Patriot Scientific

TPL, BoD nominations, Barco, sirius all seem to pale in comparison to the possibility of what possibly has happened/could happen to this company by investor groups. At the sake of repeating myself and boring a few of you, I think a closer look should be taken at the following two complaints both related. I do not know the outcome of the second complaint. However, if it was for the plaintiff then we owe it to ourselves to find out more. I hope you agree. If not, it won't be the first time we disagree.

Schaffer 1st action

No. 99 CIV. 2821(VM).

United States District Court, S.D. New York.

September 29, 2000.

DECISION AND ORDER

MARRERO, District Judge.

Plaintiff Barbara Schaffer ("Schaffer") brings this action under Section 16(b) of the Securities Exchange Act of 1934 (the "Act") for disgorgement of short-swing profits allegedly obtained by defendants acting as a group in violation of that section of the Act. Three motions for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) are presently before the Court.

Defendants CC Investments, LDC ("CCI") and Castle Creek Partners, LLC ("CCP") have argued that CCI was not, either individually or as member of a group, the beneficial owner of more than 10% of Lasersight's equity securities and that CCI is therefore not liable under Section 16(b). Defendant Societe Generale ("SG") has argued that it was not a member of any group and that certain restrictions on its ability to convert and sell shares to which it agreed preclude Section 16(b) liability. Defendants Shepherd Investments International, Ltd. ("SII"), Stark International ("SI"), Brian Stark ("Stark") and Michael Roth ("Roth") (collectively, the "Stark Defendants") have argued, among other things, that they were not beneficial owners of more than 10% of Lasersight's stock. For the reasons set forth below, the Court grants the motions to dismiss in their entirety, but grants Schaffer leave to replead.

BACKGROUND

Schaffer is a New York resident and an owner of the common stock of Lasersight Incorporated ("Lasersight" of the "Company"). Lasersight, a nominal defendant, is a Delaware corporation with its principal place of business in St. Louis, Missouri.

Defendants are CCI, a limited liability company organized under the laws of the Cayman Islands engaged in the business of trading in securities; CCP, an American limited liability company acting as CCI's investment manager; SG, a division of Societe Generale Securities Corporation engaged in trading securities; SII, a corporation organized under the laws of the British Virgin Islands that trades securities; SI, a Bermuda corporation trading securities; and Stark and Roth, investment fund managers who control the investment decisions of SII and SI.

Defendants participated in a private placement in 1997 designed to raise money for the Company so that it could purchase 442*442 certain patents from IBM. The private placement was a sale to private investors of 1600 shares of Series B Preferred Stock and Warrants to purchase 790,000 shares of Lasersight common stock.

Schaffer alleges that these seven defendants constitute a group (the "Group") and that SII and SI constitute a separate group (the "SI Group") for purposes of determining liability under Rule 16a-1(a)(1) and Sections 16(b) and 13(d)(3) of the Act; that the Group, the SI Group and CCI individually were greater than 10% beneficial owners of Lasersight's common stock; and that the Group, the SI Group and CCI engaged in certain transactions over a six month period, garnering short-swing profits in the amount of at least $7,091,975.00, all of which are disgorgeable to Lasersight under Section 16(b).

Schaffer 2nd Action

No. 99 CIV. 2821(VM).

United States District Court, S.D. New York.

August 1, 2001.

485*485 DECISION AND ORDER

MARRERO, District Judge.

Plaintiff Barbara Schaffer ("Schaffer") brings this action pursuant to § 16(b) of the Securities Exchange Act of 1934 (the "Act") for disgorgement of short-swing profits allegedly obtained by defendants acting as a group in violation of that section of the Act. Three motions for dismissal pursuant to Fed.R.Civ.P. 12(b)(6) were previously granted by this Court in its September 29, 2000 Decision and Order. See Schaffer v. CC Investments, 115 F.Supp.2d 440 (S.D.N.Y.2000) (herein "Schaffer I"). Thereafter, Schaffer amended her complaint, in accordance with leave granted therefor in the dismissal Order. The defendants (herein collectively the "Defendants") then moved to dismiss the Amended Complaint. These three motions are presently before the Court.

The Court will not revisit the particulars describing the parties or issues presented previously, familiarity with which is assumed, but will only address issues arising from the challenges to the Amended Complaint, including: (1) whether a common objective of controlling the stock of Lasersight, Inc. (the "Company") or manipulating its stock price is necessary for the existence of a group within the meaning of § 13(d) of the Act, and (2) whether preferred stock is exempt from the definition of "equity securities" under § 13(d) of the Act. For the reasons set forth below, the Court denies each of the motions to dismiss, and will allow Schaffer to pursue limited discovery within a time frame to be specified.

IV. SUFFICIENCY OF THE AMENDED COMPLAINT

This Court, in its previous Decision and Order, pointed out certain deficiencies contained in Schaffer's original complaint. The Court provided broad guidelines for what may be alleged by Schaffer to satisfy the pleading requirements, noting that, "Schaffer advances no allegations of interrelationships, contracts, alliances, meetings, agreements, coordinated activity, or understandings between or among any of the defendants regarding the conversion of preferred shares, the sale of common stock upon conversion or any other issue... Simply put, there is no evidence before the Court that defendants agreed to combine efforts in furtherance of any commonly held objective." See Schaffer v. CC Investments, 115 F.Supp.2d at 443.

The Court is satisfied that Schaffer's Amended Complaint addresses these shortcomings. In her new pleadings, Schaffer alleges that Defendants' commonly held objective was to acquire, hold, and dispose of equity securities issued by the Company. See Am. Compl. ¶ 26. There are numerous allegations of coordinated activity or concerted actions toward that goal:

26. At all relevant times, all of the defendants acted together for the purposes of acquiring holding and disposing of equity securities issued by the Company... all of the defendants collectively purchased 100% of the Preferred Stock...

27. Thus... in consideration for defendants' consent ... defendants, as a group, negotiated for, and received a put option to sell 351 preferred shares to the Company at a premium of 20%. The 16(b) Group also agreed collectively to a damages provision which allowed the defendants to allocate any damages payments from the Company among themselves and anticipated that the parties would negotiate with Lasersight as a group...

28. In March 1998, defendants, as a group, entered into a Series B Preferred Stock Agreement... Pursuant to this Agreement, defendants collectively agreed not to convert their then current preferred stock holdings... In return for this agreement, defendants, as a group, extracted significant benefits from the Company...

29. Finally, ... all of the defendants, acting as a group, sold their remaining preferred shares to the Company at a premium of 20%...

30.... Through their combined efforts, the 16(b) group was able to leverage their collective ownership in order to extract substantial economic benefits from the Company...

Am. Compl. ¶¶ 26-30.

In light of the foregoing discussion, the Court is satisfied that Schaffer has met the pleading standard of Fed.R. Civ.P. 8(a). At this state of the proceedings, prior to discovery, and accepting these factual assertions as true, Schaffer is entitled to seek discovery to substantiate her claim. Accordingly, the Court denies each of Defendants' motions to dismiss. The Court will allow Schaffer to proceed in limited discovery on the matter of whether Defendants —Societe Generale, Castle Creek Partners and CC Investments, and the Stark Defendants—formed a group whose understandings and activities regarding Lasersight Securities violated § 13(d).

Can someone please find out what the outcome was on this? Thanks.

http://scholar.google.com/scholar_case?case=8566486996690185920&hl=en&as_sdt=2&as_vis=1&oi=scholarr