The U.S. Supreme Court declined Monday to stop former shareholders of Peregrine Systems Inc. from using California insider-trading law to sue former board members of the company, which filed for bankruptcy protection in 2002 after an accounting scandal.
The court, without comment, refused to block a lawsuit against the directors.
A litigation trust representing Peregrine shareholders has been fighting in California to recover losses for former investors in the once highflying San Diego software firm. In December a California state appeals court ruled that shareholders could use state insider trading laws in their civil case.
But former Peregrine board members, including San Diego Padres owner John Moores, have been arguing that the law of Delaware, where the firm was incorporated, must be applied.
The lawsuit contends that Moores and other Peregrine executives sold millions of shares at inflated prices, receiving more than $400 million before the company collapsed. The suit invokes a California insider trading law that lets the corporation itself, rather than its shareholders, file insider-trading suits.
The shareholders' trustee, Robert C. Friese, argued that "because the relevant stock sale took place in the state of California, California properly could apply to the transactions the state's prohibition against insider trading and its remedies for such conduct" despite Delaware law.
Hewlett-Packard Co. bought Peregrine's business operations for $425 million last year.