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SAN FRANCISCO � Three JDS Uniphase Corp. in-house lawyers and one paralegal had gathered at their company’s headquarters to wait for the verdict, dreading that the jury would put a billion-dollar dagger in the company’s heart. All of them � Chief Legal Officer Christopher Dewees, General Counsel Matthew Fawcett, Associate General Counsel Andrew Pollack and paralegal Michelle Shores � were with the telecom equipment maker when stockholders filed a securities class action in 2002. The suit claimed management chicanery in the precipitous drop in JDS Uniphase shares during the dot-com bust. When the in-house team and its outside counsel at Morrison & Foerster decided to go to trial, it raised eyebrows in the securities bar. Few companies like to trust their fate to fickle jurors in high-stakes securities cases, and the plaintiffs were seeking $20 billion in damages from a company worth $3 billion. The trial, the first to go to verdict in California’s Northern District since 2002, ended with the jury finding for JDS on all counts. “Many of the cases that have gone to trial recently involved individuals that didn’t have that much to lose,” said David Furbush, a securities litigator at Pillsbury Winthrop Shaw Pittman. “Here, there was an entire corporation that was pretty much putting its survival on the line.” ‘Extreme stress’ The in-house lawyers say the decision to go to trial wasn’t an easy one. It followed six years of talks with consultants, meetings with the board, official settlement dialogues and back-channel communications. Dewees said that explaining the process to the company’s board wore on him, in the form of “the extreme stress of second-guessing whether I was properly advising the board.” “You have to be aware of your personal agenda, which is vindication, and balance it with your fiduciary duty to the shareholders,” he added. The plaintiffs, led by the Connecticut Retirement Plans and Trust Funds, claimed that JDS Uniphase executives knew that demand for their products had begun to slacken before the bust. But instead of coming clean, the executives made deceptive statements about the health of the business while selling millions of dollars’ worth of their own stock, the plaintiffs alleged. “The damages claimed by the plaintiffs were so extraordinary that a loss on any claim was likely a billion-dollar number,” Dewees said. In Milpitas, Calif.-based JDS Uniphase’s latest quarterly report, issued during the month-long trial, the company said it “would not have sufficient assets to pay such a judgment” if the jury sided with the plaintiffs on all counts. Abraham Sofaer said he isn’t shy about advising companies to settle securities class actions. And the former federal judge, now at the Hoover Institution at Stanford, wasn’t shy when JDS Uniphase hired him to consult earlier this year. “Fundamentally, my advice was that it could go to trial, but they ought to try to settle,” Sofaer said. Sofaer also tried to use his personal connections to bring the sides closer together, flying to New York to meet with the plaintiffs’ lawyers at Labaton & Sucharow. Sofaer said he’s well-acquainted with name partner Edward Labaton. He said the meeting helped narrow the gap, but apparently it wasn’t enough. “The plaintiffs were interested in headline-grabbing numbers,” Dewees said. “We were interested in being principled and [in] a rational negotiating process.” The plaintiffs’ side points the finger right back at JDS Uniphase. “I believe we negotiated in good faith; I believe we negotiated from a position of reasonableness,” said Catherine LaMarr, general counsel for the Connecticut state treasurer’s office, which administers the lead plaintiff. “But the parties were just so far apart that we obviously didn’t agree,” LaMarr added.

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