Hewlett Packard Enterprise Co. failed to persuade a judge to toss out a lawsuit accusing it of misleading investors about who would be laid off as part of a merger of its enterprise division in 2017.
(Bloomberg) — Hewlett Packard Enterprise Co. failed to persuade a judge to toss out a lawsuit accusing it of misleading investors about who would be laid off as part of a merger of its enterprise division in 2017.
In a tentative ruling Wednesday, California Superior Court Judge Sunil R. Kulkarni concluded that investors had sufficiently supported their contention that HPE duped them about the planned layoffs.
Investors filed a proposed class action against the company in 2019 after it merged its enterprise division with competitor Computer Sciences Corporation to form the new company DXC Technology.
As part of the merger, the company announced a $1 billion “optimization” that it said would target duplicative employees and optimize the company’s workforce. But instead, the investors say, it conducted mass layoffs of the new company’s “older, most essential and experienced employees, offloading their higher salaries to inflate reported earnings ahead of tens of millions of dollars in insider sales.”
“The consequences of the undisclosed mass layoff plan were predictable: an impaired workforce without the experience, know-how, capabilities, and customer relationships necessary to effectively service, maintain and develop DXC’s business,” the investors said in court papers. “This ultimately resulted in an over 50% decline in the value of DXC shares.”
Read More: Hewlett Packard Hit With New Class Age Suit Over Retrenching
HPE’s lawyers argued in a court filing that over three years, the plaintiffs have failed to assert a legally sufficient claim about any misleading statements. The company’s attorneys can contest the judge’s ruling during a hearing Thursday in Santa Clara Superior Court in San Jose. The judge also left the door open for them to file a new request to dismiss the investors’ suit.
HPE didn’t immediately respond to a request for comment.
The case is In re Hewlett Packard Enterprise Co. Shareholder Litigation, 19CV353132, California Superior Court, Santa Clara (San Jose).
(Updates with HPE’s argument in court filing)
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