Plaintiffs Beat Back Marvell’s Motion to Dismiss
On May 17, 2017, the Honorable William H. Alsup, United States District Judge for the Northern District of California, issued an order denying Marvell Technology Group’s and its former CEO’s motions to dismiss as to scienter in Luna v. Marvell Technology Group, Ltd. The case charges Marvell and certain of its officers and directors with violations of the Securities Exchange Act of 1934.
Marvell Technology Group, Ltd. is a publicly traded company holding stakes in subsidiaries that produced and sold various semiconductor products. Lead Plaintiff alleges that during the class period of November 20, 2014 to December 7, 2015, defendants made false and/or misleading statements and/or failed to disclose adverse information regarding Marvell’s business, operations and prospects, including that the company had engaged in inappropriate revenue recognition practices, its management had permitted an inappropriate and ineffective control environment, and, as a result, its key accounting metrics were misstated. As a result of these false and misleading statements and/or omissions, the price of Marvell securities were artificially inflated, with its stock price reaching a high of over $16 per share during the class period.
Lead plaintiff contends that former CEO Sehat Sutardja intentionally or with deliberate recklessness made statements about the company’s revenue that failed to account for prematurely recognized revenue. “With the benefit of those additional details and streamlined focus and evaluating the allegations holistically, this order concludes that lead plaintiff has now alleged facts sufficient to support a strong inference of scienter as to CEO Sutardja as to the pull-in transactions,” Judge Alsup held. The Judge also found that the remedial “house-cleaning and reforms,” like terminating Sutardja, restructuring and instituting training programs, “do not follow innocent mistakes. Rather, they customarily, even if not invariably, follow systemic and fraudulent abuse of internal financial controls.”
Luna v. Marvell Technology Group, Ltd., No. 3:15-cv-05447 (N.D. Cal.).