ROBERT v. MOORES Part - IV
In February 2003, Robert Reese Bains III and a group of former Peregrine Systems, Inc. (Peregrine) shareholders (collectively plaintiffs) filed this action against former Peregrine directors John J. Moores, Charles E. Noell III, and Christopher A. Cole (collectively defendants), as well as several former Peregrine employees, Peregrine's former outside accounting firm, and two of Peregrine's former business partners.[1] In their complaint, plaintiffs alleged that they had been induced to hold Peregrine stock from May 1997 through 2002 by Peregrine's false, fraudulent and misleading financial reports.[2] Plaintiffs alleged that Peregrine engaged in various fraudulent accounting practices that led to the improper recognition of revenue in Peregrine's financial statements, for the purpose of increasing Peregrine's stock price. Plaintiffs further alleged that in May 2002, after the initial public disclosure of the improper practices, Peregrine's stock price fell dramatically, causing plaintiffs to suffer damages. Plaintiffs averred that in February 2003, Peregrine issued restated financial statements for fiscal years 2000 and 2001, and for the first three quarters of 2002, and that the financial statements reduced by $509 million previously reported revenue in the amount of $1.34 billion. Of the $509 million, $259 million was deducted for non-substantiated transactions. Plaintiffs' complaint contained various fraud and fraud related causes of action. Defendants filed motions for summary judgment in which they contended that plaintiffs could not prevail on any of their fraud or fraud related causes of action because there was no evidence from which a reasonable trier of fact could conclude that defendants participated in, or knew about, any of the fraudulent accounting practices.[3] Plaintiffs filed a motion to stay the proceedings on the ground that they needed to obtain additional discovery from witnesses who had previously invoked their Fifth Amendment rights and refused to provide substantive testimony in this case. The trial court denied plaintiffs' motion for a stay, and granted defendants' motions for summary judgment.
On appeal, plaintiffs claim that the trial court erred in granting judgment for defendants as a matter of law on the fraud and fraud related causes of action. Specifically, plaintiffs claim that the trial court erred in concluding that plaintiffs failed to identify evidence from which a jury could find that defendants knew that Peregrine's financial reports contained false information. Plaintiffs also contend that there are triable issues of material fact with respect to whether defendants are liable on these causes of action pursuant to the group published information doctrine.[4] Plaintiffs further claim that the trial court erred in sustaining Noell's and Moores's demurrers[5] to plaintiffs' claim that they were liable for various California statutory securities law violations pursuant to Corporations Code section 25504.[6] Finally, plaintiffs contend that the trial court erred in denying their motion to stay the proceedings. Court reject all of plaintiffs' claims and affirm the judgment.
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