Retail Wholesale & Department Store Union Local 338 Retirement Fund v. Hewlett-Packard Co.

In 2010, Defendant-Appellee Mark Hurd resigned from his position as CEO and Chairman of Defendant-Appellee Hewlett-Packard Company (“HP”). During the course of an investigation prompted by allegations of sexual harassment, HP discovered that Hurd had misrepresented his relationship with a former independent contractor, Jodie Fisher. Hurd had not been forthcoming about the personal nature of his relationship with Fisher; in fact, he had doctored expense reports to prevent its discovery and lied to investigators. Immediately following Hurd’s resignation, the price of HP stock dropped, resulting in an alleged loss of $10 billion. In this putative class action lawsuit, HP shareholders allege violations of the Securities Exchange Act of 1934. The shareholders purchased HP stock between November 13, 2007, and August 6, 2010 (“the Class Period”) and held shares as of August 6, 2010.

This Court has not decided when a high-ranking employee’s violation of a business’s ethical code may give rise to a cause of action under § 10 and Rule 10-b of the Securities Exchange Act of 1934. Here, the issue is relatively narrow — whether shareholders may bring a claim for securities fraud when…