Brocade communications systems backdating
Johnson Fistel was appointed Co-Lead Counsel in a derivative lawsuit that involved claims against the officers and directors of Titan Corporation for breach of fiduciary duty.During the pendency of the litigation, Titan announced that it would be acquired, threatening to cause the shareholders in the derivative action to lose standing.
Specifically, the case challenged the fairness of the price shareholders received from the 2014 acquisition of Flow by American Industrial Partners.Brocade then formed a Special Litigation Committee and retained Johnson Fistel as co-counsel to Brocade to help litigate claims against ten former officers and directors of the company.After years of litigation, over $24 million was recovered for Brocade. The original shareholder plaintiffs asserted violations of state law, including breaches of fiduciary duties and unjust enrichment. Neiman was one of Brocade's founders and served on the Board of Directors from August 1995 until April 2006. Neiman served on the Audit Committee from February 1998 until October 2001, and on the Compensation Committee from August 2001 until October 2004. As members of the Compensation Committee, Defendants Dempsey, Leslie, and Neiman were involved in granting stock options to officers and directors and in ratifying grants to employees. All were aware of the improper option-granting practices at Brocade and signed inaccurate financial statements. Furthermore, Plaintiff (through its shareholders) did file a timely complaint in federal court; yet they chose not to pursue a claim against certain Defendants. The Supreme Court has held that this "by reason of" language requires that RICO plaintiffs show proximate causation, one aspect of which is a "direct relation between the injury asserted and the injurious conduct alleged." Holmes v. At one point, the Committee asked Reyes to deliver a certificate evidencing the stock option grants, but Reyes did not comply and the Board took no further action. of Wausau, , 295 (9th Cir.1996) (holding that a contribution accrues when a judgment is entered against the direct defendants). In response to arguments that the complaint lacked specific facts as to how much profit the defendant received, the court noted that "[s]uch facts are not necessary at the pleading stage and are issues to be resolved after discovery." Id.; see also In re Atmel Corp. These two state law claims are for (1) breach of an employee's duty of loyalty, and (2) aiding and abetting a breach of fiduciary duty. Celio, Steven Paul Ragland, Keker & Van Nest, LLP, San Francisco, CA, for Stephanie Jensen. Doolittle, Quinn Emanuel Urquhart Oliver & Hedges LLP, San Francisco, CA, for Michael J. Robert Charles Friese, Jahan Pierre Raissi, Jason Pang Fe Lee, Shartsis Friese & Ginsburg LLP, San Francisco, CA, for Paul R. Brown, Orrick Herrington & Sutcliffe LLP, Ruth Young Kwon, Attorney at Law, San Francisco, CA, Anthony Angelo De Corso, Eric A. Beck, Orrick, Herrington, & Sutcliffe LLP, Los Angeles, CA, for Jack Cuthbert, Robert D. Defendants were allegedly involved in a scheme to manipulate stock option grant dates so as to maximize profits to themselves at the expense of the Company. Thus, Plaintiff would not lose all remedies against the state court Defendants if equitable tolling is not permitted here. The Compensation Committee exercised little to no supervision over what they were doing, and the Committee's members themselves signed backdated grant documentation. 35 (stating that directors who backdate options must know that the options were being backdated). The Company was harmed because it received less than it otherwise would for those stock options. Brocade asserts claims twelve and thirteen against Defendants Bossi and Jensen as alternative theories in the event that these parties were not fiduciaries of the Company. Defendants falsified the dates of stock-option grants, forged records relating to Board proceedings, and created sham programs to lower the exercise prices of stock-option grants or to change the vesting periods. Defendants sought to avoid recording the compensation expenses on the Company's financial statements. To implement this scheme, Reyes abused the authority purportedly given to him to grant stock options as a "committee of one." SAC ¶ 60. The SEC conducted a formal investigation of Brocade, which resulted in a settlement of $7 million. On February 22, 2008, after settlement efforts stalled, Brocade's Board appointed the SLC to handle all matters relating to the derivative litigation. The SLC has full authority to pursue and resolve all claims relating to the backdating scheme. The SLC determined it was independent and not under the influence of the alleged wrongdoers in pursuing this action on behalf of the Company. The SLC retained separate counsel and undertook its own investigation of these claims. On June 18, 2008, the Court instructed the SLC to file its amended complaint. 220, and on August 27, 2008, the Court realigned Brocade as the sole party-plaintiff in the current action, see Dkt. The Second Amended Complaint asserts thirteen causes of action against the ten Defendants. In the subsequent months, all Defendants filed motions to dismiss, which are subject to the instant order. These claims are timely as to Defendant Canova as he was not subject to the same indemnification agreement and these claims do relate back to the filing of the original federal complaint. The second requirement of the relation back doctrine, notice, is also satisfied. The obstacle preventing amendment here is that the "mistake" prong of Rule 15(c) is not met. However, if a plaintiff is aware of the potential defendant's identity at the time the original complaint is filed, but is uncertain whether the potential defendant may be found liable, amendment is not allowed to defeat the statute of limitations. The defendants who were not named in the original federal action are Byrd, Leslie, Bonderson, Cuthbert, Jensen and Bossi. Accordingly, this claim is dismissed with leave to amend. A correction is effective "as of the date the original instrument was filed, except as to those persons who are substantially and adversely affected by the correction and as to those persons the instrument as corrected shall be effective from the filing date." 8 Del. As the Certificate of Incorporation currently stands, however, there is no exculpatory provision.
Defendant Jack Cuthbert served Brocade as an executive specializing in sales from 1998 until 2004. Cuthbert was aware of the improper practices at the Company and received faulted options. Facing an increasingly competitive market for the top technological talent, Brocade used stock options as a form of compensation in order to attract high-caliber employees. Reyes, in concert with Jensen, routinely provided extra compensation to employees (including themselves) that were backdated to coincide with low closing prices of Brocade's stock. This practice was contrary to the Company's stock-option plans, which required it to grant stock options with exercise prices based on the stock's fair market value on the actual grant date. Defendants knew that they were not adhering to the option plans, SAC ¶ 57, and actively manipulated the timing and exercise of stock-option grants, SAC ¶ 58. The scheme allowed Brocade to retain key employees while falsely inflating the quality of Brocade's financial performance. The value of the stock options that Defendants received was enhanced, allowing Defendants to enrich themselves at the expense of the Company. In October 2004, Daniel Cudgma, a former employee, sent the Company a draft civil complaint that he intended to file. Cudgma had received backdated options under Brocade's "part-time" program when he joined the Company. The Board's Audit Committee began an investigation on November 1, 2004 into the alleged improprieties. On January 6, 2005, Brocade announced that it intended to restate certain of its financial statements to record additional stock-based compensation expenses. On January 24, 2005, the Company restated its financial statements for 20. In 2007, Reyes was convicted of ten counts related to securities fraud, and Jensen was convicted of two criminal counts. The Second Amended Complaint was filed on August 1, 2008, see Dkt. Therefore, the claims for fraud under § 10(b) and California Civil Code §§ 17 are barred by the indemnification agreement as to Defendants Dempsey and Neiman. The first requirement of Rule 15 is met here because Plaintiff's claims arise out of the same transactions and core facts alleged in the original complaint. Defendants will not suffer significant prejudice since they have already been actively involved in defending similar claims, albeit in a different forum. "The defendant deserves the protection of the statute of limitations because he or she may believe the plaintiff made a conscious decision not to include him or her." Id.; see also Kilkenny, 800 F.2d at 857-58 ("Rule 15(c) was never intended to assist a plaintiff who ignores or fails to respond in a reasonable fashion to notice of a potential party"). Code § 103(f) or to reform it under the common law of reformation.
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Johnson Fistel then coordinated with counsel in a related derivative action pending in Delaware to negotiate a settlement that resulted in $29 million in increased consideration to Titan’s shareholders in the all-cash merger acquisition.
Caulfield, Dewey & Leboeuf LLP, East Palo Alto, CA, Ann M. Jack Patrick Dicanio, Richard Marmaro, Skadden Arps Slate Meagher & Flom LLP, Navid Yadegar, Proskauer Rose LLP, Los Angeles, CA, Garrett J. Blears, Robin Eve Wechkin, Hogan & Hartson LLP, Palo Alto, CA, Colin Eugene Kelley, Heller Ehrman LLP, San Francisco, CA, Matthew C. Equitable tolling does not apply, and the requirements for "relation back" under Rule 15 have not been met. Reyes was convicted on ten counts stemming from the conduct alleged in the SAC. § 1962]" has a cause of action for which treble damages may be recoverable. Under Delaware law, unjust enrichment is the "unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience." Schock v. Brocade's bylaws do not define its "officers" to include its Controller, Bossi was not appointed by Board resolution, and his offer letter provides that he was an "at-will employee." Furthermore, Bossi, as the Controller, was under the control of another officer, the CFO. Because Bossi was never a corporate fiduciary of Brocade, he cannot be liable for any direct breach of fiduciary duty, but he could potentially be liable for claims available against non-fiduciaries. The elements of this claim are (1) the existence of a relationship giving rise to a duty of loyalty, (2) one or more breaches of that duty, and (3) damage proximately caused by that breach. The duty of loyalty is "breached, and may give rise to a cause of action in the employer, when [an] employee takes action which is inimical to the best interests of the employer." Stokes v. As Bossi points out, this cause of action has only been applied in the context of an employee transferring his loyalty from his employer to a competing business by using or disclosing confidential information. Accordingly, this claim is dismissed without leave to amend. It has also alleged that, as the Controller, Bossi assisted other Defendants in their tortious conduct.
Ferrara, Dewey & Leboeuf LLP, Washington, DC, Peter Edward Root, Dewey & Leboeuf LLP, East Palo Alto, CA, for Brocade Communications Systems, Inc. Accordingly, the claims asserted in the SAC that have a statute of limitations of less than four years are barred as to Defendants Byrd, Leslie, Bonderson, Cuthbert, Jensen and Bossi. The remaining Defendants against whom this claim is asserted are Reyes and Canova. The elements of a claim for unjust enrichment are: "(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and the impoverishment, (4) the absence of justification and (5) the absence of a remedy provided by law." Cantor Fitzgerald, L. Brocade points to a Delaware service of process statute which provides that an "officer" may include a "controller." See 10 Del. This reference is not enough, however, to determine that Bossi was in fact an officer of Brocade. The Court can find and Brocade cites to no California cases that have applied this theory in a broader context, and this Court declines to expand the state claim so as to encompass this conduct. Brocade has alleged an underlying breach of fiduciary duty by multiple Defendants.