"This is a classic fraud case masquerading as a negligence claim." At least that’s what Judge Charles R. Breyer (N.D. Cal.) says about the 1933 Act claims in the Leadis Technology (NASDAQ LDIS) securities class action. You see, in throwing out the entire action, Judge Breyer held that "while plaintiffs need not prove fraud, the gravamen of the Complaint is nevertheless ‘grounded in fraud.’ Thus, the heightened pleading standard of Rule 9(b) applies." He also noted that "Plaintiffs have admitted the Complaint fails to meet the particularity requirements of Rule 9(b), and the Court agrees." Therefore, "since plaintiffs have further represented to the Court that an amendment to the Complaint would be futile, defendants' motions to dismiss are GRANTED WITH PREJUDICE."
For the Third Circuit’s and another District Judge’s views on the sound in fraud doctrine, take a look here and here.
You can read In re Leadis, issued March 1, 2006, at 2006 U.S. Dist. LEXIS 11152.
Nugget: "This is a quintessential fraud claim. Despite plaintiffs' best efforts to mask this reality and merely plead a negligence claim, their allegations necessarily depend on defendants' knowledge of these on-going occurrences and their decision to mislead investors by making the disclosures in forward-looking-rather than present-tense-statements."