Tracy Johnson v. Sable Offshore Corp. — Entry #84: REPLY in Support of NOTICE OF MOTION AND MOTION to Dismiss Case (Second Amended Class Action Complaint) 81 filed by Defendants James C
Case: Tracy Johnson v. Sable Offshore Corp. cacd · 2:25-cv-06869
filed July 28, 2025
What this document is
Docket entry #84 · filed January 26, 2026
REPLY in Support of NOTICE OF MOTION AND MOTION to Dismiss Case (Second Amended Class Action Complaint) 81 filed by Defendants James C. Flores, Gregory D. Patrinely, Sable Offshore Corp.. (Murphy, Kristin) (Entered: 01/26/2026)
Who is involved
- Christoph Ludwig
- Ferdinand Aggenbach
- Gregory D. Patrinely
- J.P. Morgan Securities LLC
- Jake Stewart
- James C. Flores
- Jefferies LLC
- Jimmy Cleveland White
- Johnson Rice and Company L.L.C.
- PEP Advisory LLC
- Roth Capital Partners, LLC
- Sable Offshore Corp.
- TD Securities USA LLC
- The Benchmark Company, LLC
- Tracy Johnson
- Tuohy Brothers Investment Research, Inc.
Why we have it
We follow this case because it names a company we track, although that company is not a party:
- Applied Digital: its former name “FLIGHT SAFETY TECHNOLOGIES INC” appears in a filing in this case.
…Co-Lead Counsel. $1.2 million. • Flight Safety Technologies, Inc., (D. Conn.). Rosen Lead Counsel. $1…
- Core Scientific: its name “Core Scientific, Inc.” appears in a filing in this case.
…Rosen Lead Counsel. Pang v. Levitt (Core Scientific, Inc.), No. 22-CV-1191-LY (W.D. Tex.). Rosen…
A free copy from the RECAP archive of federal court filings (mirrored at the Internet Archive), retrieved October 19, 2026. Federal court filings are public records.
Document text
19 page(s), 61,694 characters, converted from the PDF's text layer · plain text.
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Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 1 of 19 Page ID
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1 LATHAM & WATKINS LLP
Colleen C. Smith (SBN 231216)
2 [email protected]
3 12670 High Bluff Drive
San Diego, CA 92130
4 Telephone: (858) 523-5400
5 Kristin N. Murphy (SBN 268285)
6 [email protected]
650 Town Center Drive, 20th Floor
7 Costa Mesa, CA 92626
Telephone: (714) 540-1235
8
Counsel for Defendants Sable Offshore Corp.,
9 James C. Flores, and Gregory D. Patrinely
10
UNITED STATES DISTRICT COURT
11 CENTRAL DISTRICT OF CALIFORNIA
12
TRACY JOHNSON, Individually and on
13 behalf of all others similarly situated, Case No. 2:25-cv-06869-SVW-PVC
14 DEFENDANTS SABLE OFFSHORE
Plaintiff, CORP., JAMES C. FLORES, AND
15 GREGORY D. PATRINELY’S
v. REPLY IN SUPPORT OF MOTION
16 TO DISMISS SECOND AMENDED
SABLE OFFSHORE CORP., JAMES C. CLASS ACTION COMPLAINT
17
FLORES, and GREGORY D. CLASS ACTION
18 PATRINELY,
19 Defendants. Judge: Hon. Stephen V. Wilson
20 Hearing Date: February 9, 2026
Time: 1:30 p.m.
21
22
23
24
25
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27
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CASE NO. 2:25-cv-06869-SVW-PVC
ATTORNEYS AT LAW
DEFENDANTS’ REPLY IN SUPPORT OF MOTION
TO DISMISS SECOND AMENDED COMPLAINT
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1 TABLE OF CONTENTS
2
Page
3
I. INTRODUCTION .......................................................................................... 1
4
II. ARGUMENT ................................................................................................. 1
5
6 A. The Opposition Confirms No Falsity................................................... 1
7 1. No Falsity for Restart Statements (Stmts. 1, 2, 5, 8,
11) .............................................................................................. 1
8
9 2. No Falsity for Repair & Permit Statements (Stmts.
3, 10, 12-15) ............................................................................... 4
10
3. No Falsity for Litigation Opinions (Stmts. 7, 15-
11
18) .............................................................................................. 5
12
4. No Falsity for Hunterbrook Opinion (Stmt. 19) ........................ 6
13
B. The Opposition Confirms No Scienter ................................................ 7
14
15 1. Plaintiffs Do Not Establish a Core Operations
Inference .................................................................................... 8
16
2. Plaintiffs Do Not Plead Knowledge of Contrary
17
Information ................................................................................ 9
18
3. Plaintiffs Do Not Plead Particularized Motive .......................... 9
19
20 4. The More Compelling Inference is Good Faith ...................... 10
21 C. The Opposition Confirms No Loss Causation ................................... 11
22 III. CONCLUSION ............................................................................................ 12
23
24
25
26
27
28
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1 TABLE OF AUTHORITIES
2
Page(s)
3
CASES
4
Anshen v. Facebook,
5
2017 WL 5635021 (C.D. Cal. Oct. 4, 2017) .................................................. 9, 11
6
Bray v. Rocket Lab USA, Inc.,
7 2025 WL 3688815 (C.D. Cal. Nov. 7, 2025) ................................................... 7, 8
8
Brody v. Transitional Hosps. Corp.,
9 280 F.3d 997 (9th Cir. 2002) ................................................................................ 2
10 Bueno v. St. Jude Med., Inc.,
11 2013 WL 12142536 (C.D. Cal. Sept. 24, 2013) ................................................... 1
12 Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc.,
63 F.4th 747 (9th Cir. 2023) ............................................................................. 4, 7
13
14 Glazer Cap. Mgmt., LP v. Magistri,
549 F.3d 736 (9th Cir. 2008) ................................................................................ 5
15
Habelt v. iRhythm Techs., Inc.,
16
2022 WL 971580 (N.D. Cal. Mar. 31, 2022) ..................................................... 11
17
Hershewe v. JOYY Inc.,
18 2021 WL 6536670 (C.D. Cal. Nov. 5, 2021) ....................................................... 8
19
In re BofI Holding, Inc. Sec. Litig.,
20 977 F.3d 781 (9th Cir. 2020) .............................................................................. 12
21 In re Daou Sys. Inc.,
22 411 F.3d 1006 (9th Cir. 2005) .............................................................................. 7
23 In re Dermtech, Inc. Sec. Litig.,
24 2024 WL 4941026 (S.D. Cal. Dec. 2, 2024) ...................................................... 10
25 In re Dermtech, Inc. Sec. Litig.,
2025 WL 1618193 (S.D. Cal. June 5, 2025) ........................................................ 3
26
27 In re Herbalife, Ltd. Sec. Litig.,
2015 WL 12732428 (C.D. Cal. Mar. 27, 2015) ................................................. 12
28
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TO DISMISS SECOND AMENDED COMPLAINT
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1 In re NVIDIA Corp. Sec. Litig.,
2 768 F.3d 1046 (9th Cir. 2014) .............................................................................. 8
3 In re PG&E Corp. Sec. Litig.,
2025 WL 2781745 (N.D. Cal. Sept. 30, 2025)..................................................... 5
4
5 In re Semtech Corp.,
2025 WL 2884810 (C.D. Cal. Oct. 7, 2025) ...................................................... 10
6
In re VeriFone Holdings, Inc. Sec. Litig.,
7
704 F.3d 694 (9th Cir. 2012) ................................................................................ 9
8
Loritz v. Exide Techs.,
9 2013 WL 12134142 (C.D. Cal. Dec. 19, 2013) ................................................... 3
10
Maeve Inv. Co. v. Teekay Corp.,
11 2017 WL 5158059 (W.D. Wash. Nov. 7, 2017) .................................................. 8
12 Matrixx Initiatives, Inc. v. Siracusano,
13 563 U.S. 27 (2011) ............................................................................................... 2
14 Mihaylov v. Tattooed Chef, Inc.,
2024 WL 6901294 (C.D. Cal. Dec. 11, 2024) ..................................................... 8
15
16 N.M. State Inv. Council v. Ernst & Young LLP,
641 F.3d 1089 (9th Cir. 2011) .............................................................................. 9
17
18 Nguyen v. Radient Pharms. Corp.,
2011 WL 13141630 (C.D. Cal. Oct. 26, 2011) .................................................. 10
19
Okla. Firefighters Pension & Ret. Sys. v. Ixia,
20 50 F. Supp. 3d 1328 (C.D. Cal. 2014) .................................................................. 4
21
Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund,
22 575 U.S. 175 (2015) ............................................................................................. 4
23 Petersen v. Stem, Inc.,
24 2024 WL 4602710 (N.D. Cal. Aug. 30, 2024) ..................................................... 6
25 Prodanova v. H.C. Wainwright & Co.,
26 LLC, 993 F.3d 1097 (9th Cir. 2021) .................................................................. 10
27 Rok v. Identiv, Inc.,
2017 WL 35496 (N.D. Cal. Jan. 7, 2017) .......................................................... 11
28
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1 Rubke v. Capitol Bancorp Ltd.,
2 551 F.3d 1156 (9th Cir. 2009) .......................................................................... 5, 6
3 Sneed v. Talphera, Inc.,
147 F.4th 1123 (9th Cir. 2025) ............................................................................. 9
4
5 South Ferry LP v. Killinger,
542 F.3d 776 (9th Cir. 2008) ................................................................................ 9
6
Stephens v. Maplebear Inc.,
7
2025 WL 1359125 (N.D. Cal. May 9, 2025) ....................................................... 7
8
Studen v. Funko, Inc.,
9 2024 WL 2209686 (W.D. Wash. May 16, 2024) ................................................. 7
10
Tapia v. Wells Fargo Bank, N.A.,
11 2015 WL 4650066 (C.D. Cal. Aug. 4, 2015) ....................................................... 5
12 Thant v. Rain Oncology Inc.,
13 2025 WL 588994 (N.D. Cal. Feb. 24, 2025) ........................................................ 2
14 Webb v. Solarcity Corp.,
884 F.3d 844 (9th Cir. 2018) .......................................................................... 9, 10
15
16 Welgus v. Trinet Grp., Inc.,
2017 WL 6466264 (N.D. Cal. Dec. 18, 2017) ..................................................... 3
17
18 Yaron v. Intersect ENT, Inc.,
2020 WL 6750568 (N.D. Cal. June 19, 2020) ................................................... 12
19
Zucco Partners, LLC v. Digimarc Corp.,
20 552 F.3d 981 (9th Cir. 2009) .............................................................................. 11
21
STATUTES
22
15 U.S.C. § 78u-4(b)(1) ............................................................................................. 1
23
24 RULES
25 Fed. R. Civ. P. 9(b) .................................................................................................. 11
26 17 C.F.R. 240.10b-5(b) .............................................................................................. 2
27
28
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1 I. INTRODUCTION
2 Plaintiffs’ Opposition confirms that the Complaint fails to state a claim.
3 Plaintiffs abandon the Complaint’s core theory of fraud, conceding that Sable’s
4 report that it had “begun flowing oil production” at the beginning of the Class Period
5 was accurate. Plaintiffs also do not respond to multiple, reinforcing arguments
6 explaining why none of the Complaint’s alleged misstatements is actionable under
7 established PSLRA authorities. Indeed, Plaintiffs fail to even address more than
8 thirty cases Defendants cited, including seventeen published Ninth Circuit opinions.
9 For scienter, Plaintiffs rely primarily on an argument that scienter is inferred
10 because the statements relate to Sable’s “core operations”—a theory the Complaint
11 does not plead—and on generic motive allegations. Courts routinely reject the
12 speculative, abstract scienter arguments Plaintiffs offer.
13 For loss causation, Plaintiffs agree that they must plead “that the decline in
14 stock price was proximately caused by a revelation of fraudulent activity.” Opp. 21.
15 But they do not argue that any fraud was revealed on any date.
16 II. ARGUMENT
17 A. The Opposition Confirms No Falsity
18 1. No Falsity for Restart Statements (Stmts. 1-2, 5, 8, 11)
19 Plaintiffs originally alleged that statements that Sable “restarted production”
20 in May 2025 were false because “Sable had not restarted oil production.” ¶¶ 63, 69.
21 Plaintiffs now concede that these statements may be “literally true.” Opp. 6. So
22 Plaintiffs pivoted to two theories of falsity that do not appear in the Complaint: that
23 Sable’s oil flow was “nothing more than a minor, mandatory test,” id. 4; and that
24 Sable’s statements created a “false impression” that it would “imminently begin
25 selling oil,” id. 6. Under the PSLRA, which requires the “complaint” to specify “the
26 reason or reasons why the statement is misleading,” these new theories are
27 impermissible. 15 U.S.C. § 78u-4(b)(1); see Bueno v. St. Jude Med., Inc., 2013 WL
28 12142536, at *3 (C.D. Cal. Sept. 24, 2013) (“It is axiomatic that a complaint may
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1 not be amended by briefs in opposition to a motion to dismiss.”).
2 In any event, the new theories also fail on the merits. Plaintiffs source their
3 claim that Sable’s oil flow was just a “minor” test to Lt. Governor Kounalakis, who
4 wrote that she was “informed” by her staff that the oil flow was “the result of well-
5 testing procedures.” ¶ 72. Even if the Court credited this pleading method, Plaintiffs
6 identify no contradiction with what was disclosed. Sable told investors that it had
7 been “testing wells … throughout May 2025.” Ex. 7 at 429. It also reported that it
8 “initiated the flow of oil production from six wells” at a rate of “~6,000 barrels of
9 oil per day,” id., consistent with the Kounalakis letter, which went on to confirm that
10 Sable had “initiat[ed] … oil flow through the offshore pipeline,” ¶ 72.
11 Plaintiffs also allege that Sable’s statements created a “false impression” that
12 it would “imminently begin selling oil.” Opp. 6. Plaintiffs cannot explain how
13 statements that Sable initiated oil flow to a storage facility created a misleading
14 impression about the future.1 The theory has three flaws.
15 First, Plaintiffs would create a disclosure standard under which public
16 companies like Sable cannot report a factual development without discussing a host
17 of additional details about the status of repairs, testing, permits, approvals, and
18 litigation. Opp. 4-5. This is not the law. “[Section] 10(b) and Rule 10b–5(b) do not
19 create an affirmative duty to disclose any and all material information.” Matrixx
20 Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44-45 (2011); see Brody v. Transitional
21 Hosps. Corp., 280 F.3d 997, 1005 (9th Cir. 2002) (“Often, a statement will not
22 mislead even if it is incomplete…”). “[S]ilence, absent a duty to disclose, is not
23 1
By contrast, Statements 4 and 9 are forward-looking statements about Sable’s
24 projected oil production and sales timeline. Plaintiffs state, with no analysis, that
these and other forward-looking statements are actionable, but they do not dispute
25 that both independent prongs of the PSLRA safe harbor are met for each statement,
Mot. 10-12. See Opp. 14 n.6 (citing Thant v. Rain Oncology Inc., 2025 WL 588994,
26 at *6 (N.D. Cal. Feb. 24, 2025)). Thant did not even address the safe harbor, instead
holding that statements about a Phase 3 drug trial were misleading for omitting that
27 the drug did not meet consensus criteria to bypass Phase 2. 2025 WL 588994, at *6.
To the extent Plaintiffs meant to analogize to the portion of the May 19 Press
28 Release’s title about “Anticipated Oil Sales,” that relates to Statement 4 in the body
of the Press Release and is likewise a protected forward-looking statement.
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1 misleading …” Loritz v. Exide Techs., 2013 WL 12134142, at *1 (C.D. Cal. Dec.
2 19, 2013) (Wilson, J.) (citation omitted).
3 Second, Plaintiffs do not identify any material information that was concealed.
4 Sable disclosed at the time that it had “testing” to finish and “permits” to obtain, Ex.
5 7 at 429-30, it disclosed disputes involving the Coastal Commission, Fire Marshal,
6 and Water Board, Ex. 8 at 446-48, 450-52, and once it believed it completed repairs
7 under the Consent Decree, it disclosed that to investors, too, Ex. 7 at 429.
8 Third, even if Sable was “triumphant[]” and “excited” as it spoke about this
9 development and its “prospects for the future,” Opp. 4; Ex. 7 at 429, that is not
10 securities fraud. Plaintiffs may contend that the tone was too optimistic given
11 regulatory roadblocks, but they cannot base their claim on a theory that “suggests
12 that ‘every General who has lost a battle was making false statements saying that
13 they were going to win the battle.’” Welgus v. Trinet Grp., Inc., 2017 WL 6466264,
14 at *11 (N.D. Cal. Dec. 18, 2017). And Sable never said that it was going to “win the
15 battle.” It warned that “initial timing and production estimates” were “for illustrative
16 purposes only” and “inherently uncertain due to a number of factors outside Sable’s
17 control.” Ex. 7 at 430-431; see Ex. 8 at 456 (“no assurance that we will be successful
18 in satisfying the remainder of the requirements”), 459.2 That commercial restart was
19 later delayed, as warned, is irrelevant.
20 This is not a case where Plaintiffs and Defendants offer competing
21 interpretations. Opp. 6-7.3 Viewing the language of the restart statements in context,
22 see id. 6, confirms they are not actionable.4
23
2
24 These disclosures contradict Plaintiffs’ baseless accusations that Sable told
investors “state and local regulators could be safely ignored,” Opp. 1, and merely
25 disclosed “general warnings that the Company’s plans might not succeed,” id. 7.
3
26 See In re Dermtech, Inc. Sec. Litig., 2025 WL 1618193, at *4 (S.D. Cal. June 5,
2025) (finding falsity adequately pleaded based on competing “plausible theories
27 about how a reasonable investor would interpret ‘broader payer coverage’”).
4
Plaintiffs also do not dispute that documents attached to the Motion are subject to
28 judicial notice or incorporated by reference. Opp. 3 n.2. A number of these
contradict the conclusory allegations and drafting errors in the Complaint.
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1 2. No Falsity for Repair & Permit Statements (Stmts. 3, 10, 12-15)
2 Plaintiffs argue that Statements 3, 10, and 12-15—about Sable’s belief that it
3 had completed repairs required by the Consent Decree and did “permitted” work—
4 are not opinions. But Plaintiffs provide no support for their say-so that these were
5 “not opinions.” Opp. 9. They do not contest that opinion statements “reflect the
6 speaker’s assessment” of underlying facts and often require the “weighing of
7 competing facts,” Mot. 14, 16, which perfectly captures Sable’s assessment that it
8 had completed repairs required by a complex legal document, including those that
9 the County confirmed were “authorized by the existing permits” it previously issued.
10 Plaintiffs do not argue that the opinions were not subjectively believed or that
11 they contained any misrepresented facts. See Omnicare, Inc. v. Laborers Dist.
12 Council Constr. Indus. Pension Fund, 575 U.S. 175, 185-91 (2015). Instead,
13 Plaintiffs argue that if these statements are opinions, they are actionable because
14 they did not “‘fairly align’ with information Defendants possessed at the time they
15 made the statements,” purportedly under the third Omnicare prong. Opp. 10 (citing
16 Glazer Cap. Mgmt., L.P. v. Forescout Techs., Inc., 63 F.4th 747, 771 (9th Cir. 2023)).
17 For statements that Sable had completed repairs in May (Stmts. 3, 10, 13-15),
18 Plaintiffs offer no analysis of what information contradicted these statements.
19 Plaintiffs repeat that the Fire Marshal said (in October) that it “identified” an unmet
20 requirement, Opp. 9, but do not contest that the Complaint fails to plead facts about
21 the state of play when Sable made the statements, Mot. 15. Plaintiffs also concede
22 that the Complaint contains insufficient details about the Fire Marshal letter, which
23 Plaintiffs improperly try to remedy by citing a link to the letter. See Opp. 8 n.3; see
24 also Okla. Firefighters Pension & Ret. Sys. v. Ixia, 50 F. Supp. 3d 1328, 1350 (C.D.
25 Cal. 2014) (“Plaintiffs cannot utilize the documents to amend the complaint and
26 defeat defendants’ motions to dismiss.”). Thus, even if Statements 3, 10, and 13-15
27 are analyzed under falsity standards for non-opinion statements, they come up short.
28 Plaintiffs focus on Statement 12, that all Sable’s work was “fully permitted
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1 and approved.” Opp. 9. Their basis for arguing that this was false (or, if it is an
2 opinion, actionable) is repeating the positions of the Water Board and the Coastal
3 Commission—ignoring that for the latter, Sable spoke based on the County’s
4 confirmation that “repair work is authorized by the existing permits.” Mot. 16
5 (citing Ex. 4 at 327). But even the allegedly contrary “information Defendants
6 possessed at the time” was disclosed to investors, so it is unclear what Plaintiffs
7 claim was omitted. See Ex. 8 at 446-47 (disclosing the Coastal Commission cease
8 and desist order); id. at 450 (disclosing the Water Board’s notices of violation). See
9 Rubke v. Capitol Bancorp, Ltd., 551 F.3d 1156, 1163 (9th Cir. 2009) (it is “pointless
10 and costly to compel firms to reprint information already in the public domain.”).
11 Plaintiffs rely on inapt cases analyzing statements about compliance with
12 specific laws and regulations, which did not address whether statements were
13 opinions under the Omnicare framework. Opp. 9.5 And none addressed situations
14 like Sable’s, where it not only assessed competing facts associated with a complex
15 permitting scheme but also made the bases for its opinions clear to the public.
16 3. No Falsity for Litigation Opinions (Stmts. 7, 15-18)
17 For Statements 7 and 15-18, Plaintiffs mostly paraphrase the Complaint (and
18 make no argument at all about Statement 6).6 Opp. 10-12. Plaintiffs cite no cases
19 holding that positive comments about ongoing litigation were securities fraud, and
20 fail to address cases where courts dismissed similar statements (including near-
21 identical statements that litigation was “without merit”). Mot. 14, 15 n.6.
22 Plaintiffs argue in conclusory fashion that if these statements are opinions, the
23 opinions again did not “‘fairly align’ with information Defendants possessed at the
24
5
See, e.g., Glazer Cap. Mgmt., LP v. Magistri, 549 F.3d 736, 742 (9th Cir. 2008)
25 (specific allegations by SEC that company violated securities laws); In re PG&E
26 complianceLitig.,
Corp. Sec. 2025 WL 2781745, at *17 (N.D. Cal. Sept. 30, 2025) (regulatory
statements were allegedly contradicted by “thousands of violations,” and
27 6no government agencies told company that it was in compliance with the law).
The Opposition does not address (and thus concedes) that Statements 6 and 7 are
28 puffery. “[A]ny objection to the motion to dismiss” these statements is “waived.”
Tapia v. Wells Fargo Bank, N.A., 2015 WL 4650066, at *2 (C.D. Cal. Aug. 4, 2015).
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1 time they made the statements” under the third Omnicare prong. Opp. 12. Here too
2 Plaintiffs fail to “adequately identify the information they assert did not align with
3 the defendants’ representations.” Petersen v. Stem, Inc., 2024 WL 4602710, at *9
4 (N.D. Cal. Aug. 30, 2024). If it is the court rulings themselves, they were “in the
5 public domain,” Rubke, 551 F.3d at 1163, for investors to assess.
6 Statements about the expected impact of the Coastal Commission litigation
7 rulings (Stmts. 15, 17-18) were not misleading because Sable had announced it had
8 already completed its repairs. Mot. 14. Plaintiffs argue that the Coastal Commission
9 rulings also stopped “ongoing maintenance” but fail to plead any outstanding
10 maintenance work or even how maintenance differs from repairs. Opp. 11. As Sable
11 explained in the very statement Plaintiffs challenge, the May 28 preliminary
12 injunction was about “maintenance and repair” work, and “[a]s of this morning, that
13 work … has been successfully completed.” ¶ 81 (emphasis added). For the opinion
14 that the June 3 State Waivers TRO would not impact Sable’s “preparations for
15 restarting the flow of oil,” ¶ 81 (emphasis added), the Opposition has nothing to offer
16 except that the accurate statement was “too cute by half.” Opp. 11. There is nothing
17 “cute” about examining the text of a statement to determine whether Plaintiffs have
18 plausibly pleaded that it misled investors, and this one did not.
19 4. No Falsity for Hunterbrook Opinion (Stmt. 19)
20 Plaintiffs do not challenge that Statement 19—Sable’s comment to
21 Hunterbrook that “based upon information provided to us we believe that the alleged
22 recording was either AI generated or otherwise altered”—is a pure opinion statement
23 subject to the Omnicare framework. Plaintiffs’ Complaint fails to plead with
24 particularity that (1) the speaker did not hold the opinion at the time it was offered,
25 (2) the statement contained an embedded false statement, or (3) the statement
26 omitted a material fact. Mot. 13-14 (citing Stmt. 19), 16 (citing ¶¶ 90-91). Plaintiffs’
27 entire allegation of falsity is that “contrary to Defendants’ representations, the
28 Hunterbrook report” was, according to Plaintiffs, “accurate[].” ¶ 91. This allegation
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1 pleads nothing about the unidentified Sable speaker’s belief about the alleged
2 recording in the Hunterbrook report and pleads no facts to undercut the speaker’s
3 belief that the recording was not authentic.
4 As with the other opinions, Plaintiffs concede in the Opposition that the
5 Complaint fails to plead facts to support liability under the first or second Omnicare
6 prongs. It instead argues the third “omissions” prong is met because the statement
7 “implies that Defendants conducted an investigation” into the recording when they
8 allegedly had not. Opp. 13. But the Complaint pleads no facts as to whether an
9 investigation was conducted, rendering the Opposition pure hypothesis. See
10 Stephens v. Maplebear Inc., 2025 WL 1359125, at *6 (N.D. Cal. May 9, 2025)
11 (rejecting similar omissions theory where plaintiffs have not “pled much about the
12 investigation that Instacart executives did or did not conduct when forming those
13 opinions”). Plaintiffs also suggest that the opinion on the recording was somehow
14 “false” because Sable announced days later that its Board formed a Special
15 Committee to investigate the Hunterbrook report’s allegations. Opp. 13. But even
16 if Statement 19 “reflected facts that later proved untrue,” about the recording, “‘an
17 investor cannot state a claim by alleging only that an opinion was wrong.’” Studen
18 v. Funko, Inc., 2024 WL 2209686, at *15 (W.D. Wash. May 16, 2024) (“[T]he words
19 ‘I believe’ themselves admit [] that possibility, thus precluding liability for an untrue
20 statement of fact.”).
21 B. The Opposition Confirms No Scienter
22 Plaintiffs misstate the scienter standard and cite law that has been overruled.
23 It is no longer the case that falsity and scienter “are generally strongly inferred from
24 the same set of facts” or that the PSLRA allows a “unitary inquiry.” Opp. 14 (citing
25 In re Daou Sys. Inc., 411 F.3d 1006, 1015 (9th Cir. 2005)); see Forescout Techs., 63
26 F.4th at 766 (noting that “the combined approach” in Daou “was abrogated by
27 subsequent Supreme Court decisions”). Rather, scienter must be independently
28 pleaded “with particularity ‘with respect to each act or omission.’” Bray v. Rocket
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1 Lab USA, Inc., 2025 WL 3688815, at *2 (C.D. Cal. Nov. 7, 2025).
2 1. Plaintiffs Do Not Establish a Core Operations Inference
3 Because the Complaint does not allege specific facts showing scienter,
4 Plaintiffs pivot in the Opposition to arguing that scienter may be imputed because
5 the statements at issue concern Sable’s “core operations.” Opp. 14-16. The Court
6 may disregard this theory because the Complaint does not plead it. See Hershewe v.
7 JOYY Inc., 2021 WL 6536670, at *10 (C.D. Cal. Nov. 5, 2021) (court “need not
8 consider” a “core operations” theory first introduced in the opposition brief).
9 In any event, “absent some additional allegation of specific information
10 conveyed to management and related to the fraud or other allegations supporting
11 scienter, the core operations inference will generally fall short.” In re NVIDIA Corp.
12 Sec. Litig., 768 F.3d 1046, 1063 (9th Cir. 2014) (internal quotation marks omitted).
13 Plaintiffs do not argue that the Complaint pleads such allegations. They argue
14 instead that it would be “absurd” to suggest Sable’s CEO and CFO lacked
15 knowledge of information that contradicted public statements, because the Santa
16 Ynez Unit was “Sable’s only assets” and “determined the fate of the Company.”
17 Opp. 15. Courts repeatedly reject an “absurdity” theory merely because a company’s
18 existence depends on one product or business line. See NVIDIA, 768 F.3d at 1064
19 (rejecting core operations despite defect in “flagship product”); Mihaylov v.
20 Tattooed Chef, Inc., 2024 WL 6901294, at *7 (C.D. Cal. Dec. 11, 2024) (rejecting
21 theory that company “only had one business segment” so “everyone would have
22 been aware of, or recklessly disregarded, everything that related to that” segment).
23 The Complaint is also deficient because it “fails to specify exactly what the
24 ‘relevant fact’ is that it would be absurd to suggest that [] management was unaware
25 of.” Maeve Inv. Co. v. Teekay Corp., 2017 WL 5158059, at *5 (W.D. Wash. Nov.
26 7, 2017). Plaintiffs argue only the Individual Defendants must have known about
27 “repair, maintenance, and regulatory hurdles of the pipelines” and “progress and
28 setbacks in obtaining regulatory approvals” in the six-month Class Period. Opp. 15,
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1 16. The Ninth Circuit rejects allegations of imputed knowledge of far more specific
2 “relevant facts.” See Webb v. Solarcity Corp., 884 F.3d 844, 857 (9th Cir. 2018) (no
3 “alleged facts supporting the inference” that an accounting error “was so dramatic
4 that it would be absurd” to conclude Defendants “did not know that something was
5 wrong”). Plaintiffs’ citations show extreme, specific “relevant facts” not present
6 here. Opp. 15-16 (citing cases alleging, e.g., one of company’s three revenue
7 streams collapsed; thousands of regulatory violations that could bankrupt company;
8 important agreement CEO was briefed on, with no core operations). See also Sneed
9 v. Talphera, Inc., 147 F.4th 1123, 1134 (9th Cir. 2025) (core operations applies only
10 where falsity of the challenged statements “is patently obvious”).
11 This Court should reject the “exceedingly rare” core operations theory, South
12 Ferry LP v. Killinger, 542 F.3d 776, 786 n.3 (9th Cir. 2008), as it has done in the
13 past, see Anshen v. Facebook, 2017 WL 5635021, at *3 (C.D. Cal. Oct. 4, 2017).
14 2. Plaintiffs Do Not Plead Knowledge of Contrary Information
15 Scienter is sometimes pleaded by specific allegations of contemporaneous
16 reports or data that contradict public statements and that Defendants had “access”
17 to. Opp. 16-17 (citing cases). The Court may easily disregard this argument here,
18 because Plaintiffs do not allege what reports or data existed, let alone that any
19 Defendant had access to them. See also In re VeriFone Holdings, Inc. Sec. Litig.,
20 704 F.3d 694, 708-709 (9th Cir. 2012) (specific facts that executives made
21 “accounting adjustments”); N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d
22 1089, 1095-96 (9th Cir. 2011) (auditor’s knowledge of backdated option). Plaintiffs
23 do not dispute that an executive’s title or involvement in operations does not support
24 scienter, or that the Complaint lacks scienter allegations for Patrinely. Mot. 18.7
25 3. Plaintiffs Do Not Plead Particularized Motive
26 A complaint cannot rely on “mere motive and opportunity” but Plaintiffs
27
7
28 Plaintiffs also abandon the theory that the Hunterbrook Short Report supports
scienter, and have therefore waived that argument.
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1 boldly state “Defendants Had Motive and Opportunity to Commit Fraud.” Opp. 17.
2 Plaintiffs hypothesize an exception to well-established Ninth Circuit law that
3 conducting an equity offering does not show scienter, because they argue that Sable
4 was in “existential cris[i]s.” Opp. 18. There is no such exception. Countless cases
5 rejecting theories of scienter based on “routine corporate objectives” also note the
6 importance of a company’s stock offering to its ongoing existence. See Webb, 884
7 F.3d at 854 (“successful IPO” was allegedly needed “to generate badly needed
8 cash”); In re Dermtech, Inc. Sec. Litig., 2024 WL 4941026, at *12 (S.D. Cal. Dec.
9 2, 2024) (offering was “critical to ‘ke[ep] the lights on’” and “avoid bankruptcy”).
10 Plaintiffs’ citations are not to the contrary. In In re Semtech Corp., the court
11 agreed that an alleged desire to conduct a stock offering to solve a debt problem that
12 had become an “existential threat” would not “without more” show a strong
13 inference of scienter. 2025 WL 2884810, at *10 (C.D. Cal. Oct. 7, 2025). The court
14 found scienter pleaded only through additional facts that a director suspiciously
15 resigned just before, and the company changed its public statements soon after, the
16 offering. Id. In Nguyen v. Radient Pharms. Corp., 2011 WL 13141630, at *6 (C.D.
17 Cal. Oct. 26, 2011) (which predated Webb), the plaintiffs pleaded that the company
18 was “in litigation with investors for either being in default or breach of its financing
19 obligations” and announced a clinical study that did not exist days before the
20 company completed its “largest offering ever.” Id. at *1-2, *6.
21 As Plaintiffs do not dispute, “the lack of a plausible motive certainly makes it
22 much less likely that a plaintiff can show a strong inference of scienter.” Prodanova
23 v. H.C. Wainwright & Co., 993 F.3d 1097, 1108 (9th Cir. 2021).
24 4. The More Compelling Inference is Good Faith
25 Plaintiffs argue that “Defendants fail to offer any competing non-fraudulent
26 inference” and disregarded the Court’s duty to conduct a “holistic” review, Opp. 14,
27 19. Neither is true. See Mot. 19-20.
28 Plaintiffs posit that the “more plausible inference is that Sable repeatedly
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1 misled investors and state regulators in a desperate attempt to keep the Company
2 afloat until it could be saved by the federal government,” Opp. 21, as if it is plausible
3 that Sable knew how the federal government would later act.8 See Habelt v. iRhythm
4 Techs., Inc., 2022 WL 971580, at *16-18 (N.D. Cal. Mar. 31, 2022) (rejecting
5 “guiding theory of the entire complaint” that “Defendants had knowledge that their
6 efforts” in an “unpredictable” regulatory process were “destined to fail”); see also
7 Anshen, 2017 WL 5635021, at *3 (rejecting that “Facebook hires smart people so a
8 mistake of this magnitude can be explained only by intentional fraud”). Plaintiffs
9 cannot infer fraud based on the fact that Sable at times disagreed with its litigation
10 adversaries, defended its positions, and offered the public its opinions on the
11 expected impact of court rulings. Opp. 20-21.
12 “[A] comprehensive perspective … cannot transform a series of inadequate
13 allegations into a viable inference of scienter.” Zucco Partners, LLC v. Digimarc
14 Corp., 552 F.3d 981, 1008 (9th Cir. 2009).
15 C. The Opposition Confirms No Loss Causation
16 The Opposition does not try to defend the Complaint’s wholesale failure to
17 map the connections between the nineteen alleged misstatements and six corrective
18 disclosures. Nor does it address the absence of pleaded facts that certain disclosures
19 were even publicized during the trading day for which the Complaint asserts a loss.
20 Instead of responding to arguments why each corrective disclosure fails to meet the
21 pleading standards, the Opposition once again merely repeats quotes from the
22 Complaint. Opp. 22-23. Rule 9(b) demands more than res ipsa loquitur.
23 May 28 Letter: While it is true that a corrective disclosure may sometimes
24 originate from a “knowledgeable third part[y]” like a “reporter” or “whistleblower,”
25
8
26 Plaintiffs argue that Sable “misled the Water Board” about “waste discharges,”
Opp. 18-21; ¶¶ 51-56, but the “facts alleged must support an inference of an intent
27 to defraud the plaintiffs rather than some other group.” Rok v. Identiv, Inc., 2017 WL
35496, at *11 (N.D. Cal. Jan. 7, 2017). Moreover, the Complaint pleads that Sable
28 acknowledged to the Water Board certain incorrect determinations, ¶ 56, a perfect
example of the non-fraudulent “engaging with regulators” discussed in the Motion.
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1 Opp. 22, Plaintiffs do no work to explain how the criticism of a politician meets the
2 legal standards for loss causation. See, e.g., In re Herbalife, Ltd. Sec. Litig., 2015
3 WL 12732428, at *7 (C.D. Cal. Mar. 27, 2015) (senator “communicating concerns
4 about Herbalife’s practices” did not “constitute a corrective disclosure”).
5 May 28, June 3, October 15 Rulings: Plaintiffs do not explain how temporary,
6 forward-looking orders in litigation involving complex administrative issues made
7 “the truth bec[o]me known” about more than a dozen alleged misstatements. In re
8 BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 790 (9th Cir. 2020).
9 November 4 Vote: Recognizing that the Supervisors’ vote does not qualify
10 as a traditional disclosure, Plaintiffs instead argue that it “was a materialization of
11 the risk of Sable’s repeated dishonest interactions with regulators.” Opp. 23-24.
12 This theory requires pleading that Defendants concealed risks—not that disclosed
13 risks came to pass. See Yaron v. Intersect ENT, Inc., 2020 WL 6750568, at *8 (N.D.
14 Cal. June 19, 2020). The Complaint does not allege how Sable’s regulatory
15 “strategy”—which played out in public fora—was somehow concealed. Sable also
16 repeatedly disclosed that it depended on “numerous other governmental authorities”
17 approval and that it might “be unable to obtain required permits.” Ex. 8 at 457, 459.
18 That a disclosed risk came to pass is not loss causation.
19 October 31 and November 3 News: Plaintiffs ignore that the announcement
20 of an investigation, without more, cannot serve as a corrective disclosure in the Ninth
21 Circuit. See Mot. 23-24. They argue that a short-seller report is not barred from
22 being a corrective disclosure, but disregard Ninth Circuit authorities rejecting loss
23 causation allegations based on reports by self-interested short-sellers that are not
24 plausibly perceived by the market as “revealing the falsity of [] prior misstatements.”
25 In re BofI, 977 F.3d at 797. Plaintiffs do not otherwise explain how the alleged
26 disclosure of Sable’s alleged new equity raising goals corrected any prior statements.
27 III. CONCLUSION
28 The Complaint should be dismissed with prejudice.
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1 Dated: January 26, 2026 Respectfully submitted,
2 LATHAM & WATKINS LLP
3 By: /s/ Kristin N. Murphy
Kristin N. Murphy (SBN 268285)
4 650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626
5 Telephone: (714) 540-1235
6 Email: [email protected]
7 Colleen C. Smith (SBN 231216)
12670 High Bluff Drive
8 San Diego, CA 92130
Telephone: (858) 523-5400
9 Email: [email protected]
10 Counsel for Defendants
Sable Offshore Corp., James C.
11 Flores, and Gregory D. Patrinely
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1 CERTIFICATE OF COMPLIANCE
2 The undersigned counsel of record for Defendants Sable Offshore Corp.,
3 James C. Flores, and Gregory D. Patrinely certifies that this brief contains 12 pages,
4 which:
5 __ complies with the word limit of L.R. 11-6.1.
6 X complies with the page limit set by court order dated August 4, 2025 (Dkt.
7 No. 10).
8
9 Dated: January 26, 2026 By: /s/ Kristin N. Murphy
Kristin N. Murphy (SBN 268285)
10 650 Town Center Drive, 20th Floor
11 Costa Mesa, CA 92626
Telephone: (714) 540-1235
12 Email: [email protected]
13 Colleen C. Smith (SBN 231216)
12670 High Bluff Drive
14 San Diego, CA 92130
Telephone: (858) 523-5400
15 Email: [email protected]
16 Counsel for Defendants
17 Sable Offshore Corp., James C.
Flores, and Gregory D. Patrinely
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CASE NO. 2:25-cv-06869-SVW-PVC
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