O'Melveny Scores Victory for Client Rackable Systems in Securities Fraud Class Action

September 08, 2010


Andrea Rodeschini
O'Melveny & Myers LLP

Sonja Steptoe
O'Melveny & Myers LLP

SILICON VALLEY, CALIFORNIA ─ SEPTEMBER 8, 2010 ─ O’Melveny & Myers LLP scored a victory for client Rackable Systems, Inc. (Rackable) when the Northern District of California granted its motion to dismiss in In Re Rackable Systems, Inc. Securities Litigation.


The plaintiffs alleged that Rackable's forecasts were fraudulently based on inflated gross margins and that the company failed to disclose materially adverse conditions that would impact the company's financial guidance and results]. O’Melveny moved to dismiss the initial complaint in 2009. The motion was granted with leave to amend on all asserted grounds:  insufficient allegations of scienter and loss causation; the absence of facts supporting the core operations theory; all forward-looking statements were protected from liability by the PSLRA safe harbor; and the lack of any false or misleading statements about sales tax charges, internal control systems, or Rackable's relationships with its top customers. The plaintiffs filed an amended complaint, which alleged a similar theory and similar facts.  O'Melveny moved to dismiss the amended complaint.  On August 27, Judge Claudia Wilken dismissed the amended complaint with prejudice, finding that the new allegations did not remedy the defects noted in the prior complaint and that any further attempt to amend would be futile. 


Silicon Valley partner Meredith Landy led the team along with counsel Peter Snow.


About O’Melveny & Myers LLP

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