Tuesday, October 04, 2005

Confidential Witness Descriptions Come Up Short

So much for the Business Objects securities class action. This time, it’s the confidential witness allegations that did it in. Not to mention the falsity, loss causation, scienter... well, you get the point. But the main focus really did seem to be on the “three confidential witnesses,” with Judge Martin J. Jenkins (N.D. Cal.) noting that Plaintiffs “failed to describe the confidential witnesses with a sufficient degree of specificity,” because “the Amended Complaint provides no more than the job title of the confidential witnesses.” “Moreover, besides the statements of these three confidential witnesses, Plaintiffs have offered the Court no corroborating evidence, such as internal documents or public filings, to support their assertions of falsity.” In addition, “the witness statements are long on speculation, but short on relevant detail,” and “offer no detail regarding how the witnesses learned of the facts in their statements or how, if at all, Defendants knew about such facts.”

But don’t count Plaintiffs out just yet, as the Judge did say “it is possible that Plaintiffs could remedy their significant pleading defects in an amended complaint by adding detailed factual support for their allegations of false or misleading statements, and demonstrating that Defendants had the requisite scienter at the time the statements were made. Accordingly, the Court dismisses the Amended Complaint without prejudice.”

You can read In re Business Objects S.A., issued July 27, 2005, at 2005 U.S. Dist. LEXIS 20215.

Nugget: “Therefore, where, as here, a securities fraud complaint requires a laborious deconstruction and reconstruction of a great web of scattered, vague, redundant and often irrelevant allegations, the spirit and letter of the PSLRA support dismissal.”

No comments: