According to a press release dated July 31, 2006, the U.S. District Court for the Northern District of California granted a company's motion to dismiss a securities fraud class action, ruling that the defendant company was not obligated to disclose an opposition to a merger during a board meeting, where the board technically approved the merger unanimously. Shareholders of Hewlett Packard Co. (HP) sued the company for violations of the Securities Exchange Act of 1934 § § 10(b) and 20(a), and Rule 10b-5. Specifically, the shareholders claimed that HP fraudulently failed to disclose that one of its board members opposed a merger with Compaq Corp. during a board meeting to discuss the merger. During the board meeting, Walter Hewlett opposed the merger. However, Hewlett ultimately voted in favor of the merger, and HP announced the merger had been unanimously approved by both HP and Compaq's Boards of Directors. After the merger announcement, HP stock declined in value. When the public learned that Hewlett opposed the merger, HP stock rose again, as investors believed the opposition made the merger less likely to occur. However, the merger occurred. HP moved to dismiss the shareholders' suit. To plead § 10(b) and Rule 10b-5 violations, a shareholder must allege that the defendant made a fraudulent misrepresentation or omission in connection with the sale or purchase of securities with scienter, upon which the plaintiff relied, causing the plaintiffs' economic loss. … The district court dismissed the shareholders' suit, finding that HP announced an accurate fact that all HP board members approved the merger by a unanimous vote.
In May 2005, the case was transferred from the U.S. District Court for the District of Connecticut to the U.S. District Court for the Northern District of California. On March 24, 2006, the Court granted the motion to appoint lead plaintiff and lead counsel. On April 7, 2006, the plaintiff filed an Amended Complaint and the defendants responded by filing a motion to dismiss the Amended Complaint. The ruling on the motion to dismiss is currently pending.
The original complaint charges Defendants’ Hewlett-Packard and its Chairman of the Board of Directors and Chief Executive Officer with violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. Specifically, the complaint alleges the action arises as a result of the announcement by the Defendants on September 3, 2001 of the proposed merger of Hewlett-Packard with the Compaq Computer Corporation (“Compaq”) (the “Merger”) and subsequent public statements and public filings by the Defendants from September 4, 2001 through November 5, 2001 regarding the Merger. Those statements by the Defendants regarding the Merger were deceptive and misleading because they failed to disclose that Walter B. Hewlett (“Hewlett”) was opposed to the Merger, as detailed herein. The Defendants’ misleading and deceptive public statements regarding the Merger on September 3, 2001 and throughout the Class Period significantly artificially decreased and deflated the price of HP stock throughout the Class Period.