On May 2, 2007, a California Superior Court in San Diego County dismissed in its entirety without leave to amend an action by the Peregrine Litigation Trust against several of the former directors and officers of former software seller Peregrine Systems. Gibbs & Bruns represented a group of former outside directors of Peregrine. Among the directors exonerated in the ruling was John Moores, the founder of Houston’s BMC Software and now owner of the San Diego Padres. The ruling came as the result of a March 29, 2007 argument before Judge Lewis in San Diego. In the lawsuit, Plaintiff, a litigation trust formed in the bankruptcy of Peregrine, challenged over $500 million in stock sales by the Peregrine board and management seeking treble damages of $1.5 billion under a California insider trading statute. Judge Lewis heard nearly three hours of argument and then considered the motions for over a month. Her ruling in favor of Defendants dismissed all claims in the action.
The ruling was based on the Securities Litigation Uniform Standards Act (SLUSA), which prohibits certain state court class actions for claims arising out of securities transactions. A primary purpose of the federal statute is to prevent plaintiffs from evading federal litigation reforms enacted during the 1990s by shifting their litigation to state courts. The Peregrine Litigation Trust is controlled by the same Plaintiffs whose related federal securities fraud claims against Peregrine’s outside directors were previously dismissed by a federal judge in San Diego. The court’s opinion dismissing the case found the Litigation Trust’s claims to be a SLUSA “covered class action” preempted in state court by federal law.
