Monday, June 19, 2006

Cray's Day

Plaintiffs sure tried in the Cray action, but it looks like their first amended complaint just didn’t cut it. They lost on a bunch of points, but a couple of the more interesting ones was Judge Thomas S. Zilly (W.D. Wash.) findings that “a five-month period of stock sales does not create a strong inference of scienter where the allegedly false statements were made in a uniform and routine manner for over two years,” and “here, Plaintiffs do not adequately allege that the sales were timed to maximize the benefit from false SOX 302 certifications that were issued quarterly for at least nine quarters.”

Also, Plaintiffs reliance on a confidential witness who made the case-cracking revelation “that there was ‘talk’ that Cray was ‘fudging its books’” was apparently misplaced, with Judge Zilly calling that mere “gossip and innuendo.”

So the complaint was dismissed, but Judge Zilly did give a generous 120 days for them to try one more time.

You can read Limantour v. Cray, issued April 28, 2006, at 2006 U.S. Dist. LEXIS 27186.

Nugget: “The Court concludes that the Complaint adequately alleges that the 10-Q and SOX 302 certifications for third quarter 2002 through third quarter 2004 were false or misleading based on the disclosure in 2005 that there were material weaknesses in Cray's internal controls and procedures.”

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