Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-05222/USCOURTS-cand-3_04-cv-05222-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

In re SUPPORTSOFT, INC. SECURITIES 

LITIGATION

___________________________________/

This Document Relates to All Actions

 /

No. C 04-5222 SI

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS WITH LEAVE TO

AMEND

Now before the Court is defendants’ motion to dismiss the complaint. The Court finds that dismissal

is appropriate under the heightened pleading standards of the PSLRA. At a minimum, plaintiffs have failed to

sufficiently plead falsity and scienter. 

Much of plaintiffs’ complaint relies upon the testimony of three confidentialsources. However, the

complaint fails to provide sufficient informationabout the sources. For example, the complaint only establishes

that confidentialsource #3 was a former director of channel sales. No other information regarding the source

is provided, such as the source’s dates of employment, customers thatthe source was personally involved with,

or the source’s immediate supervisor. Furthermore, the complaint does not state how this source would know

that the Company began “pushing” perpetual licenses. The complaint does not identify when the Company

began “pushing” perpetual licenses or which customers shifted to perpetuallicenses based on the Company’s

efforts. This is not sufficient.

The information regarding the other two confidentialsources are plagued by similar problems. The

complaint provides no description of the types ofproblems faced by the Company with the implementation of

its software based on the testimony of confidentialsource #2. The complaint also fails to state when these

problems occurred and whether the problems mentioned by the source contributed to the revenue shortfall in

the third quarter of2004. The complaint certainly does not provide “a list of all relevant circumstances in great

Case 3:04-cv-05222-SI Document 55 Filed 07/18/05 Page 1 of 4
United States District Court

For the Northern District of California

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detail,” as required by In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 984-85 (9th Cir. 1999). 

The weakness of plaintiffs’ pleading with respect to the confidential sources contribute to their failure

to sufficiently plead the falsity ofstatements orscienter. Defendants also presented evidence that the Company

disclosed that it was increasingly relying on perpetual licenses during the class period. See Reply at 1. The

Company also informed investors that the increase in perpetual licenses could lead to less predictability in

revenue on a quarterly basis. See Dinsmore Decl., Ex. B at 25. Therefore, the Court finds that dismissal is

appropriate for failure to plead that the statements were false.

The Court also finds that plaintiffs have failed to plead scienter. Plaintiffs have failed to plead with

sufficient particularity that the individual defendants had knowledge of the asserted allegations. Plaintiffs have

also not pled sufficient facts to find that the stock sales by the individual defendants creates an inference of

scienter.

Plaintiffs include a series of lengthy quotes from press releases and conference calls by the Company.

It is unclear fromthe complaint exactly what portions ofthe statements plaintiffs contend are false or misleading.

In its opposition, plaintiffs attempt to narrow their allegations, which plaintiffs should do in the First Amended

Complaint. By focusing their allegations, the parties can more clearly discuss whether the statements fall within

the PSLRA’s safe-harbor provision.

Based on the discussion above, the Court GRANTS defendants’ motion to dismiss with leave to

amend. Plaintiffs must file their First Amended Complaint on or before August 19, 2005. 

IT IS SO ORDERED.

Dated: 7/15/05

 

SUSAN ILLSTON

United States District Judge

Case 3:04-cv-05222-SI Document 55 Filed 07/18/05 Page 2 of 4
United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

In re SUPPORTSOFT, INC. SECURITIES 

LITIGATION

___________________________________/

This Document Relates to All Actions

 /

No. C 04-5222 SI

ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS WITH LEAVE TO

AMEND

Now before the Court is defendants’ motion to dismiss the complaint. The Court finds that dismissal

is appropriate under the heightened pleading standards of the PSLRA. At a minimum, plaintiffs have failed to

sufficiently plead falsity and scienter. 

Much of plaintiffs’ complaint relies upon the testimony of three confidentialsources. However, the

complaint fails to provide sufficient informationabout the sources. For example, the complaint only establishes

that confidentialsource #3 was a former director of channel sales. No other information regarding the source

is provided, such as the source’s dates of employment, customers thatthe source was personally involved with,

or the source’s immediate supervisor. Furthermore, the complaint does not state how this source would know

that the Company began “pushing” perpetual licenses. The complaint does not identify when the Company

began “pushing” perpetual licenses or which customers shifted to perpetuallicenses based on the Company’s

efforts. This is not sufficient.

The information regarding the other two confidentialsources are plagued by similar problems. The

complaint provides no description of the types ofproblems faced by the Company with the implementation of

its software based on the testimony of confidentialsource #2. The complaint also fails to state when these

problems occurred and whether the problems mentioned by the source contributed to the revenue shortfall in

the third quarter of2004. The complaint certainly does not provide “a list of all relevant circumstances in great

Case 3:04-cv-05222-SI Document 55 Filed 07/18/05 Page 3 of 4
United States District Court

For the Northern District of California

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detail,” as required by In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 984-85 (9th Cir. 1999). 

The weakness of plaintiffs’ pleading with respect to the confidential sources contribute to their failure

to sufficiently plead the falsity ofstatements orscienter. Defendants also presented evidence that the Company

disclosed that it was increasingly relying on perpetual licenses during the class period. See Reply at 1. The

Company also informed investors that the increase in perpetual licenses could lead to less predictability in

revenue on a quarterly basis. See Dinsmore Decl., Ex. B at 25. Therefore, the Court finds that dismissal is

appropriate for failure to plead that the statements were false.

The Court also finds that plaintiffs have failed to plead scienter. Plaintiffs have failed to plead with

sufficient particularity that the individual defendants had knowledge of the asserted allegations. Plaintiffs have

also not pled sufficient facts to find that the stock sales by the individual defendants creates an inference of

scienter.

Plaintiffs include a series of lengthy quotes from press releases and conference calls by the Company.

It is unclear fromthe complaint exactly what portions ofthe statements plaintiffs contend are false or misleading.

In its opposition, plaintiffs attempt to narrow their allegations, which plaintiffs should do in the First Amended

Complaint. By focusing their allegations, the parties can more clearly discuss whether the statements fall within

the PSLRA’s safe-harbor provision.

Based on the discussion above, the Court GRANTS defendants’ motion to dismiss with leave to

amend. Plaintiffs must file their First Amended Complaint on or before August 19, 2005. 

IT IS SO ORDERED.

Dated: 7/15/05

 

SUSAN ILLSTON

United States District Judge

Case 3:04-cv-05222-SI Document 55 Filed 07/18/05 Page 4 of 4