One of Two Lawsuits Against Broadcom Receives Green Light
By ANDREW SIMONS
A federal judge’s decision to let a shareholder lawsuit against Broadcom Corp. go forward could have implications for a similar case pitting the chipmaker’s founders against members of the Orange County Performing Arts Center board.
Late last month, a U.S. District Court judge in Santa Ana denied Broadcom’s bid to have a suit refiled by the Minnesota State Board of Investment thrown out.
The suit originally was dismissed in March.
This time around, Judge Gary Taylor said those suing Broadcom pleaded a strong enough case that the suit should go forward.
The suit charges executives with boosting sales and profits by improperly accounting for expenses.
That allowed them to cash in on Broadcom stock, the suit alleges.
The case now is in the discovery phase with both sides set for a meeting in January.
Broadcom’s attorneys don’t see the ruling as damning.
“(The judge) said that the plaintiffs adequately pled scienter. That’s all he said,” Broadcom attorney Daniel Tyukody said. “He didn’t say anything about stock timing.”
Scienter is legal jargon for doing something “knowingly.”
The move undoubtedly has encouraged a group of prominent Orange County arts patrons and businesspeople suing Broadcom on similar grounds.
Broadcom earlier this year successfully moved to have the OC suit moved from state to federal court alongside the Minnesota case. In June, Judge Taylor also dismissed the OC suit with the option of refiling, which the plaintiffs since have done.
Adam Miller, a lawyer with Engstrom, Lipscomb & Lack who’s representing the OC plantiffs, said he expects Broadcom to try to dismiss his suit again, with the same result as the Minnesota case.
“They’re also going to ask for a dismissal, and I’m not sure why,” he said confidently.
The Minnesota case is a class action suit brought by the state’s investment board, which is chaired by Gov. Jesse Ventura. The OC suit technically isn’t a class action though it represents a group of investors.
The judge’s move to push the Minnesota case forward is a setback for Broadcom, which was hoping a permanent dismissal would render the same fate on the OC suit.
Broadcom has seen its own legal wins. Getting the OC suit into federal court was viewed as a setback to the plaintiffs, who were betting on better odds in state court
Recent changes to federal law restrict discovery, the ability of plaintiffs to subpoena documents and interview company officials under oath in preparing for trial.
Some observers had predicted both cases would be settled because shareholder suits take too much money and time to fight. Some 90% of all such cases are settled, according to attorneys.
The move to fight the suits reflects Broadcom’s combative style, whether in business or in the courtroom, observers said.
After the OC suit was filed, Nicholas and Samueli resigned their board seats at the Performing Arts Center, where both have been big givers. Samueli, seen as the more mild mannered of the two executives, was said to have led the call to fight the suit.
Incoming arts center chairman and plaintiff Tom Tierney,among those suing Broadcom,also resigned his seat following the turmoil over the suit. Emulex Corp. Chief Executive Paul Folino became chairman last month.
