MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
     - and -
KIMBERLY C. EPSTEIN (169012)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
415/288-4534 (fax)

KAPLAN, KILSHEIMER & FOX, LLP
ROBERT N. KAPLAN
685 Third Avenue, 26th Floor
New York, NY 10017
Telephone: 212/687-1980

Co-Lead Counsel for Plaintiffs

[Additional counsel appear on signature page.]

I. INTRODUCTION

II. ARGUMENT

A. Motions To Strike Are Subject To A Strict Standard

B. The Allegations Defendants Seek To Strike About The Prior Securities Class Action Relate To Defendants' Motive For The Violations Alleged In The FAC

C. Symantec Can Demonstrate No Prejudice To It From The Allegations It Seeks To Strike

III. CONCLUSION

I. INTRODUCTION

The First Amended Complaint for Violation of the Securities Exchange Act of 1934 ("FAC"), filed on April 17, 1998, alleges that defendants issued false and misleading statements about Symantec Corporation's ("Symantec" or the "Company") products, sales and future prospects between June 9, 1995 and January 8, 1996 (the "Class Period"), while falsifying the Company's financial statements for the quarters ended June 30, 1995 and September 30, 1995, in order to conceal the serious negative conditions and trends which were adversely affecting Symantec's business. ¶1. The FAC further alleges that defendants' conduct artificially inflated Symantec's stock price during the Class Period, which enabled the Individual Defendants to sell 394,555 shares of their Symantec stock for insider proceeds of over $12 million. ¶¶1, 109-115.⁽¹⁾

In conjunction with their motion to dismiss, defendants have filed a motion to strike certain substantive allegations of the FAC. However, defendants have completely ignored the strict standards required for a motion to strike, namely that the allegations the party seeks to strike must be both prejudicial and so irrelevant as to have no possible bearing on the subject matter of the action, and fail to satisfy either requirement. See 2 James Wm. Moore, Moore's Federal Practice §12.37[3], at 12-95 (3d ed. 1998).

As discussed herein, Symantec cannot demonstrate that the allegations it seeks to strike are so irrelevant as to have no possible bearing on the subject matter of this action.⁽²⁾ The FAC alleges that defendants' scheme violated §10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder. Section 10(b) sets forth liability for engaging in acts, practices or a course of business that operate as a fraud or deceit upon purchasers of securities, including disseminating or approving false statements with knowledge of or reckless disregard for the truth.

The circumstances surrounding, influencing or motivating defendants' participation in the alleged fraudulent scheme are important considerations under §10(b) and Rule 10b-5. The allegations defendants wish to strike, including reference to alleged past fraudulent conduct of Symantec and certain of the defendants, refer to factors which may have contributed to or motivated defendants' participation in the violations of the federal securities laws alleged in the FAC. Thus, they should not be stricken.

Similarly, Symantec's claim that the allegations are prejudicial, harassing and embarrassing rings hollow. As discussed below, not only has Symantec disclosed the information contained in this paragraph in numerous press releases and filings with the Securities and Exchange Commission ("SEC"), but the allegations at issue have a necessary and important bearing on the issues in the FAC. The allegations are relevant to this action, even if they might be embarrassing for defendants, particularly because they are reflective of a pattern of behavior consistent with the conduct alleged in the FAC. Therefore, defendants' motion to strike should be denied.

II. ARGUMENT

A. Motions To Strike Are Subject To A Strict Standard

A party may move to strike any "insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). When ruling on a motion to strike, the court views the challenged pleadings in the light most favorable to the pleader. See Pillsbury, Madison & Sutro v. Lerner, 31 F.3d 924, 928 (9th Cir. 1994).

It is well settled that "[a] motion to strike . . . should be denied 'unless it can be shown that no evidence in support of the allegation would be admissible.' The question of relevancy and admissibility usually should not be determined solely on the pleadings." Pease & Curren Refining, Inc. v. Spectrolab, Inc., 744 F. Supp. 945, 947 (C.D. Cal. 1990)⁽³⁾; accord Clemes v. Del Norte County Unified School Dist., No. C-93-1912-MHP(ENE), 1994 U.S. Dist. LEXIS 8625, at *21 (N.D. Cal. June 21, 1994). See also Mikropul Corp. v. Desimone & Chaplin-Airtech, Inc., 599 F. Supp. 940, 945 (S.D.N.Y. 1984) (evidentiary question not appropriate on motion to strike, better left for later determination); South Side Drive-In Co. v. Warner Bros. Pictures Distributing Corp., 30 F.R.D. 32, 36 (E.D. Pa. 1962) (evidentiary questions "better left for determination at the time of trial").

Moreover, motions to strike are not favored and "should be denied 'unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties.'" Willson v. Cagle, 711 F. Supp. 1521, 1534 (N.D. Cal. 1988), aff'd, 900 F.2d 263 (9th Cir. 1990).⁽⁴⁾ If the court is in doubt as to whether the challenged matter may raise an issue of fact or law, the motion to strike should be denied and the sufficiency of the allegations left for adjudication on the merits. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d §1382, at 700 (1990); see also United States v. 729.773 Acres of Land, 531 F. Supp. 967, 971 (D. Haw. 1982) ("A motion to strike is a severe measure and it is generally viewed with disfavor.").

Despite the stringent requirements for the granting of a motion to strike, defendants ignore the standards by distorting the applicable authorities in an attempt to create the impression that motions to strike are routinely granted. Defendants have attempted to use their motion in a prohibited manner -- as a "line-item veto" -- to dismiss allegations that they do not like but which are not facially defective.

B. The Allegations Defendants Seek To Strike About The Prior Securities Class Action Relate To Defendants' Motive For The Violations Alleged In The FAC

The allegations concerning Symantec's previous securities class action lawsuit are relevant to the subject matter of this litigation. The mention of past or pending civil or criminal litigation has been approved in the face of motions to strike. See Evans v. International Brotherhood of Electrical Workers, 313 F. Supp. 1354, 1357 (N.D. Ga. 1969) (motion to strike other unlawful company acts denied even though not directly related to the relief sought).⁽⁵⁾

The FAC alleges that during 1993 and 1994, Symantec's business performed erratically and trailed well behind the strong performances of many other successful software companies. At year-end 1994, Symantec stock was trading below the price at which it had traded two years earlier at the beginning of 1993. ¶2. The FAC further alleges that in early 1995, feeling the pressure of Symantec's poor performance, the defendants embarked on a scheme to falsely inflate the price of the Company's shares.

The defendants had two motives for their scheme. First, consistent with their historical pattern of growing their business through acquisitions, they planned to take advantage of the overvaluation of Symantec stock to make the largest stock-for-stock acquisition in the Company's history at a discount. E.g., ¶¶42-43, 51. Second, they planned to profit personally by selling a substantial portion of their own Symantec shares at grossly inflated prices. E.g., ¶¶40, 109-115.

As alleged in the FAC, in 1993 and 1994, following the prior securities class and derivative lawsuits, which alleged that Symantec and certain of its officers and directors issued false and misleading statements to its shareholders and the public, Symantec stock was trading at a depressed price. The FAC alleges that, in an effort to revitalize the price of Symantec stock, defendants engaged in the fraudulent scheme described above in order to artificially inflate the price of Symantec's stock. The prior lawsuits and their allegations are relevant because these events may have contributed to or motivated defendants' participation in the violations of the federal securities laws alleged in the FAC.

Although the previous suit was settled without any admission of guilt, the allegations regarding defendants' stock sales in 1991-1992 are both material and pertinent to the FAC, particularly since the sales occurred prior to the negative announcement about the Company's financial results. See Kaplan v. Rose, 49 F.3d 1363, 1379-80 (9th Cir. 1994) (suspicious timing of sales is probative of defendants' scienter).

Given that this suit involves similar allegations regarding defendants' artificially inflating the price of the Company's stock in order to benefit personally through their timely sales, the allegations in ¶23(b) have bearing on the subject matter of the litigation.

C. Symantec Can Demonstrate No Prejudice To It From The Allegations It Seeks To Strike

To strike material on grounds of irrelevancy, it must be "clearly show[n] that [the material to be stricken] 'has no bearing on the subject matter of the litigation.'" Moore, supra, §12.37[3]; LeDuc v. Kentucky Cent. Life Ins. Co., 814 F. Supp. 820, 830 (N.D. Cal. 1992) (same); Colaprico v. Sun Microsystems, Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991).

Even if the allegations have "no bearing" on the subject matter, they still will not be stricken unless the moving party can show that it is or will be prejudiced. Moore, supra, §12.37[3] ("movant must clearly show that [the material to be stricken] . . . 'will prejudice the defendants'"). In other words, material must be both prejudicial and irrelevant to be stricken.

Symantec's claim of prejudice is disingenuous because Symantec has repeatedly referred, in press releases and SEC filings, to both the filing and the settlement of the class action and derivative lawsuits filed against it in 1992. For example, on December 21, 1992, following the filing of the class action lawsuit, the San Francisco Chronicle noted:

Symantec Corp., a Cupertino-based maker of personal-computer software, said that a group of shareholders filed a class action lawsuit against the company for alleged violations of federal securities laws.

The suit claims that shareholders who bought Symantec stock between June 1991 and last October were damaged because the company executives made false statements to inflate the value of the stock and failed to disclose material information that would have hurt the stock.

In addition, in a press release issued by the Company on June 9, 1994, Symantec disclosed:

Symantec Corporation (Nasdaq: SYMC) announced today that the United States District Court in San Jose, Calif., approved the settlement of two securities class actions and a related derivative lawsuit brought on behalf of Symantec's stockholders.

Symantec cannot have it both ways. It cannot refer to a previous securities lawsuit against the Company in its press releases and, at the same time, claim severe prejudice from similar references in the FAC.⁽⁶⁾

Motions to strike are disfavored, especially when made early in a case, where there are other devices, such as the final pretrial order or a motion in limine, to prevent any truly irrelevant matter from reaching the jury. Chambers & Barber, Inc. v. General Adjustment Bureau, Inc., 60 F.R.D. 455, 457 (S.D.N.Y. 1973). To the extent that there is any potential for prejudice to Symantec before a jury with respect to the inclusion of the disputed allegations in the FAC, such issues are more appropriately addressed at a later stage of the litigation. If Symantec wishes to have such evidence excluded at trial, it can attempt to do so either at the final pretrial conference or through a motion in limine.

III. CONCLUSION

Symantec has not met its burden to satisfy the strict standards for granting a motion to strike irrelevant or improper matter. It will not suffer any prejudice from the allegations of ¶23(b), which are relevant to issues in the FAC. Accordingly, Symantec's motion to strike should be denied in its entirety.

SYMANTE2\DRD01959.BRF

1. For the sake of brevity, this memorandum does not include a summary of facts. Plaintiffs respectfully refer the Court to the factual statement contained in Plaintiffs' Memorandum of Points and Authorities in Opposition to Defendants' Motion to Dismiss Plaintiffs' First Amended Complaint, filed concurrently herewith.

2. The allegations that defendants seek to strike are:

Symantec and its top insiders have a history of fraudulent conduct in connection with their trading in Symantec stock. In 91-92, they pushed Symantec's stock from the high $20s to over $50 per share, while reporting strong (but phony) financial results while falsely forecasting strong, continued profit growth due to the success of Symantec's products. As a result, Gordon Eubanks, Robert Dykes, John Laing and other Symantec insiders unloaded 2.5 million of their Symantec shares for $90 million, before it was exposed that Symantec would report losses rather than the strong profits it had forecast. Symantec stock collapsed to less than $10 per share and Symantec and certain of its officers were sued for fraud. Because they suffered no adverse personal financial consequences from their prior securities fraud and insider selling, as a result of this experience, these defendants knew that they could take advantage of the opportunity to sell Symantec stock while their false statements inflated the price of the stock. Because these defendants and other Symantec insiders had previously reaped $90 million in stock sales, they were motivated to sell stock again for their personal financial gain while their latest fraudulent statements artificially inflated the stock price. The chart below highlights this prior incident of alleged securities fraud involving Symantec and its insiders:

¶23(b) (chart omitted).

3. Here, as elsewhere, emphasis has been added and citations omitted unless otherwise indicated.

4. Motions to strike are disfavored because they are often unnecessary, burdensome and delay resolution on the merits. See Stabilisierungsfonds Fur Wein v. Kaiser Stuhl Wine Distributors Pty., Ltd., 647 F.2d 200, 201 (D.C. Cir. 1981).

5. Defendants' reliance on Kent v. AVCO Corp., 815 F. Supp. 67 (D. Conn. 1992), is misplaced. In Kent, the court granted defendants' motion to strike references to unrelated litigation where the court found that the references had no relevance to the present case and their only effect was to prejudice the defendant. Plaintiffs have demonstrated that the allegations at issue have bearing on the issue of the willfulness of defendants' participation in the fraudulent scheme alleged in the FAC. In Magnavox Co. v. APF Electronics, Inc., 496 F. Supp. 29, 36 (1980), also relied upon by defendants, the court held that certain counts of the complaint, which recited facts about two prior actions also alleging patent infringement, should not be stricken because they contained matters relevant to the present action.

6. Defendants' bare bones, half-page request for judicial notice of (1) the Stipulation of Settlement filed on April 13, 1994 in the prior securities/derivative lawsuits ("prior cases"); (2) the Final Judgment and Order of Dismissal in the prior cases; (3) the Stipulation and Order for Dismissal in Borland Int'l v. Eubanks, et al.; and (4) the Motion to Dismiss filed on November 19, 1996 in People v. Wang, et al., must be denied in its entirety. Nothing in ¶23(b) makes any reference to information which was not publicly released by the Company either in a press release or an SEC filing.

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on July 30, 1998, declarant served the PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS' MOTION TO STRIKE PORTIONS OF PLAINTIFFS' FIRST AMENDED COMPLAINT by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 30th day of July, 1998, at San Diego, California.