After the Fact

Who says a judge can’t look at a corporate Defendant’s financial data issued after the class period, and available at the SEC website, to determine the falsity of earlier statements? Well, if you know, you might want to send them a copy of this opinion. In the SupportSoft action, which has a proposed class period ending in the third quarter of 2004, Judge Susan Illston (N.D. Cal.) considered Defendants argument that “because SupportSoft's revenues continued increasing after the third quarter of 2004, the allegations that SupportSoft's business was slowing are not remotely plausible.”

“The Court finds, however, that SupportSoft's quarterly revenues following the third quarter of 2004 are completely consistent with plaintiffs' accusations. After falling to $ 13.5 million in the third quarter of 2004, SupportSoft's revenue rose to $ 15.1 million, $ 15.7 million, and $ 16.9 million over the next three quarters, respectively. Thus, it took three quarters for SupportSoft to meet the guidance it had announced for the third quarter of 2004. This is completely consistent with a deteriorating business environment. Moreover, SupportSoft's revenue for the fourth quarter of 2004 [2005?] fell again to $ 13 million. (See SupportSoft Form 10-Q dated November 11, 2005, available at http://www.sec.gov/). This is another indication that SupportSoft's business was suffering and has never fully recovered.”

Result? The corporation and its executives’ motions to dismiss denied.

You can read In re SupportSoft, issued November 21, 2005, at 2005 U.S. Dist. LEXIS 31406.

Nugget: “The strength of plaintiffs' claim, of course, remains to be seen, but that is an analysis for another day.”