Bains

I.

INTRODUCTION

In February 2003, Robert Reese Bains III and a group of former Peregrine Systems, Inc. (Peregrine), shareholders (collectively plaintiffs) filed this action against former Peregrine directors John J. Moores, Charles E. Noell in, and Christopher A. Cole (collectively defendants), as well as several former Peregrine employees, Peregrine’s former outside accounting firm, and two of Peregrine’s former business partners. In their complaint, plaintiffs alleged that they had been induced to hold Peregrine stock from May 1997 through 2002 by Peregrine’s false, fraudulent and misleading financial reports. Plaintiffs alleged that Peregrine engaged in various fraudulent accounting practices that led to the improper recognition of revenue in Peregrine’s financial statements, for the purpose of increasing Peregrine’s stock price. Plaintiffs further alleged that in May 2002, after the initial public disclosure of the improper practices, Peregrine’s stock price fell dramatically, causing plaintiffs to suffer damages. Plaintiffs averred that in February 2003, Peregrine issued restated financial statements for fiscal years 2000 and 2001, and for the first three quarters…