U.S. District Court Judge Jon S. Tigar, Northern District of California. (S. Todd Rogers / The Recorder)
SAN FRANCISCO — A federal judge tossed a securities class action on Thursday that slammed Hewlett-Packard Co. for touting its code of conduct even as its former CEO became embroiled in an ethics scandal.
U.S. District Judge Jon Tigar granted HP’s motion to dismiss a putative class action that reached back to the fall of former HP CEO Mark Hurd, who resigned in 2010 after a contractor claimed Hurd made inappropriate sexual advances toward her. Plaintiffs alleged that HP misled investors by adopting a new ethics code without disclosing Hurd’s missteps.
But Tigar ruled in a 14-page order that plaintiffs had failed to show the “standards of business of conduct” HP issued in 2008 contained false statements that investors might have relied on. He also rejected plaintiffs’ argument that Hurd’s adoption of the code suggested that he abided by it.
“These representations … established only that HP aspired to comply with its own policies,” Tigar wrote.
Tigar dismissed plaintiffs’ claims against HP and Hurd without leave to amend, noting they had already been given a chance to improve their case.
Plaintiffs claimed Hurd was keenly aware that HP would have to live up to a high ethical standard after revelations of an improper investigation into leaks rocked its board. By allegedly falsifying expense reports to cover up his improper relationship with a contractor, Hurd risked losing his title and sinking HP’s stock price, plaintiffs alleged.
But Tigar found Hurd’s silence was not enough to support securities fraud allegations.
“Plaintiff’s theory of liability appears to be that a corporation or senior executive is liable whenever that executive is involved in conduct that might lead to his or her resignation or termination, regardless of the nature of that misconduct, unless the misconduct is disclosed,” Tigar wrote. “But that is not the law.”
HP was defended by a Morgan, Lewis & Bockius team led by Philadelphia-based partner Marc Sonnenfeld.
Ira Press of New York’s Kirby McInerney and Lionel Glancy of Los Angeles’s Glancy Binkow & Goldberg represented the plaintiffs in Cement & Concrete Workers District Council Pension Fund v. HP, 12-4115.
Hurd, now president of Oracle Corp., tapped Lawrence Lewis, an Orange County-based partner at Allen Matkins Leck Gamble Mallory & Natsis, to defend him.
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