Securities Litigation: Harmonic

In re Harmonic Inc. Securities Litigation
USDC ND California

Background

Company background

Litigation background

In re Harmonic Inc. Securities Litigation
USDC ND California (San Francisco) 3:00-cv-02287-PJH

Judge Phyllis J. Hamilton
Filed 6.28.00
In Knollenberg v. Harmonic, Inc., 152 F. Appx 674 (9th Cir. 2005), the plaintiffs brought a securities fraud class action against defendants, Harmonic Inc. (Harmonic) and C-Cube Microsystems, Inc. (C-Cube) and several top executives of both corporations after the stock price of both companies declined in connection with the May 2000 merger between Harmonic and C-Cube. The plaintiffs contended that the defendants and several of their executives made a series of misleading statements to obtain Harmonic shareholder approval for the acquisition of C-Cubes DiviCom division. The plaintiffs also alleged that defendants conduct violated Sections 10(b), 14(a) and 20(a) of the Exchange Act and Section 12 of the Securities Act. The plaintiffs alleged that certain executives of C-Cube engaged in insider selling. Specifically, to establish the defendants motive and opportunity to mislead investors and provide a basis for a strong inference of scienter. Id. at 682. In the Ninth Circuit, to determine whether an insider sale is suspicious, courts consider the following: (1) percentage of shares sold by the insiders; (2) timing of sales; and (3) whether the sales were consistent with the traders previous history. Id. (citations omitted). In this case, the defendants were required under the merger agreement to exercise their options and sold their shares to raise the money necessary to exercise their vested options and purchase the underlying shares. Id. The Ninth Circuit held that the plaintiffs failed to allege facts sufficient to conclude that such stock sales gave rise to a strong inference of scienter, and thus affirmed the dismissal of the plaintiffs complaint.

Lead plaintiffs