Law firm Milberg, Weiss, Bershad, Hynes & Lerach, representing an Arizona shareholder, claims the company improperly recorded revenues from resellers from April 1995 to January 1996. Other allegations include overstatement of company revenues, according to Richard Douglas, Microtest's chief information officer.
The company's stock fell from its high of $22 a share during that period to $11 by the end of the year.
"We believe the lawsuit is without merit and we will defend the allegations vigorously," Douglas said. The lawsuit was filed in Phoenix, Arizona.
Earlier in the week, StorMedia (STMD) announced a shareholder lawsuit had been filed against it as well, while Encad (ENCD) saw plaintiffs in its own shareholder suit drop their case. Milberg, Weiss, Bershad, Hynes & Lerach also represented the plaintiffs in that suit.
These cases are part of the estimated 300 securities class-action lawsuits filed nationwide each year. Of those cases, about 30 percent involve high-tech and biotechnology firms, said Mike Bogetich, research director for the Taxpayers Against Frivolous Lawsuits (TAFL). TAFL is fighting California Proposition 211, a securities litigation initiative on the November state ballot, which makes it easier for individuals to sue companies.
"High-tech companies have a short life-span and tend to be heavy with (stock option) compensation, so they tend to distort the data," countered Sean Crowley, a spokesman for Citizens for Retirement Protection and Security, a Proposition 211 supporter.
"This legislation will only punish those executives that give forward-looking statements when they know they are false."
TAFL's Bogetich said that since federal reform legislation that eliminates plaintiffs' ability to sue when forecasts are given with cautionary statements was enacted in January, many shareholder cases are now being filed in state courts.
"The Securities and Exchange Commission said filings have dropped about 40 to 50 percent, while in California, the number of shareholder lawsuits has increased by 500 percent," Bogetich added.