Imperva Investors Defeat Motion to Dismiss in Securities Class Action

May 17, 2016

In an order dated May 16, 2016, the Honorable Phyllis J. Hamilton of the Northern District of California largely denied defendants’ motion to dismiss in Shankar v. Imperva, Inc. The court upheld plaintiff’s allegations that defendants Imperva and its Chief Financial Officer Terrence Schmid issued materially false and misleading statements regarding Imperva’s competitive success against IBM but failed to disclose that IBM was able to win large deals based on price.  The court held that the risk disclosures in Imperva’s SEC filings did not warrant dismissal because they “were transmitted with a much lower ‘degree of intensity’” and acknowledged Ninth Circuit case law holding that disclosures do not support dismissal where they “‘speak[] entirely of as-yet unrealized risks and contingencies’” and do not “‘alert[] the reader that some of these risks may already have come to fruition.’”  The court also held that plaintiff had adequately alleged scienter, finding that “the ‘core operations’ theory applies to the remaining alleged false/misleading statements regarding Imperva’s competitive success,” and that the “loss causation . . . analysis is fairly straightforward,” noting that “when Imperva announced its missed earnings projection, it also acknowledged the role of pricing in losing deals to IBM, and the stock suffered a corresponding 44% drop.” 

The court previously appointed Delaware County Employees Retirement System as Lead Plaintiff in the case.  The Robbins Geller attorneys litigating the case are Douglas R. Britton, Ashley M. Price and Ivy T. Ngo.  The case is Shankar v. Imperva, Inc., No. 4:14-cv-01680-PJH.

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