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Friese v. Superior Court

California Court of Appeal, Fourth District
36 Cal.Rptr.3d 558 (2005)


Robert Friese (plaintiff) is the trustee of the successor entity to Peregrine Systems, Inc. (Peregrine), a Delaware corporation that was based in California. Friese alleges that a group of former directors and managers (defendants) engaged in illegal insider trading in 1999 when they sold stock knowing that Peregrine’s public statements had deliberately exaggerated the company’s profit margins. California’s securities laws (§§ 25402 and 25502.5) prohibit directors and other insiders from trading in the state on information that is not publicly available. Another statute, § 2116, codifies the internal affairs doctrine. Friese sued the defendants for violating § 25502.5, among other charges. The defendants moved to dismiss the insider trading charges, arguing that § 2116 requires the court to apply Delaware law, which lacks a comparable insider trading ban. The trial court granted the defendants’ motion to dismiss. Friese petitioned the appellate court for a writ of mandate to set aside the trial court’s ruling. The appellate court agreed to consider the matter.

Rule of Law


Holding and Reasoning (Benke, C.J.)

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