Judge Keeps ShoreTel IPO Case Alive

Judge Keeps ShoreTel IPO Case Alive - 8/20/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Judge Keeps ShoreTel IPO Case Alive
Shannon Henson

Securities Law 360. August 20, 2009
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EXCERPT: A judge has allowed a number of claims to go forward in a proposed securities class action brought by ShoreTel Inc. investors who say they were misled by an untrue registration statement issued in connection with the company's 2007 initial public offering. In an Aug. 19 order Judge Charles R. Breyer of the U.S. District Court for the Northern District of California dismissed the plaintiffs' Section 11 claims made under the Securities Act of 1933 as to statements made regarding the monitoring of key financial metrics and statements made regarding demonstration products. The judge refused to dismiss the other claims in the case. “We are pleased and encouraged that the court recognized the strength of the lead plaintiffs' claims for violations of the securities laws and denied the majority of defendants' motion to dismiss,” said Lewis Kahn, managing partner of Kahn Swick & Foti LLC and counsel for the plaintiffs. After the IPO and a resulting stock decline, two nearly identical class actions were filed in the California court against ShoreTel, its officers and directors and its underwriters, JPMorgan Securities Inc. and Lehman Bros. Inc. The cases, filed on behalf of “all purchasers of ShoreTel's common stock pursuant and/or traceable to the company's IPO,” were consolidated. The plaintiffs allege the defendants made materially untrue statements and omissions regarding ShoreTel's growth, revenue recognition practices, monitoring of key financial metrics, accounts receivable allowance and demonstration products. The plaintiffs said it was not until January 2008, after a series of partial disclosures, that they learned the company would post disappointing financial results. The stock dropped from $15.68 on Sept. 26, 2007, the day before the first partial disclosure, to $5.04 on Jan. 30, 2008, after the truth was fully revealed, the second amended complaint said.

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