019s procurement, distribution, accounting, and financial reporting. The\n14 decision to implement the Systems Transition was made at the highest levels of the Company, and\n15 the process of changing from the legacy \u201cAS400\u201d systems to the new SAP systems was overseen by\n16 Defendants and those who reported directly to them.\n17 3. After more than a year of preparations and testing, the Company worked to prepare its\n18 various interconnected systems for the launch of the Systems Transition. The Company had a Project\n19 Steering Committee, helmed by its Chief Information Officer (\u201cCIO\u201d), which tracked the internal\n20 readiness of each of its departments to implement the Systems Transition. As the internally-set \u201cgo-\n21 live\u201d launch date of March 2023 approached, Defendants knew that Grocery Outlet was not prepared\n22 to effectively implement the new systems. Until that point, the Company had not even attempted\n23 \u201cend-to-end\u201d testing of the new systems \u2013 testing how the different systems would interact between\n24 procurement, inventory and warehouse management, and store-level reporting. When they did\n25\n26 1\n Excluded from the Class are: Defendants; the present and former officers and directors of the\n27 Company at all relevant times; members of their immediate families and their legal representatives,\n heirs, successors, or assigns, and any entity in which any of the excluded persons has or had a\n28 controlling or majority ownership interest at any time.\n\n -2-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 3 of 47\n\n\n\n\n 1 attempt to put the systems together, they realized it did not work. The Company postponed the launch\n 2 date until July 2023.\n 3 4. As the preparations continued into the summer of 2023, the Company continued to\n 4 struggle with integrating and testing the new system. As of July 2023, the Company was still woefully\n 5 unprepared to \u201cgo live\u201d with the new system. In fact, it hadn\u2019t even completed crucial User\n 6 Acceptance Testing, which means having the Company\u2019s actual end-users test the new systems using\n 7 real-world applications and data, from start to finish.\n 8 5. None of this was disclosed to investors. When the Company announced that their new\n 9 system upgrades were being brought online in August 2023, Defendants touted the numerous benefits\n10 the new systems would provide, but concealed from investors that the Company had not yet\n11 completed critical preparations for implementing the SAP systems, yet they were planning to launch\n12 the Systems Transition anyway and attempt to troubleshoot on the fly.\n13 6. Having worked on the Systems Transition for two years, Defendants decided it was\n14 time to \u201crip off the band aid\u201d and they launched the Systems Transition in late August 2023, even\n15 though they knew the Company was not ready for it. As soon as they did, the Company was inundated\n16 with widespread disruptions to its core functionalities as a direct result of prematurely implementing\n17 the Systems Transition. These disruptions and other problems infected all aspects of the business \u2013\n18 from inventory control and ordering by store operators to financial forecasting and reporting by the\n19 Company\u2019s finance and accounting departments. In fact, the problems created by the new system\n20 were so rampant that they created a material weakness in the Company\u2019s internal controls over\n21 financial reporting.\n22 7. However, while the massive risk of encountering these very problems was apparent to\n23 Defendants before the launch, Defendants\u2019 disclosures on this topic amounted to little more than\n24 grudging half-truths and further misleading statements and omissions. Over the course of four\n25 quarters, Defendants repeatedly told the market that while they had encountered problems that had\n26 materially impacted their top-line sales, gross margins, and bottom-line earnings, the worst was\n27 behind them and material financial impacts of the Systems Transition disruptions were contained.\n28\n\n -3-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 4 of 47\n\n\n\n\n 1 8. For example, when the Company disclosed its third quarter results in November 2023,\n 2 the Company reported disappointing results and revealed for the first time that the Systems Transition\n 3 was responsible for its disappointing financial results, as Defendants had apparently expected (but\n 4 not disclosed). Yet Defendants also sought to reassure the market that the Company had \u201caddressed\n 5 the inventory visibility issues, along with other issues we experienced earlier on,\u201d and \u201crecently\n 6 returned to more normalized store ordering practices.\u201d Defendants promised the \u201cimpact\u201d would be\n 7 \u201clargely behind us at the end of the year. So you should think about us reverting back to previous\n 8 performance and all the things that we\u2019ve always talked about related to consumer trends, top line\n 9 sales and how we\u2019ve managed for both gross margin and bottom-line profit.\u201d\n10 9. That was not the case. Instead, when Defendants reported their fourth quarter financial\n11 results in February 2024, Defendants revealed not only a larger fourth quarter impact to their financial\n12 results than previously discussed, but also that they expected the ensuing first quarter results to be\n13 materially affected by the Systems Transition as well. Yet again, Defendants\u2019 disclosure came with\n14 the reassurance that the disruptions had been resolved and \u201cthe P&L impact [from the Systems\n15 Transition disruptions] will be behind [us].\u201d\n16 10. Once again, not so. As the Company revealed in May 2024, not only were the first\n17 quarter financial results impacted by the Systems Transition disruptions, those effects were even\n18 greater than they were in the prior quarter, more than double what they previously estimated, and\n19 were still lingering in the second quarter. Defendants also admitted that not only had the Systems\n20 Transition affected the Company\u2019s top- and bottom-line financial results, but it had affected the\n21 Company\u2019s ability to forecast financial results in the first instance:\n22 Forecasting has been difficult during the system transition as we have\n not had good visibility to our normal business reporting and tools.\n23 Compounding this have been data integration issues and new processes\n24 that we and our operators are adapting to within new applications.\n\n25 11. As Defendants provided piecemeal admissions and disclosed the financial damage that\n26 the Systems Transition was inflicting on the Company, the stock price repeatedly declined even as\n27 investors were repeatedly, misleadingly told that the worst was behind them. The May disclosure was\n28 particularly significant and surprising, causing the stock price to drop almost 20% in a single day.\n\n -4-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 5 of 47\n\n\n\n\n 1 12. Finally, while the direct financial implications to the Company\u2019s operations and\n 2 financial results appeared to materially end after the second quarter of 2024, the fallout from\n 3 Defendants\u2019 disclosures and failed roll-out of the Systems Transition did not. In October 2024,\n 4 Defendant Sheedy was fired by the Board of Directors for the Company\u2019s struggles to effectively\n 5 implement the Systems Transition. On that news, class members who still held their shares suffered\n 6 another single-day 16% decline.\n 7 JURISDICTION AND VENUE\n 8 13. The claims asserted herein arise under and pursuant to \u00a7\u00a7 10(b) and 20(a) of the\n 9 Exchange Act (15 U.S.C. \u00a7\u00a7 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC\n10 (17 C.F.R. \u00a7 240.10b-5).\n11 14. This Court has jurisdiction over the subject matter of this action under 28 U.S.C.\n12 \u00a7 1331 and \u00a7 27 of the Exchange Act (15 U.S.C. \u00a7 78aa).\n13 15. This Court has jurisdiction over each Defendant named herein because each Defendant\n14 has sufficient minimum contacts with this District so as to render the exercise of jurisdiction by this\n15 Court permissible under traditional notions of fair play and substantial justice.\n16 16. Venue is proper in this judicial district pursuant to \u00a7 27 of the Exchange Act (15 U.S.C.\n17 \u00a7 78aa(c)) and 28 U.S.C. \u00a7 1391(b), because the alleged false and misleading public filings and\n18 statements were made in, or issued from, this judicial district and Grocery Outlet\u2019s headquarters are\n19 located in this judicial district.\n20 17. In connection with the acts, conduct and other wrongs alleged in this complaint,\n21 Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,\n22 including but not limited to, the United States mail, interstate telephone communications, the Internet,\n23 and the facilities of the national securities exchange.\n24 PARTIES\n25 18. Lead Plaintiff Casey Cavanaugh, as set forth in his certification on file with the Court\n26 (Dkt. No. 19-2) and incorporated by reference herein, purchased Grocery Outlet common stock at\n27 artificially inflated prices during the Class Period and was damaged thereby.\n28\n\n -5-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 6 of 47\n\n\n\n\n 1 19. Defendant Grocery Outlet is a Delaware corporation with its principal executive\n 2 offices located at 5650 Hollis Street, Emeryville, CA 94608. During the Class Period, the Company\u2019s\n 3 common stock traded on the NASDAQ national stock exchange under the ticker symbol \u201cGO.\u201d\n 4 20. Defendant Robert Joseph (\u201cRJ\u201d) Sheedy served as the President, CEO, and a Director\n 5 of the Company from January 2023 to October 29, 2024. Prior to that, Sheedy served as the\n 6 Company\u2019s President from January 2019 to December 2022, its Chief Merchandise, Marketing &\n 7 Strategy Officer from April 2017 to December 2018, its Chief Merchandise & Strategy Officer from\n 8 March 2014 to April 2017, and its Vice President, Strategy from April 2012 to February 2014. On\n 9 October 29, 2024, Sheedy resigned from his board seat and as President and CEO, effective\n10 immediately.\n11 21. Defendant Charles C. Bracher was the Company\u2019s Chief Financial Officer and\n12 Executive Vice President from August 2012 until March 1, 2024. On December 8, 2023, Bracher\n13 submitted his resignation, effective March 1, 2024.\n14 22. Defendants Sheedy and Bracher are sometimes referred to herein as the \u201cIndividual\n15 Defendants.\u201d\n16 23. Each of the Individual Defendants:\n17 (a) directly participated in the management of the Company;\n18 (b) was directly involved in the day-to-day operations of the Company at the highest\n19 levels;\n20 (c) was privy to confidential proprietary information concerning the Company and its\n21 business and operations;\n22 (d) was directly or indirectly involved in drafting, producing, reviewing and/or\n23 disseminating the false and misleading statements and information alleged herein;\n24 (e) was directly or indirectly involved in the oversight or implementation of the\n25 Company\u2019s internal controls;\n26 (f) was aware of or recklessly disregarded the fact that the false and misleading statements\n27 were being issued concerning the Company; and/or\n28 (g) approved or ratified these statements in violation of the federal securities laws.\n\n -6-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 7 of 47\n\n\n\n\n 1 24. The Company and the Individual Defendants are referred to herein, collectively, as the\n 2 \u201cDefendants.\u201d\n 3 25. Grocery Outlet is liable for the acts of the Individual Defendants and its employees\n 4 under the doctrine of respondeat superior and common law principles of agency because all of the\n 5 wrongful acts complained of herein were carried out within the scope of their employment.\n 6 26. Accordingly, the scienter of the Individual Defendants and other employees and agents\n 7 of the Company is imputed to Grocery Outlet. This is particularly true with respect to Defendants\n 8 Sheedy and Bracher, the highest ranking officers of Grocery Outlet who were sufficiently senior in\n 9 the organization that it is proper to impute their scienter to Grocery Outlet.\n10 COMPANY BACKGROUND\n11 27. According to its website, Grocery Outlet is an \u201cextreme value retailer of consumables\n12 and fresh products sold via a network of independently owned and operated stores.\u201d Grocery Outlet\u2019s\n13 business model is similar to the franchise model \u2013 relying on the vast majority of its stores to be\n14 \u201cindependently operated\u201d at the local level by an individual or entity that has invested their own\n15 money into the business (referred to by the Company as an \u201cindependent operator,\u201d or \u201cIO\u201d). Grocery\n16 Outlet then generally shares 50% of its store-level gross profits with its IOs.\n17 28. At the beginning of the Class Period, Grocery Outlet had approximately 450 stores\n18 spread across eight or nine different states. Nearly all of the Company\u2019s stores were operated by\n19 independent operators, the \u201cvast majority\u201d of whom operated only one store. These IOs are\n20 responsible for their own store operations, including ordering, merchandising, and managing\n21 inventory, as well as staffing and marketing for their stores. Other business functions, such as\n22 obtaining and maintaining available discount inventory from which the IOs obtain inventory for their\n23 local stores (\u201cprocurement\u201d), distribution to the local stores (\u201csupply chain\u201d), as well as backroom\n24 functions such as information systems, are handled centrally by the Company.\n25 29. According to the Company\u2019s most current annual report prior to the beginning of the\n26 Class Period, for the fiscal year ended December 31, 2022, filed with the SEC on Form 10-K on\n27 March 1, 2023 (\u201c2022 10-K\u201d), the Company\u2019s centralized \u201cflexible sourcing and supply chain model\u201d\n28 is the key to its success. Grocery Outlet claims that it \u201callows us to offer quality, name-brand\n\n -7-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 8 of 47\n\n\n\n\n 1 opportunistic products at prices generally 40% to 70% below those of conventional retailers,\u201d and its\n 2 \u201cdifferentiated model for buying and selling ... supports profitable sales growth.\u201d\n 3 30. More specifically, Grocery Outlet purports to source its product offerings\n 4 \u201copportunistically through a centralized purchasing team .... Our speed and efficiency in responding\n 5 to supplier needs, combined with our specialized supply chain capabilities and flexible merchandising\n 6 strategy, enhance our access to discounted products and allow us to turn inventory quickly and\n 7 profitably.\u201d\n 8 31. The Company\u2019s information systems were thus instrumental to the Company\u2019s\n 9 profitability and growth \u2013 both for its centralized procurement and supply chain effectiveness, and\n10 for its IOs to effectively implement the Company\u2019s sales and marketing strategy at the local store\n11 level. \u201cIOs leverage our national purchasing network, sophisticated ordering and information systems\n12 and field support in order to operate more efficiently.\u201d\n13 32. According to Defendants,\n14 Our information systems provide a broad range of business process\n assistance and real-time data to support our purchasing and planning\n15 approach, merchandising team and strategy, multiple distribution\n16 center management, store and operational insight and financial\n reporting. We selected and developed these technologies to provide the\n17 flexibility and functionality to support our unique buying and selling\n model as well as to identify and respond to merchandising and\n18 operating trends in our business.\n19 * * *\n20 The ongoing modernization, enhancement and maintenance of our\n information systems have allowed us to support the growth in our\n21 business and store base. We have modernized and added several\n22 systems that provide us additional functionality and scalability in order\n to better support operational decision-making, including enhanced\n23 point of sale, warehouse management, human resource planning,\n business intelligence, vendor tracking and lead management, store\n24 communications, real estate lease management and financial planning\n25 and analysis systems.\n\n26 33. Because of Grocery Outlet\u2019s business model, any disruptions to the Company\u2019s\n27 information systems could have an immediate and substantial financial impact. Defendants admitted\n28 as much by including the following \u201cRisk Factor\u201d in that same FY 2022 10-K:\n\n -8-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 9 of 47\n\n\n\n\n The efficient operation and successful growth of our business depends\n 1\n upon our information systems, including our ability to operate,\n 2 maintain and develop them effectively. A failure of those systems\n could disrupt our business, subject us to liability, damage our\n 3 reputation, or otherwise impact our financial results.\n 4\n 34. As an investment thesis, the key to the Company\u2019s long-term growth was (and\n 5\n remains) increasing the number of stores. \u201cWe believe that new store growth remains our biggest\n 6\n driver of long-term stockholder value.\u201d This is due in large part to the narrow profit margins for the\n 7\n Company\u2019s \u201cextreme value\u201d grocery store business model. For example, the Company reported net\n 8\n income of a meager 2.0% of net sales in 2021, and 1.8% in 2022.\n 9\n 35. But new stores take time to become profitable. As stated in that same 2022 10-K, \u201cOn\n10\n average, we aim for our stores [to] achieve profitability during the first year of operations.\u201d Thus, in\n11\n the near- and intermediate-term, even relatively small changes in the Company\u2019s expenses, income,\n12\n and thus margins, can have a significant effect on the Company\u2019s financial performance and resulting\n13\n stock price.\n14\n 36. As the Company reported in its 2022 10-K, its \u201ckey ... financial measures\u201d and \u201ckey\n15\n operational metrics\u201d include gross margin and selling, general and administrative expenses\n16\n (\u201cSG&A\u201d), \u201ccomparable store sales,\u201d and EBITDA (Earnings Before Interest, Taxes, Depreciation,\n17\n and Amortization). As defined by the Company, comparable store sales \u201cmeasure performance of a\n18\n store during the current reporting period against the performance of the same store in the\n19\n corresponding period of the previous year,\u201d but includes only \u201cnet sales from our stores beginning on\n20\n the first day of the fourteenth full fiscal month following the store\u2019s opening.\u201d\n21 DEFENDANTS KNEW THE COMPANY WAS UNPREPARED TO LAUNCH ITS\n22 SYSTEMS TRANSITION\n\n23 37. As the Company prepared to implement the massive transition of multiple critical ERP\n24 and information technology systems, it engaged in a months-long internal campaign to align the new\n25 SAP systems\u2019 functionalities with legacy systems and train its personnel on the new systems. The\n26 new systems would impact how inventory was tracked and managed, how the Company\u2019s buyers and\n27 planners would strategize what goods to purchase, how the Company\u2019s IOs would view and order\n28\n\n -9-\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 10 of 47\n\n\n\n\n 1 inventory from the Company\u2019s warehouses, and how the Company\u2019s financial and accounting\n 2 systems would integrate with the new systems.\n 3 38. Former Employee 1 (\u201cFE1\u201d) worked as a Director of Financial Planning and Analysis\n 4 for Grocery Outlet from August 2021 to September 2024. FE1 was responsible for the \u201cfull P&L\u201d\n 5 and balance sheet of the Company, as well as annual budgeting and monthly and quarterly forecasting.\n 6 FE1 also supported the Company\u2019s investor relations department with data used for earnings\n 7 conference calls and financial statements. FE1 reported to Grocery Outlet\u2019s Senior Vice President of\n 8 Finance, Dorian Bertsch, who reported to Defendant Bracher. FE1 participated in monthly business\n 9 review meetings with Bracher both in person and by email.\n10 39. Former Employee 2 (\u201cFE2\u201d) worked for Grocery Outlet from January 2012 to April\n11 2020 and again from March 2022 to February 2025, as a Grocery Buyer for roughly 60 Grocery Outlet\n12 stores in the eastern U.S. FE2 reported to Senior Vice President of Grocery Paul Miller, who reported\n13 to Executive Vice President and Chief Purchasing Officer Steve Wilson, who reported to Defendant\n14 Sheedy. FE2 participated in meetings with Sheedy on a quarterly or biannual basis, in conjunction\n15 with department heads. As a Grocery Buyer, FE2 used the SAP ERP systems for a wide variety of\n16 functions, including \u201call inventory management,\u201d tracking sales, cost of goods sold, and profitability,\n17 as well as for creating purchase orders, and referencing a \u201chistory\u201d of the products that Grocery Outlet\n18 sold.\n19 40. Former Employee 3 (\u201cFE3\u201d) worked as an Assistant Planner for Grocery Outlet from\n20 May 2023 to October 2024. FE3 was involved with allocating products to all of the Company\u2019s retail\n21 stores and helping the Company\u2019s buyers plan for what to buy. FE3 had been trained on Grocery\n22 Outlet\u2019s legacy ERP systems, including critical applications used for planning and buying inventory,\n23 and had firsthand experience transitioning to using the new SAP systems.\n24 41. According to FE1, Grocery Outlet started preparing for the Systems Transition prior\n25 to FE1\u2019s tenure at Grocery Outlet. Soon after FE1 began working for the Company in August 2021,\n26 FE1 joined the Finance department\u2019s project working team dedicated to the implementation of the\n27 SAP systems \u2013 which project was already underway. The team was responsible for determining how\n28 the SAP systems needed to be structured to support the Finance department\u2019s requirements.\n\n - 10 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 11 of 47\n\n\n\n\n 1 42. FE2 was aware that Grocery Outlet had begun preparing for the implementation of\n 2 the SAP systems by at least late 2022. FE2 attended meetings in late 2022 to discuss issues related to\n 3 \u201cconsolidating inventory,\u201d particularly item numbers, to \u201crectify inconsistencies,\u201d as well as\n 4 \u201cscraping excess and obsolete inventory\u201d from the legacy systems that Grocery Outlet had used prior\n 5 to SAP.\n 6 43. As FE1 explained, the Company used internal tracking documents maintained in Excel\n 7 spreadsheets that different departments within the Company used to track their respective readiness\n 8 for \u201cgoing live\u201d with the Systems Transition. For example, FE1 reported that the Finance and\n 9 Accounting groups met weekly to review these documents. In FE1\u2019s experience there were typically\n10 20-30 lines of unfinished issues to fix each week, and \u201ccontinuing risk levels\u201d were assigned to each\n11 of these issues.\n12 44. According to FE1, Grocery Outlet had a \u201cProject Steering Committee\u201d for the SAP\n13 implementation. The project steering committee maintained the internal tracking documents. The\n14 Project Steering Committee held meetings every Monday that were led by Grocery Outlet\u2019s CIO,\n15 Harrison Lewis. At these meetings, the committee would discuss \u201ccritical issues\u201d with the SAP\n16 implementation, including what was \u201cready and not ready.\u201d According to FE1, Defendant Bracher\n17 and Grocery Outlet\u2019s Senior Vice President of Accounting, Lindsay Gray, represented the Finance\n18 and Accounting groups in these committee meetings. FE1 understood that the Company\u2019s \u201cC-suite\u201d\n19 and Executive Vice Presidents typically attended these meetings. Bracher and Gray typically \u201cgave\n20 readouts\u201d from the weekly meetings, reporting back to FE1 and others in the Finance and Accounting\n21 departments about when Systems Transition issues were expected to be fixed.\n22 45. According to FE1, the Project Steering Committee maintained internal tracking\n23 documents for each of the Company\u2019s various departments, not just the Finance department. FE1\n24 reported that not only were there internal tracking documents for each department, but there was also\n25 a \u201cmaster document\u201d that tracked all the items being handled by the individual departments and rated\n26 the issues that needed to be resolved by \u201curgency,\u201d resources needed, and key contact personnel\n27 responsible for the issues. According to FE1, both the master tracking document as well as the\n28 individual department tracking documents were \u201cwidely shared on SharePoint,\u201d a web-based business\n\n - 11 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 12 of 47\n\n\n\n\n 1 collaboration platform accessible on the Company\u2019s computer system. FE1 personally saw both the\n 2 master and individual department tracking documents.\n 3 46. According to FE1, the original \u201cgo-live\u201d date for SAP implementation was set for\n 4 March 2023. However, as that date approached it became clear within Grocery Outlet that large parts\n 5 of the Company were not ready for the implementation. The Company thus decided to push out the\n 6 \u201cgo-live\u201d date for implementation to July 2023. FE1 estimated that the decision to push out the launch\n 7 date from March 2023 to July 2023 was made approximately one month prior to the March launch\n 8 date. FE2 also recalled that Grocery Outlet had been working towards transitioning to SAP systems\n 9 \u201cfor years\u201d and that \u201cgoing live\u201d with the SAP systems had been \u201cpushed out several times\u201d because\n10 the Company was \u201cnot ready.\u201d\n11 47. According to FE1, the primary problem was that the Company\u2019s various \u201csilos\u201d (e.g.,\n12 Finance, Operations, or Inventory) had each prepared for the Systems Transition independently,\n13 without any attempt to integrate or jointly test the various interconnected systems. As the original\n14 March 2023 launch date approached, the Company finally attempted to integrate the new systems\n15 together as a whole, as they needed to for the new systems to support operations. However, when they\n16 tried to \u201cplug together\u201d all the various applications and systems they realized it did not work as an\n17 integrated whole, even if the individual applications worked independently within each \u201csilo.\u201d\n18 48. By July 2023, FE1 reported that the Company was still not ready to implement the\n19 SAP systems. That is when the Company made the critical decision to \u201crip off the band-aid\u201d and\n20 proceed with the Systems Transition launch in August 2023, notwithstanding the fact that the\n21 Company still was not adequately prepared to do so. According to FE1, employees at the Company\n22 were informed of this decision in a Company-wide email from Defendant Sheedy, who was ultimately\n23 accountable for the project.\n24 49. FE2 noted that \u201cmost of us [at Grocery Outlet] thought it was premature\u201d to proceed\n25 with implementation in August 2023. FE3 agreed that the Company launched the SAP systems\n26 \u201cprematurely.\u201d\n27 50. FE1 recalled that one of the key unfinished preparations when the Company decided\n28 to prematurely forge ahead with the Systems Transition launch was User Acceptance Testing\n\n - 12 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 13 of 47\n\n\n\n\n 1 (\u201cUAT\u201d). UAT progress (or lack thereof) was specifically noted in the internal tracking documents\n 2 maintained by the project steering committee.\n 3 51. UAT is the final phase of ERP pre-implementation testing where a company\u2019s real\n 4 end-users validate that the system works as intended in real-world scenarios before the ERP system\n 5 goes live. The purpose of UAT is to confirm that the ERP system meets a company\u2019s needs and\n 6 catches usability, data migration, or cross-functionality issues early, helping to prevent costly\n 7 surprises and disruptions after full deployment.\n 8 52. Despite extensive testing in previous phases, UAT can uncover issues not identified\n 9 previously. End-users are closest to the company\u2019s day-to-day operations and are best positioned to\n10 gauge the usability of the system, including its interfaces, navigation, cross-functionality, and ease\n11 of use. UAT may also highlight where additional training or user support may be required. Successful\n12 completion of UAT provides senior management with confidence in the ERP system\u2019s readiness for\n13 deployment. It allows management to witness first-hand the system\u2019s real-world capabilities and\n14 make an informed decision on when or whether to proceed with the \u2018go-live\u2019 launch.\n15 53. For SAP implementation, UAT often involves testing complete end-to-end business\n16 processes that may span multiple SAP modules and integrate with other internal or external systems,\n17 reflecting how the business actually operates day-to-day. With respect to Grocery Outlet\u2019s SAP\n18 implementation, UAT would have entailed having IOs attempt to use the new portal and inventory\n19 ordering systems, having Grocery Outlet\u2019s planners and buyers attempt to actually manage\n20 warehouse inventory, and having finance and accounting personnel use the new systems to attempt\n21 to accurately make calculations and projections for cost of goods sold, margins, and other key\n22 metrics.\n23 54. According to FE1, Grocery Outlet had not conducted end-to-end UAT prior to\n24 launching the Systems Transition. The new systems were not tested as an integrated whole to see\n25 how they would perform from beginning to end, e.g., from writing an initial purchase order for a\n26 product, to shipping the product from the supplier to a distribution center, to shipping the product\n27 from the distribution center to a store, to reporting the store\u2019s sale of that product to the finance and\n28 accounting departments. In that regard, even if the individual \u201csilos\u201d had been tested independently,\n\n - 13 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 14 of 47\n\n\n\n\n 1 failing to conduct and complete full end-to-end UAT to see how the separate silos interacted with\n 2 each other prevented the Company from seeing the full functional flow of information needed to\n 3 effectively conduct the Company\u2019s most central operations.\n 4 55. FE1 also reported that the testing performed in the individual silos used only \u201cdummy\n 5 data,\u201d not actual data from the Company\u2019s normal operations. While using \u201cdummy data\u201d could\n 6 show that random data was flowing where it needed to go, without actual data it would not be possible\n 7 to see if the data flows actually \u201cmade sense\u201d and were not being distorted or lost as they passed\n 8 through the various systems.\n 9 56. FE2 recalled that reconciling and scrubbing data from Grocery Outlet\u2019s legacy\n10 systems was also not fully completed when the Company decided to \u201cgo live\u201d with the SAP systems.\n11 This was a problem because whereas the Company\u2019s legacy AS400 system had tracked inventory by\n12 item number, the SAP system was \u201ccompletely UPC-driven.\u201d As FE2 explained, the issue with\n13 transitioning to a UPC-driven system was that multiple Grocery Outlet products with different item\n14 numbers often shared the same UPC, such as different sizes of cans of the same type of soda \u2013 these\n15 would each have different item numbers in the AS400 system but all had the same UPC. The result\n16 was a \u201cbig issue with inventory control.\u201d\n17 57. According to FE2, the Company also \u201cstruggled with different item numbers\u201d that\n18 were used for the same products in the eastern and western regions in which Grocery Outlet operated,\n19 so the Company had to determine which item numbers to use for the new system. These issues with\n20 the item numbers had to be resolved quickly because they significantly impacted Grocery Outlet\u2019s\n21 operations, and it took until the first couple of months after the Systems Transition for the Company\n22 to resolve those problems. FE2 stated the Company did not adequately anticipate and was not\n23 adequately prepared for these issues prior to the Systems Transition.\n24 58. According to FE1, when the SAP systems went live in late August 2023, the biggest,\n25 immediate problem related to inventory, particularly in regards to \u201cvisibility\u201d of how much inventory\n26 was actually on hand and determining the valuation of the inventory. As FE1 explained, every product\n27 had its own cost-of-goods-sold (\u201cCOGS\u201d) and the price at which it was sold, but determining the\n28 quantities of some products could be problematic. For instance, similar to what FE2 described, there\n\n - 14 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 15 of 47\n\n\n\n\n 1 might be a COGS and sales price for a single granola bar, but those single bars would come in a box\n 2 of six. As such, there could be times when, a single bar was \u201cringing up\u201d as a box in SAP and thereby\n 3 resulted in incorrectly valuing the inventory. These issues were not due to latent data integrity issues\n 4 in the legacy ERP systems, they were attributable to \u201ckeying issues\u201d (i.e., end-users entering details\n 5 incorrectly) and learning to manage the new SAP systems, especially data flows between purchasing,\n 6 the stores and warehouses.\n 7 59. FE1 reported that Grocery Outlet had poor visibility as to its inventory because of the\n 8 poor data flow. Without adequate visibility, the Company was \u201cflying blind\u201d when it came to valuing\n 9 its inventory. According to FE1, in the fourth quarter of 2023, after the Systems Transition was\n10 implemented, Grocery Outlet did \u201cnot know what we had\u201d with regard to inventory. While the\n11 Company was able to see how much inventory had been purchased, it did \u201cnot have good visibility\u201d\n12 to inventory levels. This, in turn, meant the Company did not know the volumes of inventory at risk\n13 of spoiling. According to FE1, through at least November 2023 the company had been deliberately\n14 conservative in how much inventory it purchased because of this lack of visibility on inventory levels.\n15 60. FE3 reported that when the Systems Transition launched at the end of August 2023,\n16 it immediately \u201cbroke all the functionality of everything.\u201d FE3 specifically noted that data integrity\n17 was severely compromised when the SAP systems went live, such that \u201cnone of the data made sense,\u201d\n18 and was instead \u201call random information\u201d such that the Company had \u201cno idea what was accurate.\u201d\n19 61. Had Grocery Outlet completed end-to-end UAT for the Systems Transition, it would\n20 have been able to identify and resolve, or at least mitigate, these inventory issues before\n21 implementing the new SAP systems. Indeed, FE2 reported that the Systems Transition imposed a\n22 steep \u201clearning curve\u201d on the Company\u2019s IOs as they adapted to the new SAP systems. Failing to\n23 complete end-to-end UAT on the new SAP systems prior to launching the Systems Transition created\n24 a material risk that the Company would encounter significant disruptions to its operations, with\n25 material adverse impacts on its financial results and financial reporting.\n26 62. The Systems Transition was a massive Company-wide project, ultimately spearheaded\n27 by Defendant Sheedy. The project involved Company-wide overhaul of ERP systems and implicated\n28\n\n - 15 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 16 of 47\n\n\n\n\n 1 multiple key operational aspects of the Company, including inventory, warehouse data, store level\n 2 reporting, and financial reporting.\n 3 63. Ultimately, the strategic decision to implement the Systems Transition when\n 4 Defendants knew the Company was not ready to do so led to material impacts on key financial\n 5 metrics, such as sales growth and margins, and led to a material weakness in the Company\u2019s internal\n 6 controls on financial reporting. Sheedy was eventually asked to step down in light of the prematurely\n 7 implemented and poorly executed Systems Transition.\n 8 64. FE2 also reported that Sheedy personally addressed issues regarding the SAP\n 9 transition during Company \u201ctown hall\u201d meetings, further indicating Sheedy\u2019s knowledge of, and\n10 direct involvement in, preparing the Company and implementing the Systems Transition.\n11 DEFENDANTS\u2019 MATERIALLY FALSE AND MISLEADING STATEMENTS,\n OMISSIONS, AND HALF-TRUTHS ABOUT THE COMPANY\u2019S SYSTEMS TRANSITION\n12\n 65. During the Class Period, Defendants made numerous material false and misleading\n13\n14 statements, omissions, and half-truths concerning the Company\u2019s Systems Transition, concealing the\n15 known risks attendant thereto. Each of these false or misleading statements and omissions was made\n16 with Defendants\u2019 knowledge of, or severely reckless disregard for, the undisclosed material facts\n17 which rendered those statements misleading.\n 66. On March 1, 2023, after the close of trading, the Company filed the 2022 10-K, which\n18\n19 Defendants Sheedy and Bracher signed. The 2022 10-K contained the following purported risk\n20 disclosure, which was identical to the risk disclosure provided in the Company\u2019s annual report for\n 2\n21 the prior year:\n Any material challenges or difficulties in maintaining or updating\n22\n our existing technology, including modernizing components of our\n23 existing system architecture, or developing or implementing new\n technology could have a material adverse effect on our business or\n24 results of operations.\n25 We modify, update and replace our systems and infrastructure from\n time to time, including by adding new hardware, software and\n26 applications; maintaining, updating or replacing legacy programs;\n27 converting to global systems; integrating new service providers; and\n\n28 2\n Emphasis is added unless otherwise indicated.\n\n - 16 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 17 of 47\n\n\n\n\n adding enhanced or new functionality, such as cloud computing\n 1\n technologies. In addition, we have a customized enterprise resource\n 2 planning system, components of which have already been replaced and\n additional components of which we are replacing over the next several\n 3 years, including our financial ledger, inventory management platform\n and product data warehouse system. The implementation, operation,\n 4\n and proper functionality of these improvements is anticipated to require\n 5 a significant investment of financial, human, and technical resources.\n It is possible that we could experience implementation, operational and\n 6 functionality issues, delays, higher than expected costs and other issues\n 7 during the course of implementing and utilizing these improvements.\n With any update or replacement of our systems and infrastructure there\n 8 is a risk of business disruption, liability and reputational damage\n associated with these actions, including from not accurately capturing\n 9 and maintaining data, efficiently testing and implementing changes,\n10 realizing the expected benefit of the change and managing the potential\n disruption of the actions and diversion of internal teams' attention as\n11 the changes are implemented.\n12 Further, the time and resources required to implement or optimize the\n benefits of new technology initiatives, or potential issues that arise in\n13 implementing such initiatives, could reduce the efficiency of our\n operations in the short term.\n14\n The efficient operation and successful growth of our business depends\n15 upon our information systems, including our ability to operate,\n16 maintain and develop them effectively. A failure of those systems\n could disrupt our business, subject us to liability, damage our\n17 reputation, or otherwise impact our financial results.\n18 67. On August 8, 2023, after the market closed, the Company filed with the SEC on Form\n19 10-Q its Quarterly Report for the quarter ended July 1, 2023 (\u201cQ2\u201923 10-Q\u201d). Defendant Bracher\n20 signed the Q2\u201923 10-Q.\n21 68. Under the subheading, \u201cItem 1A. Risk Factors,\u201d the Q2\u201923 10-Q stated that: \u201cour\n22 business, financial condition and operating results can be affected by a number of factors, ...\n23 including but not limited to those described in Part I, Item 1A of our 2022 Form 10-K under the\n24 heading \u2018Risk Factors,\u2019.... There have been no material changes to our risk factors since the 2022\n25 Form 10-K.\u201d Thus, the Q2\u201923 10-Q incorporated the risk factor specified above in the 2022 10-K.\n26 69. The underlined sentences above in the 2022 10-K were misleading, and the risk\n27 disclosure was inadequate, when incorporated into the Q2\u201923 10-Q because Defendants failed to\n28 disclose known material adverse facts about the planned launch of the Systems Transition.\n\n - 17 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 18 of 47\n\n\n\n\n 1 70. Specifically, Grocery Outlet had originally planned to deploy the new SAP systems\n 2 in March 2023, but Defendants postponed the \u201cgo-live\u201d date to July 2023 because they knew the\n 3 Company was not adequately prepared to implement the new systems. Then in July 2023, although\n 4 they knew the Company was still unprepared and could not effectively deploy the Systems Transition\n 5 without a material risk of significant disruptions, Defendants decided they did not want to wait any\n 6 longer and that they would deploy the new SAP systems in August 2023 anyway. The purported risk\n 7 disclosure, as incorporated into the Q2\u201923 10-Q, framed these risks as hypothetical and generalized,\n 8 concerning \u201cany update or replacement of our systems,\u201d or that the implementation of the\n 9 Company\u2019s new ERP systems \u201ccould\u201d cause \u201cimplementation, operational and functionality issues,\n10 delays, higher than expected costs and other issues during the course of implementing\u201d the ERP\n11 system upgrades.\n12 71. In reality, at the time these statements were made the risks were specific and no longer\n13 hypothetical because by August 2023 Defendants had already decided to \u201cgo live\u201d with the Systems\n14 Transition despite the Company still being inadequately prepared, due in part to a failure to complete\n15 end-to-end UAT.\n16 72. Also on August 8, 2023, after the market closed, the Company held an earnings\n17 conference call for the second quarter of 2023 (\u201cQ2\u201923 Earnings Call\u201d). On the Q2\u201923 Earnings Call,\n18 Defendant Sheedy made the following statement about certain aspects of the System Transition: \u201cour\n19 forthcoming store portal[] is a new platform that will provide operators with better analytics and\n20 easier access to information to make smarter business decisions. We look forward to delivering this\n21 new application to operators this quarter.\u201d\n22 73. This statement was misleading because the Company originally planned to deploy the\n23 Systems Transition in March 2023, but already had to delay the \u201cgo-live\u201d date until at least July 2023\n24 because it was inadequately prepared to implement Systems Transition. By July 2023 the Company\n25 was still inadequately prepared, but Defendants decided to press forward with deploying the Systems\n26 Transition in August 2023 anyway. Thus, it was misleading for Sheedy to tout the purported benefits\n27 of the Systems Transition while omitting the material likelihood that the Company would experience\n28\n\n - 18 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 19 of 47\n\n\n\n\n 1 severe disruptions, reduced visibility into inventory and finances, and other significant issues with\n 2 implementation due to being inadequately prepared.\n 3 74. The Q2\u201923 Earnings Call also included the following exchange between an analyst\n 4 and Defendant Sheedy:\n 5 Analyst: ... when is the portal going to be out there? And what do you\n think\u2014if you had to pick 2 elements of that, that will be the most\n 6 impactful for the IOs. What would that be? I'm sort of curious in terms\n 7 of so many items, elasticity. Is that one of the that would allow the IOs\n to price more opportunistic if they haven't to date?\n 8 Defendant Sheedy: ... And then yes, in terms of benefits for the\n 9 operator, gosh, so many. I think, John, the first thing that comes to mind\n is just easier access to information and access to new information that\n10 they\u2019ve not seen before, at least not in the format that it will be\n available. And then with that, comes better decision-making, faster,\n11\n better decision-making around inventory, around ordering, around\n12 managing the mix, really in all aspects for how they manage their\n business, which is a huge benefit, so which to grow sales and improve\n13 margin. And then the other benefit that I would mention is just\n efficiencies. So certainly, you\u2019ve talked about rise in costs, operating\n14\n expenses, labor, et cetera, challenges that we, together with operators,\n15 have managed through for a long time now, but this new platform\n portal will allow them to operate even more efficiently, better use of\n16 their time, reallocate it to spend time with customers, or operate the\n17 P&L more efficiently to help them with their income growth.\n\n18 75. These statements by Defendant Sheedy about the benefits that the impending\n\n19 implementation of the Systems Transition would bring were misleading because the Company\n20 originally planned to deploy the Systems Transition in March 2023, but already had to delay the \u201cgo-\n21 live\u201d date until at least July 2023 because it was inadequately prepared to implement the new SAP\n22 systems. The Company was still inadequately prepared in July 2023, but it decided to press forward\n23 with deploying the Systems Transition in August 2023 anyway. Thus, it was misleading for Sheedy\n24 to tout the purported benefits of the Systems Transition such as \u201ceasier access to information,\u201d\n25 \u201cgrow[ing] sales and improv[ing] margins,\u201d and \u201cefficiencies\u201d while omitting the likelihood that the\n26 Company would experience disruptions, reduced visibility into inventory and finances, and other\n27 issues with implementation due to being inadequately prepared, which would have a material and\n28\n\n - 19 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 20 of 47\n\n\n\n\n 1 adverse impact on the Company\u2019s sales growth, margins, and efficiencies in the forthcoming periods\n 2 as the Systems Transition was implemented.\n 3 76. Defendant Sheedy\u2019s comments about the purported benefits Grocery Outlet expected\n 4 from the impending Systems Transition were noted by securities analysts following Grocery Outlet,\n 5 demonstrating the importance to investors of the implementation of the Systems Transition. For\n 6 example, an analyst report from Guggenheim Partners on August 9, 2023 noted that \u201cthe new IO\n 7 portal, going live this month, would, among other things, improve pricing.\u201d\n 8 77. Likewise, an analyst report from Telsey Advisory Group on the same day highlighted\n 9 Grocery Outlet\u2019s \u201cnew technology initiatives, including the rollout of a new store portal for IO\u2019s\u2014a\n10 new platform that will provide operators with better analytics.\u201d\n11 78. A second report by Telsey Advisory Group on September 15, 2023, following a virtual\n12 investor meeting with Defendants Sheedy and Bracher, noted that \u201cGrocery Outlet also is leveraging\n13 technology via its ... and new IT platform for independent operators (IO\u2019s)\u2014all helping gain new\n14 customers and increase productivity.\u201d\n15 79. On November 8, 2023, Grocery Outlet filed with the SEC on Form 10-Q its Quarterly\n16 Report for the quarter ended September 30, 2023 (\u201cQ3\u201923 10-Q\u201d). The Q3\u201923 10-Q stated, under the\n17 subheading, \u201cChanges in Internal Control over Financial Reporting,\u201d that:\n18 During the quarter ended September 30, 2023, we replaced components\n of our enterprise resource planning system, including our financial\n19 ledger, inventory management platform and product data warehouse\n20 system. These new systems are intended to provide us with enhanced\n transactional processing, security and management tools, and are an\n21 important element of our system of disclosure controls and procedures.\n We modified certain existing internal controls, as well as implemented\n22 new controls and procedures impacted by the implementation of these\n23 new systems. We will continue to monitor and evaluate the operating\n effectiveness of the related controls during subsequent periods. Except\n24 for the implementation of these new systems, there was no change in\n our internal control over financial reporting identified in connection\n25 with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the\n26 Exchange Act that has materially affected, or is reasonably likely to\n materially affect, our internal control over financial reporting.\n27\n28\n\n - 20 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 21 of 47\n\n\n\n\n 1 80. The underlined statement was false and misleading because, due to the premature\n 2 implementation of the Systems Transition, the Company suffered disruptions to numerous functions\n 3 within the Company that were so pervasive that the Company experienced an undisclosed material\n 4 weakness in its internal control over financial reporting related to its information technology general\n 5 computer controls (\u201cITGC\u2019s\u201d). As the Company later admitted in February 2024, the Systems\n 6 Transition had \u201cled to a significant increase in the volume of transactions across user access, program\n 7 change management, and IT operations for which [the Company\u2019s] existing controls were not\n 8 designed to address. As a result, certain of the Company\u2019s related business controls that are dependent\n 9 upon the affected ITGC\u2019s were also deemed ineffective.\u201d As a result of the Systems Transition,\n10 implemented over one month prior to the end of the quarter, \u201cthe pervasive impact of these control\n11 deficiencies ... created a reasonable possibility that a material misstatement to the consolidated\n12 financial statements would not be prevented or detected on a timely basis.\u201d These deficiencies\n13 represented a new, undisclosed material weakness in the Company\u2019s internal control over financial\n14 reporting that arose during the third quarter, and rendered its internal control over financial reporting\n15 not effective after the Systems Transition was implemented \u2013 before the quarter\u2019s end and before the\n16 Q3\u201923 10-Q was filed.\n17 81. Attached to the Q3\u201923 10-Q were SOX certifications signed by Defendants Sheedy\n18 and Bracher, attesting to the disclosure of any material changes to the Company\u2019s internal control\n19 over financial reporting, and the disclosure of all fraud.\n20 82. Specifically, the SOX certifications attached to the Q3\u201923 10-Q stated that: (1) \u201cthis\n21 report does not contain any untrue statement of a material fact or omit to state a material fact necessary\n22 to make the statements made, in light of the circumstances under which such statements were made,\n23 not misleading with respect to the period covered by this report\u201d; and (2) the certifying officers \u201care\n24 responsible for establishing and maintaining disclosure controls and procedures ... and internal control\n25 over financial reporting\u201d for the Company, and that they have disclosed any change in the Company\u2019s\n26 internal control over financial reporting that occurred during the quarter \u201cthat has materially affected,\n27 or is reasonably likely to materially affect, the registrant\u2019s internal control over financial reporting.\u201d\n28 The SOX certifications also stated that the certifying officers had disclosed to the Company\u2019s auditors\n\n - 21 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 22 of 47\n\n\n\n\n 1 and the Board\u2019s audit committee \u201c[a]ll significant deficiencies and material weaknesses in the design\n 2 or operation of internal control over financial reporting which are reasonably likely to adversely affect\n 3 the registrant's ability to record, process, summarize and report financial information.\u201d\n 4 83. These SOX certifications were false because the Q3\u201923 10-Q report, to which these\n 5 SOX certifications were attached, omitted material facts that rendered certain of its statements\n 6 misleading, as identified above, and did not disclose a material weakness in the Company\u2019s internal\n 7 control over financial reporting that had arisen during the quarter.\n 8 PLAINTIFF AND THE CLASS WERE DAMAGED\n AS THE CONCEALED RISKS MATERIALIZED\n 9\n10 84. Defendants\u2019 misleading statements and omissions about the Systems Transition, as\n\n11 identified above, concealed the material risk that the Company would suffer significant disruptions\n12 to its operations and financial functions because it was inadequately prepared to implement the\n13 Systems Transition when it decided to \u201cgo live\u201d anyway, which disruptions were likely to have a\n14 material adverse impact on the Company\u2019s financial results. That concealed risk came to light\n15 through a series of partial disclosures beginning in late 2023, revealing that the risk had indeed come\n16 to bear as the Company experienced significant disruptions to its inventory systems, warehousing,\n17 and financial reporting visibility, among other things, as a result of trying to implement the Systems\n18 Transition without being adequately prepared, and instead being forced to troubleshoot on the fly.\n19 As the truth came to light, these revelations caused Grocery Outlet\u2019s share price to fall, harming\n20 Plaintiff and the Class.\n21 85. Defendants also continued to make misleading statements as they repeatedly assured\n\n22 analysts and investors that the impact from the Systems Transition would extend no further than the\n23 then-current quarters, despite knowing several material, undisclosed facts showing there was no\n24 reasonable factual basis for those assurances.\n 86. On November 7, 2023, the Company held an earnings conference call for the third\n25\n26 quarter of 2023 (\u201cQ3\u201923 Earnings Call\u201d). During the Q3\u201923 Earnings Call, Defendant Sheedy\n27 revealed for the first time that implementation of the Systems Transition during the third quarter\n28\n\n - 22 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 23 of 47\n\n\n\n\n 1 resulted in significant disruptions that materially impacted Grocery Outlet\u2019s third and fourth quarter\n 2 financial results:\n 3 While pleased with our third quarter performance, we experienced\n operational disruptions as we transition to upgraded systems. On\n 4 prior calls, we have discussed our approach and history of investing in\n 5 modernizing systems to improve capabilities and drive efficiency. We\n began to implement our most recent enhancements in late August,\n 6 which include upgrades to product, inventory, financial and\n reporting platforms. One important component of this upgrade is a\n 7 new store portal that will provide operators with improved data to make\n 8 better purchasing, merchandising and marketing decisions. We are\n excited for the improved functionality, scalability and data analytics\n 9 that this and other enhancements will provide. The transition to these\n new systems has resulted in ordering and inventory disruptions that\n10 have impacted third and fourth quarter results.\n11 We have been partnering closely with our independent operators to\n minimize the impact to customers and sales. We have also elected to\n12\n provide commission support to our operators as we continue to make\n13 steady progress adapting to the new systems. ...\n\n14 87. During the same call, Defendant Bracher provided further details of the negative\n15 financial impact in the third quarter of 2023 caused by problems from implementing the Systems\n16 Transition:\n17 \u2022 \u201cOur system upgrades impacted comparable store sales by an estimated\n 150 basis points\u201d\n18\n \u2022 The Company estimated that \u201cinventory inefficiencies related to our\n19 system transition... impacted gross margin by approximately 50 basis\n20 points.\u201d\n \u2022 \u201cSG&A expense increased 8.7% to $278.1 million compared to the\n21\n third quarter of 2022. The increase was driven by higher commission\n22 payments to IOs, .... Higher commission expense reflects strong gross\n profit growth together with support we elected to provide to our IOs in\n23 connection with our system upgrades.\u201d\n24 \u2022 \u201cWhile our underlying business remains strong, we do expect the\n system transition to significantly impact financial results in the fourth\n25\n quarter and to a greater degree than the third quarter, given the\n26 additional months affected.\u201d\n\n27 \u2022 \u201cWith respect to the top line, we expect fourth quarter comp growth to\n be approximately 2%, which assumes a 300 basis point headwind from\n28 the system transition.\u201d\n\n - 23 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 24 of 47\n\n\n\n\n \u2022 \u201cWe expect fourth quarter gross margin to be approximately 30%,\n 1\n reflecting ... approximately 150 basis points of impact due to the system\n 2 transition.\u201d\n\n 3 88. The question-and-answer portion of the call followed, during which several analysts\n 4 repeatedly questioned Defendants about the impact of the Systems Transition and Defendants Sheedy\n 5 and Bracher provided additional detail about the disruptions and impact to the Company\u2019s third and\n 6 fourth quarter financial results.\n 7 89. For example, Defendant Sheedy provided more detail about the various upgrades\n 8 involved in the Systems Transition, and how the disruptions caused by the Systems Transition led to\n 9 the impacts on sales (due to \u201clighter inventory levels\u201d), margins (due to \u201cinventory inefficiencies\u201d),\n10 and SG&A expenses (due to commission support for IOs). Sheedy also admitted that \u201cwe did expect\n11 some disruption during this transition.\u201d\n12 [Goldman Sachs Analyst:] ... I just wanted to start off with a couple\n of questions around the new platforms you implemented this quarter.\n13\n What has been the biggest challenge related to the ordering? Is it just\n14 learning the new program? Is there anything specific about the\n functionality that surprised you?\n15\n And then you also said the disruption would be largely behind us by\n16 year-end. But how should we think about any impact into the first half\n of next year, especially any cost that we should think about\n17 annualizing? ...\n18 [Defendant Sheedy:] ...We did upgrade a number of systems at the\n end of August, inclusive of product inventory, financial and reporting\n19\n platforms. These upgrades include replacement of our AS400 system,\n20 which is our legacy ERP system, with SAP along with other third-party\n plus some new proprietary applications for buying and store\n21 operations. So that was the enhancement that was implemented back a\n couple of months ago.\n22\n * * *\n23\n In terms of the challenges and the disruption that we face as we\n24 transition to the new systems, we were challenged with inventory\n visibility, and the impact here was on ordering and inventory\n25 management in general. And unfortunately, this disruption did have an\n26 impact throughout the business and the P&L. And notably, as\n mentioned in our comments, top line sales were impacted by lighter\n27 inventory levels, slightly lower variety. We had some pressure on\n margin as it relates to inventory inefficiencies. And then SG&A was\n28\n higher as well as we elected to provide operators with support. I\u2019ll say\n\n - 24 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 25 of 47\n\n\n\n\n that we did expect some disruption during this transition. It was\n 1\n factored into our previous guidance, just not to the degree that we\u2019ve\n 2 been experiencing it. And of course, we\u2019re very disappointed with the\n magnitude of it and we own it. We own where we are.\n 3\n 90. Sheedy\u2019s statements that they \u201cdid expect some disruption during this [Systems\n 4\n T]ransition\u201d also supports an inference that Defendants knew that Grocery Outlet was inadequately\n 5\n prepared to launch the Systems Transition when they decided to \u201cgo live\u201d anyway.\n 6\n 91. Following up on the same analyst\u2019s questions, Defendant Bracher explained that the\n 7\n impact from the fourth quarter was expected to be greater than the third simply because of the timing\n 8\n of the Systems Transition being implemented in late August, with only just over one month left in the\n 9\n third quarter, compared to the full three-month impact expected in the fourth quarter. Yet in the same\n10\n breath, Bracher also confirmed that the Company expected the impacts from the Systems Transition\n11\n to be resolved by the end of the fourth quarter, and thus the Company would \u201center the new year\n12\n without any lingering cost impacts or otherwise related to the transition.\u201d\n13\n We do expect that as we -- over the course of the fourth quarter, all of\n14 those impacts moderate. And as disappointed as we are with the\n15 magnitude of the impact in the fourth quarter, we do expect and believe\n that it will be largely behind us by the end of the year. And so our view\n16 at this point is we will enter the new year without any lingering cost\n impacts or otherwise related to the transition.\n17\n18 92. These underlined statements were misleading because Defendants knew they had no\n\n19 reasonable basis to assure analysts and investors that the impacts of the Systems Transition would be\n20 resolved over the few weeks remaining until the end of the year. Specifically, Defendants knew at the\n21 time these statements were made that: (1) Grocery Outlet had launched the Systems Transition\n22 without being adequately prepared and immediately faced widespread disruptions across critical\n23 business functions; (2) the Company had atypically poor visibility into its normal business reporting\n24 and tools that led to difficulty with forecasting and limited data visibility; (3) the disruptions from the\n25 Systems Transition were so rampant that they created a material weakness in the Company\u2019s internal\n26 control over financial reporting and deficiencies in other business controls; and (4) while Defendants\n27 claimed that the disruptions were to some extent \u201cexpected,\u201d they admitted that they had significantly\n28 underestimated the magnitude of the problems, which were still ongoing and unresolved when these\n\n - 25 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 26 of 47\n\n\n\n\n 1 assurances were made. These statements (along with other similar statements during the same call)\n 2 gave investors the false impression that Defendants had a realistic grasp of the extent of the problems\n 3 from implementing the Systems Transition and a reasonable basis for claiming the impacts would end\n 4 by the end of the quarter when they made these statements, when in fact they did not.\n 5 93. Defendant Sheedy echoed the same sentiment. He also admitted that \u201cwe\u2019ve always\n 6 known how large [the Systems Transition] was and complex. We did expect as a result, some\n 7 disruption.\u201d Sheedy further confirmed that for 2024, analysts \u201cshould think about us reverting back\n 8 to previous performance ... for both gross margin and bottom-line profit,\u201d as the issues with the\n 9 Systems Transition would be resolved during the fourth quarter.\n10 [Deutsche Bank Analyst:] So RJ, I just wanted to follow up on the\n system upgrades. I mean, it does sound like you anticipated some\n11 disruption but then it has actually come in well ahead of that. Like, one,\n12 is that a fair characterization? And then two, is it fair to say that this\n doesn\u2019t alter any of the margin structure into next year or the long term?\n13 And you\u2019ll essentially be able to fully recapture all of the margin\n pressures once you lap the third and the fourth quarters?\n14\n [Defendant Sheedy:] The -- yes, for your first question, that is a fair\n15 characterization. We did expect -- this is a big transition from a legacy\n platform that we've been operating on for the past several decades.\n16\n So -- and it\u2019s something that we\u2019ve been working on for a couple of\n17 years now. So we\u2019ve always known how large it was and complex. We\n did expect as a result, some disruption, certainly not to this degree or\n18 this magnitude. So I think you characterized it well.\n19 And then in terms of impact looking forward, and I think similar to the\n earlier question, we -- as I said, we do [expect] the transitional impact\n20 to be contained to this year, from what we\u2019ve already experienced in\n21 the third quarter. And then largely behind us at the end of the year. So\n you should think about us reverting back to previous performance and\n22 all the things that we\u2019ve always talked about related to consumer\n trends, top line sales and how we've managed for both gross margin\n23 and bottom-line profit.\n24\n 94. These underlined statements were misleading because Defendants knew they had no\n25\n reasonable basis to assure analysts and investors that the impacts of the Systems Transition would be\n26\n resolved over the few weeks remaining until the end of the year, and that the Company would revert\n27\n to previous performance and trends, especially \u201cfrom what [Grocery Outlet had] already experienced\n28\n\n - 26 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 27 of 47\n\n\n\n\n 1 in the third quarter.\u201d Specifically, Defendants knew at the time these statements were made that: (1)\n 2 Grocery Outlet had launched the Systems Transition without being adequately prepared and\n 3 immediately faced widespread disruptions across critical business functions; (2) the Company had\n 4 atypically poor visibility into its normal business reporting and tools that led to difficulty with\n 5 forecasting and limited data visibility; (3) the disruptions from the Systems Transition were so\n 6 rampant that they created a material weakness in the Company\u2019s internal control over financial\n 7 reporting and deficiencies in other business controls; and (4) while Defendants claimed that the\n 8 disruptions were to some extent \u201cexpected,\u201d they admitted that they had significantly underestimated\n 9 the magnitude of the problems, which were still ongoing and unresolved when these assurances were\n10 made. These statements (along with other similar statements during the same call) gave investors the\n11 false impression that Defendants had a realistic grasp of the extent of the problems from implementing\n12 the Systems Transition and a reasonable basis for claiming the impacts would end by the end of the\n13 quarter when they made these statements, based on the disruptions the Company experienced in the\n14 third quarter, when in fact they did not.\n15 95. Defendant Sheedy also stated twice during the Q3\u201923 Earnings Call that: the Company\n16 \u201canticipate[s] the transitional impacts to be largely behind us as we get to the end of the year.\u201d\n17 96. These statements were misleading because Defendants knew they had no reasonable\n18 basis to assure analysts and investors that the impacts of the Systems Transition would be resolved\n19 over the few weeks remaining until the end of the year. Specifically, Defendants knew at the time\n20 these statements were made that: (1) Grocery Outlet had launched the Systems Transition without\n21 being adequately prepared and immediately faced widespread disruptions across critical business\n22 functions; (2) the Company had atypically poor visibility into its normal business reporting and tools\n23 that led to difficulty with forecasting and limited data visibility; (3) the disruptions from the Systems\n24 Transition were so rampant that they created a material weakness in the Company\u2019s internal control\n25 over financial reporting and deficiencies in other business controls; and (4) while Defendants claimed\n26 that the disruptions were to some extent \u201cexpected,\u201d they admitted that they had significantly\n27 underestimated the magnitude of the problems, which were still ongoing and unresolved when these\n28 assurances were made. These statements (along with other similar statements during the same call)\n\n - 27 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 28 of 47\n\n\n\n\n 1 gave investors the false impression that Defendants had a realistic grasp of the extent of the problems\n 2 from implementing the Systems Transition and a reasonable basis for claiming the impacts would end\n 3 by the end of the quarter when they made these statements, when in fact they did not.\n 4 97. Defendant Bracher also stated that \u201cGiven the progress that we\u2019ve made and the daily\n 5 progress that we continue to make, we do feel confident in being able to resolve these outstanding\n 6 issues to the point where the impact is then largely behind us by the end of the year.\u201d\n 7 98. This statement was misleading because Defendants knew they had no reasonable basis\n 8 to assure analysts and investors that the impacts of the Systems Transition would be resolved over\n 9 the few weeks remaining until the end of the year, especially in light of the \u201cprogress\u201d Grocery Outlet\n10 had made (or lack thereof) in resolving those disruptions and mitigating the impacts. Specifically,\n11 Defendants knew at the time this statement was made that: (1) Grocery Outlet had launched the\n12 Systems Transition without being adequately prepared and immediately faced widespread disruptions\n13 across critical business functions; (2) the Company had atypically poor visibility into its normal\n14 business reporting and tools that led to difficulty with forecasting and limited data visibility; (3) the\n15 disruptions from the Systems Transition were so rampant that they created a material weakness in the\n16 Company\u2019s internal control over financial reporting and deficiencies in other business controls; and\n17 (4) while Defendants claimed that the disruptions were to some extent \u201cexpected,\u201d they admitted that\n18 they had significantly underestimated the magnitude of the problems, which were still ongoing and\n19 unresolved when these assurances were made. This statement (along with other similar statements\n20 during the same call) gave investors the false impression that Defendants had a realistic grasp of the\n21 extent of the problems from implementing the Systems Transition and a reasonable basis for claiming\n22 the impacts would end by the end of the quarter when they made these statements, based on the\n23 disruptions and impacts the Company experienced in the third quarter, when in fact they did not.\n24 99. Defendant Bracher also explained during the Q3\u201923 Earnings Call that \u201cat the outset\u201d\n25 of the Systems Transition, Grocery Outlet decided to provide commission support to its operators\n26 during the Systems Transition. As Bracher described, the Company\u2019s \u201cinventory visibility and\n27 ordering challenges...impacted the operators\u2019 ability to manage the flow of product into their stores.\u201d\n28 When the Company experienced problems from the Systems Transition with, it became \u201cvery\n\n - 28 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 29 of 47\n\n\n\n\n 1 difficult\u201d for operators to \u201cpull[] product in through the order guide.\u201d Accordingly, when they first\n 2 implemented the Systems Transition, Grocery Outlet decided to provide its operators with\n 3 commission support \u201cto help minimize the impact of this transition on their commission and income.\u201d\n 4 100. As FE1 explained, paying commissions to IOs was typically a \u201cstandard process\u201d by\n 5 which the IOs received about half of Grocery Outlet\u2019s overall gross profits. Determining the amount\n 6 of commission to pay to IOs included taking a physical inventory count at the end of a period,\n 7 determining the overall COGS for the period, and then making adjustments following a period close\n 8 based on final reconciliations of these results, after which additional commissions were paid based\n 9 on those adjustments. However, during the rocky implementation of the Systems Transition, Grocery\n10 Outlet\u2019s margin rates were \u201call over the place.\u201d So, to determine COGS during the periods impacted\n11 by the Systems Transition disruptions, the Company looked at historical margins and paid the\n12 commissions based on those historical margins, even if they were higher than the margins as derived\n13 imperfectly from the new SAP systems outputs.\n14 101. The Company\u2019s decision to provide commission support to its IOs \u201cat the outset\u201d of\n15 the Systems Transition further shows that Defendants were aware of, or recklessly disregarded, the\n16 material risk that their premature launch of the Systems Transition was likely to cause significant\n17 disruptions for its operators that would materially impact the Company\u2019s margins (upon which the\n18 IOs\u2019 commissions were based).\n19 102. On this news, the price of Grocery Outlet stock fell $1.31, or 4.6%, to close at $27.15\n20 on November 8, 2023, on higher than usual trading volume.\n21 103. However, while the Q3\u201923 Earnings Call partially revealed the impact of disruptions\n22 during the third and fourth quarters of 2023, and Defendants admitted those problems were expected\n23 prior to implementing the Systems Transition, it did not fully reveal the impacts of the undisclosed\n24 risks, which would continue to plague the Company into the first half of 2024. This was especially\n25 true in light of Defendants\u2019 misleading comments assuring analysts that the impacts of disruptions\n26 from the System Transition would be resolved by the end of 2023.\n27 104. On December 11, 2023, after the market closed, Grocery Outlet issued a press release\n28 reporting that Defendant Bracher \u201chas informed the Company of his intention to step down as Chief\n\n - 29 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 30 of 47\n\n\n\n\n 1 Financial Officer, effective as of March 1, 2024.\u201d The market understood Bracher\u2019s departure to be\n 2 related to the previous partial disclosure of the problems resulting from the Systems Transition. Thus,\n 3 this announcement further partially revealed to the market the extent of the impact from the\n 4 Company\u2019s decision to \u201cgo live\u201d with the Systems Transition despite being inadequately prepared to\n 5 do so.\n 6 105. For example, an analyst report by Guggenheim Partners on December 12, 2023 noted\n 7 that Defendant Bracher\u2019s \u201csurprising\u201d departure from Grocery Outlet \u201cwas not anticipated, and is ill-\n 8 timed in light of recent, uncharacteristic ERP transition issues.\u201d As the report explained: \u201cInvestors\n 9 may rightly be concerned by this development since ... most importantly, it occurs in the immediate\n10 aftermath of an uncharacteristic ERP-driven 3Q miss and guide-down.\u201d\n11 106. On this news, the price of Grocery Outlet stock fell $1.83, or 6.2%, to close at $27.91\n12 on December 12, 2023, on higher than usual trading volume.\n13 107. On February 27, 2024, after the market closed, Defendants issued a press release\n14 entitled \u201cGrocery Outlet Holding Corp. Announces Fourth Quarter and Fiscal 2023 Financial\n15 Results.\u201d The Company announced that for the fourth quarter of 2023, the Company\u2019s comparable\n16 store sales for the quarter increased by 2.7% year-over-year, its gross margin for the quarter was\n17 unchanged at 30.2%, and its Adjusted EBITDA decreased 6.3% to $50.9 million.\n18 108. The release also revealed that the Systems Transition issues continued to plague the\n19 Company through the end of the fourth quarter of 2023:\n20 As previously disclosed, the Company experienced disruptions as a\n result of the implementation of new technological platforms in late\n21 August 2023. Such disruptions are estimated to have negatively\n22 impacted store sales by approximately 200 basis points and gross\n margin by 130 basis points in the fourth quarter.\n23\n 109. Later that same day, the Company held an earnings conference call for its fourth\n24\n quarter and full-year 2023 results (\u201cQ4\u201923 Earnings Call\u201d). During the Q4\u201923 Earnings Call,\n25\n Defendants provided further updates on the Company\u2019s progress in resolving disruptions and other\n26\n consequences from the Systems Transition.\n27\n28\n\n - 30 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 31 of 47\n\n\n\n\n 1 110. Defendant Bracher explained that Grocery Outlet estimated that \u201cthe system transition\n 2 impacted comp sales by approximately 200 basis points for the quarter.\u201d Additionally, he noted that\n 3 \u201cthe margin impact of our system integration ... was approximately 130 basis points in the quarter.\u201d\n 4 111. However, Defendants also revealed that the impacts of implementing the Systems\n 5 Transition were persisting into the first quarter of 2024 \u2013 they were not resolved in the fourth quarter\n 6 of 2023 as Defendants previously represented. As Defendant Sheedy explained during the call, \u201cdata\n 7 integration efforts are taking longer than expected and are still impacting our business results. The\n 8 largest remaining issues are related to warehouse product expiry data and store level reporting for\n 9 IOs.\u201d\n10 112. With respect to the Company\u2019s guidance for the first quarter of 2024, Bracher revealed\n11 that the Company projected \u201ccomp[arable store sales] growth in the first quarter to be approximately\n12 2%, which includes an estimated 50-basis-point impact from the system transition,\u201d and \u201cgross\n13 margin for the quarter of approximately 30.4%, which includes an estimated 100-basis-point impact\n14 from the system transition.\u201d\n15 113. This surprised the market, and during the conference call, analysts pressed Defendants\n16 on the total impact of the Systems Transition and when the Company expected to finally be clear of\n17 the disruptions and impacts on the Company\u2019s financial results. Defendant Bracher shared that the\n18 bottom-line EBITDA impact from the Systems Transition was approximately $20 million in the\n19 fourth quarter of 2023, and it was projected to be $14 million in the first quarter of 2024.\n20 [GUGGENHEIM PARTNERS ANALYST:] Wanted to start with\n when do you think -- is it really the end of the first quarter when there\n21 is a complete normalization in how the IOs are using the systems and\n22 financial impact? Is that fair? And then, how do you think about when\n you try to forecast the recovery in the back half of the year because you\n23 lost over 200 basis points of comp and over 100 basis points of gross?\n I mean, it looks like there's some recovery, but certainly nowhere near\n24 a complete recovery.\n25 [DEFENDANT BRACHER:] So in total, think about the EBITDA\n impact from the technology transition and interruptions is impacting\n26\n EBITDA by $20 million in the fourth quarter, about half of that comes\n27 from the elective IO commission support that we provided to operators.\n\n28 The balance coming from combination of the impact of the top line and\n gross margin rate as we've disclosed. In the first quarter, those impacts\n - 31 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 32 of 47\n\n\n\n\n continued, but to a lesser degree. So that -- what had been a $20 million\n 1\n EBITDA impact in Q4, down to what we estimate and is implied in our\n 2 guidance of roughly $14 million impact to the first quarter. Again, half\n of that coming from elective IO commission and the balance from sales\n 3 and margin impact.\n 4\n 114. According to the fourth quarter earnings release the Company\u2019s EBITDA for the\n 5\n fourth quarter was approximately $43.2 million, which means that it would have been nearly 50%\n 6\n higher but for the disruptions from the Systems Transition.\n 7\n 115. Defendant Bracher also explained that the Company\u2019s first quarter guidance was based\n 8\n on the assumption that the Company would resolve the remaining issues with the Systems Transition\n 9\n and returned to normal operations, including terminating commission support, during the first quarter.\n10 Our current guidance assumes that we resolve the remaining issues in\n11 front of us and are back to steady state operations and conclude the\n elective commission support by the end of the first quarter.\n12\n 116. However, once again Sheedy assured analysts and investors that \u201c[w]e expect these\n13\n [data integration efforts, including issues related to warehouse product expiry data and store level\n14\n reporting for IOs] to be resolved soon, after which the P&L impact will be behind [us].\u201d\n15\n 117. This statement was misleading because Defendants knew they had no reasonable basis\n16\n to assure analysts and investors that the impacts of the Systems Transition would be resolved over\n17\n the four weeks remaining until the end of the quarter. Specifically, Defendants knew at the time this\n18\n statement was made that: (1) Grocery Outlet had launched the Systems Transition without being\n19\n adequately prepared and immediately faced widespread disruptions across critical business functions;\n20\n (2) the Company had atypically poor visibility into its normal business reporting and tools that led to\n21\n difficulty with forecasting and limited data visibility; (3) the disruptions from the Systems Transition\n22\n were so rampant that they created a material weakness in the Company\u2019s internal control over\n23\n financial reporting and deficiencies in other business controls; (4) over the preceding six months,\n24\n Defendants had repeatedly significantly underestimated the magnitude of the disruptions stemming\n25\n from the Systems Transition, how long it would take for Grocery Outlet to resolve those problems,\n26\n and how long the material financial impacts from those disruptions would persist.\n27\n28\n\n - 32 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 33 of 47\n\n\n\n\n 1 118. Moreover, when this statement was made Defendants knew that the Company had not\n 2 yet completed \u201ccatch-up invoice processing and final margin reconciliation at the end of the quarter.\u201d\n 3 As the Company\u2019s interim CFO later admitted in May 2024 when the Company revealed lingering\n 4 impacts from the Systems Transition had persisted into the second quarter:\n 5 ... store margins and IO commissions are determined when we take\n physical inventory counts in the store. ... And this residual cost that we\n 6 are talking about in the second quarter relates to certain elements of\n 7 margin and commission, which can only be calculated after a full\n inventory period has been completed. ... So this is what is reflected in\n 8 the 100 basis points lower margin that we talked about as residual cost\n in the second quarter. It also relates to, within our guidance for slightly\n 9 higher commission in SG&A for the commission that also will be paid\n10 in the second quarter.\n\n11 In other words, Defendants could not know that the \u201cP&L impact\u201d from the Systems Transition would\n12 be \u201cbehind [us]\u201d when they had not yet completed physical story inventory counts and the final\n13 margin reconciliation, upon which the IO commissions and the Company\u2019s second quarter margins\n14 and SG&A expenses would be based. Accordingly, Defendant Sheedy\u2019s statement once again gave\n15 investors the false impression that Defendants had a realistic grasp of the extent of the problems from\n16 implementing the Systems Transition and a reasonable basis for claiming the impacts would end by\n17 the end of the quarter when they made this statement, when in fact they did not.\n18 119. On this news, the price of Grocery Outlet stock fell $0.32, or 1.2%, to close at $26.15\n19 on February 28, 2024, on higher than usual trading volume.\n20 120. After the market closed on February 28, 2024, Grocery Outlet filed with the SEC on\n21 Form 10-K its Annual Report for the fiscal year ended December 30, 2023 (\u201c2023 10-K\u201d).\n22 121. The 2023 10-K contained the following statements about the Systems Transition,\n23 providing additional detail as to how the Systems Transition directly impacted the Company\u2019s\n24 operations:\n25 We rely on our distribution, transportation and technology network and\n systems to provide goods to our distribution centers and stores in a\n26 timely and cost-effective manner. Our stores are highly dependent on\n27 the successful operations of our distribution, transportation and\n technology networks, as IOs use these systems to order multiple\n28 deliveries per week and many of our products have a limited shelf life\n\n - 33 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 34 of 47\n\n\n\n\n from the time of purchase, particularly opportunistic buys and fresh\n 1\n foods. Deliveries to our stores occur from our distribution centers or\n 2 directly from our suppliers. We use three primary leased distribution\n centers that we operate and five primary distribution centers operated\n 3 by third-parties. Any disruption, unanticipated or unusual expense or\n operational failure related to these processes and systems could affect\n 4\n store operations negatively. For example, during fiscal 2023 we\n 5 replaced components of our enterprise resource planning system,\n including our financial ledger, inventory management platform and\n 6 product data warehouse system. The implementation of these system\n 7 upgrades resulted in ordering and inventory disruptions beginning in\n late August 2023, which resulted in reduced net sales and gross margin.\n 8\n 122. Moreover, the 2023 10-K also revealed for the first time that implementing the\n 9\n Systems Transition before the Company was prepared had led to disruptions so rampant that they\n10\n resulted in a material weakness in the Company\u2019s internal control over financial reporting:\n11\n The Company's management conducted an assessment of the\n12 Company's internal control over financial reporting based on the\n framework established by the Committee of Sponsoring Organizations\n13\n of the Treadway Commission in Internal Control - Integrated\n14 Framework (2013). In connection with this assessment, the Company\u2019s\n management identified deficiencies in the design and operating\n15 effectiveness of controls in its internal control over financial reporting\n16 related to certain information technology general computer controls\n (\u201cITGC\u2019s\u201d). The replacement of components of our enterprise\n17 resource planning system in late August 2023 led to a significant\n increase in the volume of transactions across user access, program\n18 change management, and IT operations for which our existing\n19 controls were not designed to address. As a result, certain of the\n Company\u2019s related business controls that are dependent upon the\n20 affected ITGC\u2019s were also deemed ineffective. We did not identify any\n misstatements to the consolidated financial statements as of and for the\n21 year ended December 30, 2023 because of these control deficiencies.\n22 However, the pervasive impact of these control deficiencies to the\n Company\u2019s internal control over financial reporting created a\n23 reasonable possibility that a material misstatement to the\n consolidated financial statements would not be prevented or detected\n24 on a timely basis. Therefore, we concluded that the deficiencies\n25 represent a material weakness in our internal control over financial\n reporting and, as such, our internal control over financial reporting\n26 was not effective as of December 30, 2023.\n27 123. On this news, the price of Grocery Outlet stock fell another $0.36, or 1.4%, to close at\n28 $25.79 on February 29, 2024, on higher than usual trading volume.\n\n - 34 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 35 of 47\n\n\n\n\n 1 124. On May 7, 2024, after the market closed, Defendants issued a press release announcing\n 2 their financial results for the first quarter of 2024, revealing that challenges from the Systems\n 3 Transition had had a larger continuing impact on the Company\u2019s results during the first quarter than\n 4 had been disclosed. The press release provided additional detail on the impact of the Systems\n 5 Transition on sales and expenses during the first quarter:\n 6 \u2022 Gross margin decreased 180 basis points to 29.3%. As previously\n disclosed, the Company experienced disruptions as a result of the\n 7 implementation of new technology platforms in late August 2023.\n 8 Such disruptions are estimated to have negatively impacted gross\n margin by 210 basis points in the first quarter.\n 9\n \u2022 Selling, general and administrative expenses increased by 13.3% to\n10 $303.4 million, or 29.3% of net sales. This includes $12.4 million\n of commission support we elected to provide our operators in\n11 connection with our system upgrades.\n12\n 125. During the corresponding earnings conference call later that same day, Defendants\n13\n outlined the persistent impacts Grocery Outlet was still experiencing from the Systems Transition.\n14\n [DEFENDANT SHEEDY:] Our low first quarter margins were the\n15 result of both expected and unexpected impacts from our systems\n transition. We've made good progress since our last call, resolving\n16 known issues and have ended the IO commission support program as\n planned. However, our results were incrementally impacted by\n17\n unforeseen systems transition costs that surfaced at the end of the\n18 quarter. ...\n\n19 * * *\n First quarter gross margin of 29.3% was 110 basis points below our\n20 expectations and includes approximately 210 basis points of impact\n21 from our systems transition issues. In late August, we upgraded our\n product, inventory, financial and reporting platforms. This transition\n22 has disrupted our business operationally and financially over the past 8\n months as we discussed on our last 2 calls.\n23\n In February, there were 2 large remaining system issues impacting\n24 profit. One was related to warehouse product expiry data and the\n25 other related to store level reporting. We have since resolved both of\n these and the negative impact to first quarter gross margin came in\n26 as expected at about 100 basis points. We\u2019ve reduced warehouse\n shrink close to normal levels with better data visibility and accurate\n27 store-level reporting enabled us to end the commission support\n28 program in March.\n\n\n - 35 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 36 of 47\n\n\n\n\n 1 126. Lindsay Gray, the Company\u2019s interim CFO following the departure of Defendant\n 2 Bracher, added the following details about the Company\u2019s guidance for the second quarter of 2024,\n 3 and admitted for the first time that Defendants\u2019 ability to accurately forecast the Company\u2019s financial\n 4 prospects had been impacted by, and throughout the implementation of, the Systems Transition:\n 5 Forecasting has been difficult during the system transition as we\n have not had good visibility to our normal business reporting and\n 6 tools. Compounding this have been data integration issues and new\n 7 processes that we and our operators are adapting to within new\n applications. Our guidance takes [this] into consideration as we\n 8 complete final stages of our stabilization work.\n 9 * * *\n We expect gross margin for the second quarter of approximately\n10\n 30.0%, which includes an estimated 100 basis point impact from the\n11 systems transition. This is due to residual expense from our\n commission support program as we finish store physical inventory\n12 counts in the second quarter.\n13\n 127. The fact that, as Ms. Gray admitted, \u201c[f]orecasting has been difficult during the system\n14\n transition as we have not had good visibility to our normal business reporting and tools,\u201d but\n15\n Defendants never disclosed this difficulty or lack of visibility when providing Grocery Outlet\u2019s\n16\n quarterly guidance further supports an inference that Defendants acted with deliberate recklessness\n17\n when they provided misleading half-truths to investors during the Class Period regarding the ongoing\n18\n disruptions and financial impacts from the Systems Transition.\n19\n 128. In response to a question by a Craig Hallum analyst as to \u201cthe cumulative effect over\n20\n the course now of four quarters,\u201d Gray explained that \u201coverall, the impact that the systems transition\n21\n has had on us is about $65 million.\u201d\n22\n 129. In response to a follow-up question from a Morgan Stanley analyst \u201con the gross\n23\n margin and the systems issues\u201d and why they persisted into the second quarter, Defendant Sheedy\n24\n further explained that:\n25\n For the first quarter, this additional 110 basis point impact, we\n26 identified this on the back end of the quarter. It was quantified during\n catch-up invoice processing and margin reconciliation. So we had\n27 some delayed payment processes due to the new systems. But really\n the main cause was limited data visibility for how we manage and\n28\n forecast margin. It was a bigger issue in the first quarter than it was\n\n - 36 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 37 of 47\n\n\n\n\n in the fourth quarter because of the amount of time that we've been\n 1\n managing the business with limited data.\n 2\n 130. This news surprised the market once again and Grocery Outlet stock fell $5.02 per\n 3\n share, or 19.4%, to close at $20.88 on May 8, 2024, on extremely high volume.\n 4\n 131. A number of well-known analysts who had been following Grocery Outlet lowered\n 5\n their price targets in response to Grocery Outlet\u2019s May 7, 2024 disclosures. For example, Guggenheim\n 6\n Partners, while remaining \u201cneutral\u201d despite cutting estimates, highlighted that \u201c[t]he ERP-related\n 7\n operational/financial disruption, which has dominated the narrative over the past six months, reached\n 8\n a crescendo with the largest \u2018miss and guide-down\u2019 to date driving the shares ~15% lower after-\n 9\n hours.\u201d Speaking to Grocery Outlet\u2019s overall performance for the quarter and disappointing second\n10\n quarter guidance, the analyst further noted the following:\n11\n However, adjusted EBITDA missed by $14 million with margin\n12 declining a greater-than-we-modeled 270 basis points. Reported gross\n margin eroded by 182 basis points, a shortfall of more than 100 basis\n13 points which was attributed to a lack of visibility into margin\n14 dynamics. GO\u2019s unique, treasure hunt-oriented procurement model\n requires informed buying and pricing decisions and this was lacking,\n15 in our view.\n16 * * *\n\n17 The 2Q guide was even more surprising since we assumed that the\n transitory costs were behind us. Instead, ... management guided to gross\n18 and EBITDA margins of 30.0% and 5.4%, respectively, 150-200 basis\n points below our estimates.\n19\n20 132. Additionally, Telsey Advisory Group, while cutting their price target, summarized the\n\n21 issues surrounding the Systems Transition in detail, stating in pertinent part:\n22 In August 2023, Grocery Outlet started to upgrade its inventory,\n financial, and reporting systems, but the implementation has taken\n23 longer to execute, creating product and data visibility issues as well as\n operating challenges. In February 2024, the company finally completed\n24 the upgrade of its last two remaining systems \u2014warehouse product\n25 expiry data and store level reporting. However, execution challenges,\n physical inventory counting, and invoicing issues caused pressure on\n26 the gross margin. Furthermore, Grocery Outlet provided commission\n support to its independent operators (IOs) during this disruption, which\n27 further elevated expenses. Overall, the system transition issue created\n28 profit pressure of ~$65MM over the past year, with half of it being IO\n commission support[.]\n - 37 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 38 of 47\n\n\n\n\n 1 133. Similarly, Jefferies, while also cutting their price target, highlighted the impact\n 2 resulting from Systems Transition in the current quarter as follows:\n 3 GM came in at ~29.3%, below cons of ~30.4%, due to the new systems\n integration headwinds. The co. estimated the systems disruption\n 4 equated to a ~210bps drag on GM in Q1, or ~110bps higher than\n 5 mgmt\u2019s expectations. Looking ahead, GO expects the disruption to\n continue through Q2; however, noted that critical reporting and\n 6 visibility functions have been restored, and anticipate a reversion to a\n more normalized margin level in 2H.\n 7\n 8 134. Deutsche Bank also cut its price target and noted that in light of the repeated\n\n 9 disclosures of extended impacts from the Systems Transition, \u201cthe market will certainly question\n10 management's handle on the business given the lingering system integration challenges. ... patience\n11 will be required and we need to see improved execution moving forward.\u201d\n12 135. The careful and consistent attention that these analysts, among others, frequently paid\n\n13 to the impact of the Systems Transition on Grocery Outlet\u2019s sales, gross margins, and EBITDA shows\n14 that investors were acutely attuned to the impacted metrics and found the impact of the Systems\n15 Transition, as the concealed risks materialized, highly material to Grocery Outlet\u2019s stock price\n16 valuation.\n17 136. Then, on October 30, 2024, before the market opened, the Company filed with the\n\n18 SEC a Current Report on Form 8-K. This Current Report revealed that: \u201cAfter discussion with the\n19 Board of Directors of the Company (the \u201cBoard\u201d), on October 29, 2024, Robert J. Sheedy, Jr. agreed\n20 to step down as the Company\u2019s President and Chief Executive Officer and resign as a member of the\n21 Board, effective immediately.\u201d\n22 137. On this news, the price of Grocery Outlet stock fell $2.71 per share, or 16.3%, to close\n\n23 at $13.90 per share on October 30, 2024, on higher than usual trading volume. This stock price drop\n24 was also a result of Defendants\u2019 continued misleading statements and omissions concerning the\n25 effects of the Systems Transition during the Class Period.\n26 138. Ultimately, Sheedy was forced out because of the operational and financial challenges\n\n27 that the Systems Transition created during the first four quarters after it was implemented. Sheedy\n28 was held responsible because he was intimately aware that the Company was woefully unprepared to\n\n - 38 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 39 of 47\n\n\n\n\n 1 launch the Systems Transition in August 2023, and that there was a material and undisclosed\n 2 likelihood that prematurely implementing the Systems Transition would (and did) significantly\n 3 disrupt Grocery Outlet\u2019s business, operations, ability to make financial projections, and ultimately its\n 4 bottom line and margins.\n 5 139. On November 5, 2024, the Company held an earnings conference call for the third\n 6 quarter of 2024. During that call, Eric Lindberg, Grocery Outlet\u2019s interim CEO and Chairman of the\n 7 Company\u2019s board of directors confirmed that the board had asked Defendant Sheedy to resign due to\n 8 the problems the Company had encountered over the prior year with the Systems Transition. In\n 9 response to an analyst asking for \u201cmore color on RJ [Sheedy]\u2019s departure,\u201d Lindberg explained that:\n10 So let me start first with the CEO transition. You all know, this last\n year has been really difficult it\u2019s been an operational challenge year\n11 from the systems transition. We have not executed like we want like\n12 our expectations and like our history. And that's been super\n challenging. I\u2019d say because of the relationship that we've all enjoyed,\n13 working with RJ [Sheedy] for many, many years, we were patient. We\n felt like that was the right thing to do to be patient. And but I can tell\n14 you the same way that you all might be feeling about our performance\n15 we were feeling that internally as well. So, we finally got to a point\n after the last Board Meeting where, we sat down. We had a frank\n16 conversation and we had an agreement to move forward.\n17 CLASS ACTION ALLEGATIONS\n18 140. Plaintiff brings this action as a class action pursuant to Rules 23(a) and 23(b)(3) of the\n19 Federal Rule of Civil Procedure on behalf of himself and the Class.\n20 141. The members of the Class are so numerous that joinder of all members is\n21 impracticable. Millions of shares of the Company\u2019s common stock were traded publicly during the\n22 Class Period on the NASDAQ. While the exact number of Class members is unknown to Plaintiff at\n23 this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are\n24 hundreds or thousands of members in the proposed Class. Record owners and other members of the\n25 Class may be identified from records maintained by the Company or its transfer agent and may be\n26 notified of the pendency of this action by mail, using the form of notice similar to that customarily\n27 used in securities class actions.\n28\n\n - 39 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 40 of 47\n\n\n\n\n 1 142. Plaintiff\u2019s claims are typical of the claims of the members of the Class as all members\n 2 of the Class are similarly affected by Defendants\u2019 wrongful conduct in violation of federal law that is\n 3 complained of herein.\n 4 143. Plaintiff will fairly and adequately protect the interests of the members of the Class\n 5 and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no\n 6 interests antagonistic to or in conflict with those of the Class.\n 7 144. Common questions of law and fact exist as to all members of the Class and\n 8 predominate over any questions solely affecting individual members of the Class. Among the\n 9 questions of law and fact common to the Class are:\n10 (a) whether Defendants violated the federal securities laws as alleged herein;\n11 (b) whether, during the Class Period, Defendants made false or misleading statements of\n12 material fact to the investing public, or omitted material facts necessary to make the\n13 statements made, in light of the circumstances under which they were made, not\n14 misleading;\n15 (c) whether the Defendants caused the Company to issue false and misleading SEC filings\n16 and public statements during the Class Period;\n17 (d) whether Defendants acted negligently, knowingly, or recklessly in issuing, or causing\n18 the Company to issue, false and misleading SEC filings and public statements during\n19 the Class Period;\n20 (e) whether the price of the Company\u2019s common stock during the Class Period was\n21 artificially inflated because of Defendants\u2019 conduct complained of herein; and\n22 (f) whether the members of the Class have sustained damages and, if so, what is the proper\n23 measure of damages.\n24 145. Plaintiff will rely in part upon the presumption of reliance established by the fraud-on-\n25 the-market doctrine in that, among other things: (a) during the Class Period, Defendants made public\n26 statements of material fact that were false, misleading, or were rendered misleading because of\n27 Defendants\u2019 failure to disclose material facts necessary to prevent such statement from being\n28 misleading; (b) as a result of the false and misleading statements and omissions of material fact, the\n\n - 40 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 41 of 47\n\n\n\n\n 1 Company\u2019s common stock traded at artificially inflated prices during the Class Period; (c) Plaintiff\n 2 and other members of the Class purchased or otherwise acquired the Company\u2019s common stock\n 3 relying on the integrity of the market price of the Company\u2019s common stock and market information\n 4 relating to the Company, and have been damaged thereby.\n 5 146. During the Class Period, the artificial inflation of the Company\u2019s common stock was\n 6 caused by Defendants\u2019 material misrepresentations and omissions as described above, causing the\n 7 damages sustained by Plaintiff and the other members of the Class. Defendants\u2019 material\n 8 misrepresentations and omissions created an unrealistically positive assessment of the Company and\n 9 its business, operations, and prospects, causing the price of the Company\u2019s common stock to be\n10 artificially inflated at all relevant times, including when Plaintiff and other members of the Class\n11 purchased the stock. When the truth hidden by these misrepresentations and omissions was disclosed,\n12 that disclosure negatively affected the value of the Company\u2019s common stock, dissipating the\n13 artificial inflation and damaging Plaintiff and other members of the Class.\n14 147. The market for the Company\u2019s common stock was an efficient market at all times\n15 during the Class Period for the following reasons, among others:\n16 (a) Defendants made public misrepresentations or failed to disclose material facts during\n17 the Class Period;\n18 (b) As a regulated issuer, the Company filed periodic public reports with the SEC;\n19 (c) The Company regularly communicated with public investors by means of established\n20 market communication mechanisms, including through regular dissemination of\n21 Current Reports in their SEC filings;\n22 (d) The Company\u2019s shares were liquid and traded with moderate to heavy volume during\n23 the Class Period. On average, approximately 6.9 million shares of the Company\u2019s\n24 common stock, or roughly 7.0% of the Company\u2019s total shares outstanding, were\n25 traded weekly during the Class Period, permitting a very strong presumption that its\n26 shares traded on an efficient market;\n27\n28\n\n - 41 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 42 of 47\n\n\n\n\n 1 (e) During the Class Period, the Company\u2019s common stock met the requirements for\n 2 listing, and were listed and traded on the NASDAQ, a highly efficient and automated\n 3 market;\n 4 (f) The Company was covered by multiple securities analysts employed by brokerage\n 5 firms who wrote reports about the Company, which were distributed to customers,\n 6 made publicly available, and entered the public marketplace;\n 7 (g) The misrepresentations and omissions alleged would tend to induce a reasonable\n 8 investor to misjudge the value of the Company\u2019s securities; and\n 9 (h) Unexpected material news about the Company was rapidly reflected in and\n10 incorporated into the Company\u2019s securities prices during the Class Period.\n11 148. Based on the foregoing, the market for the Company\u2019s common stock promptly\n12 digested current information regarding the Company from all publicly available sources and reflected\n13 such information in the prices of the Company\u2019s common stock shares. Under these circumstances,\n14 all purchasers of the Company\u2019s common stock during the Class Period suffered similar injury\n15 through their purchase of the Company\u2019s common stock at artificially inflated prices, and thus are\n16 entitled to a presumption of reliance.\n17 149. Alternatively, Plaintiff and the Class are entitled to the presumption of reliance\n18 established by the Supreme Court in Affiliated Ute Citizens of the State of Utah v. United States, 406\n19 U.S. 128 (1972), because the Class\u2019s claims are in large part grounded on Defendants\u2019 omissions of\n20 material facts in their Class Period statements in violation of Defendants\u2019 duty to disclose such facts.\n21 Thus, positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts\n22 withheld were material in that a reasonable investor might have considered them important in making\n23 investment decisions. Here, the misleadingly omitted facts were material, so the presumption applies.\n24 150. A class action is superior to all other available methods for the fair and efficient\n25 adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the\n26 damages suffered by individual Class members may be relatively small, the expense and burden of\n27 individual litigation make it impossible for members of the Class to individually redress the wrongs\n28 done to them. There will be no difficulty in the management of this action as a class action.\n\n - 42 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 43 of 47\n\n\n\n\n 1 151. The prosecution of separate actions by individual members of the Class would create\n 2 a risk of inconsistent or varying adjudication with respect to individual members of the Class that\n 3 would establish incompatible standards of conduct for the party opposing the Class.\n 4 COUNT I\n Violation of Section 10(b) of the Exchange Act and Rule 10b-5\n 5\n Against All Defendants\n 6 152. Plaintiff repeats and realleges each and every allegation contained above as if fully set\n 7 forth herein.\n 8 153. This Count is asserted against the Company and the Individual Defendants and is\n 9 based upon Section 10(b) of the Exchange Act, 15 U.S.C. \u00a7 78j(b), and Rule 10b-5 promulgated\n10 thereunder by the SEC.\n11 154. During the Class Period, the Company and the Individual Defendants, individually\n12 and in concert, directly or indirectly, disseminated or approved the false statements specified above,\n13 which they knew or recklessly disregarded were false and/or misleading in that they contained\n14 misrepresentations and failed to disclose material facts necessary in order to make the statements\n15 made, in light of the circumstances under which they were made, not misleading.\n16 155. The Company and the Individual Defendants violated \u00a710(b) of the Exchange Act and\n17 Rule 10b-5 in that they: employed devices, schemes and artifices to defraud; made untrue statements\n18 of material facts or omitted to state material facts necessary in order to make the statements made, in\n19 light of the circumstances under which they were made, not misleading; or engaged in acts, practices\n20 and a course of business that operated as a fraud or deceit upon Plaintiff and others similarly situated\n21 in connection with their purchases of the Company\u2019s common stock during the Class Period.\n22 156. The Company and the Individual Defendants acted with scienter in that they knew or\n23 recklessly disregarded that the public documents and statements issued or disseminated in the name\n24 of the Company were materially false and/or misleading; knew or recklessly disregarded that such\n25 statements or documents would be issued or disseminated to the investing public; and knowingly and\n26 substantially participated, or acquiesced in the issuance or dissemination of such statements or\n27 documents as primary violations of the securities laws. These defendants, by virtue of their receipt of\n28 information reflecting the true facts about the Company, their control over, and/or receipt and/or\n\n - 43 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 44 of 47\n\n\n\n\n 1 modification of the Company\u2019s allegedly materially misleading statements, and/or their associations\n 2 with the Company which made them privy to confidential proprietary information concerning the\n 3 Company, participated in the fraudulent scheme alleged herein.\n 4 157. The Individual Defendants, the senior officers and/or directors of the Company, had\n 5 actual knowledge of the material omissions and/or the falsity of the material statements set forth\n 6 above, and intended to deceive Plaintiff and the other members of the Class, or, in the alternative,\n 7 acted with reckless disregard for the truth when they failed to ascertain and disclose the true facts in\n 8 the statements made by them or other personnel of the Company to members of the investing public,\n 9 including Plaintiff and the Class.\n10 158. As a result of the foregoing, the market prices of the Company\u2019s common stock were\n11 artificially inflated during the Class Period. In ignorance of the falsity of the Company\u2019s and the\n12 Individual Defendants\u2019 statements, Plaintiff and the other members of the Class relied on the\n13 statements described above and/or the integrity of the market price of the Company\u2019s common stock\n14 during the Class Period in purchasing the Company\u2019s common stock at prices that were artificially\n15 inflated as a result of the Company\u2019s and the Individual Defendants\u2019 false and/or misleading\n16 statements.\n17 159. Had Plaintiff and the other members of the Class been aware that the market price of\n18 the Company\u2019s common stock had been artificially inflated by the Company\u2019s and the Individual\n19 Defendants\u2019 false and/or misleading statements, they would not have purchased the Company\u2019s\n20 common stock at the artificially inflated prices that they did, or at all.\n21 160. As a result of the wrongful conduct alleged herein, Plaintiff and other members of the\n22 Class have suffered damages in an amount to be established at trial.\n23 161. By reason of the foregoing, the Company and the Individual Defendants have violated\n24 Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder and are liable to the Plaintiff\n25 and the other members of the Class for substantial damages which they suffered in connection with\n26 their purchases of the Company\u2019s common stock during the Class Period.\n27\n28\n\n - 44 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 45 of 47\n\n\n\n\n 1 COUNT II\n Violations of Section 20(a) of The Exchange Act\n 2\n Against The Individual Defendants\n 3 162. Plaintiff repeats and realleges each and every allegation contained above as if fully set\n 4 forth herein.\n 5 163. During the Class Period, the Individual Defendants participated in the operation and\n 6 management of the Company, and conducted and participated, directly and indirectly, in the conduct\n 7 of the Company\u2019s business affairs. Due in part to their senior positions, as well as the facts alleged\n 8 above, they knew the adverse non-public information regarding the Company\u2019s business practices.\n 9 164. As officers and/or directors of a publicly owned company, the Individual Defendants\n10 had a duty to disseminate accurate and truthful information with respect to the Company\u2019s financial\n11 condition and results of operations, and to correct promptly any public statements issued by the\n12 Company which had become materially false or misleading.\n13 165. Due in part to their positions of control and authority as senior officers, as well as the\n14 facts alleged above, the Individual Defendants had the power, which they exercised, to direct the\n15 actions of the Company as alleged herein and control the contents of the various public statements\n16 which the Company disseminated in the marketplace during the Class Period. Throughout the Class\n17 Period, the Individual Defendants exercised their power and authority to cause the Company to\n18 engage in the wrongful acts complained of herein. The Individual Defendants therefore, were\n19 \u201ccontrolling persons\u201d of the Company within the meaning of Section 20(a) of the Exchange Act. In\n20 this capacity, they participated in the unlawful conduct alleged which artificially inflated the market\n21 price of the Company\u2019s common stock.\n22 166. Each of the Individual Defendants exercised control over the general operations of the\n23 Company and possessed the power to control the specific activities which comprise the primary\n24 violations about which Plaintiff and the other members of the Class complain.\n25 167. By reason of the above conduct, the Individual Defendants are liable pursuant to\n26 Section 20(a) of the Exchange Act for the violations committed by the Company.\n27\n28\n\n - 45 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 46 of 47\n\n\n\n\n 1 PRAYER FOR RELIEF\n 2 WHEREFORE, Plaintiff, on behalf of himself and the Class, prays for relief and judgment as\n 3 follows:\n 4 A. Determining that this action may be maintained as a class action under Rule 23 of the\n 5 Federal Rules of Civil Procedure, designating Plaintiff as class representative and Plaintiff\u2019s\n 6 counsel and class counsel;\n 7 B. Awarding damages in favor of Plaintiff and the other Class members against all\n 8 Defendants, jointly and severally, for all damages sustained as a result of Defendants\u2019\n 9 wrongdoing, in an amount to be proven at trial, including interest thereon;\n10 C. Awarding Plaintiff and the Class prejudgment and post-judgment interest and their\n11 reasonable costs and expenses incurred in prosecuting this action, including reasonable\n12 attorneys\u2019 fees and expert fees; and\n13 D. Awarding such other and further relief as this Court may deem just and proper.\n14 JURY TRIAL DEMAND\n15 Plaintiff hereby demands a trial by jury.\n16\n Date: August 19, 2025 THE ROSEN LAW FIRM, P.A.\n17\n By: /s/Joshua Baker\n18\n Laurence M. Rosen, Esq. (SBN 219683)\n19 355 S. Grand Avenue, Suite 2450\n Los Angeles, CA 90071\n20 Telephone: (213) 785-2610\n Facsimile: (213) 226-4684\n21\n Email: lrosen@rosenlegal.com\n22\n Jonathan Stern (pro hac vice)\n23 Josh Baker (pro hac vice)\n24 275 Madison Avenue, 40th Floor\n New York, NY 10016\n25 Telephone: (212) 686-1060\n Facsimile: (212) 202-3827\n26 Email: jstern@rosenlegal.com\n27 Email: jbaker@rosenlegal.com\n\n28 Lead Counsel for Lead Plaintiff and the Class\n\n - 46 -\n Amended Complaint\n\f Case 4:25-cv-00957-JST Document 38 Filed 08/19/25 Page 47 of 47\n\n\n\n\n 1\n THE SCHALL LAW FIRM\n 2 Brian Schall\n 2049 Century Park East, Suite 2460\n 3 Los Angeles, CA 90067\n Telephone: (310) 301-3335\n 4\n brian@schallfirm.com\n 5\n Additional Counsel for Lead Plaintiff\n 6\n 7\n 8\n 9\n10\n11\n12\n13\n14\n15\n16\n17\n18\n19\n20\n21\n22\n23\n24\n25\n26\n27\n28\n\n - 47 -\n Amended Complaint\n\f","ocr_status":2,"date_upload":"2025-12-25T19:20:49.379294-08:00","document_number":"38","attachment_number":null,"pacer_doc_id":"035026099782","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Amended Complaint","acms_document_guid":""}],"date_created":"2025-08-19T20:02:41.211086-07:00","date_modified":"2025-12-30T21:29:24.458589-08:00","date_filed":"2025-08-19","time_filed":"19:42:38","entry_number":38,"recap_sequence_number":"2025-08-19.001","pacer_sequence_number":125,"description":"AMENDED COMPLAINT against Charles C. 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Tigar granting 36 Motion for Pro Hac Vice as to Joshua E. Baker. 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(Attachments: # 1 Certificate of Good Standing)(Baker, Joshua) (Filed on 8/6/2025) (Entered: 08/06/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/432975218/","id":432975218,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/447316210/","id":447316210,"tags":[],"absolute_url":"/docket/69592783/35/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-07-29T10:02:53.329716-07:00","date_modified":"2025-12-30T21:29:24.293450-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"35","attachment_number":null,"pacer_doc_id":"035026015377","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Order Relating Case","acms_document_guid":""}],"date_created":"2025-07-29T10:02:53.314347-07:00","date_modified":"2025-12-30T21:29:24.272499-08:00","date_filed":"2025-07-29","time_filed":"09:41:15","entry_number":35,"recap_sequence_number":"2025-07-29.001","pacer_sequence_number":118,"description":"RELATED CASE ORDER. Signed by Judge Jon S. Tigar on 07/29/2025. Case No. 25-cv-957-JST is related to Case No. 25-cv-3697-LB. (dms, COURT STAFF) (Filed on 7/29/2025) (Entered: 07/29/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/431451752/","id":431451752,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/445758181/","id":445758181,"tags":[],"absolute_url":"/docket/69592783/34/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-07-15T10:56:49.535180-07:00","date_modified":"2025-12-30T21:29:24.248900-08:00","sha1":"5859d8f8fe12fd401ef0c5fc79152504f8f1b293","page_count":1,"file_size":125796,"filepath_local":"recap/gov.uscourts.cand.443500/gov.uscourts.cand.443500.34.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.cand.443500/gov.uscourts.cand.443500.34.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 4:25-cv-00957-JST Document 34 Filed 07/15/25 Page 1 of 1\n\n\n\n\n 1\n\n 2\n\n 3\n\n 4\n\n 5\n\n 6\n\n 7\n\n 8 UNITED STATES DISTRICT COURT\n\n 9 NORTHERN DISTRICT OF CALIFORNIA\n\n 10 San Francisco Division\n\n 11 KEITH CONNERS,\n Case No. 25-cv-03697-LB\n 12 Plaintiff,\nNorthern District of California\n United States District Court\n\n\n\n\n 13 v. REFERRAL FOR PURPOSE OF\n DETERMINING RELATIONSHIP\n 14 ROBERT JOSEPH SHEEDY, et al.,\n 15 Defendants.\n\n 16\n\n 17 Pursuant to Civil Local Rule 3-12(c), the court refers the above-titled case to United States\n\n 18 District Judge Jon S. Tigar, to consider whether the case is related to case number 4:25-cv-00957-\n\n 19 JST Liberato v. Grocery Outlet Holding Corp. et al.\n\n 20\n\n 21 IT IS SO ORDERED.\n\n 22 Dated: July 15, 2025\n\n 23 ______________________________________\n LAUREL BEELER\n 24 United States Magistrate Judge\n 25\n\n 26\n\n 27\n\n 28\n\n ORDER \u2014 No. 25-cv-03697-LB\n\f","ocr_status":2,"date_upload":"2025-07-16T11:14:10.001452-07:00","document_number":"34","attachment_number":null,"pacer_doc_id":"035025963497","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"Judicial Referral for Purpose of Determining Relationship of Cases","acms_document_guid":""}],"date_created":"2025-07-15T10:56:49.516709-07:00","date_modified":"2025-12-30T21:29:24.226913-08:00","date_filed":"2025-07-15","time_filed":"09:30:15","entry_number":34,"recap_sequence_number":"2025-07-15.001","pacer_sequence_number":116,"description":"Judicial Referral for Purpose of Determining Relationship of Cases re 4:25-cv-00957-JST and 3:25-cv-03697-LB. Signed by Judge Laurel Beeler on 07/15/2025. 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Tigar granting 32 Stipulation. Amended Complaint due by 8/19/2025. Motion to Dismiss due by 10/21/2025. Opposition due by 12/23/2025. Reply due by 1/30/2026. (dms, COURT STAFF) (Filed on 7/11/2025) (Entered: 07/11/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/431054335/","id":431054335,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/445350713/","id":445350713,"tags":[],"absolute_url":"/docket/69592783/32/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-07-10T15:03:29.708074-07:00","date_modified":"2025-12-30T21:29:24.147063-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"32","attachment_number":null,"pacer_doc_id":"035025948651","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Stipulation and Proposed Order","acms_document_guid":""}],"date_created":"2025-07-10T15:03:29.693548-07:00","date_modified":"2025-12-30T21:29:24.125091-08:00","date_filed":"2025-07-10","time_filed":"14:41:37","entry_number":32,"recap_sequence_number":"2025-07-10.001","pacer_sequence_number":112,"description":"STIPULATION WITH PROPOSED ORDER to Modify Schedule filed by Casey Cavanaugh. (Stern, Jonathan) (Filed on 7/10/2025) (Entered: 07/10/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/429750567/","id":429750567,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69592783/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/444012528/","id":444012528,"tags":[],"absolute_url":"/docket/69592783/28/in-re-grocery-outlet-holding-corp-securities-litigation/","date_created":"2025-06-26T22:23:16.780419-07:00","date_modified":"2025-12-30T21:29:23.926255-08:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"28","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-06-26T22:23:16.769205-07:00","date_modified":"2025-12-30T21:29:23.905173-08:00","date_filed":"2025-06-02","time_filed":null,"entry_number":28,"recap_sequence_number":"2025-06-02.002","pacer_sequence_number":null,"description":"CLERK'S NOTICE VACATING MOTION HEARING. Before the Court is 18 MOTION to Consolidate Cases, MOTION to Appoint Lead Plaintiff and Lead Counsel filed by Casey Cavanaugh. Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds the matter suitable for disposition without oral argument. The hearing on this matter currently scheduled for June 5, 2025 at 2:00 PM is hereby VACATED. (This is a text-only entry generated by the court. There is no document associated with this entry.) (dms, COURT STAFF) (Filed on 6/2/2025) (Entered: 06/02/2025)","tags":[]}],"entries_total":"https://www.courtlistener.com/api/rest/v4/docket-entries/?count=on&docket=69592783&page_size=40"}