Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_02-cv-01486/USCOURTS-cand-4_02-cv-01486-102/pdf.json

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

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

In re JDS UNIPHASE CORPORATION

SECURITIES LITIGATION

 /

No. C 02-1486 CW

ORDER GRANTING

DEFENDANTS JDS,

STRAUS, MULLER

AND ABBE'S MOTION

TO DISMISS

PLAINTIFFS' ADVA

CLAIMS

In its August 24, 2007 order on the parties' cross-motions for

summary judgment, the Court deemed Plaintiffs' complaint amended to

challenge additional alleged misstatements. August 24, 2007 Order

at 12. The Court also permitted Defendants to file "a motion to

dismiss the claims related to ADVA . . . if they have grounds to do

so that were not raised or addressed in their motion for summary

judgment." Id. On September 18, 2007, Defendants JDS Uniphase

Corporation (JDSU), Jozef Straus, Anthony Muller and Charles Abbe

Case 4:02-cv-01486-CW Document 1617 Filed 10/10/07 Page 1 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1As an initial matter, Plaintiffs argue Defendants' motion

should be denied because Defendants make extensive reference to

materials outside the pleadings. In the alternative, Plaintiffs

argue that the motion should be treated as a motion for summary

judgment. See Fed. R. Civ. P. 12(b). Defendants counter that they

relied on the documents to which Plaintiffs referred in their

opposition to Defendants' motion for summary judgment because

Plaintiffs have not filed an amended complaint. In any event, the

Court finds that Defendants' arguments entitle it to summary

judgment on claims based on these two statements. 

2

filed such a motion. Plaintiffs oppose the motion.1 Having

considered the parties' papers and the evidence cited therein, the

Court grants Defendants' motion.

As discussed in the order on the parties' cross-motions for

summary judgment, Plaintiffs' ADVA claims are based on Defendants'

valuation of ADVA, a company in which JDSU acquired a twenty-nine

percent interest through its acquisition of E-TEK. Plaintiffs

claim that Defendants should have written down the carrying value

of ADVA during the quarter ending December 31, 2000 because of

declines in ADVA's stock prices. Therefore, Plaintiffs argue that

the April 24, 2001 press release and the May 11, 2001 Form 10-Q for

the quarter ended March 31, 2001, which both reported assets of

$65,039.5 million, including $714.5 million based on JDSU's

valuation of its investment in ADVA, violate § 10(b) of the

Securities Exchange Act of 1934. 

The Court has already granted summary judgment to Defendants

on Plaintiffs' claims related to Defendants' statements of good

will in the press release and Form 10-Q because both documents

contained adequate warnings about the need to write-off good will. 

Therefore, the Court found that the information regarding the

Case 4:02-cv-01486-CW Document 1617 Filed 10/10/07 Page 2 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

upcoming good will write-off had already entered the market and

Defendants' failure explicitly to describe the write-off could not

be found misleading. August 24, 2007 Order at 33 (citing In re

Convergent Technologies Security Litigation, 948 F.2d 507, 513 (9th

Cir. 1991)).

Defendants argue that similar reasoning applies here because

the April 24, 2001 press release stated that JDSU was "evaluating

the carrying value of certain long-lived assets, consisting

primarily of $56.2 billion of goodwill recorded on its balance

sheet at March 31, 2001." Fernandez Decl., Ex. 5 at 3. Further,

the press release recognized "[d]ownturns in telecommunications

equipment and financial markets" and stated that JDSU "anticipates

recording additional charges to reduce the carrying value of the

unamortized goodwill and other long-lived assets and such

adjustments could represent a substantial portion of their carrying

value." Id. Similarly, the May 11, 2001 Form 10-Q stated that

JDSU was

currently evaluating the carrying value of certain longlived assets and acquired equity method investments,

consisting primarily of $56.2 billion of goodwill and

the Company's $757 million equity method investment in

ADVA [] recorded on its balance sheet at March 31, 2001.

Id., Ex. 3 at 4. The Form 10-Q repeated the general statements

regarding downturns in the market and the anticipation of future

write-downs. Id.

Plaintiffs counter that the press release's reference to

"long-lived assets" does not capture the value of ADVA, an equity

method investment. First, Plaintiffs argue that long-lived assets

refer only to tangible assets. However, this argument is

Case 4:02-cv-01486-CW Document 1617 Filed 10/10/07 Page 3 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

undermined by JDSU's statement that the long-lived assets and

acquired equity method investments it was evaluating consisted

"primarily of $56.2 billion of goodwill and the Company's $757

million equity method investment in ADVA." Id., Ex. 5 at 21. 

Neither good will nor equity method investments are tangible

assets. 

Further, Plaintiffs point to the Form 10-Q, which explicitly

discusses long-lived assets and acquired equity method investments

as evidence that long-lived assets cannot include equity method

investments. Defendants argue that the discussion and balance

sheets contained in the press release are less detailed than those

in the Form 10-Q. While it might have been more precise if the

Form 10-Q had stated that JDSU was assessing its long-lived assets

including acquired equity method investments, the Form 10-Q was

filed after the press release and would not have caused confusion

for an individual reading the press release. 

Plaintiffs next argue that the future write-down of ADVA was

not adequately included in the press release or Form 10-Q because

the documents did not explicitly state that the investment was

impaired or discuss the amount of the anticipated write-down. 

However, the press release acknowledged "[d]ownturns in the

telecommunications equipment and financial markets," stated that

JDSU "anticipate[d] recording additional charges to reduce the

carrying value of . . . long-lived assets" and recognized that

"such adjustments could represent a substantial portion of their

carrying value." Id., Ex. 5 at 3. Similarly, the Form 10-Q

specifically recognized JDSU's "$757 million equity method

Case 4:02-cv-01486-CW Document 1617 Filed 10/10/07 Page 4 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

investment in ADVA" and repeated the warning that "adjustments

could represent a substantial portion of their carrying value." 

Id., Ex. 3 at 21.

The Court finds that the information regarding JDSU's need to

write-down the carrying value of ADVA was already in the market at

the time of the alleged misstatements. Therefore, the Court GRANTS

Defendants' motion (Docket No 1450). 

IT IS SO ORDERED.

Dated: 10/10/07 

CLAUDIA WILKEN

United States District Judge

Case 4:02-cv-01486-CW Document 1617 Filed 10/10/07 Page 5 of 5