The 9th US Circuit Court of Appeals reversed a judge's
ruling dismissing the lawsuit as filed too late. Investors say they did not
discover the alleged fraud until the US Securities and Exchange Commission
fined HP $6 million (roughly Rs. 49 crores) over its sales practice disclosures
in September 2020.
Darren Robbins, an attorney for the pension fund leading the
case, said the opinion will help investors.
"By their very nature, misrepresentations inhibit
investors from discovering corporate misconduct," he said.
A spokesperson for HP did not immediately reply to a request
for comment.
The SEC said in 2020 that some HP regional managers used
incentives to accelerate sales they expected to materialize in later quarters.
It also said sales managers sold steeply discounted supplies to distributors
known to resell HP products outside their own territories,
"cannibalizing" sales from local distributors and violating company
policy.
The SEC said HP did not timely disclose to investors how
these practices, which occurred in 2015 and 2016, were reducing margins and
boosting inventories at the Palo Alto, California-based technology company.
The company did not admit or deny the SEC's findings.
Investors sued weeks after the SEC settlement, alleging HP
and its top executives defrauded investors by hiding the impact of the
practices until 2016.
On June 21, 2016, HP announced a plan to reduce inventories
in its distribution channels, and projected it would reduce net revenue from
supplies by $450 million over two quarters. Its share price fell 5.4 percent
the next day.
US District Judge Jeffey White in Oakland, California,
dismissed the case in March 2022, saying investors should have sued within two
years of when the statements were made.
Circuit Judge Jay Bybee wrote for the San Francisco,
California-based appeals court that White had overlooked shareholders' claim
that the SEC settlement "put HP's prior statements in a new context,
revealing that ostensibly innocuous statements were actually intentional
misrepresentations."
The case is York County v. HP Inc. et al., 9th U.S. Circuit
Court of Appeals, No. 22-15501. © Reuters