Pegasystems will pay $35MN to resolve a shareholder lawsuit.
The lawsuit claimed Alan Trefler, CEO of Pegasystems, had assured investors that a separate lawsuit – a trade secrets case against Pega by Appian - was "without merit".
Ultimately, the jury found in Appian’s favor – to the tune of $2BN+ - and Pega’s share price tanked, dropping 21 percent.
Two weeks later, shareholders brought about this shareholder suit, complaining that Trefler’s assurances broke the Securities Exchange Act of 1934.
The suit rumbled on for almost two years until last week – when Ken Stillwell, Chief Operating Officer & Chief Financial Officer at Pegasystems, shared an update.
"We reached an agreement to resolve that shareholder suit for $35 million," he said during an earnings call.
We look forward to putting that distraction and the associated legal fees behind us.
Robbins Geller Rudman & Dowd LLP - the investors’ attorney - revealed that the difficulties of proving its civil securities fraud case to a jury influenced the decision.
Indeed, proving the case would involve further discovery work, dispositions, and a long, costly trial.
Moreover, the attorney suggested that investors didn’t want to wait to discover if Pega would win its appeal against the $2BN+ verdict in the Appian case.
As cited by Law360, the class counsel said:
Should Pega ultimately fail to significantly reduce or nullify the Virginia judgment, Pega's ability to fund a judgment following a trial in this case would be severely jeopardized.
"In short, neither obtaining nor collecting on a large trial judgment was assured."
As such, the $35MN payment from Pega - or its insurers – seemingly appeared the safest option for investors to ensure compensation.
Meanwhile, the deal enables Pega to maintain its denial that it never made any act or misstatement for which it could be considered liable under federal law.
