Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 1 of 19 Page ID #:2151 1 LATHAM & WATKINS LLP Colleen C. Smith (SBN 231216) 2 colleen.smith@lw.com 3 12670 High Bluff Drive San Diego, CA 92130 4 Telephone: (858) 523-5400 5 Kristin N. Murphy (SBN 268285) 6 kristin.murphy@lw.com 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 26 27 28 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 2 of 19 Page ID #:2152 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW i DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 3 of 19 Page ID #:2153 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW ii DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 4 of 19 Page ID #:2154 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW iii DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 5 of 19 Page ID #:2155 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW iv DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 6 of 19 Page ID #:2156 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 1 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 7 of 19 Page ID #:2157 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. CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 2 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 8 of 19 Page ID #:2158 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. CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 3 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 9 of 19 Page ID #:2159 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 4 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 10 of 19 Page ID #:2160 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). CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 5 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 11 of 19 Page ID #:2161 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 6 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 12 of 19 Page ID #:2162 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 7 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 13 of 19 Page ID #:2163 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, CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 8 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 14 of 19 Page ID #:2164 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. CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 9 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 15 of 19 Page ID #:2165 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 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 10 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 16 of 19 Page ID #:2166 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. CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 11 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 17 of 19 Page ID #:2167 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. CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 12 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 18 of 19 Page ID #:2168 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: kristin.murphy@lw.com 7 Colleen C. Smith (SBN 231216) 12670 High Bluff Drive 8 San Diego, CA 92130 Telephone: (858) 523-5400 9 Email: colleen.smith@lw.com 10 Counsel for Defendants Sable Offshore Corp., James C. 11 Flores, and Gregory D. Patrinely 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 13 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT Case 2:25-cv-06869-SVW-PVC Document 84 Filed 01/26/26 Page 19 of 19 Page ID #:2169 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: kristin.murphy@lw.com 13 Colleen C. Smith (SBN 231216) 12670 High Bluff Drive 14 San Diego, CA 92130 Telephone: (858) 523-5400 15 Email: colleen.smith@lw.com 16 Counsel for Defendants 17 Sable Offshore Corp., James C. Flores, and Gregory D. Patrinely 18 19 20 21 22 23 24 25 26 27 28 CASE NO. 2:25-cv-06869-SVW-PVC ATTORNEYS AT LAW 14 DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS SECOND AMENDED COMPLAINT