Monday, May 08, 2006

Judge Shoots Down Moving Target

You know you’re in bad shape when your judge says your complaint “is defective because” your “theory of fraud, itself, is legally flawed and is premised on either a fundamental misunderstanding of” Defendants’ “business model, at best, or a blatant misrepresentation of the pertinent facts.”

Yep, that’s the situation in the Applied Signal securities class action, with Judge Saundra Brown Armstrong (N.D. Cal.), after dismissing Plaintiffs theory regarding the company’s backlog, holding that “the Court finds it important to point out that this case departs from the usual circumstances where dismissal with leave to amend is appropriate because the plaintiff has merely failed to allege, with sufficient particularity, facts supporting a viable legal theory of securities fraud.”

So “since Plaintiff could only amend his Consolidated Amended Complaint to allege additional facts that are consistent with the facts that have already been plead, the Court finds that granting Plaintiff leave to amend in order to augment the Consolidated Amended Complaint with additional facts would be futile.”

You can read In re Applied Signal Technology Inc., issued February 8, 2006, at 2006 U.S. Dist. LEXIS 24498.

Nugget: “Further, since Plaintiff has already changed his theory of fraud twice, granting further leave to amend would be highly prejudicial to Defendants. The typically liberal standard of allowing leave to amend should not be employed to require Defendants to defend against an amorphous, "moving target" securities fraud case that is not well thought-out or well supported.”

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