Changhui Hu, et al. v. Cadence Design Systems, Inc., et al...

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MILBERG LLPJEFF S. WESTERMAN SBN 94559KAREN T. ROGERS (SBN 185465)One California Plaza300 S . Grand Ave., Suite 3900Los Angeles, CA 90071Telephone: (213) 617-1200Facsimile : (213) 617-1975E-mail : [email protected]@milberg.com

DYER & BERENS LLPROBERT J. DYER IIIJEFFREY A. BERENS682 Grant StreetDenver , CO 80203-3507Telephone: 303/861-1764Facsimile : 303/395-0393E-mail : [email protected]@dyerberens.com

Attorneys for Plaintiff

[Additional Counsel on Signature Page]

FILEDOOCT 2 9 2008 S S

RICHARD W. WIEKING

CLERK , U.S. DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES DISTRICT COURT is^-,^v

NORTHERN DISTRICT OF CALIFORNIA

CHANGHUI HU, Individually and on Behalf Case No.of All Others Similarly Situated,

LNLA ION 4966Plaintiff, )

COMPLAINT FOR VIOLATION OF THEvs. ) FEDERAL SECURITIES LAWS

CADENCE DESIGN SYSTEMS, INC., )MICHAEL J. FISTER, WILLIAM PORTER ) DEMAND FOR JURY TRIALand KEVIN S. PALATNIK, )

Defendants. )

COMPLAINT FOR VIOLATION OF THE FEDERAL

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*400

Plaintiff has alleged the following based upon the investigation of Plaintiffs counsel,

which included a review of United States Securities and Exchange Commission ("SEC") filings

by Cadence Design Systems, Inc. ("Cadence" or the "Company"), as well as regulatory filings

and reports, press releases and other public statements issued by the Company, and media reports

about the Company, and Plaintiff believes that substantial additional evidentiary support will

exist for the allegations set forth herein after a reasonable opportunity for discovery.

INTRODUCTION AND OVERVIEW

1. This is a class action for violations of the anti-fraud provisions of the federal

securities laws on behalf of all purchasers of Cadence common stock between April 23, 2008 and

October 22, 2008 (the "Class Period"), who were damaged thereby (the "Class").

2. Cadence develops electronic design automation, or EDA, software and hardware.

Beginning on April 23, 2008 and continuing throughout the Class Period, defendants

misrepresented Cadence's financial performance and prospects, overstated its revenues and

caused it to file false and misleading financial statements with the SEC.

3. On October 15, 2008, the Company announced the unexpected departures of its

Chief Executive Officer ("CEO"), defendant Michael J. Fister and four other senior executives,

including defendant William Porter. In response to this surprise announcement, the price of

Cadence common stock dropped approximately 15%.

4. Merely a week later, on October 22, 2008, defendants stunned investors by

acknowledging that the Company was reviewing the recognition of revenue related to customer

contracts signed in 1Q08 and that it expected to restate its financial statements not only for the

first quarter of 2008, but also the first half of 2008. Specifically, the Company had improperly

reported approximately $24 million in revenue in the first quarter of 2008 that would not be

earned until the later quarters and, therefore, should be properly recognized ratably over the

duration of the customer contracts.

I

COMPLAINT FOR VIOLATION OF THE FEDERAL - I -

SECURITIES LAWS

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5. As a result of these disclosures , Cadence's stock price dropped another 25%.

These decreases in Cadence ' s stock price were a result of the artificial inflation caused by

defendants ' false and misleading statements coming out of the stock price.

JURISDICTION AND VENUE

6. The claims asserted arise under §§ 10 (b) and 20 ( a) of the Securities Exchange Act

of 1934 ("1934 Act"), 15 U.S.C. §§ 78j(b) and 78t(a), and Rule lOb-5, 17 C.F.R. § 240.10b-5.

Jurisdiction is conferred by and venue is proper pursuant to § 27 of the 1934 Act. Cadence's

headquarters are located in San Jose , California and false statements were made in this District

and acts giving rise to the violations complained of occurred in this District.

7. In connection with the acts alleged in this Complaint , defendants , directly or

indirectly , used the means and instrumentalities of interstate commerce , including , but not

limited to , the mails, interstate telephone communications and the facilities of the national

securities markets.

THE PARTIES

8. Plaintiff Changhui Hu Purchased Cadence securities during the Class Period as set

forth in the attached certification and was damaged thereby.

9. Defendant Cadence, which is headquartered in San Jose, California, develops

electronic design automation (EDA) software and hardware. The Company licenses software,

sells or leases hardware technology, and provides design, methodology and education services

throughout the world to help manage and accelerate electronics product development processes.

Its stock is traded under the symbol CDNS on the NASDAQ, which is an efficient market.

10. Defendant Michael J. Fister ("Fister") was, at all relevant times during the Class

Period, President, CEO and a director of the Company.

11. Defendant William Porter ("Porter") was, at relevant times during the Class

Period, Executive Vice President and Chief Administrative Officer ("CAO"). Porter also served

as the Company's Chief Financial Officer ("CFO) between 1999 and April 23, 2008. As CAO,

Porter oversaw Cadence's Finance and Treasury departments.

COMPLAINT FOR VIOLATION OF THE FEDERAL 2

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12. Defendant Kevin S. Palatnik ("Palatnik") was, at all relevant times during the

Class Period, Senior Vice President and CFO of the Company.

13. Defendants Fister, Porter and Palatnik are collectively referred to herein as the

"Individual Defendants."

14. During the Class Period, the Individual Defendants, as senior executive officers

and/or directors of Cadence, were privy to confidential and proprietary information concerning

Cadence, its operations, finances, financial condition and present and future business prospects.

The Individual Defendants also had access to material adverse non-public information

concerning Cadence. Because of their positions with Cadence, the Individual Defendants had

access to non-public information about its business, finances and present and future business

prospects through internal corporate documents, conversations and connections with other

corporate officers and employees, attendance at management and/or board of directors meetings

and committees thereof, and via reports and other information provided to them in connection

therewith. Because of their possession of such information, the Individual Defendants knew or

recklessly disregarded that the adverse facts and misstatements specified herein had not been

disclosed to, and were being concealed from, the investing public.

15. The Individual Defendants are liable as direct participants in the wrongs

complained of herein. In addition, the Individual Defendants, by reason of their status as senior

executive officers and/or directors, were "controlling persons" within the meaning of

Section 20(a) of the 1934 Act and had the power and influence to cause the Company to engage

in the unlawful conduct complained of herein. Because of their positions of control, the

Individual Defendants were able to and did, directly or indirectly, control the conduct of

Cadence's business.

16. The Individual Defendants, because of their positions with the Company,

controlled and/or possessed the authority to control the contents of its reports, press releases and

presentations to securities analysts and through them, to the investing public. The Individual

Defendants were provided with copies of the Company's reports and press releases alleged

COMPLAINT FOR VIOLATION OF THE FEDERAL - 3 -

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herein to be misleading prior to issuance and had the ability and opportunity to prevent their

issuance or cause them to be corrected. Thus, the Individual Defendants had the opportunity to

commit the fraudulent acts alleged herein.

17. As senior executive officers and/or directors and as controlling persons of a

publicly traded company whose common stock was, and is, registered with the SEC pursuant to

the 1934 Act, and was, and is, traded on the NASDAQ and governed by the federal securities

laws, the Individual Defendants had a duty to promptly disseminate accurate and truthful

information with respect to Cadence's financial condition and performance, growth, operations,

financial statements, business, management, earnings and present and future business prospects,

and to correct any previously issued statements that had become materially misleading or untrue,

so that the market price of Cadence's common stock would be based upon truthful and accurate

information. The Individual Defendants' misrepresentations and omissions during the Class

Period violated these specific requirements and obligations.

18. The Individual Defendants are liable as participants in a fraudulent scheme and

course of conduct which operated as a fraud or deceit on purchasers of Cadence's common stock

by disseminating materially false and misleading statements and/or concealing material adverse

facts. The scheme deceived the investing public regarding Cadence's business, operations and

management and the intrinsic value of Cadence's securities and caused Plaintiff and members of

the Class to purchase Cadence's common stock at artificially inflated prices.

SCIENTER

19. During the Class Period, defendants had both the motive and opportunity to

I conduct fraud . They also had actual knowledge of the misleading nature of the statements they

I made or acted in reckless disregard of the true information known to them at the time. In so

doing, the defendants participated in a scheme to defraud and committed acts, practices and

participated in a course of business that operated as a fraud or deceit on purchasers of Cadence

securities during the Class Period.

OMPLAINT FOR VIOLATION OF THE FEDERAL - 4 -

ECURITIES LAWS

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FALSE AND MISLEADINGSTATEMENTS DURING THE CLASS PERIOD

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20. On April 23, 2008, the Company issued a press release entitled, "Cadence Reports

QI Revenue of $287 Million." The release stated in part (emphasis added unless otherwise

noted):

Cadence Design Systems, Inc. (NASDAQ: CDNS) today reported first quarter2008 revenue of $287 million, compared to revenue of $365 million reported forthe same period in 2007. On a GAAP basis, Cadence recognized a net loss of$19 million, or $(0.07) per share on a diluted basis, in the first quarter of 2008,compared to net income of $44 million, or $0.15 per share on a diluted basis, in

the same period in 2007.

Using this non-GAAP measure, net income in the first quarter of 2008 was

$12 million , or $0.04 per share on a diluted basis, as compared to $75 million, or

$0.26 per share on a diluted basis, in the same period in 2007.

"First quarter results met our expectations and we'll continue to focus on

improving our operating performance throughout the year," said Bill Porter,

executive vice president and chief administrative officer.

21. In a separate press release on April 23, 2008 entitled , "Kevin S. Palatnik Named

Cadence Chief Financial Officer; William Porter to Become Chief Administrative Officer," the

Company stated, in part:

Cadence Design Systems , Inc. (Nasdaq : CDNS) today announced that Kevin S.

Palatnik has been appointed chief financial officer (CFO), succeeding William

Porter in the role. Palatnik will continue to report to Porter, who has been named

to the new position of chief administrative officer (CAO). These changes are

consistent with Cadence's succession planning process and are effective

immediately.

22. On April 25, 2008, the Company filed its quarterly report with the SEC on Form

10-Q. The Company's Form 10-Q was signed by defendants Fister and Palatnik and reaffirmed

the Company's previously announced financial results. Additionally, and with respect to the

presentation of its financial results, the Company stated:

The Condensed Consolidated Financial Statements included in this Quarterly

Report on Form 10-Q have been prepared by Cadence Design Systems, Inc., or

Cadence, without audit, pursuant to the rules and regulations of the Securities and

Exchange Commission, or the SEC. Certain information and footnote disclosures

normally included in consolidated financial statements prepared in accordance

with generally accepted accounting principles have been condensed or omitted


SECURITIES LAWSDOCS\449727v1

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I pursuant to such rules and regulations. However, Cadence believes that thedisclosures contained in this Quarterly Report comply with the requirements of

2 Section 13(a) of the Securities Exchange Act of 1934, as amended, for aQuarterly Report on Form 10-Q and are adequate to make the information

3 presented not misleading.

4 23. On June 17, 2008, the Company issued a press release entitled, "Cadence

5 Proposes to Acquire Mentor Graphics for $16.00 per Share in Cash; Transaction Valued at $1.6

6 Billion." The release stated in part:

7 Cadence Design Systems, Inc. (NASDAQ: CDNS), today announced that it8 submitted a proposal to the Board of Directors of Mentor Graphics Corporation

(NASDAQ: MENT) to acquire Mentor Graphics for $16.00 per share in cash.Cadence's all-cash proposal, which is not subject to any financing condition,

9 represents a 30% premium over the closing price of Mentor Graphics common

10stock on June 16, 2008, the last trading day prior to public disclosure ofCadence's proposal, a 59% premium over the closing price of Mentor Graphicscommon stock on May 2, 2008, when Cadence presented the terms of the

11 proposal to Mentor Graphics, and a 46% premium over Mentor Graphics' average

12closing price for the past 30 trading days. The transaction price represents a totalenterprise value of $1.6 billion on a fully diluted basis, which reflects Mentor

13Graphics' net debt of $69 million.

14"A combined Cadence-Mentor will offer customers a broader and more fullyintegrated product and technology portfolio in a timeframe that better enables

15them to address urgent and complex challenges associated with their next-generation product development," said Michael J. Fister, president and chief

16executive officer of Cadence. "Together, we will accelerate the rate and efficiencyof customers' innovation by making it possible for them to develop products that

17better meet end user needs."

18 "We believe the combination of Cadence and Mentor Graphics deliverssignificant benefits to both companies' shareholders that are simply too

19compelling to ignore," said Kevin S. Palatnik, senior vice president and chieffinancial officer of Cadence. "Our $16.00 per share all-cash proposal provides

20Mentor Graphics shareholders with a substantial cash premium for theirinvestment in Mentor Graphics. It remains our strong preference to work

21cooperatively with Mentor Graphics, and to immediately commence discussions

with Mentor Graphics regarding our proposal."

22 24. On July 23, 2008, the Company issued a press release entitled, "Cadence Reports

23 Q2 Revenue of $329 Million." The release reported revenues of $616 million and a net loss of

24 $13.7 million or $(0.05) per share on a diluted basis, for the six months ended June 28, 2008, and

25 further stated in part:

26 Cadence Design Systems, Inc. (NASDAQ: CDNS) today reported second quarter

272008 revenue of $329 million, compared to revenue of $391 million reported for

the same period in 2007. On a GAAP basis, Cadence recognized net income of

28 $5 million, or $0.02 per share on a diluted basis, in the second quarter of 2008,

COMPLAINT FOR VIOLATION OF THE FEDERAL - 6-


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compared to net income of $60 million, or $0.20 per share on a diluted basis, inthe same period in 2007.

2

3 Using this non-GAAP measure, net income in the second quarter of 2008 was4 $38 million, or $0.14 per share on a diluted basis, as compared to $91 million, or

$0.30 per share on a diluted basis, in the same period in 2007.

5 "Although we achieved our Q2 numbers, it was more difficult than we planned.6 Customers are demanding still more flexibility in when, what and how they

purchase software and hardware," said Mike Fister, chief executive officer. "As

7 a result we've made the decision to lower our outlook and transition to an

approximately ninety-percent ratable license mix. We believe this transition will

8 enable us to keep our focus on the value of our technology. This decision is the

right one for our business over the long term and for building and sustaining

9 strong customer relationships into the future."

10

I 1Business Outlook

12For the third quarter of2008, the company expects total revenue in the range of

$235 million to $245 million. Third quarter GAAP net loss per share is

13expected to be in the range of $(0.27) to $(0.25). Net loss per share using the

non-GAAP measure defined below is expected to be in the range of $(0.11) to

14$(0.09).

15For the full year 2008, the company expects total revenue in the range of

$1.120 billion to $1.140 billion. On a GAAP basis, net loss per share for fiscal

162008 is expected to be in the range of $(0.54) to $(0.50). Using the non-GAAP

measure defined below, diluted earnings per share for fiscal 2008 are expected

17to be in the range of $0.01 to $0.05.

18 25. On July 29, 2008, the Company filed its quarterly report with the SEC on Form

19 10-Q. The Company's Form 10-Q was signed by defendants Fister and Palatnik, reaffirmed the

20 Company's previously announced financial results. Additionally, and with respect to the

21 presentation of its financial results, the Company stated:

22 The Condensed Consolidated Financial Statements included in this Quarterly

23Report on Form 10-Q have been prepared by Cadence Design Systems, Inc., or

Cadence, without audit, pursuant to the rules and regulations of the Securities and

24Exchange Commission, or the SEC. Certain information and footnote disclosures

normally included in consolidated financial statements prepared in accordance

25with generally accepted accounting principles have been condensed or omitted

pursuant to such rules and regulations. However, Cadence believes that the

26disclosures contained in this Quarterly Report on Form 10-Q comply with the

requirements of Section 13(a) of the Securities Exchange Act of 1934, as

27amended, for a Quarterly Report on Form 10-Q and are adequate to make the

information presented not misleading.

28COMPLAINT FOR VIOLATION OF THE FEDERAL - 7-


*00

26. On August 15, 2008, the Company issued a press release entitled, "Cadence

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Withdraws Proposal to Acquire Mentor Graphics." The release stated in part:

Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced that it haswithdrawn its proposal to acquire all of the outstanding shares of Mentor GraphicsCorporation (NASDAQ: MENT) common stock and that its Board of Directors

has authorized a $500 million increase to Cadence's stock repurchase program.The Company said:

"Our goal in pursuing a combination of Cadence and Mentor Graphics was to

create a company that would offer customers a broader and more fully integratedproduct and technology portfolio in a timeframe that would better enable them to

address urgent and complex challenges associated with their next-generation

product development. It is unfortunate for Mentor Graphics shareholders,

however, that despite our best efforts, Mentor Graphics' Board and management

were unwilling to engage in substantive discussions on what we believe would

have been a compelling opportunity to create significant value for both

companies' shareholders and customers."

"Cadence is a disciplined buyer and will only pursue transactions that make sound

financial sense for our shareholders. Mentor Graphics' failure to engage in

substantive discussions on our all-cash premium proposal prevented us from

confirming for our financing sources the significant synergies associated with this

transaction. That, along with our revised outlook and the present economic

climate, led us to conclude that financing terms for the transaction are no longer

attractive for our shareholders. We remain focused on executing our strategy of

delivering holistic solutions that address our customers' key challenges, while

ensuring that Cadence operates in the most cost-efficient manner."

DEFENDANTS' STATEMENTS WERE FALSE AND MISLEADING

27. Defendants' statements set forth above were materially false and misleading

because approximately $24 million in revenue that Cadence claimed in the first quarter of 2008

and in the six months ended June 28, 2008 was not earned and would not be earned until later

quarters and should not have been recognized . Therefore , defendants overstated Cadence's

revenues for 1Q08 and the six months ended June 28 , 2008, understated its net loss for 1Q08 and

the six months ended June 28, 2008 , and overstated its "non-GAAP" net income . Defendants

also misrepresented and failed to disclose that: (a) Cadence had "borrowed" these improperly

recognized revenues from future quarters, thereby necessarily harming the Company ' s future

operating performance and prospects , and making it more difficult or impossible to meet its

guidance; and ( b) the disclosures in the Form 10-Qs were not adequate to make the information

presented not misleading.

ICOMPLAINT FOR VIOLATION OF THE FEDERAL - 8 -

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THE TRUTH BEGINS TO COME TO LIGHT

2 28. On October 15, 2008, the Company issued a press release entitled "Cadence

3 Board of Directors Creates Interim Office of Chief Executive; Michael Fister Resigns." The

4 release announced: "Michael Fister's resignation as President, Chief Executive Officer and a

5 director of the company, by mutual agreement between Mr. Fister and the Board." It also

6 announced the immediate resignations of. (i) defendant William Porter; (ii) James S. Miller, Jr.,

7 Executive Vice President - Products and Technologies Organization; (iii) Kevin Bushby,

8 Executive Vice President - Worldwide Field Operations; and (iv) R.L. Smith McKeithen,

9 Executive Vice President - Corporate Affairs.

10 29• In response to this shocking announcement, the per share price of Cadence

11 common stock dropped approximately 15%.

12 30. Merely one week later, on October 22, 2008, the Company issued a press release

13 entitled, "Cadence Announces Accounting Review and Postpones Release of Third Quarter 2008

14 Financial Results and Webcast." The release stated in part:

15 Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced that it is

reviewing, in conjunction with the company's independent accountants and legal

16 advisors, the recognition of revenue related to customer contracts signed during

the first quarter of 2008.17

Cadence initiated the review after preliminarily determining during its regular

18 review of its third quarter results that approximately $24 million of revenue

relating to these contracts was recognized during the first quarter of 2008, but

19 should have been recognized ratably over the duration of the contracts

commencing in the second quarter of 2008. Cadence expects to restate its

20 financial statements for the first quarter of 2008 and the first half of 2008 to

correct the revenue recognition with respect to these contracts.

21

22 31. Investors were stunned. In response, Cadence's stock price dropped from

23 $4.32/share on October 22, 2008 to as low as $2.42/share the next day. The foregoing decreases

24 in Cadence's stock price were a result of the artificial inflation caused by defendants' misleading

25 statements coming out of the stock price.

26 LOSS CAUSATION/ECONOMIC LOSS

27 32. During the Class Period, as detailed herein, defendants made false and misleading

28 statements and engaged in a scheme to deceive the market. This artificially inflated Cadence's


SECURITIES LAWS

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stock price and operated as a fraud or deceit on the Class. Later, when defendants' prior

misrepresentations and fraudulent conduct became apparent to the market, Cadence's stock price

fell precipitously, as the prior artificial inflation came out of the stock price over time. As a

result of their purchases of Cadence securities during the Class Period, Plaintiff and other

members of the Class suffered economic loss, i.e., damages, under the federal securities laws.

NO SAFE HARBOR

33. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking

statements" when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements. Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

herein, defendants are liable for those false forward-looking statements because at the time each

of those forward-looking statements were made, the particular speaker knew that the particular

forward-looking statement was false, and/or the forward-looking statement was authorized

and/or approved by an executive officer of Cadence who knew that those statements were false

when made.APPLICABILITY OF PRESUMPTION OFRELIANCE: FRAUD ON THE MARKET

34. Plaintiff will rely upon the presumption of reliance established by the fraud-on-

the-market doctrine in that, among other things:

(a) Defendants made public misrepresentations or failed to disclose material

facts during the Class Period;

(b) The omissions and misrepresentations were material;

(c) The Company's stock traded in an efficient market;



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(d) The misrepresentations alleged would tend to induce a reasonable investor

to misjudge the value of the Company's stock; and

(e) Plaintiff and other members of the Class purchased Cadence stock

between the time defendants misrepresented or failed to disclose material facts and the time the

true facts were disclosed, without knowledge of the misrepresented or omitted facts.

35. At all relevant times, the market for Cadence stock was efficient for the following

reasons, among others:

(a) As a regulated issuer, Cadence filed periodic public reports with the SEC;

and

(b) Cadence regularly communicated with public investors via established

market communication mechanisms, including through regular disseminations of press releases

on the major news wire services and through other wide-ranging public disclosures, such as

communications with the financial press, securities analysts and other similar reporting services.

CLASS ACTION ALLEGATIONS

36. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure on behalf of all persons who purchased Cadence common stock during

the Class Period (the "Class"). Excluded from the Class are defendants, directors and officers of

Cadence and their families and affiliates.

37. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits

to the parties and the Court. Cadence had more than 260 million shares of stock outstanding,

owned by thousands of persons.

38. There is a well-defined community of interest in the questions of law and fact

involved in this case. Questions of law and fact common to the members of the Class which

predominate over questions which may affect individual Class members include:

(a) Whether the 1934 Act was violated by defendants;

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(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants' statements omitted material facts necessary in order

to make the statements made, in light of the circumstances under which they were made, not

misleading;

(d) Whether defendants knew or recklessly disregarded that their statements

were false and misleading;

(e) Whether the price of Cadence stock was artificially inflated; and

(f) The extent of damage sustained by Class members and the appropriate

measure of damages.

39. Plaintiff's claims are typical of those of the Class because Plaintiff and the Class

sustained damages from defendants' wrongful conduct.

40. Plaintiff will adequately protect the interests of the Class and has retained counsel

who are experienced in class action securities litigation. Plaintiff has no interests which conflict

with those of the Class.

41. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

COUNT IFor Violation of § 10 (b) of the 1934 Actand Rule 10b-5 Against All Defendants

42. Plaintiff incorporates ¶¶1-41 by reference.

43. During the Class Period, defendants disseminated or approved the false

statements specified above, which they knew or recklessly disregarded were misleading in that

they contained misrepresentations and failed to disclose material facts necessary in order to make

the statements made, in light of the circumstances under which they were made, not misleading.

44. Defendants violated § 10(b) of the 1934 Act and Rule I Ob-5 in that they:

(a) Employed devices, schemes and artifices to defraud;

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(b) Made untrue statements of material facts or omitted to state material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading; or

(c) Engaged in acts, practices, and a course of business that operated as a

fraud or deceit upon Plaintiff and others similarly situated in connection with their purchases of

Cadence securities during the Class Period.

45. Plaintiff and the Class have suffered damages in that, in reliance on the integrity

of the market, they paid artificially inflated prices for Cadence securities. Plaintiff and the Class

would not have purchased Cadence securities at the prices they paid, or at all, if they had been

aware that the market prices had been artificially and falsely inflated by defendants' misleading

statements.

46. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their purchases of Cadence

securities during the Class Period.

COUNT IIFor Violation of § 20 (a) of the 1934 Act

Against All Defendants

47. Plaintiff incorporates ¶¶1-46 by reference.

48. The Individual Defendants acted as controlling persons of Cadence within the

meaning of § 20 of the 1934 Act. By virtue of their positions and their power to control public

statements about Cadence, the Individual Defendants had the power and ability to control the

actions of Cadence and its employees. Cadence controlled the Individual Defendants and its

other officers and employees. By reason of such conduct, defendants are liable pursuant to

§ 20(a) of the 1934 Act.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment as follows:

A. Declaring this action to be a proper class action pursuant to Fed. R. Civ. P. 23;

COMPLAINT FOR VIOLATION OF THE FEDERAL - I .i -

SECURITIES LAWS

^ro *90

B. Awarding Plaintiff and the members of the Class damages and interest;

C. Awarding Plaintiff's reasonable costs, including attorneys' and experts' fees; and

D. Awarding such equitable/injunctive or other relief as the Court may deem just and

proper.

JURY DEMAND

Plaintiff demands a trial by jury.

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DATED: October 29, 2008 MILBERG LLPJEFF S. WESTERMANKAREN T. ROGERS

KAREN T. RO RS

One California Plaza300 S. Grand Ave., Suite 3900Los Angeles, CA 90071Telephone: (213) 617-1200Facsimile : (213) 617-1975E-mail: [email protected]@milberg.com

DYER & BERENS LLPROBERT J. DYER IIIJEFFREY A. BERENS682 Grant StreetDenver, CO 80203-3507Telephone : 303/861-1764Facsimile : 303/395-0393E-mail : [email protected]@dyerberens.com

HOLZER, HOLZER & FISTEL, LLCCOREY D. HOLZERMICHAEL I. FISTEL, JR.200 Ashford Center North, Suite 300Atlanta, GA 30338Telephone : 770/392-0090Facsimile : 770/392-0029E-mail : [email protected]@holzerlaw.com

Attorneys for Plaintiff

OMPLAINT FOR VIOLATION OF THE FEDERAL - 14 -


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