Lifting the Lid: Investors press claims in lengthy JDSU case
NEW YORK (Reuters) - Shareholder class-action lawsuits rarely go to trial, but a long-running case against JDS Uniphase Corp. (JDSU.O)(JDU.TO), a late 1990s stock market darling that nearly collapsed when the tech bubble burst, could soon be an exception.
Investors embraced the fiber optics parts provider during the dot-com boom as it went on a dizzying merger spree, but they quickly soured on JDSU, which rang up a staggering $50.6 billion net loss in fiscal 2001 when business spending on telecommunications products stalled.
Its shares plunged 99 percent, erasing billions in stockholder value, and the company laid off thousand of workers.
Now, JDSU, a much smaller version of its former self, and four former top executives are preparing to go to trial in October to defend themselves against a shareholder lawsuit stemming from the company's huge stock declines.
Only an estimated 1 percent of securities class-actions ever go to trial, because they usually are dismissed or settled beforehand.
These cases face many hurdles for plaintiffs. Just last week the Supreme Court raised the bar for investors pursuing securities fraud claims, ruling that they need to make a compelling case that the defendants' intended to deceive or else the suits can be thrown out.
The parties involved generally want to avoid costly and risky trials, and courts try to urge plaintiffs and companies to resolve the matter themselves, often through mediation, legal experts say.
"Because class-actions are complex, the courts are motivated to have the parties settle so that busy dockets are not clogged with class-action trials," said Arthur Jakoby, a partner at law firm Herrick Feinstein who handles class-action defense matters but is not involved in the JDSU case.
One of the last big class-actions to go to trial was a lawsuit against auditor Arthur Andersen LLP, brought by WorldCom investors who claimed they were cheated in the telecom company's collapse. That case was settled in April 2005, during the trial.
CONNECTICUT SEEKS RECOVERIES
The civil lawsuit against JDSU, first filed in 2002, has been pending in a U.S. District Court in Oakland, California. A trial is set for October 1, but on July 26 the defendants will ask U.S. District Judge Claudia Wilken to grant summary judgment in their favor on all of the shareholders' claims.
The lead plaintiff, the Connecticut Retirement Plans and Trust Funds, contends the company concealed information that its business prospects were deteriorating while insiders were unloading hundreds of millions of dollars of their own shares.
"The basic allegation is that the company knew that disaster was imminent but continued to reassure investors that everything was fine," said Richard Blumenthal, Connecticut's attorney general. "At the same time, company executives were selling large sums of their own shares and shareholders, like our pension funds, suffered big losses."
The lawsuit says stockholders lost about $20 billion. The Connecticut fund says it lost about $65 million.
JDSU has denied any wrongdoing. A company spokeswoman declined to comment on the case beyond JDSU's stance in its court papers that statements about performance were not misleading and that the amount of the stock sales by the former executives were consistent with their past sales. Continued...
