Small v. Fritz Companies, Inc.

Fritz Companies, Inc. (FritzCo.) (defendant) acquired Intertrans Corporation and other companies. FritzCo. adopted the Intertrans accounting system for most of its business. On April 2, 1996, FritzCo. issued a press release reporting its third-quarter 1996 revenues, net income, and earnings per share. On July 24, 1996, FritzCo. restated its revenue and earnings for the third quarter. Third-quarter earnings were reduced by more than $7 million. FritzCo. also announced it would incur a loss of more than $3 million in the fourth quarter. FritzCo. stockholder Harvey Greenfield filed a class action on behalf of all FritzCo. shareholders who owned and held FritzCo. common stock as of April 2, 1996, through at least July 24, 1996, in reliance on FritzCo.’s misrepresentations (collectively, the shareholders) (plaintiffs), claiming that FritzCo. and three officers (collectively, Fritz) (defendants) engaged in common-law fraud and negligent misrepresentation. The complaint alleged that the April 2 numbers were wrong because of problems integrating the Intertrans and FritzCo. accounting systems; FritzCo.’s stock decreased more than 55 percent to $12.25 per share in response to FritzCo.’s disclosures on July 24; and had FritzCo. disclosed the accurate financial information on April 2, the shareholders would have sold their shares for more than $12.25 per share. The trial court sustained Fritz’s demurrer and entered judgment for Fritz. The court of appeal reversed. The California Supreme Court granted Fritz’s petition for review.