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Exulting in the recent dismissal of a securities fraud class action, attorneys representing 3Com Corp. say it pays to power up the litigation team and stand tough. A trial date had been set for Feb. 26, and company executives had agreed to bring in David Boies, famous for his role in the Microsoft antitrust case and for challenging Florida’s presidential election results, to take the lead in the trial. But on Friday, Santa Clara County, Calif., Superior Court Judge Conrad Rushing dismissed on summary judgment a class action against 3Com, toppling the plaintiffs’ contention that 3Com misled investors between Sept. 24, 1996, and Feb. 10, 1997. “This is a big win. This was one that was shaping up to be a big battle of the titans,” said Keith Eggleton, a partner with Wilson Sonsini Goodrich and Rosati, who represented 3Com. Despite the 1995 Private Securities Litigation Reform Act, 3Com — like other companies dealing with dips in the stock market — has faced a flood of securities fraud class actions. With securities class action filings in federal courts increasing and the size of settlements growing each year by the millions, companies like 3Com will need to play hardball, Eggleton said. “They were tired of getting sued,” he said. “A lot of companies settle these because they need to get rid of distraction and it’s the path of least resistance.” Since the 1995 legislation, securities class action filings in federal courts have increased from 188 in 1995 to 238 in 1999, according to National Economic Research Associates, an economic consulting and analysis firm based in New York. The cost of settlements has also risen substantially in the past five years, from $8.5 million to $12 million. Explaining the move to bring in heavy-hitter Boies, Eggleton added, “They were serious about trying the case and they wanted everyone to know that. They hired the best in the world.” In Hirsch v. 3Com Corp. (CV 764977), disappointing quarterly results and an announcement that 3Com would match competitor Intel’s price cut on fast Ethernet cards caused 3Com’s stock price to drop from a high near $70 to $30 a share. Hirsch had been consolidated with Kravitz v. 3Com Corp. (CV 765962). Judge Rushing ruled that there was no convincing evidence that 3Com misled investors. “The court finds that plaintiff has failed to present competent evidence sufficient to raise a triable issue of material fact that defendants made false or misleading statements or that they had knowledge of falsity,” Rushing wrote. A parallel class action filed in federal court for the same time period was dismissed with prejudice. This is one of three class action securities fraud cases filed against 3Com by plaintiffs’ attorneys Milberg Weiss Bershad Hynes & Lerach in the last three years. Milberg Weiss attorneys did not return calls. One of the cases, over 3Com’s merger with U.S. Robotics Corp., played out in federal and state courts and then settled in October for $259 million. “It was the last lingering issue of the large merger,” Eggleton said about 3Com’s decision to settle. “It was part of its business history they were ready to get past.” A third case was dismissed with prejudice, but it has been appealed to the 9th U.S. Circuit Court of Appeals.

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