Unreported / Non-Citable
Background
Eleven New York City retirement funds sued cloud-data company Snowflake and two former executives after Snowflake shares declined in 2022. The funds alleged that the company concealed how inefficient computing architecture caused customers to consume prepaid credits faster, temporarily boosting revenue while making the service less attractive.
The investors claimed later announcements about product improvements and slower projected growth revealed the truth. After earlier pleading attempts, Snowflake moved to dismiss the third amended complaint under the federal securities laws.
The Court’s Holding
The court dismissed the complaint with prejudice. Even at the relatively forgiving pleading stage, the funds had to allege loss causation: facts plausibly showing that a disclosure revealed the alleged fraud and caused the claimed economic loss.
The supposed May 2022 corrective disclosure largely repeated information already available to the market, while a broader technology-stock selloff supplied a substantially more plausible explanation for the price movement. Because the investors had already received an opportunity and specific guidance to cure this defect, the court denied further leave to amend.
Key Takeaways
- A stock-price decline alone does not establish securities fraud; the complaint must connect the loss to disclosure of the alleged concealed facts.
- Information already known to investors generally cannot serve as a corrective disclosure.
- Courts may consider obvious market-wide explanations when deciding whether pleaded loss causation is plausible.
- Repeated failure to cure a specifically identified defect can justify dismissal with prejudice.
Why It Matters
For California technology companies and their investors, the decision illustrates the practical force of the loss-causation requirement. Plaintiffs should isolate company-specific price effects and explain what genuinely new information reached the market. Defense counsel should test alleged corrective disclosures against prior public statements and contemporaneous industry movement.