Highfields Capital I, LP v. SeaWorld Entm't, Inc.

• Decision Date: 25 March 2022
• Docket Number: 18-cv-1276-MMA (AGS)
• Parties: HIGHFIELDS CAPITAL I, LP, et al., Plaintiffs, v. SEAWORLD ENTERTAINMENT, INC. et al., Defendants.
• Court: U.S. District Court — Southern District of California

HIGHFIELDS CAPITAL I, LP, et al., Plaintiffs, v. SEAWORLD ENTERTAINMENT, INC. et al., Defendants.

No. 18-cv-1276-MMA (AGS)

United States District Court, S.D. California

March 25, 2022

ORDER AFFIRMING TENTATIVE RULINGS RE: EVIDENTIARY OBJECTIONS, DAUBERT MOTIONS, AND MOTIONS FOR SUMMARY JUDGMENT

[Doc. Nos. 169, 170, 174, 176, 177, 178]

REDACTED

HON MICHAEL M. ANELLO UNITED STATES DISTRICT JUDGE

On March 16, 2022, Plaintiffs Highfields Capital I LP Highfields Capital II LP, Highfields Capital III L.P., Highfields Capital IV LP, and Highfields Capital LTD. (collectively, “Plaintiffs” or “Highfields”) and Defendants SeaWorld Entertainment, Inc. (“SeaWorld”), James Atchison, James Heaney, and Marc Swanson (collectively, “Defendants”) appeared before the Court for a hearing on Defendants' evidentiary objections as well as the parties' Daubert motions and cross-motions for summary judgment. In anticipation of the hearing, the Court issued tentative rulings on the pending motions. See Doc. No. 199. For the reasons set forth below, the Court AFFIRMS its tentative rulings.

I. Background^[1]

Plaintiffs bring this securities fraud action against Defendants asserting claims pursuant to sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. See Doc. No. 1 (“Compl.”). This case involves statements made by Defendants in the wake of the 2013 documentary Blackfish. Blackfish tells the story of Tilikum, a killer whale, who killed a SeaWorld trainer in February 2010. Doc. No. 137-2 (“Plaintiffs' Separate Statement” or “PSS”) Nos. 12-13; Doc. No. 139-2 (“Defendants' Separate Statement” or “DSS”) No. 13.^[2] The film is generally about killer whales in captivity as well as the death of trainer Dawn Brancheau at SeaWorld in 2010. PSS Nos. 11-12; DSS No. 13. Blackfish premiered at the Sundance film festival on January 19, 2013. PSS No. 9; DSS No. 14. Blackfish then premiered in theaters on July 19, 2013. PSS No. 9; DSS No. 15. On October 24, 2013, CNN aired Blackfish to approximately 1.36 million viewers. DSS No. 16. Thereafter, in 2013 and 2014, Blackfish was aired on CNN multiple times. PSS No. 15. Blackfish became available to stream on Netflix in December 2013. DSS No. 17.

SeaWorld is a theme park and entertainment company. PSS No. 1; DSS No. 2. During the relevant time period, SeaWorld owned eleven theme parks, including SeaWorld Orlando, SeaWorld San Diego, and SeaWorld Texas. PSS No. 4; DSS No. 2. During this time, Mr. Atchison was the President and Chief Executive Officer of SeaWorld, PSS Nos 20, 22; Compl ¶ 29, Mr. Heaney was SeaWorld's Chief Financial Officer, see, e.g., PSS No. 20; Compl. ¶ 30, and Mr. Swanson was SeaWorld's Chief Accounting Officer, PSS No. 18; Compl. ¶ 31.

Plaintiffs are investment funds commonly managed by Highfields Capital Management. PSS No. 5; DSS Nos. 21, 24. Plaintiffs purchased and held SeaWorld common stock from 2013 through 2015. PSS No. 5; DSS No. 23. During this time, Peter Fleiss was a Managing Director at Highfields and also served as a portfolio manager of a portfolio that held SeaWorld stock. PSS No. 7; DSS No. 25. James Corcoran was a Highfields investment analyst who was responsible for Highfields' SeaWorld position. PSS No. 8; DSS No. 39.

According to Plaintiffs, while they were invested in SeaWorld, they “repeatedly asked [SeaWorld] . . . whether (and if so, how) [Blackfish] was affecting SeaWorld.” PSS No. 20. On summary judgment, Plaintiffs assert that Defendants made six false and misleading statements regarding Blackfish's impact on SeaWorld:^[3]

1. November 13, 2013: Mr. Atchison's quote in a Wall Street Journal article;

2. December 10, 2013: Messrs. Atchison and Heaney's statements during a meeting with Plaintiffs in Boston, Massachusetts;

3. December 20, 2013: Mr. Atchison's quote in an Orlando Sentinel article;

4. January 13, 2014: Mr. Fred Jacob's^[4] quote in The Dodo article;

5. March 13, 2014: Mr. Atchison's statement during a First Quarter 2014 earnings call with investors; and

6. May 20, 2014: Mr. Heaney's statement during a J.P. Morgan Global Technology, Media, and Telecom Conference call.

On August 13, 2014, SeaWorld reported its results for the second quarter of 2014^[5]in SEC form 8-K. DSS No. 104. SeaWorld reported, among other things, a net loss of $15.9 million. DSS No. 104. SeaWorld also noted lower attendance due to a combination of factors, including the newly added factor: “demand pressures related to recent media attention surrounding proposed legislation in the state of California.” DSS No. 104. The legislation refers to a bill in California proposed by Assembly Member Richard Bloom in March 2013 to ban orca performances in response to Blackfish (the “Bloom Bill”). DSS No. 61; PSS No. 106. Plaintiffs assert that this amounted to a corrective disclosure and is the relevant corrective disclosure date.^[6] Compl. ¶ 189.

On August 13, 2014, SeaWorld stock dropped nearly 33%. DSS No. 106. In response, Plaintiffs sold nearly 1.1 million shares of SeaWorld stock and lost “millions of dollars.” Compl. ¶ 16; DSS No. 107.

II. Evidentiary Objections

Defendants lodge two sets of evidentiary objections in connection with the summary judgment motions. The Court addresses each in turn.

A. Defendants' First Set of Objections

Defendants first object to two pieces of evidence that Plaintiffs submitted in support of their motion for partial summary judgment: (1) Mr. Corcoran's declaration; and (2) MKM Partners' (“MKM”) research and a marketing presentation by Initiative Media, LLC (“Initiative”).

1. Mr. Corcoran's Declaration

According to Defendants, Mr. Corcoran's August 19, 2021 declaration, Doc. No. 137-84 (“Corcoran Decl.”), is a sham. As noted above, Mr. Corcoran is a former employee of Highfields. Corcoran Decl. ¶ 3. Mr. Corcoran made the declaration based upon “personal knowledge of the facts.” Corcoran Decl. ¶ 2. However, Defendants take issue with three paragraphs, arguing that they are contradicted by the evidence:

30. The first [representation] occurred on December 10, 2013, when we met with Messrs. Atchison, Heaney and Ballesteros in Boston. The meeting was organized by Goldman Sachs, SeaWorld's banker in connection with the offering of Blackstone stock.

31. During that meeting, I recall we asked Messrs. Atchison and Heaney whether Blackfish was having any impact on SeaWorld's business. This was consistent with any meeting we would have had with Company management at this time, because we were constantly asking SeaWorld whether the film was impacting or affecting the business.

32. Messrs. Atchison and Heaney stated that the film was having no impact on the Company. Again, this was inconsistent with the responses we received from the Company during this time period, in which they repeatedly denied that Blackfish was having any impact at all.

Corcoran Decl. ¶¶ 30-32.

Defendants assert that Mr. Corcoran was not present at the December 10, 2013 meeting in Boston, based upon the following evidence: (1) Mr. Corcoran's two emails on December 9, 2013 stating that he could not attend the December 10, 2013 meeting in Boston because he was in New York City; (2) the absence of his name on Goldman Sachs' December 9, 2013 list of attendees for the meeting; and (3) the absence of his name on the “Confirmed Attendees” list on the December 10, 2013 agenda. Doc. No. 151-143 at 2-3. Defendants also explain that follow up communication within Highfields shows, not only that Mr. Corcoran was not present at the meeting, but that Blackfish was not discussed. Id. at 3. For example, when Mr. Corcoran asked Mr. Fleiss how the meeting went, Mr. Fleiss emailed a summary, which notes a new “Antarctica” attraction, “weather in pa, ” and “float in the Macy's [day] parade” but is silent as to Blackfish. See Defendant's Opposition Exhibit (“DOX”) 22.

It is undisputed that Mr. Corcoran did not attend the December 10, 2013 meeting in Boston. See Doc. No. 159-11 at 2. Plaintiffs nonetheless argue that his declaration is not a sham because he never stated that he attended the meeting-he merely stated “we” as in Highfields. Plaintiffs also explain that Mr. Fleiss's October 12, 2021 declaration, Doc. No. 148-96 (“Fleiss Decl.”), confirms Mr. Corcoran's recollection of what transpired at the meeting.

The sham affidavit rule only applies where a declaration is clearly and unambiguously contradicted by prior testimony such that the Court can make a factual determination that the sham declaration is only offered to create an artificial factual issue. See Baker v. SeaWorld Entm't, Inc., 423 F.Supp.3d 878, 925 (S.D. Cal. 2019).

Contrary to Plaintiffs assertion, Mr. Fleiss's declaration does not confirm Mr. Corcoran's recollection of events. Mr. Fleiss stated in his declaration that at the December 10, 2013 meeting “in response to a question from another investment manager, Atchison told us the musician cancellations were not material and he was not concerned about them.” Fleiss Decl. ¶ 39. The import of this statement regarding musician cancellations relates to the assertion elsewhere that “musical acts had withdrawn . . . because of concerns relating to Blackfish.” Fleiss Decl. ¶ 37. Mr. Corcoran, however, attests that “During that meeting, I recall we asked Messrs. Atchison and Heaney whether Blackfish was having any impact on SeaWorld's business.” Corcoran Decl. ¶ 31. Because Mr. Fleiss was present at the meeting and his account differs from that of Mr. Corcoran's, Mr. Fleiss's declaration undoubtedly calls Mr. Corcoran's reliability into question, and in fact reveals that this particular statement is inaccurate.

However Mr. Corcoran's declaration does not create an artificial factual dispute because Mr. Fleiss's...