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Wednesday
Jun172009

Oracle vs. Household Finance---A Tale of Two Securities Fraud Class Actions

My friends at a competitor firm have had their ups and downs recently, and always have. They invested years of their lives into litigating a securites fraud suits against Household Finance and Oracle. Last month, the case against Household Finance paid off (at least for the time being) with a jury verdict worth perhaps hunderds of millions. The case is discussed here. The case is a model showing why defendants should settle before trial.

A second case, filed about the same time...and which went up and down on an appeal over pleading issues, however met a different end (at least for he time being.) Just days ago, a Judge in the Northern Distict of California, threw out the securities fraud class action against Oracle on a summary judgement motion. Much of the opinon is based on the failure to tie the alleged fraud to the reasons the stock dropped. The case was by no means a clean case. Oracle had undisclosed messes at hand, and Larry Ellison sold almost $1 billion in stock just before the disclosures that caused the stock to drop. The problem, according to the Court, is that the stock seemed to drop based on an unexpected slowdown...or predicted slowdown in sales that cropped up during the last few weeks...not the accounting issues and product issues the plaintiffs case was built upon. The opinion can be found here. This case is a model showing why defendants  never settle before trial.

I observed both cases in their infancy and through much of the discovery while I worked with many of the attorneys involved. The energy in prosecuting such cases is intense, and the attorneys devoted much of the last 8 years to these cases. I am both happy and saddened for my former colleagues. But that is the life of a securities fraud litigator...and perhaps any litigator. The difference is that the defense attorneys get paid either way.

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