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COLAPRICO v. SUN MICROSYSTEMS

March 13, 1991

JOSEPH COLAPRICO and JOEL GERBER, Plaintiffs,
v.
SUN MICROSYSTEMS, INC., et al., Defendants


Spencer Williams, United States District Judge.


The opinion of the court was delivered by: WILLIAMS

SPENCER WILLIAMS, UNITED STATES DISTRICT JUDGE

 Defendants move to dismiss count III and to strike paragraphs 29 and 38 of the first amended complaint. Because count III of the complaint states a valid claim for negligent misrepresentation under California law, defendants' motion to dismiss this claim is DENIED. Because paragraphs 29 and 38 of the complaint are not clearly irrelevant to a determination of plaintiffs' claims, defendants' motion to strike those paragraphs is DENIED.

 BACKGROUND

 Although this class action has not yet been certified, plaintiffs' proposed class consists of those investors who purchased Sun Microsystems Inc. stock between August 9, 1990 and October 23, 1990. The complaint states that defendants issued, or caused to be issued, several misleading positive statements and forecasts, upon which plaintiffs relied in making their investments. Plaintiffs further allege that they suffered losses when the company's actual earnings fell short of the projected earnings, and the value of the stock dropped.

 DISCUSSION

 I. MOTION TO DISMISS THE CLAIM FOR NEGLIGENT MISREPRESENTATION

 A. Introduction

 Plaintiffs' first amended complaint is divided into three counts: (1) violation of sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5, (2) fraud and deceit, and (3) negligent misrepresentation. Defendants now seek to dismiss the third count because it is based entirely on statements issued after the corporation sold its stock to the public. Defendants argue that California law does not hold them liable to the general public for statements contained in reports and press releases addressed to analysts, their shareholders, and the SEC.

 In response, plaintiffs contend that California law extends liability for negligent misrepresentation not simply to the express address of the statements, but to all the intended recipients. Therefore, plaintiffs argue, the complaint's allegation that the statements were intended to influence the investing public prevents a dismissal under Fed. R. Civ. P. 12(b)(6).

 B. Legal Standards

 1. Fed. R. Civ. P. 12(b)(6) Motion to Dismiss

 Under the liberal federal pleading policies, a plaintiff need only give defendant fair notice of the claims against it. Conley v. Gibson, 355 U.S. 41, 47, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). A claim should not be dismissed unless it is certain that the law would not permit the requested relief even if all of the allegations in the complaint ...


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