author: SEEBORG, District Judge:

text:
    SAFARI CLUB INTERNATIONAL; Joan Whipple, PlaintiffsAppellees, v. Dr. Lawrence P. RUDOLPH, Defendant-Appellant.
    No. 14-56236
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted June 10, 2016, Pasadena, California
    Filed January 18, 2017

      Kenneth M. Argentieri (argued), Duane Morris LLP, Pittsburg, Pennsylvania; Patricia P. Hollenbeck and Heather U. Guerena, Duane Morris LLP, San Diego, California; for Defendant-Appellant.
    Albert C. Nicholson (argued) and Vince M. Verde, Ogletree Deakins Nash Smoak & Stewart P.C., Costa Mesa, California; Joseph J. Nardulli, The Wolf Law Firm, Irvine, California; for Plaintiffs-Appellees.
    Before: JOHNNIE B. RAWLINSON and CARLOS T. BEA, Circuit Judges, and RICHARD SEEBORG, District Judge.

       The Honorable Richard Seeborg, United States District Judge for the Northern District of California, sitting by designation.

   OPINION

SEEBORG, District Judge:

Dr. Lawrence P. Rudolph is an award-winning hunter who made his way to the top of Safari Club International (“SCI”), a sport hunting and wildlife conservation organization. Following his term at the helm, various SCI members accused him of official misconduct, stripped him of his awards, and then exiled him permanently from the association. That’s when the season opened. Rudolph sued SCI and its president, his friend, John Whipple, whom he assured was named only by virtue of his position at the head of the organization. With his quarry in sight, Rudolph lured Whipple to lunch, brought up the pending litigation, recorded the conversation surreptitiously, and then posted it on YouTube for public consumption.

Outraged, Whipple and SCI fired back at Rudolph with a barrage of legal claims, including statutory invasion of privacy, negligence per se, and common law invasion of privacy. The district court granted Rudolph’s motion to strike under California’s anti-SLAPP statute as to four claims for relief, but denied the motion as to these privacy claims, finding plaintiffs had demonstrated a reasonable probability of prevailing on the merits. On appeal, Rudolph seeks to line up the perfect shot, arguing all three claims must fail because there can be no objectively reasonable expectation of confidentiality in a conversation that occurs in a public place. Rudolph’s marksmanship, apparently on target in the tundra, here is wide of the mark. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

I. FACTS

Plaintiff-Appellee SCI is a hunting and wildlife conservation organization with roughly 50,000 members and nearly 200 chapters across twenty-six different countries. Appellant’s Excerpts of Record (“AER”) 2. Defendant-Appellant Rudolph has been an SCI member for approximately twenty-five years and became a lifetime member of the organization in 2006. AER 56. The next year, Rudolph received the “Weatherby Award,” which recognizes one individual annually for hunting achievement, outstanding support of conservation, and dedication to ethical sport hunting. Id. Rudolph has occupied a number of organizational positions throughout his tenure with SCI, culminating in consecutive one-year terms as President of SCI and the Safari Club International Foundation (“SCIF”). AER 2.

Following his second year at the helm of the group, Rudolph was hired to perform public relations as the Chief Communications Officer of SCI. AER 56. In 2012, however, a conflict arose between Rudolph and the organization, with various members accusing him of, among other things, adultery, making false statements, and intellectual property infringement. Id. Believing he had breached his duties of loyalty and care to the organization, SCI terminated Rudolph’s contract, stripped him of his awards, and expelled him from membership. AER 2. Whipple was president of SCI at the time of Rudolph’s expulsion and signed the letter officially terminating Rudolph’s membership. AER 57.

Stung and defiant, Rudolph sued SCI and several of its board members, including Whipple, in November 2012 in the U.S. District Court for the Western District of Pennsylvania. AER 62. The court dismissed the individual defendants on jurisdictional grounds and Rudolph thereupon refiled the lawsuit against the same individuals in the U.S. District Court for the District of Wyoming. These actions center on Rudolph’s claims that SCI members defamed him maliciously in order to ruin his reputation and ultimately to run him out of the organization.

On February 20, 2013, while Whipple was a defendant in the Pennsylvania action, Rudolph invited him to meet for lunch at a restaurant in Los Angeles. AER 88. At that time, Whipple still considered Rudolph a good friend, and believed Rudolph felt the same way. Id. Indeed, Whipple recalled Rudolph as saying he sued him in Pennsylvania only because he was the current president of SCI. Id. In any event, Whipple said yes and they met at his residence before departing for Wineworks for Everyone, id. a wine store and restaurant that is open to the general public. AER 63.

Rudolph and Whipple met over lunch for approximately five hours. Id. There were several other patrons and employees in the restaurant at the time the meeting took place. AER 63-64. Whipple offered his own declaration in which he stated that those other patrons in the room were not within earshot of their conversation. Id. He also claimed he and Rudolph kept their voices fairly low, and that when servers approached, they stopped talking about anything substantive. AER 64. Rudolph, by contrast, insists his recordings demonstrate that the other patrons were close enough to overhear their conversation, and that staff and other patrons repeatedly walked past the table throughout the meeting. AER 58. Rudolph further claims Whipple never lowered his voice overtly or manifested body language that in any way would suggest he was attempting to maintain privacy or intended to keep the conversation confidential. Id.

Rudolph eventually steered the discussion to the ongoing litigation between himself, Whipple, and SCI. AER 63. They talked about Whipple’s role in the underlying events and the conduct of various SCI board members. Unbeknownst to Whipple, Rudolph recorded both audio and video of the entire conversation (“Whipple Video”), which he later reduced into a film for public dissemination called: Rudolph v. Safari Club International SCI President Tells the Truth on Video Rudolph Exonerated!! (“Rudolph Video”). AER 58. The Rudolph Video allegedly contains clips confirming the allegations against Rudolph were false and malicious. Id. Importantly, Rudolph never asked for, nor obtained, Whipple’s consent to record the conversation, and Whipple maintained he never would have given Rudolph his consent. AER 89.

Later that year, SCI and Whipple brought suit in the Orange County Superi- or Court alleging Rudolph violated section 632 of the California Penal Code, outlawing the recording of a “confidential communication” without the consent of all parties to the communication. See Cal. Penal Code § 632. Plaintiffs sought to enjoin Rudolph from introducing the Whipple Video into evidence in the Pennsylvania and Wyoming actions, and the state court issued a temporary restraining order (“TRO”) on December 20, 2013. Following removal of the action to the district court and a hearing, the district court denied plaintiffs’ request for a preliminary injunction. AER 3. The denial was affirmed by this Court on December 26, 2014. AER 75-81.

The TRO soon dissolved and Rudolph posted both videos on YouTube for public viewing, with SCI members being the target audience. AER 58. Rudolph claims he created the videos for use in his litigation against SCI and various SCI board members, to inform SCI members about the details of the actions, to repair his reputation, and to stop those in power at SCI from wasting SCI’s resources. Id.

Plaintiffs filed a First Amended Verified Complaint (“FAC”) soon after the videos were posted, this time asserting seven claims for relief: (1) statutory invasion of privacy, Cal. Penal Code §§ 632, 637.2; (2) injunctive relief; (3) negligence per se; (4) common law invasion of privacy; (5) false light invasion of privacy; (6) intentional infliction of emotional distress; and (7) negligent infliction of emotional distress.

On March 13, 2014, Rudolph moved to strike the FAC pursuant to California’s “anti-SLAPP” statute, see Cal. Civ. Proc. Code § 425.16, and concurrently moved to dismiss. Plaintiffs opposed the motions by relying only on the verified FAC, as opposed to invoking any other evidence in the record.

The district court, however, looked to the entire record, including a declaration submitted by Whipple with his ex parte application for a TRO, which also appeared as an attachment to the notice of removal. It then granted in part and denied in part Rudolph’s motion to strike. AER 1-16. Rudolph moved to reconsider on the ground the court denied him due process by unilaterally scouring the record, digging up the declaration, and relying on it to decide his motions. Granting the motion to reconsider, the district court then proceeded to reaffirm its prior order, finding the Whipple declaration properly had been considered. AER 17-27.

On July 29, 2014, Rudolph timely appealed from that portion of the district court’s July 2, 2014, order which denied Rudolph’s motion to strike. Rudolph maintains the court erred in denying the motion on the three remaining claims: (1) statutory invasion of privacy, Cal. Penal Code §§ 632, 637.2; (2) negligence per se; and (3) common law invasion of privacy.

II. STANDARD OF REVIEW

This Court reviews the district court’s denial of a special motion to strike de novo. See Graham-Sult v. Clainos, 756 F.3d 724, 735 (9th Cir. 2014); Martinez v. Metabolife Int’l, Inc., 113 Cal.App.4th 181, 186, 6 Cal.Rptr.3d 494 (2003).

III. DISCUSSION

California’s anti-SLAPP statute authorizes a “special motion to strike” any “cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech ... in connection with a public issue.” Cal. Civ. Proc. Code § 425.16(b)(1). Courts evaluating anti-SLAPP motions first ask if the defendant has shown the challenged cause of action “aris[es] from” activity taken “in furtherance” of the defendant’s right of petition or free speech. Id. If so, the burden shifts to the plaintiff to show “a [reasonable] probability of prevailing on the challenged claims.” Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 595 (9th Cir. 2010).

Here, Rudolph maintains the court should have stricken the statutory invasion of privacy claim, the negligence per se claim tied to that cause of action, and the common law invasion of privacy claim. Though Rudolph can show the claims arise from activity he took in furtherance of his right to free speech, plaintiffs can show a reasonable probability of prevailing on the challenged claims. Accordingly, the district court did not err in denying in part Rudolph’s special motion to strike.

A. “Arising from” Protected Activity

Rudolph’s first task is to make a prima facie showing that each cause of action against him “aris[es] from” activity he took “in furtherance” of his right to petition or free speech. Cal. Civ. Proc. Code § 425.16(b)(1). “[T]he critical consideration is whether the cause of action is based on the defendant’s protected” conduct. Mindys, 611 F.3d at 597 (quoting Navellier v. Sletten, 29 Cal.4th 82, 89, 124 Cal.Rptr.2d 530, 52 P.3d 703 (2002)). Specifically, “ ‘the act underlying the plaintiffs cause’ or ‘the act which forms the basis for the plaintiffs cause of action’ must itself have been an act in furtherance of the right of petition or free speech,” Equilon Enters, v. Consumer Cause, Inc., 29 Cal.4th 53, 66,124 Cal.Rptr.2d 507, 52 P.3d 685 (2002) (quoting ComputerXpress, Inc. v. Jackson, 93 Cal.App.4th 993, 1003, 113 Cal.Rptr.2d 625 (2001)).

1. The Conduct Underlying Each Claim.

Here, the critical act underlying each claim is Rudolph’s recording of his conversation with Whipple. This follows from a quick explanation of the elements of each claim.

The first claim asserts a violation of Section 632 of the California Penal Code. That provision bars the recording of a “confidential communication” without the consent of all parties to the communication. See Cal. Penal Code § 632(a). A communication is confidential if it is “carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto.” Id. § 632(c). The statute excludes, however, “a communication made in a public gathering ... or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.” Id. Though the parties dispute whether the restaurant conversation can be categorized as a confidential communication, there is little doubt the precise act at the heart of this claim is Rudolph’s making of the surreptitious recording. See AER 66.

Plaintiffs next assert a claim for negligence per se, which requires showing: (1) a defendant violated a statute, ordinance, or regulation; (2) the violation proximately caused injury; (3) the injury resulted from an occurrence the enactment was designed to prevent; and (4) the plaintiff was a member of the class of persons the statute was intended to protect. Ramirez v. Nelson, 44 Cal.4th 908, 917-18, 80 Cal. Rptr.3d 728,188 P.3d 659 (2008). The statute plaintiffs invoke is section 632 of the California Penal Code, AER 68, therefore tying this cause of action to the surreptitious recording mentioned above.

The final claim asserts an invasion of privacy under California common law, which requires “(1) intrusion into a private place, conversation!;,] or matter, (2) in a manner highly offensive to a reasonable person.” Shulman v. Grp. W. Prods., Inc., 18 Cal.4th 200, 231, 74 Cal.Rptr.2d 843, 955 P.2d 469 (1998). Once again, the act plaintiffs invoke as an intrusion is Rudolph’s recording of the discussion with Whipple. AER 69. In sum, the act of making the recording without Whipple’s knowledge or consent underlies all three claims in this case.

2. Rudolph’s Conduct Furthered the Exercise of Free Speech

The next question is whether Rudolph’s conduct was taken “in furtherance” of protected activity. The anti-SLAPP statute expressly recognizes four categories of protected speech and petitioning, three of which are implicated here: “any written or oral statement or writing made in connection with an issue under consideration ... [by a] judicial body,” Cal. Civ. Proc. Code § 425.16(e)(2), “any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest,” id. § 425.16(e)(3), and “any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest,” id. § 425.16(e)(4). Rudolph need only show the conduct underlying each claim falls within one protected category. Rudolph’s making of the surreptitious recording falls within section 425.16(e)(4).

To start, that section does not require a “statement” by Rudolph; rather, it protects “conduct” in furtherance of the right of free speech in connection with a public issue. Next, California authority suggests Rudolph’s creation of the recording was an act in furtherance of the exercise of free speech. In Lieberman v. KCOP Television, Inc., 110 Cal.App.4th 156, 1 Cal. Rptr.3d 536 (2003), two reporters met a doctor at his clinic and secretly recorded their private consultations on audio and videotape. Id. at 161-62, 1 Cal.Rptr.3d 536. Portions of the tapes were later broadcast in a segment called “Caught in the Act,” which claimed the doctor prescribed Vicodin without conducting proper medical examinations. Id. at 162, 1 Cal. Rptr.3d 536. The doctor brought suit under section 632 and argued, like SCI does here, the illegal act of recording does not constitute protected conduct under the anti-SLAPP statute. Id. at 165, 1 Cal. Rptr.3d 536. Concluding to the contrary, the court noted the statute covers “conduct in furtherance of the exercise” of free speech, and found the surreptitious recording — which it categorized as “news-gathering” — was conduct in furtherance of that right. Id. at 166, 1 Cal.Rptr.3d 636. Rudolph contends his conduct advanced the “right of free speech in connection with a public issue” because he published the two videos to SCI’s 50,000 members “to influence issues regarding governance” of the organization. Opening Brief (“OB”) at 19. Rudolph’s act of recording is therefore akin to the “newsgathering” detailed in KCOP, meaning it constitutes conduct undertaken in furtherance of his subsequent exercise of free speech.

Plaintiffs counter that Rudolph’s conduct does not fit within the anti-SLAPP statute because he violated section 632, and illegal conduct is not constitutionally protected. At this point in the proceedings, however, it is far from clear that Rudolph’s creation of the recording actually violated section 632, and unless the conduct conclusively is shown or admitted to be illegal, a defendant can still invoke the anti-SLAPP statute. Flatley v. Mauro, 39 Cal.4th 299, 317, 46 Cal.Rptr.3d 606, 139 P.3d 2 (2006). In particular, the California Supreme Court held the statute may be invoked unless the conduct is “illegal as a matter of law,” meaning the defendant “concedes” or “un-controverted and conclusive evidence” establishes the speech or petitioning activity is illegal. Id. at 320, 46 Cal.Rptr.3d 606, 139 P.3d 2. To find otherwise would eviscerate the anti-SLAPP statute’s protections because the plaintiff could preclude the statute’s application simply by alleging criminal conduct by the defendant.

As more fully explained below, section 632 outlaws only the surreptitious recording of “confidential communications,” but a communication is not confidential if “made in a public gathering” or the parties reasonably may expect that it “may be overheard.” See Cal. Penal Code §§ 632(a), (c). In light of that standard, Rudolph’s creation of the recording may or may not be criminal given the conversation took place in a restaurant open to the public when other customers were present. The upshot is that Rudolph is not precluded from bringing an anti-SLAPP motion in the first instance, and KCOP establishes his conduct fits within a protected category — section 425.16(e)(4).

Rudolph’s conduct was also connected to an issue of public interest. “[T]he definition of ‘public interest’ within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity.” Rivero v. Am. Fed’n of State, Cty., and Mun. Emps., AFL-CIO, 105 Cal. App.4th 913, 920, 130 Cal.Rptr.2d 81 (2003) (quotation marks omitted). The Rivero court surveyed the cases that had examined the boundaries of a “public issue,” finding “the subject statements either concerned a person or entity in the public eye, conduct that could directly affect a large number of people beyond the direct participants[,] or a topic of widespread, public interest.” Id. at 924, 130 Cal.Rptr.2d 81 (citations omitted).

Here, the recording implicates public issues because it involved two presidents of an organization with 50,000 members, and was published on the Internet to promote reform of the organization and to “stop those in power at SCI from wasting SCI’s resources.” AER 58. Rudolph specifically criticized SCI leadership for mismanagement and abuse at the financial expense of the organization’s members. See AER 58. These statements fall within the ambit of the statute’s broad definition of an issue that implicates the public interest. See, e.g., Damon v. Ocean Hills Journalism Club, 85 Cal.App.4th 468, 479, 102 Cal. Rptr.2d 205 (2000) (statements about governance of homeowners association with 3,000 members concerned the public interest); Ludwig v. Superior Court, 37 Cal. App.4th 8, 43 Cal.Rptr.2d 350 (1995) (development of a mall was “clearly a matter of public interest”).

In sum, mindful that the statute must be “construed broadly” to “encourage continued participation in matters of public significance,” Cal. Civ. Proc. Code § 425.16(a), Rudolph adequately has shown each cause of action “aris[es] from” activity taken “in furtherance” of his right to free speech, id. § 425.16(b)(1). Specifically, the creation of the recording is akin to the newsgathering found to further the exercise of free speech. The statements published for public consumption also implicate public issues because they concern the governance of an organization that impacts a broad segment of society. Rudolph accordingly has met his burden at step one of the anti-SLAPP analysis.

B. Reasonable Probability of Prevailing

At step two, the burden shifts to Whipple and SCI to show “a [reasonable] probability of prevailing on the challenged claims.” Mindys, 611 F.3d at 595. To do so, they need only “state and substantiate a legally sufficient claim,” id. at 598-99 (quotation marks omitted), that is, “plaintiffis] must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiffis] is credited.” Id. at 599 (quoting Wilson v. Parker, Covert & Chidester, 28 Cal.4th 811, 821, 123 Cal.Rptr.2d 19, 50 P.3d 733 (2002)). “The applicable burden ‘is much like that used in determining a motion for nonsuit or directed verdict, which mandates dismissal when no reasonable jury could find for the plaintiff.’ ” Id. (quoting Metabolife, 264 F.3d at 840). Importantly, “[t]he court ‘does not weigh the credibility or comparative probative strength of competing evidence,’ but ‘should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiffs attempt to establish evidentiary support for the claim.’ ” Id. (quoting Wilson, 28 Cal.4th at 821, 123 Cal.Rptr.2d 19, 50 P.3d 733).

1. Statutory Invasion of Privacy

The first claim is for invasion of privacy under section 632 of the Penal Code. Plaintiffs must show it is legally sufficient and supported by sufficient facts to sustain a favorable judgment if their evidence is credited. Mindys, 611 F.3d at 599.

Section 632 renders liable “[e]very person who, intentionally and without the consent of all parties to a confidential communication ... eavesdrops upon or records the confidential communication” by “means of any electronic amplifying or recording device.” See Cal. Penal Code § 632(a). The term “confidential communication” includes:

any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made in a public gathering or in any legislative, judicial, executive or administrative proceeding open to the public, or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.

Id. § 632(c) (emphasis added). The California Supreme Court found “a conversation is confidential under section 632 if a party to that conversation has an objectively reasonable expectation that the conversation is not being overheard or recorded.” Hataishi v. First Am. Home Buyers Prat. Corp., 223 Cal.App.4th 1464, 1464, 168 Cal. Rptr.3d 262 (2014) (quoting Flanagan v. Flanagan, 27 Cal.4th 766, 776-77, 117 Cal. Rptr.2d 574, 41 P.3d 575 (2002)).

The Whipple declaration makes out a prima facie case for a violation of section 632, and furnishes an evidentiary basis sufficient for a jury to find in plaintiffs’ favor. Whipple states Rudolph contacted him for lunch on February 20, 2013, and they met for five hours at a restaurant called Wineworks for Everyone. AER 88-89. Though there were “6 to 10 other patrons in the room,” Whipple testified the conversation “was not capable of being heard,” and noted “any time a waiter or patron came to or by the table, we stopped talking about anything of substance.” AER 89. Whipple then declared he never consented to any recording of the conversation, but learned Rudolph recorded the entire discussion by audio and video means. AER 89-90. These allegations, if ultimately proven, reflect that Rudolph recorded the conversation without Whipple’s consent, in circumstances under which Whipple reasonably could expect his statements would not be overheard. Accordingly, a reasonable jury could find in plaintiffs’ favor should they credit Whipple’s declaration.

Rudolph fires off four arguments aimed at upending this conclusion, each of which misses the mark. First, Rudolph submits plaintiffs present no evidence the communication was confidential because the Whipple declaration relates exclusively to Whipple’s subjective beliefs. Yet, Whipple was a firsthand participant in the conversation and his declaration speaks not only to his beliefs, but to the objective circumstances surrounding the discussion at the restaurant.

Second, Rudolph submits the unedited Whipple Video defeats the declaration because it proves there can be no objectively reasonable expectation the conversation was confidential. This argument misconstrues the task the parties presented to the district court, for it asks for an explicit weighing of evidence — i.e., the declaration versus the video. At step two, however, “we accept as true all evidence favorable to the plaintiff and assess the defendant’s evidence only to determine if it defeats the plaintiffs submission as a matter of law.” Hecimovich v. Encinal Sch. Parent Teacher Org., 203 Cal.App.4th 450, 468-69, 137 Cal.Rptr.3d 455 (2012) (quoting Overstock.com, Inc. v. Gradient Analytics, 151 Cal.App.4th 688, 699-700, 61 Cal.Rptr.3d 29 (2007)). The video does not defeat the Whipple declaration as a matter of law because, as the district court found, what one person might consider a normal pause when speaking to a waiter, another could reasonably find to be a deliberate effort to maintain confidentiality.

Third, Rudolph insists as a matter of law there can be no objectively reasonable expectation of confidentiality because the conversation occurred in a place that was open to the public. That contention is at odds with California authority viewing privacy as relative. See, e.g., Sanders v. Am. Broad. Cos., Inc., 20 Cal.4th 907, 915-16, 85 Cal.Rptr.2d 909, 978 P.2d 67 (1999). For instance, in KCOP, the reporter posing as a patient brought a companion into the examination room, and later argued the doctor could not expect his communications would be confidential because another person was present. KCOP, 110 Cal. App.4th at 168, 1 Cal.Rptr.3d 536. The court found “[t]he presence of others does not necessarily make an expectation of privacy objectively unreasonable, but presents a question of fact for the jury to resolve.” Id. at 169,1 Cal.Rptr.3d 536. The court concluded a jury could find the doctor reasonably expected the communications were private, and thus affirmed the district court’s denial of the defendants’ anti-SLAPP motion to strike. Id. at 169-70, 1 Cal.Rptr.3d 536. Likewise, here, if a jury credits the Whipple declaration, it could find Whipple’s claimed expectation of privacy to be objectively reasonable. This possibility warrants denial of Rudolph’s motion to strike.

Rudolph maintains this analysis is flawed, but the authority he invokes does not establish conversations in public locations categorically cannot be confidential. In particular, he relies heavily on Deteresa v. American Broadcasting Cos., Inc., 121 F.3d 460 (9th Cir. 1997), in which we affirmed a lower court’s grant of summary judgment in favor of a defendant on claims for violation of section 632 and invasion of privacy. Id. at 465-66, 468. Applying the old O’Laskey standard (which the California Supreme Court has since overturned), we held the plaintiff had no reasonable expectation of privacy in a conversation that occurred in public, with a person who openly identified himself as a reporter for ABC, where the reporter indicated that he wanted to speak with the plaintiff about appearing on a television show. Id. at 462, 465.

Even if we assume Deteresa remains good law after Flanagan, see supra, n.8, Deteresa would still not control here. Newsgathering is a quintessential function of a reporter; indeed, a reporter’s very job is to record and disseminate facts and information about news-worthy events. Thus, the relationship (and concomitant expectation of privacy in information shared) with a reporter who shows up unannounced at one’s doorstep is very different than the relationship between close friends. Because Whipple believed he was talking to Rudolph as a long-time friend, the critical fact supporting Deteresa’s result is absent here. Contrary to Rudolph’s position, nothing about Deteresa supports a per se rule that one cannot have a reasonable expectation of privacy in a conversation just because it occurs in public.

Nor does Wilkins v. National Broadcasting Co., Inc., 71 Cal.App.4th 1066, 84 Cal.Rptr.2d 329 (1999) support a per se rule. In that case, two television producers surreptitiously recorded a lunch meeting with two salesmen on “an outside patio table at a restaurant in Malibu.” Id. at 1072, 84 Cal.Rptr.2d 329. Far from holding that the public setting automatically negated any reasonable expectation of privacy, the court examined the facts surrounding the lunch at length. Id. at 1080, 84 Cal. Rptr.2d 329. It observed the producers had brought two companions with them but the salesmen never inquired as to the identities of the strangers. Id. In addition, “[wjaiters frequently came to the table, but [the salesman] did not acknowledge them, pause in his sales pitch, or even lower his voice.” Id. “On the facts of th[e] case,” the court found the salesmen had no objectively reasonable expectation of privacy. Id. Here, by contrast, Whipple contends the conversation could not be overheard, because he and Rudolph lowered their voices overtly when others approached.

In short, even the cases cited by Rudolph demonstrate that whether a communication is confidential is a question of fact normally left to the fact finder. See Shulman, 18 Cal.4th at 233-35, 74 Cal.Rptr.2d 843, 955 P.2d 469; see also Vera v. O’Keefe, No. 10-cv-1422-L (MDD), 2012 WL 3263930, at *4 (S.D. Cal. Aug. 9, 2012) (“California courts have held that a reasonable expectation of privacy may be a question of fact for the jury to decide when either party has been recorded without his or her consent.”); Turnbull v. Am. Broad. Cos., No. CV 03-3554 SJO (FMOX), 2005 WL 6054964, at *1, *6-7 (C.D. Cal. Mar. 7, 2005) (examining a jury’s conclusion the plaintiffs did not have a reasonable expectation of privacy in a conversation that took place in a casting interview).

The take-home message is that privacy is relative and, depending on the circumstances, one can harbor an objectively reasonable expectation of privacy in a public location. Accordingly, the mere fact that Whipple’s conversation took place in a public restaurant does not mean Whipple failed to advance a prima facie case for a violation of section 632.

Fourth, Rudolph contends there could be no objectively reasonable expectation of confidentiality given Whipple and Rudolph were adversaries in pending litigation. Not only does Rudolph offer no authority to support this proposition, the argument is unconvincing in any event. At the time of the conversation, Whipple thought Rudolph was a good friend. AER 88. What is more, Rudolph lured Whipple to the conversation by saying “he had not wanted to sue” Whipple and did so only because the latter signed a letter as SCI president. Placed in that light, and combined with the allegation they stopped talking when other patrons approached, a reasonable jury could find Whipple had an objectively reasonable expectation of privacy in this circumstance.

In sum, mindful that a “[rjeasonable probability in the anti-SLAPP statute [means] ... only a minimum level of legal sufficiency and triability,” Graham-Suit, 756 F.3d at 740, plaintiffs have met their burden at step two, The Whipple declaration makes out a prima facie case for a violation of section 632, and furnishes a basis sufficient for a jury to find in plaintiffs’ favor on this claim.

2. Negligence Per Se

Plaintiffs’ next claim is for negligence per se, which requires showing: (1) a defendant violated a statute, ordinance, or regulation; (2) the violation proximately caused injury; (3) the injury resulted from an occurrence the enactment was designed to prevent; and (4) the plaintiff was a member of the class of persons the statute was intended to protect. Ramirez, 44 Cal.4th at 917-18, 80 Cal.Rptr.3d 728, 188 P.3d 659.

Plaintiffs aver Rudolph violated section 632 by making the surreptitious recording, the violation proximately caused them injury, the injury is the kind the statute is designed to prevent, and they are persons the statute aims to protect. AER 68. Rudolph responds only that the claim must fail because there is no plausible basis upon which a violation of section 632 can be established. In other words, Rudolph merely reiterates his prior argument.

Plaintiffs have met their step two burden as to the claim for negligence per se. They allege adequately and then subsequently support a violation of section 632. See KCOP, 110 Cal.App.4th at 164, 1 Cal. Rptr.3d 536 (“A section 632 violation is committed the moment a confidential communication is secretly recorded regardless of whether it is subsequently disclosed.”). Both the FAC and Whipple’s declaration aver the recording caused injury. See AER 68, 90. Surreptitious recordings are the kinds of occurrences the statute was designed to prevent, and individuals who unknowingly have their conversations recorded are those the statute protects. As the district court found, plaintiffs have shown a probability of success on their negligence per se claim.

3. Common Law Invasion of Privacy

The final claim — brought only by Whipple — is for common law invasion of privacy, which requires “(1) intrusion into a private place, conversation!,] or matter, (2) in a manner highly offensive to a reasonable person.” Shulman, 18 Cal.4th at 231, 74 Cal.Rptr.2d 843, 955 P.2d 469.

As to the first element, “the defendant must have ‘penetrated some zone of physical or sensory privacy ... or obtained unwanted access to data’ by electronic or other covert means, in violation of the law or social norms.” Hernandez v. Hillsides, Inc., 47 Cal.4th 272, 286, 97 Cal. Rptr.3d 274, 211 P.3d 1063 (2009) (quoting Shulman, 18 Cal.4th at 232, 74 Cal.Rptr.2d 843, 955 P.2d 469). “[T]he expectation of privacy must be objectively reasonable.” Id. (internal quotation marks omitted). “The second common law element essentially involves a ‘policy' determination as to whether the alleged intrusion is ‘highly offensive’ under the particular circumstances.” Id. at 287, 97 Cal.Rptr.3d 274, 211 P.3d 1063 (citation omitted). “Relevant factors include the degree and setting of the intrusion, and the intruder’s motives and objectives.” Id.

Here, Whipple adequately states and substantiates a claim for common law invasion of privacy. Whipple avers Rudolph’s surreptitious recording of their lunchtime discussion intruded unlawfully into his private conversation. AER 69. He maintains the occurrence was objectively offensive because Rudolph used friendship to lure him to lunch, then secretly recorded their conversation and shared it widely with members of the public. Id. The complaint adds Whipple suffered emotional distress, continues to be humiliated, and fears he will be shunned, avoided, and subjected to ridicule. Id. Though the question is close, we think plaintiffs’ proffered evidence, taken as whole, could support a reasonable jury finding that Rudolph’s actions constituted a “highly offensive” intrusion into Whipple’s privacy. Whipple therefore meets his step two burden for common law invasion of privacy. Rudolph nonetheless takes aim at Whipple’s evidence as to both prongs of this claim.

a) Intrusion into a private conversation

Rudolph’s opening shot once again is to say there is no objectively reasonable expectation of privacy when a conversation takes place in a location that is open to the public. However, as we have already discussed, courts have consistently rejected that assertion.

In Sanders, for example, a reporter working undercover obtained employment alongside the plaintiff as a telepsychic, giving “readings” to customers over the phone. 20 Cal.4th at 910-11, 85 Cal.Rptr.2d 909, 978 P.2d 67. The reporter then secretly videotaped and recorded interactions with the plaintiff and other psychics using a small hidden camera. Id. at 910, 85 Cal. Rptr.2d 909, 978 P.2d 67. The tapings occurred in a large room containing 100 cubicles that were open on one side, open on top, and from which eoworkers could be seen and heard. Id. at 912, 85 Cal.Rptr.2d 909, 978 P.2d 67. Visitors, however, could not enter this area without permission from the front desk. Id. Ultimately, the plaintiff sued the reporter for violating his privacy after one of his conversations aired on television. Id. at 910, 913 & n. 1, 85 Cal.Rptr.2d 909, 978 P.2d 67.

The court began its analysis by noting it has not stated “an expectation of privacy, in order to be reasonable for purposes of the intrusion tort, must be of absolute or complete privacy.” Id. at 915, 85 Cal. Rptr.2d 909, 978 P,2d 67. Indeed, “privacy, for purposes of the intrusion tort, is not a binary, all-or-nothing characteristic.” Id. at 916, 85 Cal.Rptr.2d 909, 978 P.2d 67. Rather, “[t]here are degrees and nuances to societal recognition of our expectations of privacy: the fact that the privacy one expects in a given setting is not complete or absolute does not render the expectation unreasonable as a matter of law.” Id. In other words, “privacy ... is relative,” and “[t]he mere fact that a person can be seen by someone does not automatically mean that he or she can legally be forced to be subject to being seen by everyone.” Id. The court added, “the reasonableness of a person’s expectation of visual and aural privacy depends not only on who might have been able to observe the subject interaction, but on the identity of the claimed intruder and the means of intrusion.” Id. at 923, 85 Cal.Rptr.2d 909, 978 P.2d 67.

Applying that framework, the court found “an employee may, under some circumstances, have a reasonable expectation of visual or aural privacy against electronic intrusion by a stranger to the workplace, despite the possibility that the conversations and interactions at issue could be witnessed by coworkers.” Id. at 918, 85 Cal.Rptr.2d 909, 978 P.2d 67. As to the identity of the intruder, the court noted employees were misled to think the reporter was a colleague, and thus had no reason to suspect their conversations would be recorded for television. Id. at 921, 85 Cal. Rptr.2d 909, 978 P.2d 67; see also Hernandez, 47 Cal.4th at 289, 97 Cal.Rptr.3d 274, 211 P.3d 1063. Looking at the nature of the intrusion, it found “[t]he possibility of being overheard by coworkers does not, as a matter of law, render unreasonable an employee’s expectation that his or her interactions within a nonpublic workplace will not be videotaped in secret by a journalist.” Sanders, 20 Cal.4th at 923, 85 Cal. Rptr.2d 909, 978 P.2d 67. Distilling its holding, the court said the tort is not defeated “simply because the events or conversations upon which the defendant allegedly intruded were not completely private from all other eyes and ears.” Id. at 911, 85 Cal.Rptr.2d 909, 978 P.2d 67.

Rudolph is correct Sanders distinguished workplaces “regularly open to entry or observation by the public,” and said “any expectation of privacy against press recording is less likely to be deemed reasonable” in those locations. Id. at 923, 85 Cal.Rptr.2d 909, 978 P.2d 67; see also Hernandez, 47 Cal.4th at 290, 97 Cal.Rptr.3d 274, 211 P.3d 1063 (noting workplaces open to the public occupy “one end of the spectrum”). The court did not, however, endorse a per se rule holding there is no objectively reasonable expectation of privar cy when a conversation takes place in a location that is open to the public. Privacy expectations may be diminished in that scenario, but the court’s analysis instructs emphatically that the inquiry requires a fact-based investigation of the precise circumstances. This holding is encapsulated in the pronouncement: “the fact that' the privacy one expects in a given setting is not complete or absolute does not render the expectation unreasonable as a matter of law.” Sanders, 20 Cal.4th at 916, 85 Cal.Rptr.2d 909, 978 P.2d 67.

That Sanders did not endorse a per se rule is bolstered by the California Supreme Court’s subsequent analysis in Hernandez. There, the court examined the privacy expectations of two employees whose shared office their employer surreptitiously videotaped after hours. 47 Cal.4th at 277, 97 Cal.Rptr.3d 274, 211 P.3d 1063. It described its analytical framework as “consistent with Sanders, which asks whether the employee could be ‘overheard or observed’ by others when the tortious act allegedly occurred.” Id. at 290, 97 Cal.Rptr.3d 274, 211 P.3d 1063 (citation omitted). Applying Sanders, the court examined “the physical layout of the area intruded upon, its relationship to the workplace as a whole, and the nature of the activities commonly performed in such places.” Id. Again, it acknowledged public locations occupy one end of the privacy spectrum, but it continued to suggest the analysis requires a fact-based inquiry into the precise circumstances. See id. In sum, though there is daylight for Rudolph’s argument, a per se rule would be at odds with the principles articulated by the California Supreme Court in this area.

The absence of a per se rule notwithstanding, the sufficiency of Whipple’s allegations in light of Sanders must be addressed. To start, the identity of the intruder weighs in Whipple’s favor as Rudolph lured him to the lunchtime conversation, saying “he had not wanted to sue” him and did so only because Whipple signed a letter as SCI president. AER 88. True, Whipple and Rudolph were adversaries in litigation, but Whipple still considered Rudolph to be a good friend, and thus had little reason to suspect his conversation might be recorded. The nature and means of intrusion also weigh in Whipple’s favor because the parties sought overtly to keep the conversation quiet, yet Rudolph hoodwinked Whipple by recording it. All told, Whipple has offered evidence sufficient to establish a “probability” that a reasonable jury could agree he maintained an objectively reasonable expectation of privacy, and that Rudolph’s recording invaded a confidential conversation under these particular circumstances.

b) Highly Offensive

The next element requires the manner of intrusion be “highly offensive” to a reasonable person, and “sufficiently serious” and unwarranted as to constitute an “egregious breach of the social norms.” Hernandez, 47 Cal.4th at 295, 97 Cal. Rptr.3d 274, 211 P.3d 1063 (quotation marks and citation omitted). “Even in cases involving the use of photographic and electronic recording devices, which can raise difficult questions about covert surveillance, ‘California tort law provides no bright line on [‘offensiveness’]; each case must be taken on its facts.’ ” Id. at 287, 97 Cal.Rptr.3d 274, 211 P.3d 1063 (quoting Shulman, 18 Cal.4th at 237, 74 Cal.Rptr.2d 843, 955 P.2d 469). Courts consider “the degree of intrusion, the context, conduct and circumstances surrounding the intrusion as well as the intruder’s motives and objectives, the setting into which he intrudes, and the expectations of those whose privacy is invaded.” Wilkins, 71 Cal. App.4th at 1075-76, 84 Cal.Rptr.2d 329 (quoting Miller v. Nat’l Broad. Co., 187 Cal.App.3d 1463, 1483-84, 232 Cal.Rptr. 668 (1986)).

Rudolph maintains the surreptitious recording was not highly offensive because it took place in a public restaurant amongst adversaries in pending litigation. As Whipple freely discussed sensitive information about pending litigation between himself and Rudolph, Rudolph insists there was no deception, and thus his conduct cannot possibly rise to the level of highly offensive.

To be sure, Rudolph’s conduct seems less “offensive” than that committed in other cases involving surreptitious recordings, see, e.g., Dietemann v. Time, Inc., 449 F.2d 245, 247, 250 (9th Cir. 1971) (finding an invasion of privacy where the defendant gained entrance into another person’s home by subterfuge and then recorded him); Noble v. Sears, Roebuck & Co., 33 Cal.App.3d 654, 657, 659-60, 663-64, 109 Cal.Rptr. 269 (1973) (reversing a lower court’s dismissal of a cause of action for “unreasonably intrusive investigation” in violation of the right to privacy where a private investigator obtained entrance into a hospital room by deception and then recorded a patient); Miller, 187 Cal.App.3d at 1469, 1483-84, 1493, 232 Cal.Rptr. 668 (reversing a grant of summary judgment in favor of the defendant and reasoning that reasonable people could find that a news team’s intrusion into the plaintiffs bedroom, without authorization, to film rescue attempt was highly offensive, given the plaintiffs vulnerable state), but a jury could still find the element is met notwithstanding the public nature of the restaurant. There is no doubt it is more offensive to be recorded while in an area with inherently elevated privacy (home, hospital room, bedroom), but the location, at bottom, simply is one factor incorporated into the analysis. Here, moreover, Whipple was misled into thinking Rudolph was a friend, then had his secretly recorded conversation disseminated widely on the Internet. Furthermore, as the district court noted, such conduct can warrant the imposition of criminal penalties, suggesting the California legislature, and perhaps an ordinary person, would view it to be highly offensive. See Cal. Penal Code § 682(a) (providing for “imprisonment in the county jail not exceeding one year”). Mindful that Whipple need only show “minimal merit” for his claim, Soukup v. Law Offices of Herbert Hafif 39 Cal.4th 260, 279, 46 Cal. Rptr.3d 638, 139 P.3d 30 (2006), if his evidence is credited, a reasonable jury could conclude Rudolph’s conduct was highly offensive. Whipple has met his burden at step two of the anti-SLAPP analysis.

IV. CONCLUSION

In sum, the district court correctly denied Rudolph’s anti-SLAPP motion to strike plaintiffs’ claims for violation of California Penal Code section 632, negligence per se, and common law invasion of privacy. Though Rudolph can show those claims arise from activity he took in furtherance of his right to free speech, plaintiffs can show a reasonable probability of prevailing on each of the challenged claims. Accordingly, we affirm the district court’s denial of Rudolph’s motion to strike the above claims under California’s anti-SLAPP statute. We also deny Rudolph’s corresponding request for an additional attorney fee award.

We remand for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal.

AFFIRMED.

      . In November 2014, Whipple passed away and Joan Whipple substituted into this action as John Whipple's successor-in-interest. We note that, though California law generally favors assignability, "purely personal” causes of action, "includfing] tort causes of action for wrongs done to the person, the reputation or the feelings of an injured party,” are not assignable. AMCO Ins. Co. v. All Sols. Ins. Agency, LLC, 244 Cal.App.4th 883, 891-92, 198 Cal.Rptr.3d 687 (2016), review denied (Apr. 20, 2016). Similarly, damages for pain, suffering, emotional distress, and disfigurement do not survive an injured party’s death. See Cal. Civ. Proc. Code § 377.34 ("In an action ... by a decedent’s ... successor in interest ..., the damages recoverable are limited to the loss or damage that the decedent sustained or incurred before death, including any penalties or punitive or exemplary damages that the decedent would have been entitled to recover had the decedent lived, [but] do not include damages for pain, suffering, or disfigurement." (emphasis added)); see also Carr v. Progressive Cas. Ins. Co., 152 Cal. App.3d 881, 892, 199 Cal.Rptr. 835 (1984). Thus, much of the damages Whipple alleges, including "emotional distress,” "embarrassment,” and "humiliation,” AER 67, do not survive Whipple’s death. Of course, Whipple (through his successor-in-interest) also seeks statutory and exemplary damages, AER 72, which do survive Whipple's death. Cal. Civ. Proc. Code § 377.34. And while these allegations may be sufficient to state a prima facie claim, we note that Article III further requires more: Whipple’s successor-in-interest must establish a “concrete and particularized” injury to maintain Whipple’s claims in federal court. Because the parties have not raised or briefed these issues, we leave it to the district court to decide, in the first instance, whether Whipple has established a "concrete and particularized” injury, consistent with the principles set forth in Spokeo, Inc. v. Robins, — U.S. -, 136 S.Ct. 1540, 1548-49, 194 L.Ed.2d 635 (2016), as revised (May 24, 2016) (explaining that “Article III standing requires a concrete injury even in the context of a statutory violation”; that a "statute grants a person a statutory right [i.e., to vindicate a harm not previously legally cognizable] and purports to authorize that person to sue to vindicate that right,” does not "automatically satisf[y] the injury-in-fact requirement”).

      . The Whipple video is publicly available at: https ://www.youtube. com/watch? v=dU7Mo WhzIJs. The Rudolph video (an edited version of the Whipple video, which Rudolph titled, "Rudolph v. Safari Club International SCI President Tells the Truth on Video Rudolph Exonerated!!") is publicly available at: https:// www.youtube.com/watch?v=2aYY0YF4ktA.

      . California law provides for the pre-trial dismissal of certain actions, known as Strategic Lawsuits Against Public Participation, or SLAPPs, that "masquerade as ordinary lawsuits,” Wilcox v. Superior Court, 27 Cal. App.4th 809, 816, 33 Cal.Rptr.2d 446 (1994), but are intended to deter individuals "from exercising their political or legal rights or to punish them for doing so[,]” Batzel v. Smith, 333 F.3d 1018, 1024 (9th Cir. 2003).

      . Rudolph also contends his conduct falls within sections 425.16(e)(2) and (3), but those arguments need not be reached.

      . Plaintiffs submit Rudolph has not shown the requisite connection because the making of the recording is not itself a public issue, and the public has no interest in the litigation pending in Pennsylvania and Wyoming. This argument is unpersuasive. The surreptitious recording need only be conduct that advances the exercise of free speech on an issue of public interest. See KCOP, 110 Cal.App.4th at 166, 1 Cal.Rptr.3d 536. By exposing alleged corruption in SCI, the making of the recording fits within that framework.

      . Rudolph conceded at oral argument it is appropriate to consider the Whipple declaration, and the allegations in the verified complaint generally mirror those appearing in that declaration. Accordingly, we need not reach whether the district court erred in finding a verified pleading may not be considered when assessing a plaintiffs probability of success at step two.'

      . For example, in Davis v. Los Angeles West Travelodge, No. CV 08-8279 (CBM) (CTX), 2009 WL 4260406 (C.D. Cal. Oct. 8, 2009) (unpublished), the court examined (on a motion in limine) whether a conversation between the plaintiff and a desk clerk in a hotel lobby was a confidential communication under section 632. Id. at *2. The court acknowledged the lobby was a "public place,” but proceeded to weigh the evidence, concluding "[g]iven the location of the communication and the nature of the conversation, the desk clerk could have no reasonable expectation that her conversation was not being overheard,” Id. The Davis court limited this finding to the facts of the case. Id. In Chamberlain v. Les Schwab Tire Ctr. of Calif., Inc., No. 2: 11-cv-03105-JAM-DAD, 2012 WL 6020103 (E.D. Cal. Dec. 3, 2012) (unpublished), the court examined (on a motion for sanctions) whether a conversation "in the tire bay, an open and public place,” involved an objectively reasonable expectation of privacy. Id. at *3. The plaintiff presented evidence "employees were coming and going and they could readily overhear what was said,” and the defendant, for its part, “provided no evidence to the contrary.” Id. On that record, the court found neither party could reasonably expect the discussion would not be overheard. Id. Not only are these unpublished cases of only limited persuasive value, they are readily distinguishable. Here, unlike Chamberlain, the parties’ competing evidence creates a question of fact as to whether or not service staff or other patrons could overhear the conversation between Whipple and Rudolph.

      . Wilkins applied the O’Laskey standard of "confidential communications,” which the California Supreme Court subsequently overruled. See Wilkins v. National Broadcasting Co., Inc., 71 Cal.App.4th 1066, 1080, 84 Cal. Rptr.2d 329 (1999). Under the O’Laskey test, a conversation is confidential only if the party has an objectively reasonable expectation the content will not later be divulged to third parties. See O'Laskey v. Sortino, 224 Cal. App.3d 241, 248, 273 Cal.Rptr. 674 (1990). The California Supreme Court rejected that . standard in Flanagan, 27 Cal.4th at 776, 117 Cal.Rptr,2d 574, 41 P.3d 575, endorsing instead the test set forth in Frio v. Superior Court, 203 Cal.App.3d 1480, 250 Cal.Rptr. 819 (1988): "under section 632 ‘confidentiality’ appears to require nothing more than the existence of a reasonable expectation by one of the parties that no one is ‘listening in’ or overhearing the conversation.” Id. at 772-73, 117 Cal.Rptr.2d 574, 41 P.3d 575.

      . Rudolph’s contrary authority is plainly distinguishable. In both Wilkins, 71 Cal.App.4th at 1075-78, 84 Cal.Rptr.2d 329, and Deteresa, 121 F.3d at 465-66, discussed supra, the court held that the plaintiff had no objectively reasonable expectation of privacy as a matter of law. Thus, the plaintiff in both of those cases could not establish the first element of an invasion of privacy claim. Conversely here, there is a question of fact as to whether Whipple had an objectively reasonable expectation of privacy in his conversation with Rudolph.


source: Caselaw Access Project

author: CHRISTENSEN, Chief District Judge:

license: Public Domain

text:
    RETAIL WHOLESALE & DEPARTMENT STORE UNION LOCAL 338 RETIREMENT FUND, Plaintiff-Appellant, v. HEWLETT-PACKARD CO. and Mark A. Hurd, Defendants-Appellees.
    No. 14-16433
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted July 7, 2016 San Francisco, California
    Filed January 19, 2017

      Ira M. Press (argued), Mark A. Strauss, and Thomas W. Elrod, Kirby Mclnerney LLP, New York, New York; for Plaintiff-Appellant.
    Marc J. Sonnenfeld (argued), Karen Pieslak Pohlmann, and Laura Hughes McNally, Morgan Lewis & Bockius LLP, Philadelphia, Pennsylvania; Thomas M. Peterson and Joseph E. Floren, Morgan Lewis & Bockius LLP, San Francisco, California; Robert E. Gooding, Morgan Lewis & Bockius LLP, Irvine, California; for Defendant-Appellee Hewlett-Packard Company.
    Lawrence D. Lewis (argued), Dwight L. Armstrong, and Keith Paul Bishop, Allen Matkins Leek Gamble Mallory & Natsis LLP, Irvine, California; Amy Winter-sheimer Findley, Allen Matkins Leek Gamble Mallory & Natsis LLP, San Diego, California; for Defendant-Appellee Mark V. Hurd.
    Before: MARSHA S. BERZON and N. RANDY SMITH, Circuit Judges and DANA L. CHRISTENSEN, Chief District Judge.

      The Honorable Dana L. Christensen, Chief District Judge for the U.S. District Court for the District of Montana, sitting by designation.

   OPINION

CHRISTENSEN, Chief District Judge:

In 2010, Defendant-Appellee Mark Hurd resigned from his position as CEO and Chairman of Defendant-Appellee Hewlett-Packard Company (“HP”). During the course of an investigation prompted by allegations of sexual harassment, HP discovered that Hurd had misrepresented his relationship with a former independent contractor, Jodie Fisher. Hurd had not been forthcoming about the personal nature of his relationship with Fisher; in fact, he had doctored expense reports to prevent its discovery and lied to investigators. Immediately following Hurd’s resignation, the price of HP stock dropped, resulting in an alleged loss of $10 billion. In this putative class action lawsuit, HP shareholders allege violations of the Securities Exchange Act of 1934. The shareholders purchased HP stock between November 13, 2007, and August 6, 2010 (“the Class Period”) and held shares as of August 6, 2010.

This Court has not decided when a high-ranking employee’s violation of a business’s ethical code may give rise to a cause of action under § 10 and Rule 10-b of the Securities Exchange Act of 1934. Here, the issue is relatively narrow — whether shareholders may bring a claim for securities fraud when a CEO and Chairman violates the corporate code of ethics after publicly touting the business’s high standards for ethics and compliance. Retail Wholesale & Department Store Union Local 338 Retirement Fund (“Retail Wholesale”), lead plaintiff in the putative class action, claims that security fraud arises from the conflict between Hurd’s unethical behavior and HP’s promotion of business ethics. Defendants argue that Retail Wholesale failed to sufficiently allege that Defendants had made a material misrepresentation or misleadingly omitted a material fact. Affirming the district court below, we hold that Retail Wholesale has failed to state a claim under the Securities Exchange Act of 1934.

This Court reviews de novo a district court’s dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In re VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 694, 700-01 (9th Cir. 2012). In addition to the plausibility pleading standard applicable to all complaints, Retail Wholesale’s fraud allegations must satisfy the particularity standard of Federal Rule of Civil Procedure 9(b), as well as the heightened pleading standard for securities fraud created by the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4. Id. at 701. Under the PSLRA, plaintiffs must, among other requirements, “specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading.” 15 U.S.C. § 78u-4(b)(1)(B).

I. FACTUAL AND PROCEDURAL HISTORY

A. Facts

The Triggering Event: Mark Hurd’s Sexual Harassment Scandal

In the fall of 2007, Jodie Fisher began working part-time for HP as an independent contractor. Fisher’s contract required her to introduce significant clients to Hurd at HP events held at hotels throughout the world. She worked in this capacity for approximately two years.

In the summer of 2010, about nine months after Fisher stopped contracting with HP, Fisher’s attorney, Gloria Allred, sent a letter to HP’s Board of Directors. Asserting claims of discrimination against both Hurd and HP, Allred alleged that Hurd had sexually harassed Fisher. In addition to the harassment allegations, All-red wrote that Hurd had given Fisher confidential information about an impending merger.

HP’s Board promptly launched an investigation. Initially, Hurd lied to the Board about the nature and scope of his relationship with Fisher and about his familiarity with Fisher’s prior work in adult films. The investigation revealed that Hurd and Fisher spent more time together during HP events than Hurd had represented. It also uncovered that Hurd doctored expense reports on several occasions, claiming that he had eaten dinner with his bodyguard when he had in fact dined alone with Fisher. At least twice, Hurd expensed meetings with Fisher when there had been no nearby HP event. Some time before the investigation concluded, Hurd admitted that he and Fisher had a “very close personal relationship.” Without having interviewed Fisher or her attorney, the investigating law firm did not find evidence of sexual harassment or insider trading, but it concluded that Hurd falsified expense reports and lied about his relationship with Fisher.

Hurd resigned from HP shortly after the investigation concluded. In a press release, HP acknowledged Hurd’s knowing violation of HP’s code of conduct, confirming that sexual harassment allegations had been made and that an investigation found unethical behavior. Hurd was quoted as saying, “As the investigation progressed, I realized that there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me through my career.” Immediately following Hurd’s resignation, the price of HP stock dropped, resulting in an alleged loss of $10 billion to HP’s stockholders.

Background: HP’s 2006 Ethics Scandal

A few years earlier, in 2006, a major scandal erupted when a whistleblower informed several government agencies that HP had hired detectives to monitor the phone records and email accounts of HP directors, HP employees, and journalists to find the sources of leaks of company information to the press. Criminal charges were brought against HP’s then-Chairwoman and General Counsel. Although Hurd had been CEO throughout this time, having taken the position in 2005, he was found free from wrongdoing. The scandal had the effect of bolstering his reputation for integrity. Following the then-Chairwoman’s departure, HP integrated the roles of Chairman and CEO and named Hurd as the company’s first joint Chairman and CEO. Under Hurd’s leadership, HP’s shares remained buoyant during the 2006 scandal, dipping only for a brief time during which Hurd’s own involvement in the monitoring was questioned.

Apparently as a result of the 2006 scandal, HP intensified its promotion of ethical behavior within the company. With Hurd at the helm, HP reinforced the importance of its corporate code of ethics, the Standards of Business Conduct (“SBC”). Through congressional testimony, press releases, investor briefings, and public letters to employees, Hurd took many opportunities to proclaim HP’s integrity and its intention to enforce violations of the SBC. HP, its stockholders, and Wall Street insiders viewed Hurd as one of HP’s most valuable assets, seeing his leadership as the 2006 scandal’s silver lining.

Shareholders filed multiple derivative claims in the wake of the 2006 scandal, all of which were settled together in 2007. HP made some promises regarding business ethics as part of the settlement, including: appointing a “Lead Independent Director,” tasked with implementing and enforcing the SBC; appointing a “Chief Ethics and Compliance Officer” to report SBC violations; appointing an “Ethics and Compliance Committee” to oversee HP’s policies and procedures regarding compliance and ethics; improving ethics and compliance training programs; and strengthening the SBC, particularly in regard to whistleblow-ing.

Defendants’ Statements Regarding Business Ethics

Hurd led the charge to strengthen and ensure compliance with the SBC. After HP redoubled its commitment to corporate ethics and before Allred’s letter triggered the investigation into Hurd’s relationship with Fisher, HP revised the SBC. Hurd wrote the introductory message, describing the importance of ethics and entreating HP’s employees to “commit together, as individuals and as a company, to build trust in everything we do by living our values and conducting business consistent with the high ethical standards embodied within our SBC.”

Many of Defendants’ representations regarding ethics and compliance were made outside of the Class Period. The 2006 scandal predated the Class Period, as did the strongest statements made by Hurd and HP allegedly elevating the importance of the SBC. For example, Retail Wholesale points to a letter sent to employees, statements made during press conferences, and congressional testimony, all of which occurred during 2006. It was during this time that Defendants suggested having implemented a zero-tolerance policy for SBC violations, informing employees that: “Any violations of our standards are unacceptable to Hewlett-Packard and we will take appropriate action.”

The complaint alleges fewer instances of representations made during the Class Period. Most notably, the SBC itself was updated and released, including Hurd’s prefatory message. Concurrently with the release of the updated ethical code, HP published the SBC on the investor-relations portion of HP’s website. Additionally, during this time, HP restructured its internal organization, creating procedures and positions designed to improve compliance and ethical conduct, and HP’s Chief Ethics and Compliance Officer stated that ethics and compliance were a “competitive advantage” for HP.

The SBC includes several provisions inconsistent with Hurd’s relationship with Fisher and its cover-up. Retail Wholesale draws attention to particular provisions within the SBC, all of which are stated affirmatively and in the present tense. For example, HP states in the SBC that “[w]e maintain accurate business records” and “create business records that accurately reflect the truth of the underlying transaction or event.” The SBC contains similarly worded statements regarding: honesty; cooperation with investigators; using good judgment; reporting misconduct; treating others with respect; avoiding unlawful discrimination; refusing to tolerate harassment; preserving assets; avoiding conflicts of interest; providing gifts appropriately; preventing insider trading; and protecting confidential information.

During the Class Period, HP also asserted that the strength of its business was tied to retaining executives such as Hurd. In its 10-K and 10-Q filings with the SEC, HP included a risk factor: “The failure to hire executives and key employees or the loss of executives and key employees could have a significant impact on our operations.”

B. Procedural History

Cement & Concrete Workers District Council Pension Fund initiated' this putative class action in the summer of 2012, and filed its First Amended Complaint (“FAC”) later in 2012. Plaintiffs claimed that Defendants committed securities fraud in violation of the Securities Exchange Act of 1934. Upon motions to dismiss for failure to state a claim filed by Defendants HP and Hurd, the district court dismissed the FAC without prejudice, determining that the Plaintiffs had failed to adequately allege materiality and falsity.

Retail Wholesale filed the Second Amended Complaint (“SAC”) shortly after the court’s first order granting dismissal. HP and Hurd again moved to dismiss for failure to state a claim, and the district court again granted their motion, this time with prejudice, finding that any further amendments would be futile. As in its first order, the district court determined that Retail Wholesale’s claims could not survive because materiality and falsity had not been alleged. Retail Wholesale timely appealed.

II. DISCUSSION

Section 10(b) of the Securities Exchange Act of 1934 prohibits the use of “any manipulative or deceptive device or contrivance” related to the purchase or sale of securities when the use violates the regulations promulgated by the Securities and Exchange Commission (“SEC”). 15 U.S.C. § 78j(b). Under the operative regulation, Rule 10b-5, it is unlawful for any person “[t]o make any untrue statement of fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b).

To be viable, a claim brought under § 10(b) and Rule 10b-5 must contain six essential elements: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37-38, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011) (quoting Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008)). Our discussion focuses on the first element — whether there was a material misrepresentation or omission — as that factor is the issue most hotly contested by the parties, and its resolution is dispositive of the case.

An actionable material misrepresentation or omission has two components. First, under the PSLRA and the Federal Rules of Civil Procedure, plaintiffs must allege a misrepresentation or a misleading omission with particularity and explain why it is misleading. 15 U.S.C. § 78u-4(b)(l)(A)-(B); Fed. R. Civ. P. 9(b). Second, applying an objective standard, that misrepresentation or omission must have been material to investors. 15 U.S.C. § 78u-4(b)(l)(A)-(B). The materiality of the misrepresentation or an omission depends upon whether there is “a substantial likelihood that [it] would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available” for the purpose of decisionmaking by stockholders concerning their investments. Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976)).

Retail Wholesale has raised two theories in support of its argument regarding this element. First, it asserts that there were material misrepresentations — specifically, that Defendants’ public statements about business ethics, particularly the SBC itself, were material representations made demonstrably false by their inconsistency with Hurd’s conduct. Second, it argues that there were material omissions, contending that Defendants misled investors by failing to meet a duty owed to investors to disclose Hurd’s unethical behavior. Because neither Defendants’ statements nor their omissions were misleading, both theories fail.

A. Material Misrepresentation

Retail Wholesale argues that the SBC, bolstered by Defendants’ express promotion of corporate ethics, gives rise to a finding of material misrepresentation. Its claim is based in three factual allegations: (1) HP and Hurd actively promoted the SBC and stated that HP had zero tolerance for SBC violations; (2) Hurd’s SBC violations led to his resignation; and (3) Hurd’s resignation caused HP’s stock price to drop. The Court cannot agree that, under the facts alleged in the complaint, Defendants’ representations about ethics were materially misleading.

Like the district court below, some courts that have considered whether a corporate code of ethics may give rise to a § 10 and Rule 10b-5 claim have found that the claim failed for lack of materiality, never reaching falsity, see Nathanson v. Polycom, Inc., 87 F.Supp.3d 966, 976-77 (N.D. Cal. 2015), or reaching falsity only after first finding a lack of materiality, see In re Yum! Brands, Inc. Sec. Litig., 73 F.Supp.3d 846, 864-65 (W.D. Ky. 2014). Others have analyzed falsity first and not considered materiality after determining that no misleading representation or omission was made. See City of Roseville Emps.’ Ret. Sys. v. Horizon Lines, Inc., 686 F.Supp.2d 404 (D. Del. 2009); Andropolis v. Red Robin Gourmet Burgers, Inc., 505 F.Supp.2d 662, 685-86 (D. Colo. 2007). Where a complaint arises from “soft information,” such as representations of compliance, the Sixth Circuit applies a wholly different analysis, considering scienter alongside materiality to determine whether a representation is an actionable misrepresentation. See In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 470-73 (6th Cir. 2014).

The Ninth Circuit has not addressed how to determine whether statements made in or about an ethical code are actionable representations if the ethical code is violated. We approach this issue here by first analyzing falsity, to determine whether an ethical code and statements made about the code contain any misrepresentations of fact, and then, if there was a misrepresentation, determining its materiality — that is, its significance to stockholder decisionmaking.

1. Objective Falsity

“[A] statement is misleading if it would give a reasonable investor the ‘impression of a state of affairs that differs in a material way from the one that actually exists.’” Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985 (9th Cir. 2008) (quoting Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002)). To be misleading, a statement must be “capable of objective verification.” Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 2014). For example, “puffing” — expressing an opinion rather than a knowingly false statement of fact— is not misleading. Id.-, see also Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1206-07 (9th Cir. 2016); In re Cutera Sec. Litig., 610 F.3d 1103,1111 (9th Cir. 2010).

Defendants made no objectively verifiable statements during the Class Period. As one court has aptly written, a code of conduct is “inherently aspirational.” An-dropolis, 505 F.Supp.2d at 686. Such a code expresses opinions as to what actions are preferable, as opposed to implying that all staff, directors, and officers always adhere to its aspirations. See id.

Similarly, Hurd’s comments prefacing the SBC are not objectively verifiable. In the 2008 preface to the SBC, Hurd stated, in part,

We want to be a company known for its ethical leadership....
We know actions speak louder than words. We must make decisions and behave in ways that we can be proud of, that reflect our commitment to doing the right thing.
... Let us commit together, as individuals and as a company, to build trust in everything we do by living our values and conducting business consistent with the high ethical standards within our SBC.

The aspirational nature of these statements is evident. They emphasize a desire to commit to certain “shared values” outlined in the SBC and provide a “vague statement[] of optimism,” not capable of objective verification. See Or. Pub. Emps., 774 F.3d at 606.

A contrary interpretation — that statements such as, for example, the SBC’s “we make ethical decisions,” or Hurd’s prefatory statements, can be measured for compliance — is simply untenable, as it could turn all corporate wrongdoing into securities fraud. See, e.g., Santa Fe Indus. v. Green, 430 U.S. 462, 478-89, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977) (holding that the Securities Exchange Act is limited in scope to its textual provisions and does not conflict with state law regarding corporate misconduct, particularly corporate mismanagement). Indeed, at oral argument, Retail Wholesale conceded that the SBC in and of itself could not support its claim and acknowledged that it has been unable to locate a case from any jurisdiction in which a court found alleged noncompliance with an ethical code actionable.

Nor does the context, as Retail Wholesale argues, somehow make the SBC and related representations capable of being objectively false. The case that comes closest to supporting Retail Wholesale’s context argument, Omnicare, decided by the Sixth Circuit, involved not a code of ethics but rather a Form 10-K annual report to the SEC. 769 F.3d at 463-64. According to the Omnicare complaint, the defendants, a pharmaceutical care provider and its current and former employees, conducted internal audits revealing pervasive Medicare fraud. Id. at 462, 479. The audits were consistent with the defendants’ recent history of noncompliance, including conduct leading to a $98 million settlement with the government. Id, at 478. After the audits, the defendant certified in its Form 10-K that it was in material compliance with state and federal law. Id. Although the language in the Form 10-K was vague and boilerplate, the Sixth Circuit determined that the complaint did not fail for lack of falsity or materiality. Id. at 478-80.

Retail Wholesale argues that, similar to the Omnicare context, the context in this case surrounding the adoption and promotion of the SBC transforms what would otherwise be aspirational into statements capable of objective verification. We disagree, in part because context more appropriately factors into the question of whether an alleged misrepresentation was material to investors, not into whether a statement itself could be a misrepresentation. See Matrixx, 563 U.S. at 43-47, 131 S.Ct. 1309.

Even if background facts were relevant to whether a statement is amenable to falsity, the totality of the statements made within the Class Period leads only to the proposition that business ethics are important to HP. We note that the case may have been closer had Hurd’s sexual harassment and false expenses scandal involved facts remotely similar to those presented by the 2006 scandal, as the ethical code could then have been understood as at least promising specifically not to do what had been done in 2006. Here, however, the context does not make HP’s promotion of business ethics any less subjective or vague. Further, Retail Wholesale cites to no case law suggesting that context may operate to allow a plaintiff to import an ouNof-Class-Period statement into the Class Period. The strongest statement alleged in the complaint—the suggestion of a zero tolerance policy for SBC violations—was made outside of the Class Period.

In sum, we conclude that as there was no statement during the Class Period that was capable of being objectively false, there was no affirmative misrepresentation.

2. Materiality

Additionally, although the threshold for a showing of materiality is lower than that for falsity, we agree with the reasoning of the district court that any affirmative misrepresentation could not have been material. It cannot be said that there is “a substantial likelihood” that the SBC and related representations “altered the ‘total mix’ of information made available” for use in stockholder decisionmak-ing. Basic, 485 U.S. at 231-32, 108 S.Ct. 978. Not only was there nothing unusual about the promotion of business ethics at HP, but the substance and online publication of the SBC were mandated by the SEC. 17 C.F.R. § 229.406(a). In fact, the ethical issues most relevant to this litigation—conflicts of interest, disclosure, internal handling of violations—are directly addressed by SEC regulations. Id.

Although materiality is generally an issue of mixed fact and law, best left to the fact-finder, Matrixx, 563 U.S. at 45-48, 131 S.Ct. 1309, a standard that is too low would “bury the shareholders in an avalanche of trivial information—a result that is hardly conducive to informed decision-making.” TSC Indus., 426 U.S. at 448-49, 96 S.Ct. 2126. It simply cannot be that a reasonable investor’s decision would conceivably have been affected by HP’s compliance with SEC regulations requiring publication of ethics standards.

Further, Retail Wholesale’s contention that a slump in HP’s stock indicates materiality is not well-taken. “[Ejvidence of stock price movements provides no rational basis for determining whether [a product’s] risks were adequately conveyed to the public.” In re Apple Comput. Sec. Litig., 886 F.2d 1109, 1116 (9th Cir. 1989). As this Court recently noted, a change in stock price, such as that following Hurd’s resignation, would factor into reliance, a different prong of the § 10(b) and Rule 10b-5 analysis, and “[ajbsent an actionable misstatement, reliance does not come into play.” Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1060 (9th Cir. 2014).

In sum, the representations made in and about the SBC were not material to stockholder decisionmaking.

B. Materially Misleading Omission

As an alternative theory, Retail Wholesale argues that Defendants’ failure to disclose material facts — namely, the facts concerning Hurd’s noncompliance with the SBC — is actionable. We disagree. Just as there was no statement capable of being factually misleading, there was no omission that could have been actionable as misleading.

Absent a duty to disclose, an omission does not give rise to a cause of action under § 10(b) and Rule 10b-5. Basic, 485 U.S. at 239 n.17, 108 S.Ct. 978. “[Section] 10(b) and Rule 10b-5(b) do not create an affirmative duty to disclose any and all material information.” Matrixx, 563 U.S. at 44, 131 S.Ct. 1309. An actionable omission claim arises only when disclosure is “necessary ... to make the statements made, in light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). In other words, a duty to provide information exists only where statements were made which were misleading in light of the context surrounding the statements.

Here, there was no duty to disclose because HP’s and Hurd’s failures to speak did not “affirmatively create an impression of a state of affairs that differs in a material way from the one that actually exists.” Brody, 280 F.3d at 1006. As noted, the SBC, and the statements within the Class Period promoting it, were transparently aspirational. The promotion of ethical conduct at HP did not reasonably suggest that there would be no violations of the SBC by the CEO or anyone else. Nor did Hurd’s own statements warrant that he had been personally compliant or that he personally would comply with the SBC in the future.

The analysis would likely be different if HP had continued the conduct that gave rise to the 2006 scandal while claiming that it had learned a valuable lesson in ethics. However, that is not the case here. Although the facts reflect misbehavior by the corporation’s highest executive in violation of its ethical code, the fact that HP and Hurd enhanced and touted the SBC does not, without more, transform the misbehavior into an actionable material omission under the securities laws.

Because the affirmative statements did not create an impression of full compliance, HP and Hurd had no duty to disclose Hurd’s misuse of CEO authority and misbehavior in violation of the SBC.

III. CONCLUSION

The complaint does not give rise to an actionable claim for securities fraud. This is not to say that Hurd’s conduct was consistent with the general ethical values espoused within the SBC and related statements. Indeed, Hurd did not demonstrate the “uncompromising integrity” asked of him by the SBC. However, there was no fraud. The statements made were aspirational, and neither Hurd nor HP warranted total compliance with the SBC. Nor did Hurd, personally, attest to stockholders that he was not behaving as it turned out he was. In short, there were no material misrepresentations or actionable material omissions. Further, even if the complaint adequately alleged the existence of a misrepresentation or a misleading omission, it would not have been actionable, as it was immaterial.

AFFIRMED.

      . Because Retail Wholesale appeals from the district court's order grafting Defendants’ motion to dismiss, the facts are taken from Plaintiffs’ complaint and are assumed to be true. Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009).

      . There may be instances in which another order of decision is more efficient. We do not mean to prescribe any particular sequence of analysis.

      . Although we do not reach the issue, having failed to find an actionable misstatement, we note that we are somewhat perplexed by Retail Wholesale’s argument that it was the falsity of the SBC that led to their damages. To the contrary, it appears that HP’s ethics and compliance policies worked. Hurd did not live up to HP’s standards; HP became aware of Hurd’s ostensible misconduct; HP quickly launched an investigation, confirming the misconduct; and Hurd resigned. In fact, given Retail Wholesale’s position that Hurd's resignation triggered the decline in stock value, it’s entirely possible that the strength — as much as the weakness — of the SBC factored into Retail Wholesale’s claimed damages.