Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 1 of 33 Page ID #:2118 1 Laurence M. Rosen, Esq. (SBN 219683) 2 THE ROSEN LAW FIRM, P.A. 3 Email: lrosen@rosenlegal.com 355 South Grand Avenue, Suite 2450 4 Los Angeles, CA 90071 5 Telephone: (213) 785-2610 6 Counsel for Lead Plaintiff and the Class 7 8 [Additional Counsel on Signature Page] 9 UNITED STATES DISTRICT COURT 10 CENTRAL DISTRICT OF CALIFORNIA 11 TRACY JOHNSON, Individually and On Case No: 2:25-cv-06869-SVW-PVC 12 Behalf of All Others Similarly Situated, 13 CLASS ACTION Plaintiff, 14 PLAINTIFFS’ MEMORANDUM 15 v. OF LAW IN OPPOSITION TO DEFENDANTS’ MOTION TO 16 SABLE OFFSHORE CORP., JAMES C. DISMISS SECOND AMENDED 17 FLORES, and GREGORY D. CLASS ACTION COMPLAINT PATRINELY, 18 JUDGE: Hon. Stephen V. Wilson 19 Defendants. DATE: February 9, 2026 TIME: 1:30 p.m. 20 21 22 23 24 25 26 27 28 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 2 of 33 Page ID #:2119 1 TABLE OF CONTENTS 2 I. INTRODUCTION..............................................................................................................1 3 II. FACTUAL BACKGROUND ............................................................................................1 4 A. Sable’s Business......................................................................................................1 5 B. Sable’s Immense Regulatory Hurdles ..................................................................2 6 III. ARGUMENT ......................................................................................................................3 7 A. The SAC Adequately Pleads That Defendants Made Material 8 Misrepresentations .................................................................................................3 9 1. The May 19 Press Release and May 22 Prospectus Misled 10 Investors ......................................................................................................4 11 2. Defendants Repeatedly Misled Investors About Sable’s Repair 12 Work and Its Permits to Conduct Such Work ........................................8 13 3. Defendants Misled Investors By Downplaying the Impact of 14 Sable’s Legal and Regulatory Problems ................................................10 4. Defendants Misled Investors About Hunterbrook................................12 15 B. Plaintiffs Adequately Allege Scienter .................................................................14 16 1. Core Operations Establishes Strong Inference of Scienter ..................14 17 2. Defendants Knew Or Had Access To Contrary Information ..............16 18 3. Defendants Had Motive and Opportunity to Commit Fraud ..............17 19 a. Defendants Inflated Stock Price Before Secondary 20 Offerings .......................................................................................17 21 4. The Inference of Scienter Is At Least As Compelling as 22 Defendants’ Suggested Inference............................................................19 23 C. Plaintiffs Adequately Allege Loss Causation.....................................................21 24 D. Plaintiffs Adequately Allege Control Person Liability .....................................24 25 IV. CONCLUSION ................................................................................................................24 26 27 28 -i- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 3 of 33 Page ID #:2120 1 TABLE OF AUTHORITIES Page(s) 2 3 Cases 4 AMI - Gov't Emps. Provident Fund Mgmt. Co. Ltd. v. Alphabet Inc., 2025 WL 899959 (N.D. Cal. Mar. 24, 2025) ........................................................ 15 5 6 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................................ 3 7 8 Axonic Cap. LLC v. Gateway One Lending & Fin., 2019 WL 4138024 (C.D. Cal. May 22, 2019)....................................................... 20 9 10 Azar v. Yelp, Inc., 11 2018 WL 6182756 (N.D. Cal. Nov. 27, 2018) ...................................................... 16 12 Berson v. Applied Signal Tech., Inc., 13 527 F.3d 982 (9th Cir. 2008) ....................................................................... 7, 16, 17 14 Blake v. Canoo Inc., 15 2025 WL 2992263 (C.D. Cal. Oct. 22, 2025) ................................................. 15, 16 16 Dura Pharm., Inc. v. Broudo, 17 544 U.S. 336 (2005) .......................................................................................... 4, 22 18 Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc., 19 63 F.4th 747 (9th Cir. 2023) ............................................................................ 10, 12 20 Glazer Cap. Mgmt., LP v. Magistri, 21 549 F.3d 736 (9th Cir. 2008) ................................................................................... 9 22 Gompper v. VISX, Inc., 23 298 F.3d 893 (9th Cir. 2002) ................................................................................... 8 24 In re Amgen Sec. Litig., 25 2014 WL 12585809 (C.D. Cal. Aug. 4, 2014) ...................................................... 22 26 In re BofI Holding, Inc. Sec. Litig., 27 977 F.3d 781 (9th Cir. 2020) ........................................................................... 22, 23 28 - ii - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 4 of 33 Page ID #:2121 1 In re BofI Holding, Inc. Sec. Litig., 2017 WL 2257980 (S.D. Cal. May 23, 2017) ....................................................... 25 2 3 In re Convergent Techs. Sec. Litig., 948 F.2d 507 (9th Cir. 1991) ................................................................................... 6 4 5 In re Daou Sys., Inc., 411 F.3d 1015 (9th Cir. 2005) ............................................................................... 14 6 7 In re Dermtech, Inc. Sec. Litig., 2025 WL 1618193 (S.D. Cal. June 5, 2025) ........................................................... 6 8 9 In re Genius Brands Int'l, Inc. Sec. Litig., 97 F.4th 1171 (9th Cir. 2024) ................................................................................ 24 10 11 In re Gilead Scis. Sec. Litig., 536 F.3d 1049 (9th Cir. 2008) ........................................................................... 3, 22 12 13 In re Montage Tech. Grp. Ltd. Sec. Litig., 78 F. Supp. 3d 1215 (N.D. Cal. 2015)................................................................... 16 14 15 In re PG&E Corp. Sec. Litig., 2025 WL 2781745 (N.D. Cal. Sept. 30, 2025)................................................ 10, 16 16 17 In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869 (9th Cir. 2012) ................................................................................. 19 18 19 In re Semtech Corp., 2025 WL 2884810 (C.D. Cal. Oct. 7, 2025) ......................................................... 18 20 21 In re VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 694 (9th Cir. 2012) ........................................................................... 15, 20 22 23 In re WageWorks, Inc., Sec. Litig., 2020 WL 2896547 (N.D. Cal. June 1, 2020) ........................................................ 24 24 25 Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988 (9th Cir. 2018) ................................................................................... 3 26 27 Lambert v. Baker Tilly Hong Kong Ltd., 2016 WL 6272465 (C.D. Cal. May 23, 2016)....................................................... 22 28 - iii - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 5 of 33 Page ID #:2122 1 Lloyd v. CVB Fin. Corp., 811 F.3d 1200 (9th Cir. 2016) ............................................................................... 22 2 3 Lopez v. Smith, 203 F.3d 1122 (9th Cir. 2000) ............................................................................... 25 4 5 Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) .................................................................................................. 4 6 7 New Mexico State Inv. Council v. Ernst & Young LLP, 641 F.3d 1089 (9th Cir. 2011) ............................................................................... 20 8 9 Nguyen v. Radient Pharms. Corp., 2011 WL 13141630 (C.D. Cal. Oct. 26, 2011) ..................................................... 19 10 11 Nursing Home Pension Fund, Loc. 144 v. Oracle Corp., 380 F.3d 1226 (9th Cir. 2004) ............................................................................... 17 12 13 Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175 (2015) .................................................................................... 4, 10, 14 14 15 Osher v. JNI Corp., 183 F. App’x 604 (9th Cir. 2006) .......................................................................... 25 16 17 Prodanova v. H.C. Wainwright & Co., LLC, 993 F.3d 1097 (9th Cir. 2021) ............................................................................... 15 18 19 Reese v. Malone, 747 F.3d 557 (9th Cir. 2014) ............................................................................. 9, 17 20 21 Roberti v. OSI Sys., Inc., 2015 WL 1985562 (C.D. Cal. Feb. 27, 2015) ....................................................... 17 22 23 S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776 (9th Cir. 2008) ................................................................................. 20 24 25 S.E.C. v. Platforms Wireless Int’l Corp., 559 F. Supp. 2d 1091 (S.D. Cal. 2008) ................................................................. 17 26 27 Schueneman v. Arena Pharms., Inc., 840 F.3d 698 (9th Cir. 2016) ................................................................................. 14 28 - iv - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 6 of 33 Page ID #:2123 1 Sneed v. Talphera, Inc., 147 F.4th 1123 (9th Cir. 2025) ................................................................................ 7 2 3 Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) ................................................................................. 7 4 5 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) .................................................................................... 3, 14, 20 6 7 Thant v. Rain Oncology Inc., 2025 WL 588994 (N.D. Cal. Feb. 24, 2025) ....................................................... 7, 8 8 9 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) ................................................................................. 4 10 11 Webb v. Solarcity Corp., 884 F.3d 844 (9th Cir. 2018) ................................................................................. 18 12 Statutes 13 14 15 U.S.C. § 78u-4(b)(1)(B) ......................................................................................... 4 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -v- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 7 of 33 Page ID #:2124 1 I. INTRODUCTION 2 Defendants Sable Offshore Corp. (“Sable” or the “Company”), CEO James 3 Flores, and CFO Gregory Patrinely misled investors throughout the Class Period 4 (May 19, 2025 to November 4, 2025) about Sable’s progress in restarting commercial 5 oil production off the coast of Santa Barbara ten years after a disastrous oil spill. 6 Defendants began the Class Period by creating the false impression that it restarted 7 oil production and would soon begin selling oil, but it was just a ruse to inflate Sable’s 8 stock price for a secondary offering three days later. Over the following five months, 9 Defendants continued to insist that oil sales were just around the corner, state and 10 local regulators could be safely ignored, Sable had completed necessary repairs and 11 obtained necessary permits, and adverse legal decisions would have no effect on the 12 resumption of oil sales. 13 Through a series of corrective disclosures, investors learned the truth: Sable 14 had not finished its repairs, had been violating state laws while ignoring regulators, 15 and the adverse court decisions precluded oil sales. To top it off, CEO Flores told a 16 select group of investors that the Company needed to raise hundreds of millions of 17 dollars by the end of the year, the Company falsely claimed a leaked recording of the 18 call was fake, and Defendants finally came clean with another equity raise. 19 Plaintiffs adequately allege each element of securities fraud, and the Court 20 should deny Defendants’ Motion (ECF 81, the “Motion”). 21 II. FACTUAL BACKGROUND 22 A. Sable’s Business 23 On May 19, 2015, an underground oil pipeline in Santa Barbara County 24 ruptured, spilling over 120,000 gallons of crude oil. ¶18.1 The oil spill was 25 California’s worst since the 1960s. After ExxonMobil spent nearly a decade trying to 26 27 1 Unless otherwise stated, all paragraph (“¶”) references are to Plaintiffs’ Second 28 Amended Class Action Complaint for Violation of the Federal Securities Laws (“SAC”), and all internal citations and quotations are omitted. -1- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 8 of 33 Page ID #:2125 1 obtain the permits to restart production, it sold the offshore oil platforms and the 2 onshore processing facility and onshore and offshore pipelines (the “SYU Assets”) 3 to Sable. ¶¶19-23. Sable borrowed the vast majority of the purchase price from 4 Exxon, and Exxon could retake ownership if Sable failed to restart production by 5 2026. ¶¶24-25. 6 B. Sable’s Immense Regulatory Hurdles 7 Sable faced significant operational and federal, state, and local regulatory 8 hurdles before it could restart oil production. 9 In February 2025, the Santa Barbara County Board of Supervisors (“County 10 Board”) voted 2-2 to deny the transfer of pipeline operation permits from Exxon to 11 Sable. ¶¶28-29. Sable sued in federal court, and the Board eventually denied the 12 transfer again in November 2025. ¶¶30-32. 13 The California Coastal Commission issued a Notices of Violation against 14 Sable in September 2024 and February 2025, finding that Sable was engaging in 15 construction activities without a permit in violation of the California Coastal Act and 16 Santa Barbara County’s Local Coastal Program. ¶¶33-34. After being ignored, the 17 Coastal Commission issued a cease a desist order and eventually successfully sued to 18 enforce the order. ¶¶35-40. 19 Sable also required approval from the California Office of State Fire Marshal 20 before restarting use of the onshore pipelines. ¶41. An April 2025 lawsuit by 21 environmentalists led to an injunction prohibiting Sable from restarting use of the 22 onshore pipelines. ¶¶44-47. In October 2025, the Fire Marshal found that Sable had 23 yet to complete the required repairs for restart. ¶49. 24 On October 3, 2025, the California Regional Water Quality Control Board (the 25 “Water Board”) filed a civil complaint against Sable alleging “numerous violations 26 of its obligation to notify the Regional Water Board of proposed waste discharges 27 and obtain the appropriate regulatory requirements, thereby preventing the Regional 28 -2- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 9 of 33 Page ID #:2126 1 Water Board from assuring best management practices are employed to avoid, 2 minimize and mitigate impacts to water quality.” ¶¶51-55. 3 III. ARGUMENT 4 Courts assess Rule 12(b)(6) motions by considering the complaint 2 in its 5 entirety, “accept[ing] all factual allegations . . . as true” and construing them in the 6 light most favorable to plaintiff. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 7 U.S. 308, 322 (2007). A complaint should not be dismissed if it contains a “sufficient 8 factual matter [that], accepted as true, ‘state[s] a claim to relief that is plausible on its 9 face.’” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Courts must be mindful that 10 “a district court ruling on a motion to dismiss is not sitting as a trier of fact” and “[a] 11 well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof 12 of those facts is improbable, and that a recovery is very remote and unlikely.” In re 13 Gilead Scis. Sec. Litig., 536 F.3d 1049, 1057 (9th Cir. 2008). 14 A plaintiff asserting claims asserted under Section 10(b) of the Securities 15 Exchange Act must plead six elements: a misrepresentation or omission of material 16 fact, scienter, a connection with the purchase of sale of a security, reliance, economic 17 loss, and loss causation. Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341–42 (2005). 18 Defendants challenge only falsity, scienter, and loss causation. 19 A. The SAC Adequately Pleads That Defendants Made Material Misrepresentations 20 To plead falsity under the PSLRA, a plaintiff must “specify each statement [or 21 omission] alleged to have been misleading [and] the reason or reasons why the 22 statement [or omission] is misleading.” 15 U.S.C. § 78u-4(b)(1)(B). The allegations 23 24 Defendants ask that the Court take judicial notice of certain documents. ECF 82. To 2 the extent the Court takes notice of these documents, it may only take notice of the 25 fact that statements in those documents were made, and any attempt by Defendants 26 to use these exhibits to defeat Plaintiffs’ adequately pled claims is improper and highly discouraged by the Ninth Circuit. See Khoja v. Orexigen Therapeutics, Inc., 27 899 F.3d 988, 998 (9th Cir. 2018) (recognizing a “concerning pattern in securities 28 cases” by defendants to improperly exploit judicial notice “to defeat what would otherwise constitute adequately stated claims at the pleading stage”). -3- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 10 of 33 Page ID #:2127 1 must identify who made the allegedly misleading statements and what statements 2 were misleading, state where and when the statements were made, and explain why 3 the statements were misleading. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 4 1106 (9th Cir. 2003). 5 “Disclosure [of material information] is required… when necessary ‘to 6 make… statements made, in the light of the circumstances under which they were 7 made, not misleading.’” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 8 (2011). “[L]iteral accuracy is not enough: An issuer must as well desist from 9 misleading investors by saying one thing and holding back another.” Omnicare, Inc. 10 v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175, 192 (2015). 11 The SAC meets these criteria and adequately pleads falsity. 12 1. The May 19 Press Release and May 22 Prospectus Misled Investors 13 On May 19, 2025 – the ten year anniversary of the disastrous 2015 Refugio Oil 14 Spill – Sable announced that the restart of oil production and the imminent 15 resumption of oil sales. ¶58. In a press release entitled “Sable Offshore Corp. Reports 16 Restart of Oil Production at the Santa Ynez Unit and Anticipated Oil Sales from the 17 Las Flores Pipeline System in July 2025”, Sable triumphantly declared that “as of 18 May 15, 2025, [Sable] has restarted production [] and has begun flowing oil 19 production to Las Flores Canyon.” ¶¶58-59. Importantly, the press release stated that 20 “Sable has now completed its anomaly repair program on the Onshore Pipeline as 21 specified by the Consent Decree” and that “Sable expects to fill the ~540,000 barrels 22 of crude oil storage capacity at LFC by the middle of June 2025 and subsequently 23 recommence oil sales in July 2025.” ¶¶59-60. 24 This announcement materially misled investors by creating the false 25 impression that Sable was ramping up oil production and would soon begin to sell 26 oil. ¶63. Unbeknownst to investors, the “flowing oil production” was nothing more 27 than a minor, mandatory test. ¶72. Moreover, Sable was not about to recommence oil 28 -4- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 11 of 33 Page ID #:2128 1 sales: it had not finished its repair work or testing, it had not received the permits to 2 perform the work, and it had not received the required approvals from necessary 3 regulators. ¶63. Indeed, regulators had repeatedly informed Sable that it lacked the 4 necessary permits to complete its repairs or restart production. ¶¶33-38; 51-54. The 5 Coastal Commission issued Notices of Violation against Sable in September 2024 6 and February 2025 detailing Sable’s illegal and unpermitted construction activities 7 on the pipelines. ¶¶33-34. After Sable refused to cooperate, the Coastal Commission 8 issued a cease and desist order requiring Sable to halt all relevant repair and 9 maintenance work. ¶¶37. Sable also had no ability to obtain the necessary Final 10 Development Permits, which the County Board had refused to transfer from Exxon 11 to Sable in February 2025. ¶¶ 28-29. 12 Just as Defendants had planned, the misleading press release inflated Sable’s 13 stock price by over 14 percent, closing at $33.02 on May 19, 2025. ¶64. Sable quickly 14 shifted to the second step of its plan: conducting a secondary with an inflated share 15 price to raise about $250 million. ¶66; see also ECF 81-10 at 2. The May 22, 2025 16 Prospectus for Sable’s secondary offering repeated the same misleading statements 17 that Sable made in the May 19 press release. ¶¶67-68. 18 On May 23, 2025, Eleni Kounalakis, the Lieutenant Governor of California 19 and chair of the California State Lands Commission, wrote a letter (the “May 23 20 Letter”) to Sable’s Vice President of Environmental & Government Affairs, Steve 21 Rusch stating that Sable’s press release “mischaracterize[d] the nature of recent 22 activities, causing significant public confusion and raising questions regarding 23 Sable’s intentions.” ¶¶70-72. Lt. Gov. Kounalakis continued, explaining that Sable’s 24 press release “also implies that Sable has restarted operations at the Santa Ynez Unit” 25 despite the fact that “the limited volume oil flows are the result of well-testing 26 procedures required by the Bureau of Safety and Environmental Enforcement prior 27 to restart and “do not constitute a resumption of commercial production or a full 28 restart of the SYU.” ¶72. Importantly, Lt. Gov Kounalakis concluded that -5- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 12 of 33 Page ID #:2129 1 “[c]haracterizing testing activities as a restart of operations is not only misleading 2 but also highly inappropriate – particularly given that Sable has not obtained the 3 necessary regulatory approvals to fully resume operations at SYU.” Id. (emphasis 4 added). 5 The Motion asserts that the challenged statements in the May 19 press release 6 and May 22 Prospectus were not misleading because Sable did, in fact, conduct a 7 well test on May 15, 2025. Motion at 9-10. But even if Defendants’ statements were 8 literally true, they are still actionable because they created a false impression. See, 9 e.g., In re Dermtech, Inc. Sec. Litig., 2025 WL 1618193, at *4 (S.D. Cal. June 5, 10 2025) (“[A]n issuer’s public statements cannot be analyzed in complete isolation. 11 Some statements, although literally accurate, can become, through their context and 12 manner of presentation, devices which mislead investors. For that reason, the 13 disclosure required by the securities laws is measured not by literal truth, but by the 14 ability of the material to accurately inform rather than mislead prospective buyers.”) 15 (quoting In re Convergent Techs. Sec. Litig., 948 F.2d 507, 512 (9th Cir. 1991), as 16 amended on denial of reh’g (Dec. 6, 1991)). The SAC plausibly alleges that a 17 reasonable investor could have interpreted these statements to mean that Sable would 18 continue producing oil and imminently begin selling oil. ¶63. 19 The Motion correctly notes that a court must “examine ‘the context 20 surrounding the statement’ to ‘decide whether a misstatement or omission can 21 mislead’”. Motion at 10 (quoting Sneed v. Talphera, Inc., 147 F.4th 1123, 1131 (9th 22 Cir. 2025)). But the Motion then fails to grapple with the actual context surrounding 23 these statements. Defendants did not merely announce that Sable had completed a 24 well test; they announced that Sable had restarted oil production, finished its anomaly 25 repairs, would fill its onshore tanks by mid-June; and would begin selling oil in July. 26 ¶¶58-62. A reasonable investor could understand these statements, in context, to 27 mean that Sable had reached a new milestone and would imminently begin selling 28 oil. Indeed, the press release quoted Defendant Flores as stating that “[t]his milestone -6- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 13 of 33 Page ID #:2130 1 achievement is a result of a tremendous amount of effort from all of Sable’s 2 employees, contractors, Board of Directors, stakeholders, and suppliers.” ECF 81-9. 3 A reasonable investor could plausibly interpret these announcements, taken together, 4 as something more than a well-test. 5 The Motion also contends that the statements were not misleading because 6 Sable warned investors that “environmental groups could ‘be successful in delaying 7 or preventing us from obtaining the required approvals through litigation’ and that 8 “there was ‘no assurance that the necessary permits will be obtained’”. Motion at 10. 9 But general warnings that the Company’s plans might not succeed are insufficient. 10 See Thant v. Rain Oncology Inc., 2025 WL 588994, at *6 (N.D. Cal. Feb. 24, 2025) 11 (denying dismissal of claim concerning literally true statement about drug trial – 12 despite the fact that the defendant “repeatedly and emphatically disclosed that its 13 Phase 3 trial might fail” because of atypically high risk that the trial would fail). 14 Finally, the Court need only decide whether Plaintiffs’ proposed interpretation 15 is plausible, not whether Plaintiffs’ interpretation is more plausible than Defendants’ 16 interpretation. See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“If there are 17 two alternative explanations, one advanced by defendant and the other advanced by 18 plaintiff, both of which are plausible, plaintiff's complaint survives a motion to 19 dismiss under Rule 12(b)(6).”); Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 20 986 (9th Cir. 2008) (reversing dismissal of 10(b) claim where the plaintiffs’ 21 interpretation of a challenged statement was “just as likely” as the defendants’ 22 interpretation); Thant v. Rain Oncology Inc., 2025 WL 588994, at *6 (N.D. Cal. Feb. 23 24, 2025) (“when there are multiple plausible interpretations, the obligation to draw 24 inferences in favor of plaintiffs mean that courts must choose the interpretation most 25 favorable to plaintiffs”). At the pleading stage, a court can only weigh competing 26 inferences when evaluating scienter – not falsity. See Gompper v. VISX, Inc., 298 27 F.3d 893, 897 (9th Cir. 2002). 28 -7- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 14 of 33 Page ID #:2131 1 2. Defendants Repeatedly Misled Investors About Sable’s Repair Work and Its Permits to Conduct Such Work 2 Defendants repeatedly misled investors by stating that (i) Sable had completed 3 all of the repair work and testing necessary to restart the operation of the onshore 4 pipelines and begin selling oil; and (ii) all of the repair and maintenance work Sable 5 performed was fully permitted and approved. At the start of the Class Period, on May 6 19, 2025, Sable told investors that it “completed its anomaly repair program on the 7 Onshore Pipeline as specified by the Consent Decree.” ¶59; see also ¶68 (same 8 statement in May 22, 2025 Prospectus). On May 23, 2025, Courthouse News 9 published a statement by a Sable spokesperson stating that “[a]ll the work Sable has 10 performed is fully permitted and approved.” ¶62. On May 28, 2025, Sable stated that 11 it had “successfully hydrotested all segments of [the onshore pipeline), satisfying the 12 final operational condition to restart of the Onshore Pipeline” and that “no more 13 repairs are required to the Onshore Pipelines prior to restart.” ¶¶80-81. 14 These statements materially misled investors: Sable had not completed its 15 required repair work or testing, and Sable did not have the necessary permits to 16 complete the repair work. First, as explained above, the Coastal Commission 17 repeatedly informed Sable that it was performing unpermitted repair and maintenance 18 work and issued a cease and desist order in April 2025 requiring Sable to halt its 19 unpermitted work and immediately seek the required permits. Second, the Water 20 Board repeatedly also repeatedly informed Sable from November 2024 through April 21 2025 that Sable was engaged in unpermitted pipeline repairs. ¶¶53-57. Third, the Fire 22 Marshal confirmed in a letter to Sable on October 22, 2025 that Sable still had not 23 completed the anomaly repairs required under the Consent Decree. ¶49. 3 24 25 3 The full letter, which is incorporated into the SAC by reference, is available at 26 https://s202.q4cdn.com/300304768/files/doc_news/2025/10/OSFM-Letter-to- Sable.pdf. The letter explains that Sable failed to meet an anomaly repair required 27 under item 9 of the State Waivers concerning a 180-day repair condition for tool 28 sizing and tolerance. Letter at 1-2 (“The State Waivers require all such anomalies to be remediated, including tool tolerance. According to OSFM records, Sable has not -8- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 15 of 33 Page ID #:2132 1 The Motion states that the SAC fails to allege how the repairs remained 2 unfinished. Motion at 12. This assertion is nonsensical given that the Motion later 3 concedes that “Plaintiffs allege that the Fire Marshal (in October 2025) ‘identified a 4 Requirement’ that Sable had not yet met before the Fire Marshal could approve 5 Sable’s Restart Plan.” Motion at 15. 6 Alternatively, the Motion contends that the challenged statements that Sable’s 7 repairs were both completed and fully permitted were “inactionable statements of 8 opinion.” Motion at 15. The Motion is mistaken – the challenged statements are not 9 opinions, and they are actionable even if they were opinions. 10 First, Sable’s statement that “[a]ll the work Sable has performed is fully 11 permitted and approved” (¶62) is a statement of fact, not a statement of opinion. 12 Courts. It is black letter law in this Circuit that “[s]tatements of legal compliance are 13 pled with adequate falsity when documents detail specific violations of law that 14 existed at the time the warranties were made.” Reese v. Malone, 747 F.3d 557, 578 15 (9th Cir. 2014), overruled by City of Dearborn Heights Act 345 Police & Fire Ret. 16 Sys. v. Align Tech., Inc., 856 F.3d 605 (9th Cir. 2017); see also Glazer Cap. Mgmt., 17 LP v. Magistri, 549 F.3d 736, 742 (9th Cir. 2008) (falsity adequately pleaded for the 18 defendant’s statement that it was “in compliance in all material respects with the 19 provisions of Section 13(b) of the Exchange Act” because the complaint cited a later 20 SEC cease and desist order stating that company violated Section 13(b) of the 21 Exchange Act). The recent decision in In re PG&E Corp. Sec. Litig., 2025 WL 22 2781745, at *17 (N.D. Cal. Sept. 30, 2025) is particularly instructive. In PG&E, the 23 plaintiffs challenged statements that “PG&E meets or exceeds regulatory 24 requirements” and that “PG&E follows all applicable federal and state vegetation 25 clearance requirements.” Id. The court found that these statements were not non- 26 actionable statements of opinion; they were objectively verifiable statements of fact. 27 28 satisfied this condition in the State Waivers. The above findings alone and the inconsistencies with the State Waiver requirements prevent restart under the law.” -9- PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 16 of 33 Page ID #:2133 1 Id. Further, the court found that the complaint adequately alleged they were 2 materially misleading because PG&E was later found to have been violating 3 applicable regulations throughout the class period. Id. The same is true, here. The 4 Coastal Commission and Water Board repeatedly informed Sable that it was 5 performing unpermitted repair work. ¶¶33-38, 51-57. Further, Judge Anderle granted 6 the Coastal Commission’s application for a preliminary injunction, finding that the 7 Commission presented evidence that “that Sable has not obtained a [permit] for 8 Sable’s repair and maintenance activities” and “that Sable has continued its repair 9 and maintenance activities notwithstanding the [cease and desist order].” ¶39. In 10 October, Judge Anderle again ruled that Sable’s work was unpermitted and had not 11 been authorized by the County’s 1986 permit. ¶40. 12 Second, even if these statements were opinions, they would still be actionable 13 because they did not “fairly align” with information Defendants possessed at the time 14 they made the statements. Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc., 63 F.4th 15 747, 764 (9th Cir. 2023) (“These concrete assurances did not ‘fairly align[ ] with the 16 information in [defendant’s] possession at the time’ and are therefore actionable”) 17 (quoting Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 18 U.S. 175, 188-89 (2015)). 19 3. Defendants Misled Investors By Downplaying the Impact of Sable’s Legal and Regulatory Problems 20 On May 28, 2025, Judge Thomas P. Anderle granted the Coastal 21 Commission’s application for a preliminary injunction, which enforced the 22 Commission’s April 10 cease and desist order. ¶39. The order enjoined Sable from 23 continuing its unpermitted maintenance and repair activities on the onshore pipelines. 24 and enjoins Sable’s ongoing repair and maintenance work in violations of the Coastal 25 Act. ¶74. In response to the May 28 order, Sable’s Steve Rusch stated that the 26 decision “has no bearing on Sable’s plans to recommence oil sales by July.” ¶81. 27 28 - 10 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 17 of 33 Page ID #:2134 1 On June 3, 2025, Judge Donna Geck issued a temporary restraining order 2 preventing the Fire Marshal from granting further authorizations and prohibiting 3 Sable from restarting use of the pipelines. ¶¶46, 78. In response, Rusch stated on 4 behalf of Sable that “[t]he court decision does not impede Sable’s preparations for 5 restarting the flow of oil. Restart of the Las Flores Pipeline System is governed by a 6 federal consent decree.” ¶81. 7 These statements materially misled investors because the rulings materially 8 impacted Sable’s ability to start using the onshore pipelines and begin oil sales. Judge 9 Anderle’s ruling prohibited Sable from performing ongoing maintenance or repairs 10 on the pipelines, which would inevitably delay any planned oil sales. ¶82. Further, 11 Rusch, himself, submitted a declaration in opposition to the Coastal Commission 12 injunction stating that granting the injunction would cause Sable irreparable harm by 13 preventing it from performing ongoing maintenance or repairs. ¶78; ECF 81-14 at 4. 4 14 The Motion contends that this statement was true because Sable had already finished 15 its repair work. Motion at 13, 14. Tellingly, the Motion is silent about the ongoing 16 maintenance, which Sable would need to perform in order to actually operate the 17 pipelines. ¶78. The Motion also asserts that the June 3 Order – which prevented Sable 18 from restarting use of the pipelines – did not “impede Sable’s preparations for 19 restarting the flow of oil” through those same pipelines. Motion at 14-15. The Motion 20 is too cute by half.5 21 22 The SAC mistakenly alleged that Rusch issued this declaration in the Fire Marshall 4 litigation. As the Motion correctly notes, Rusch issued the declaration in the Coastal 23 Commission litigation. Motion at 13 & n.4. 24 The Motion asserts in a footnote that its misstatements were “reasonable” because 5 a federal agency purported to approve it restart plan after the Class Period. Motion at 25 15 & n.8. But the federal agency endorsed none of Sable’s actual alleged 26 misstatements, and Judge Donna Geck has already declined to lift the injunction blocking Sable from restarting the onshore pipelines. See 27 https://www.independent.com/2026/01/07/santa-barbara-judge-keeps-sable- 28 injunction-in-place-as-company-confirms-no-oil-in-pipelines/. At the hearing, an attorney for Sable represented that each day Judge Geck’s June 3, 2025 injunction - 11 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 18 of 33 Page ID #:2135 1 On October 15, 2025, Judge Thomas held that the Coastal Commission had 2 not abused its discretion in issuing the April 10 Orders. Judge Anderle found that, 3 contrary to Sable’s assertions, Sable’s development work was not authorized by a 4 1986 permit from the County and that the CCC had the authority to find that Sable 5 was in violation of the Coastal Act and to issue a cease and desist order given the 6 County’s failure to act on Sable’s violations. ¶83. In response, Sable issued a press 7 release stating that “the ruling would have no impact on the resumption of petroleum 8 transportation through the Las Flores Pipeline System.” The press release also quoted 9 Defendant Flores stating that the ruling “has no impact on Sable’s business strategy 10 of either resuming petroleum transportation through the Las Flores Pipeline System 11 or selling its Santa Ynez Unit production through an OS&T.” ¶85. 12 Similarly to the May 28 Order, the October 15 Order continued to preclude 13 Sable from performing the necessary repairs or maintenance to restart or operate the 14 pipelines. Even if these statements were opinions – which they are not – they would 15 still be actionable because they did not “fairly align” with information Defendants 16 possessed at the time they made the statements. Glazer Cap. Mgmt., L.P. v. Forescout 17 Techs., Inc., 63 F.4th 747, 764 (9th Cir. 2023). 18 4. Defendants Misled Investors About Hunterbrook On October 31, 2025, Hunterbrook Media (“Hunterbrook”) reported that 19 Defendant Flores “told a select group of investors in October that the company would 20 likely have to raise up to $200 million in equity by the end of 2025.” ¶88. The 21 company had not publicly disclosed that Sable required an imminent equity raise 22 which would dilute the value of existing shares. Id. Hunterbrook published a 38- 23 minute recording of the conversation between Defendant Flores and investors. On the 24 recording, Flores stated “We’re supposed to be on production in September, right? 25 We’re not gonna be on production in September, so we’re gonna have to bridge a 26 27 remains in place costs the Houston-based company millions. At the time, Sable 28 assured investors that the injunction “does not impede Sable’s preparations for restarting the flow of oil.” ¶81. - 12 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 19 of 33 Page ID #:2136 1 little to the financing. We’ll need some type of injection somewhere in the $100 to 2 $150 to $200 million dollar range.” Id. 3 Later that day, the Company falsely denied the Hunterbrook report. Sable 4 stated to Hunterbrook that “based upon information provided to us we believe that 5 the alleged recording was either AI generated or otherwise altered.” ¶90. 6 The Motion asserts, without explanation, that the SAC fails to allege how this 7 statement is actionable. Motion at 16. But the SAC plainly alleges that the statement 8 was false because Hunterbrook accurately reported that Defendant Flores was 9 selectively providing material non-public information to investors and that Sable 10 imminently needed to raise to hundreds of millions of dollars to continue operations. 11 ¶91. On November 3, 2025, the Company issued a press release effectively 12 confirming the Hunterbrook report. ¶92. The press release disclosed that Sable had 13 entered into an amended loan agreement with ExxonMobil that would become 14 effective once the company raises at least $225 million in equity contributions. Id. 15 The press release further stated that the amendment extends the maturity date of the 16 loan by one year, to March 31, 2027, and increases the annual interest rate for the 17 loan from ten percent to fifteen percent. Id. Further, the Company announced that 18 “the Company’s Board of Directors formed a Special Committee of independent 19 directors to undertake an independent investigation of the allegations contained in an 20 October 31, 2025 report published by Hunterbrook, which contains audio recording 21 of a call that took place in October 2025.” Id. 22 As the Supreme Court explained in Omnicare, a statement of opinion is 23 actionable if it omits facts “for example, the fact that the speaker failed to conduct 24 any investigation—that rebut the recipient's predictable inference.” Omnicare, 575 25 U.S., at 191. Defendants’ statement that “we believe that the alleged recording was 26 either AI generated or otherwise altered” implies that Defendants conducted an 27 investigation. Had Sable performed even a minimal amount diligence – including 28 asking Defendant Flores about the recording – they would have learned that the - 13 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 20 of 33 Page ID #:2137 1 recording was real and that Sable did need to raise hundreds of millions of dollars, 2 just as they publicly announced a few days later. ¶92. 6 3 B. Plaintiffs Adequately Allege Scienter 4 Plaintiffs allege facts raising a strong inference of scienter, which not only 5 includes knowledge, “but also deliberate recklessness.” Schueneman v. Arena 6 Pharms., Inc., 840 F.3d 698, 705 (9th Cir. 2016). The “inquiry . . . is whether all of 7 the facts alleged, taken collectively, give rise to a strong inference of scienter, not 8 whether any individual allegation, scrutinized in isolation, meets that standard.” 9 Tellabs, 551 U.S. at 322– 23. A “strong inference” is raised when “a reasonable 10 person would deem the inference of scienter cogent and at least as compelling as any 11 plausible opposing inference” of nonfraudulent intent. Id. at 310. The scienter 12 inference “need not be irrefutable . . . or even the most plausible,” and no “smoking- 13 gun” is required. Id. at 324–26. “‘[F]alsity and scienter in private securities fraud 14 cases are generally strongly inferred from the same set of facts,’ and the two 15 requirements may be combined into a unitary inquiry under the PSLRA.” In re 16 Capstone Turbine Corp. Sec. Litig., 2018 WL 836274, at *5 (C.D. Cal. Feb. 9, 17 2018) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1015 (9th Cir. 2005)). 18 Crucially, Defendants fail to offer any competing non-fraudulent inference. 19 Instead of identifying any plausible innocent explanation, Defendants improperly 20 seek to “attack individual allegations in isolation,” which “cannot overcome the 21 overwhelming evidence drawn from a holistic view.” In re VeriFone Holdings, Inc. 22 Sec. Litig., 704 F.3d 694, 710 (9th Cir. 2012). 23 1. Core Operations Establishes Strong Inference of Scienter 24 “The core operations theory . . . presumes that ‘corporate officers have 25 knowledge of the critical core operation of their companies.” Prodanova v. H.C. 26 6 The Motion’s assertion that projected actions are inactionable under safe harbor (Motion at 10- 27 11) is wrong. See, e.g., Rain Oncology, 2025 WL 588994, at *6 (statement that “we anticipate commencing a pivotal Phase 3 trial in LPS in the second half of 2021” was literally true, but 28 misleading because it omitted failure to satisfy Phase 2 bypass criteria”). - 14 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 21 of 33 Page ID #:2138 1 Wainwright & Co., LLC, 993 F.3d 1097, 1111 (9th Cir. 2021). “There are three 2 circumstances under which core operations allegations can support a strong inference 3 of scienter: (1) when they, along with other allegations, support a cogent and 4 compelling inference of scienter, (2) when they are themselves particular and suggest 5 that the defendants had actual access to the disputed information, and (3) in the rare 6 circumstances when they are not particularized, but the nature of the relevant fact is 7 of such prominence that it would be absurd to suggest that management was without 8 knowledge of the matter.” Blake v. Canoo Inc., 2025 WL 2992263, at *15 (C.D. Cal. 9 Oct. 22, 2025) (quoting Prodanova, 993 F.3d at 1111). 10 Here, it would be absurd to suggest that Defendants Flores and Patrinely were 11 unaware of repair, maintenance, and regulatory hurdles of the pipelines. Defendants 12 are experienced oil executives (¶¶101, 103) who formed Sable for one purpose: to 13 acquire the SYU Assets, repair the pipelines, and obtain regulatory approval to restart 14 the pipelines and oil production (¶23). These assets were Sable’s only assets. ¶97. 15 The status of Sable’s repairs to the pipeline, the requirements of the Consent 16 Decree, and Sable’s regulatory battles with the Coastal Commission, the Water 17 Board, environmental groups, the County Board, and the Fire Marshal were all well 18 known facts to Sable’s management because they determined the fate of the 19 Company. See AMI - Gov't Emps. Provident Fund Mgmt. Co. Ltd. v. Alphabet Inc., 20 2025 WL 899959, at *6 (N.D. Cal. Mar. 24, 2025), motion to certify appeal denied, 21 2025 WL 2578281 (N.D. Cal. Sept. 5, 2025) (“Because the FAN Agreement was 22 ‘existential’ to Google in 2017, it is a fair inference that the CEO of Google—who 23 admits that he reviews ‘at a high level [ ] all the important decisions’ Google makes— 24 would have been aware of the basic terms of the FAN Agreement at the time it was 25 being negotiated.”). Courts have found a strong inference of scienter based on the 26 core operations theory in less obvious situations. See Berson v. Applied Signal Tech., 27 Inc., 527 F.3d 982, 987, 989 (9th Cir. 2008) (finding it “hard to believe that [the CEO 28 and CFO] would not have known about stop-work orders that allegedly halted tens - 15 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 22 of 33 Page ID #:2139 1 of millions of dollars of the company’s work”); Blake v. Canoo Inc., 2025 WL 2 2992263, at *16 (C.D. Cal. Oct. 22, 2025) (core operations pled where “allegations 3 regarding the importance of the engineering services pipeline to Canoo's three- 4 pronged, phased go-to-market strategy, it would be absurd to suggest that the 5 Individual Defendants, Kranz, Balciunas, and Aquila, were not aware of the collapse 6 of the pipeline in December 2020”); In re PG&E Corp. Sec. Litig., 2025 WL 7 2781745, at *21 (N.D. Cal. Sept. 30, 2025) (“the Officer Defendants must have 8 known of a prominent issue like wildfire regulatory violations that would expose 9 PG&E to severe financial penalties and potentially threaten its viability as a going 10 concern”); Azar v. Yelp, Inc., 2018 WL 6182756, at *20 (N.D. Cal. Nov. 27, 2018) 11 (allegations showing that local advertising program was “a central component of 12 Yelp’s operations” and was “prominent enough that it would be absurd to suggest 13 that top management was unaware of the” adverse facts); In re Montage Tech. Grp. 14 Ltd. Sec. Litig., 78 F. Supp. 3d 1215, 1227 (N.D. Cal. 2015) (“it would be absurd to 15 suggest” that management did not know their largest distributor was a related party, 16 where their transactions accounted for 71% of the company’s revenue). 17 In short, Sable’s progress and setbacks in obtaining regulatory approvals “were 18 prominent enough that it would be absurd to suggest that top management was 19 without knowledge of the matter.” Berson v. Applied Signal Tech., Inc., 527 F.3d 20 982, 989 (9th Cir. 2008).7 21 2. Defendants Knew Or Had Access To Contrary Information “The most direct way to show both that a statement was false when made and 22 that the party making the statement knew that it was false is via contemporaneous 23 reports or data, available to the party, which contradict the statement.” Nursing Home 24 Pension Fund, Loc. 144 v. Oracle Corp., 380 F.3d 1226, 1230 (9th Cir. 2004). The 25 SAC alleges that Defendants knew or were reckless in not knowing about the 26 27 7 The SAC adequately alleges scienter against Sable because “[t]he scienter of a 28 corporation can be imputed from that of its officers.” S.E.C. v. Platforms Wireless Int’l Corp., 559 F. Supp. 2d 1091, 1096 (S.D. Cal. 2008). - 16 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 23 of 33 Page ID #:2140 1 regulatory hurdles Sable faced or that their statements would mislead investors. 2 In the Ninth Circuit, “an assertion that defendants were unaware of the alleged 3 issues can be ‘directly contradicted by the fact that [they] specifically addressed it in 4 [their] statement[s].’” Roberti v. OSI Sys., Inc., 2015 WL 1985562, at *12 (C.D. Cal. 5 Feb. 27, 2015) (quoting Reese, 747 F.3d at 571). “By making ‘detailed factual 6 statement [s], contradicting important data to which [the Individual Defendants] had 7 access, a strong inference arises that [they] knowingly misled the public as to its clear 8 meaning.’” Here, Defendant Flores and the Company repeatedly issued detailed 9 statements minimizing Sable’s regulatory hurdles and legal setbacks. 10 Sable’s term loan agreement from ExxonMobil requires that Defendant Flores 11 remain “directly and actively involved in the day-to-day management” of Sable. The 12 Company’s 2025 Proxy Statement stated: “The board of directors believes that Mr. 13 Flores’ knowledge of the daily operations of and familiarity with the Company and 14 industry put him in the best position to provide leadership to the board of directors 15 on setting the agenda, emerging issues facing the Company and the upstream oil and 16 gas industry, and strategic opportunities.” ¶101. 17 3. Defendants Had Motive and Opportunity to Commit Fraud a. Defendants Inflated Stock Price Before 18 Secondary Offerings 19 The Company has no revenue or cash flows from its operations, nor will it 20 generate any revenue or cash flows from its operations until it restarts production of 21 the SYU Assets. The Company has experienced losses from operations and has had 22 negative cash flows from operations since its inception and will continue to incur 23 losses until it can restart production of the SYU Assets. Accordingly, the Company 24 was entirely reliant on its cash on hand and capital raises to continue its operations. 25 Defendants misled investors about the true state of Sable’s operations and regulatory 26 compliance to artificially inflate its stock price at the time of its equity raises. 27 The recent decision in In re Semtech Corp., 2025 WL 2884810, at *10 (C.D. 28 Cal. Oct. 7, 2025) is instructive. In Semtech, the plaintiffs alleged scienter “primarily” - 17 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 24 of 33 Page ID #:2141 1 by pointing to the defendant’s “significant debt position that it substantially solved 2 with a stock offering.” Id. The court agreed, finding that the plaintiffs alleged a strong 3 inference of scienter, in large part, by alleging that the defendant’s “debt had become 4 an ‘existential threat,’ and Defendants ‘sought to delay the release of the bad news 5 that Semtech's FY2026 ACC revenue opportunity had evaporated until after a 6 planned December 2024 public offering of stock.’” Id. Defendants did the same here 7 – issuing a misleading press release touting that Sable had restarted oil production 8 just three days before issuing a secondary offering raising $250 million. 9 The Motion asserts that courts cannot find an inference of scienter based on 10 public offerings. Motion at 18. Defendants misunderstand the case law. The cases the 11 Motion cites do not involve companies in existential crises. See Webb v. Solarcity 12 Corp., 884 F.3d 844, 856 (9th Cir. 2018) (“We also credit the allegation that there is 13 a strong incentive to present an appearance of profitability and to keep stock prices 14 high in the months immediately preceding and following a company's IPO”, but 15 “motive to boost the company’s profitability and stock prices in the months 16 surrounding the company's IPO are not ‘specific’ or ‘particularized,’ as our 17 precedents require”); In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 884 (9th Cir. 18 2012) (no scienter merely because the defendants “were seeking a partner and were 19 planning to raise capital in a stock offering”). In contrast, “a demonstration of a desire 20 to raise company financing, combined with the ‘red flags’ of a company's financial 21 condition, is sufficient to plead scienter.” Nguyen v. Radient Pharms. Corp., 2011 22 WL 13141630, at *6 (C.D. Cal. Oct. 26, 2011). 23 Finally, the Wall Street Journal reported that Flores’s venture paid $204 24 million in cash out of the total $1.1 billion Sable was expected to pay to ExxonMobil 25 for the SYU Assets and that Flores would “make tens of millions of dollars if he can” 26 restart the commercial oil sales. ¶102. 27 Sable also faced another deadline that existentially threatened the Company. 28 On August 1, 2024, the Fire Marshal granted Sable’s request to extend the deadline - 18 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 25 of 33 Page ID #:2142 1 to complete its implementation of the Restart Plans to July 1, 2025. ¶43.In granting 2 the extension, the Fire Marshal stated that “[i]t is imperative that [Sable] successfully 3 completes the proposed retrofit construction by this new deadline.” Id. The Water 4 Board’s complaint states that Sable management intentionally misled the Water 5 Board as a stalling tactic so that it could meet the July 1, 2025 deadline: “At the time 6 of its inadequate submissions in March and April of 2025, Sable management knew 7 full well additional excavation and repair work would be ongoing. However, instead 8 of identifying sites where Sable was planning to carry out activities that could affect 9 water quality, as required by the Section 13267 Order, Sable chose to limit its 10 response to work done as of the March 10, 2025 due date of the Technical Report 11 (which ironically was not met). This cynical approach to the Regional Water 12 Board’s regulatory permitting requirements was obviously taken to avoid any 13 potential delay in getting the sites permitted and any associated Regional Water 14 Board review that might impact the July 1, 2025 deadline for Sable’s completion 15 of repairs imposed by the Fire Marshal.” ¶54. (emphasis added) 16 4. The Inference of Scienter Is At Least As Compelling as Defendants’ Suggested Inference 17 The SAC pleads a strong inference of scienter. However, even if each 18 individual scienter allegations are insufficient, the Court must “conduct a ‘holistic’ 19 review of the same allegations to determine whether the insufficient allegations 20 combine to create a strong inference of intentional conduct or deliberate 21 recklessness.” New Mexico State Inv. Council v. Ernst & Young LLP, 641 F.3d 1089, 22 1095 (9th Cir. 2011) (reversing dismissal and finding a strong inference of scienter). 23 The holistic review must consider even “[v]ague or ambiguous allegations” because 24 “federal courts certainly need not close their eyes to circumstances that are probative 25 of scienter viewed with a practical and common-sense perspective.” S. Ferry LP, No. 26 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008). 27 28 - 19 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 26 of 33 Page ID #:2143 1 Defendants impermissibly contest scienter by attacking each scienter 2 allegation in isolation. Motion at 17-19. The Supreme Court has explicitly rejected 3 this type of argument, holding that “the court’s job is not to scrutinize each allegation 4 in isolation but to assess all the allegations holistically.” Tellabs, 551 U.S. at 326. 5 “Viewed in isolation, any one allegation may not compel an inference of scienter. 6 However, when we consider the allegations holistically, the inference that 7 [defendants] were deliberately reckless as to the truth of their financial reports and 8 related public statements is at least as compelling as any opposing inference.” 9 VeriFone, 704 F.3d at 698–99 (overturning district court’s dismissal and finding 10 scienter); see also Axonic Cap. LLC v. Gateway One Lending & Fin., 2019 WL 11 4138024, at *11 (C.D. Cal. May 22, 2019) (“although no one allegation, standing 12 alone, is sufficient to create a strong inference of scienter, a “holistic” review of the 13 same allegations does create a strong inference of intentional conduct or deliberate 14 recklessness”). 15 Defendants do not, and cannot, suggest any non-fraudulent inference to 16 compete with the strong inference of fraud pleaded by the SAC. The Motion asserts 17 that the non-fraudulent inference is that “Sable believed in its plans but faced 18 disappointing, unexpected third-party developments” and that “[a]t each step, Sable 19 kept investors informed, including advising potential investors of the risks inherent 20 to its business.” Motion at 19-20. But Sable repeatedly misled investors about the 21 significance of those “disappointing” developments, including telling investors that 22 the May 28, June 3, and October 15 court decisions would have no effect on Sable’s 23 planned restart. ¶¶ 24 The Motion also claims that Sable “openly engaged with regulators.” The SAC 25 is replete with allegations showing that Sable repeatedly ignored and misled 26 regulators. Sable ignored the Coastal Commission’s notices of violation and cease 27 and desist orders. ¶¶33-40. Sable also misled the Water Board about its compliance, 28 providing “incomplete information with little meaningful detail regarding the - 20 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 27 of 33 Page ID #:2144 1 extensive excavation, repair and backfilling conducted as part of the Repair Plan.” ¶¶ 2 52-53. The Water Board determined that Sable’s response “made clear it did not 3 perform meaningful assessment of the environmental impact of its excavation 4 campaign” despite assurances otherwise. ¶¶51-56. 5 Sable’s repeated bad faith interactions with regulators ultimately convinced 6 one of their allies on the County Board to switch his vote against transferring permits 7 to Sable. ¶93. Supervisor Steve Lavagnino, who previously voted in favor of 8 transferring the permits to Sable in February 2025, voted against the transfer. Id. 9 Lavagnino explained that he changed his mind because of Sable’s repeated refusal to 10 cooperate with regulators and follow the law – which Sable had repeatedly, and 11 falsely, denied. As the Santa Maria Sun reported: “[T]he landscape has changed 12 dramatically since February,” he said during the hearing. “To me, the following are 13 facts, not emotions: Since February, Sable has been charged criminally 21 times, with 14 five of those charges being felonies. I have many friends in the oil industry, and I will 15 continue to support efforts to access our natural resources, but it has to be done 16 responsibly by operators who put safety above profits,” Lavagnino said. “The 17 evidence in this case is overwhelming. There is something wrong with the strategy 18 of Sable’s leadership. Trying to simply bulldoze through the permitting process has 19 not been helpful and is not the way we expect businesses in Santa Barbara County to 20 conduct themselves.” Id. 21 The more plausible inference is that Sable repeatedly misled investors and state 22 regulators in a desperate attempt to keep the Company afloat until it could be saved 23 by the federal government. 24 C. Plaintiffs Adequately Allege Loss Causation 25 To plead loss causation, the Supreme Court simply requires “some indication 26 of the loss and the causal connection” to the alleged fraud. Dura Pharms., Inc. v. 27 Broudo, 544 U.S. 336, 347 (2005). Plaintiffs need only allege that the decline in stock 28 price was proximately caused by a revelation of fraudulent activity rather than by - 21 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 28 of 33 Page ID #:2145 1 changing market conditions, changing investor expectations, or other unrelated 2 factors. Lambert v. Baker Tilly Hong Kong Ltd., 2016 WL 6272465, at *2 (C.D. Cal. 3 May 23, 2016). “[S]o long as the complaint alleges facts that, if taken as true, 4 plausibly establish loss causation, a Rule 12(b)(6) dismissal is inappropriate.” In re 5 Gilead, 536 F.3d at 1057. In fact, “[t]he misrepresentation need not be the sole reason 6 for the decline in value of the securities, but it must be a ‘substantial cause.’” Id. at 7 1055. A corrective disclosure need not be a mirror image of the earlier representation. 8 In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 791 n.3 (9th Cir. 2020). “The 9 ultimate issue is whether the defendant’s misstatement, as opposed to some other fact, 10 foreseeably caused the plaintiff’s loss.” Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 11 1210 (9th Cir. 2016). “A plaintiff may also establish loss causation by alleging that 12 the defendant's misrepresentations concealed a risk that materialized and played some 13 part in diminishing the value of the security.” In re Amgen Sec. Litig., 2014 WL 14 12585809, at *20 (C.D. Cal. Aug. 4, 2014). 15 The SAC alleges that each of the alleged corrective disclosures are directly tied 16 to the alleged misstatements and omissions. The Motion fails to undermine these 17 allegations. 18 First, the Motion baselessly asserts that the corrective disclosures fail because 19 several come from third parties rather than directly from Sable. Motion at 20. 20 Tellingly, The Motion does not cite to any authority to support this assertion. “[A] 21 corrective disclosure need not consist of an admission of fraud by the defendant or a 22 formal finding of fraud by a government agency” and “can instead come from any 23 source, including knowledgeable third parties such as whistleblowers, analysts, or 24 investigative reporters.” In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 790 (9th 25 Cir. 2020). 26 Second, the Motion contends the May 28 letter from Lt. Governor Kounalakis 27 is not corrective because it merely “confirmed Sable had restarted oil production.” 28 Motion at 20-21. The letter explicitly explains the misleading impression left by - 22 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 29 of 33 Page ID #:2146 1 Sable’s May 19 press release, stating that the “press release appears to 2 mischaracterize the nature of recent activities, causing significant public confusion 3 and raising questions regarding Sable’s intentions” by implying “that Sable has 4 restarted operations, despite the reality that “the limited volume oil flows are the 5 result of well-testing procedures required by the Bureau of Safety and Environmental 6 Enforcement prior to restart.” The letter explicitly states that “[c]haracterizing testing 7 activities as a restart of operations is not only misleading but also highly 8 inappropriate.” 9 Third, the Motion asserts that the May 28, June 3, and October 15 court rulings 10 were not corrective disclosures because they were merely “bad news.” Motion at 21- 11 23. The May 28 ruling held that the Coastal Commission had presented prima facie 12 evidence that Sable was performing unpermitted work, which directly corrected 13 Sable’s May 23 statement that “[a]ll the work Sable has performed is fully permitted 14 and approved.” ¶62, 76. As the May 28, 2025 Investing.com article stated: “Despite 15 Sable’s claims that the work was authorized under existing permits from the County 16 of Santa Barbara, the court found a prima facie case for the Coastal Commission, 17 indicating that the activities constituted a violation of the Coastal Act.” ¶76. The 18 October 15 ruling further established that Sable had ignored regulatory orders and 19 performed unpermitted work. ¶¶83-84. The June 3 order, preventing the Fire Marshal 20 from granting authorizations and Sable from restarting the pipelines, corrected 21 Sable’s statements that the lawsuit was without merit and that its anomaly repair 22 program was complete. ¶¶59, 62, 78. 23 Fourth, the November 4 corrective disclosure was a materialization of the risk 24 of Sable’s repeated dishonest interactions with regulators – of which Sable repeatedly 25 both denied both the existence and the consequences. ¶¶93, 96 (“The evidence in this 26 case is overwhelming. There is something wrong with the strategy of Sable’s 27 leadership. Trying to simply bulldoze through the permitting process has not been 28 helpful and is not the way we expect businesses in Santa Barbara County to conduct - 23 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 30 of 33 Page ID #:2147 1 themselves.”); see also In re WageWorks, Inc., Sec. Litig., 2020 WL 2896547, at *5 2 (N.D. Cal. June 1, 2020) (“under a ‘materialization of the risk’ theory, plaintiff may 3 allege that ‘the very facts about which defendant lied’ caused the injuries. Any kind 4 of proximate cause satisfies this requirement”). 5 Finally, the October 31 and November 3 reports were both corrective. ¶¶ 88- 6 89, 92. The October 31 Hunterbrook Report showed that Sable’s need to raise 7 additional equity contradicted Defendants’ repeated claims that regulatory and 8 judicial orders concerning the Company’s ability to make repairs and restart 9 production would have an effect on the Company’s ability to timely resume 10 commercial sales. ¶88. The November 3 press release confirmed the Hunterbrook 11 report and revealed that Sable’s October 31 statement denying the Hunterbrook report 12 was false. ¶92. The Motion claims that short seller reports cannot serve as corrective 13 disclosures; this is not true. See In re Genius Brands Int'l, Inc. Sec. Litig., 97 F.4th 14 1171, 1187 (9th Cir. 2024) (short seller report was corrective disclosure). 15 D. Plaintiffs Adequately Allege Control Person Liability 16 Plaintiffs have adequately pleaded control person liability under Section 20(a) 17 by alleging primary violations and that Defendants were in positions of control. ¶¶21- 18 23; see In re BofI Holding, Inc. Sec. Litig., 2017 WL 2257980, at *21 (S.D. Cal. May 19 23, 2017). 20 IV. CONCLUSION 21 The Motion should be denied in its entirety. Alternatively, if the Court grants 22 any portion of the Motion, Plaintiff respectfully requests leave to amend. 8 23 Dated: January 12, 2026 THE ROSEN LAW FIRM, P.A. 24 25 8 See Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (holding that leave to 26 amend should be freely granted unless “the pleading could not possibly be cured by the allegation of other facts”); Osher v. JNI Corp., 183 F. App’x 604, 605 (9th Cir. 27 2006) (“[l]eave to amend is to be granted with extreme liberality in securities fraud 28 cases, because the heightened pleading requirements imposed by the PSLRA are so difficult to meet”). - 24 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 31 of 33 Page ID #:2148 1 /s/ Daniel Tyre-Karp Daniel Tyre-Karp (pro hac vice) 2 275 Madison Ave., 40th Floor 3 New York, NY 10016 Telephone: (212) 686-1060 4 Facsimile: (212) 202-3827 5 Email: dtyrekarp@rosenlegal.com 6 7 Laurence M. Rosen (SBN 219683) 355 South Grand Avenue, Suite 2450 8 Los Angeles, CA 90071 9 Telephone: (213) 785-2610 Facsimile: (213) 226-4684 10 Email: lrosen@rosenlegal.com 11 Lead Counsel for Plaintiffs 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 25 - PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 32 of 33 Page ID #:2149 1 CERTIFICATE OF SERVICE 2 I hereby certify that on January 12, 2026, I authorized the electronic filing of 3 the foregoing with the Clerk of the Court using the CM/ECF system which will send 4 notification of such filing to the e-mail addresses denoted on the attached Electronic 5 Mail Notice List, and I hereby certify that I caused to be mailed the foregoing 6 document or paper via the United States Postal Service to the non-CM/ECF 7 participants indicated on the attached Manual Notice List. 8 I certify under penalty of perjury under the laws of the United States of 9 America that the foregoing is true and correct. 10 11 Dated: January 12, 2026 /s/ Daniel Tyre-Karp Daniel Tyre-Karp 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 26 - CERTIFICATE OF SERVICE Case 2:25-cv-06869-SVW-PVC Document 83 Filed 01/12/26 Page 33 of 33 Page ID #:2150 1 CERTIFICATE OF COMPLIANCE 2 The undersigned counsel of record for Lead Plaintiff Jimmy Cleveland White and 3 named plaintiffs Tracy Johnson and Jake Stewart certifies that this brief contains 24 4 5 pages, which: 6 __ complies with the word limit of L.R. 11-6.1. 7 X complies with the page limit set by court order dated August 4, 2025 (Dkt. No. 8 9 10). 10 11 Dated: January 12, 2026 /s/ Daniel Tyre-Karp Daniel Tyre-Karp 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 27 - CERTIFICATE OF SERVICE