US judge allows Openwave options suit to go ahead

NEW YORK, Nov 1 (Reuters) - A U.S. judge has ruled that a shareholder lawsuit against Openwave Systems Inc OPWV.O and former and current officials over their roles in an alleged scheme to backdate stock options can go forward.

U.S. District Judge Denise Cote, in an opinion dated Oct. 31, denied the defendants’ request to throw out the entire case, saying certain claims against the company and nine individuals, including two former chief executives and two former chief financial officers, could proceed.

The lead plaintiff, an Arkansas pension fund, had alleged “with specificity” that four former executives, including ex-CEO Donald Listwin and ex-CFO Alan Black, had received backdated options, Cote wrote.

Cote let stand another count that names ex-CEO David Peterschmidt and ex-CFO Harold Covert among others in connection with their positions of control at the company.

Cote also let certain claims proceed against three directors who were on the compensation committee of Openwave’s board. Two of them are still on the board, according to information on the company’s Web site.

“This is a groundbreaking decision because there are very few decisions in this area going one way or another,” said Chad Johnson, lawyer for the plaintiffs.

“This is a detailed and well-reasoned decision,” added Johnson, of the firm Bernstein Litowitz Berger & Grossmann. “It will be, I suspect, looked at by courts across the country who are considering similar cases.”

An Openwave representative could not be reached immediately for comment.

Arkansas Teacher Retirement System, the lead plaintiff, has alleged that Openwave’s stock price dropped as a result of the defendants’ seven-year-long stock options backdating scheme, which led Openwave to restate financial results.

Last December, Openwave said its review of stock option grants resulted in about $182 million in charges for extra compensation costs for fiscal years 2000 to 2005.

The software maker said at the time its review did not find evidence of fraud or manipulation in granting of stock options. But a board committee found instances in which the grant date used by the company as the date for measuring options “preceded the appropriate measurement date,” the company had said.

The case was filed in February in U.S. District Court in Manhattan and seeks to represent those who bought the company’s stock between Sept. 30, 2002, and Oct. 26, 2006, according to the ruling.

Most of the backdating is alleged to have occurred between 2000 and 2002, Cote wrote.

The fund brought claims under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The lawsuit named Openwave, several former officers and directors, the underwriters of a December 2005 stock offering, and its auditor as defendants.

The judge granted the request to dismiss claims brought under the Securities Act and some of the claims against some of the defendants under the Securities Exchange Act, according to the ruling.