The jury awarded our clients a complete defense verdict in the first case involving a “holder’s claim” to reach trial in California.
Retained by Latham & Watkins
Defense counsel retained Cornerstone Research to support Steven Solomon of the University of California, Berkeley, to address corporate governance, reliance, and disclosure allegations. Following a 14-day trial, the jury found in favor of the defense on all claims.
This was the first case involving a “holder’s claim” to go to trial in California, and was the first time in 86 years that a securities holder’s claim matter went to trial in the United States.
The plaintiff was a board member and the second-largest shareholder of Quality Systems Inc. (QSI; now known as NextGen Healthcare). In late 2011, he claimed that he intended to sell his company shares, but then decided to hold his shares based on alleged misrepresentations and omissions by QSI and its officers. After the stock price dropped in mid-2012, the plaintiff sued QSI and certain individuals claiming damages of several hundred million dollars—the difference in the price of his shares between the time he claimed he intended to sell and the price after the drop.
Professor Solomon provided testimony on the customs and practices surrounding disclosure in public filings, as well as on corporate governance norms around insider trading. He also opined on the role of sophisticated and activist investors in relying on management’s statements, and showed inconsistencies in the plaintiff’s actions and practices with his claims in the case.
Following a 14-day trial, the jury awarded a total victory to the defense. The jury found that QSI and its executives had not committed either intentional misrepresentation and concealment or fraud. This matter was the first case involving a “holder’s claim” to go to trial in California, and was the first time in 86 years that a securities holder’s claim matter went to trial in the United States.