There was court action yesterday in the class action lawsuit against Prosper Marketplace (Prosper.com). As Prosper-watcher Investar points out here, Judge Kramer sustained the demurrer filed by the 3 remaining outside directors – this time without leave to further amend. A case mangement conference (CMC) was held – and the next CMC scheduled for October 29, 2009.

(or something along those lines..)

In preparation for next week’s action in the Superior Court of California, Prosper’s outside directors have filed a reply brief in response to the August 26 opposition memo filed by the plaintiffs, which was filed in response to the August 10 demurrer to the second amended complaint of July 10, 2009.

The actual document is not yet available for download and, based on our experience with the Court’s web site, it’s difficult to tell if it will, at some point, be made available at all.

That said, it is always good to note progress in this case and we look forward to an interesting week.

Earlier today, plaintiffs filed their answer to the August 10 demurrer filed by the outside directors in response to the Second Amended Complaint, which was filed by the plaintiffs on July 10.

The file has not yet become available to the public via the Court’s web site.

The next hearing in the case still appears to be scheduled for September 15, 2009.

Earlier today, defendants Breyer, Kagle and Cheng filed their demurrer to the lenders’ 2nd amended complaint with the Superior Court of California in the ongoing class action  litigation against Prosper Marketplace (Prosper.com) related to the sale of unregistered securities.

The hearing on the demurrer has been scheduled to occur in San Francisco on September 15, 2009 – the same hearing already on the Court’s schedule as a “complex litigation” hearing.

Looks like several key issues will come before the court on this date.

(Hope to have access to the scanned document from the court soon)

UPDATE:  As of July 30, 2009, this hearing has now been moved up on the calendar and re-scheduled for September 15, 2009.

In the ongoing legal proceedings against Prosper Marketplace (Prosper.com), The Superior Court of California, County of San Francisco has just issued notice that, due to anticipated work furlough mandated by the court administration, the next hearing in the case has been re-scheduled for September 21, 2009.

Prosper-watcher Investar continues to keep a keen eye on developments in the ongoing legal saga.  Investar has kindly offered me the permission to re-post his content (which I may decide to do on occasion) – and I will, of course, indicate when this is the case and give due credit and attribution.

Class Action Lawsuit
Prosper Wins A Temporary Reprieve
Second Session in Court
(update 1)

ORDER SUSTAINING DEMURRER TO FIRST AMENDED COMPLAINT
During the courtroom session on July 9, 2009, the judge officially handed down his ruling on the Demurrer by Prosper’s Outside Directors. The ruling effectively rendered lender’s “First Amended Complaint of Securities Violations” null and void. Judge Richard Kramer found the lenders failed to “state facts sufficient to constitute a cause of action” in two of their six allegations.

The judge said there was insufficient evidence each lender should receive up to $10,000 in addition to recovery of their actual losses because Promissory Notes (borrower’s loans) Prosper sold them should have been registered as securities and were not (item 3 of 6 in their complaint). There was also insufficient evidence Prosper failed to do due diligence in determining how the Promissory Notes in question should be sold, and especially the claim its directors failed to exercise reasonable care in structuring the loan sales (item 6 of 6).

Prosper’s reprieve is short lived at best. In the order, the judge granted the lenders “leave to amend and file a Second Amended Complaint” and ordered the document to arrive at his court no later than today, July 10.

ORDER – STIPULATION AND PROTECTIVE ORDER
Also during the July 9 session, the judge recognized the “Protective Order” drafted by Morrison & Foerster, Prosper’s law firm, and ordered the parties to follow that protocol when making interrogatories, motions or requests for production of documents, requests for admissions into evidence, and when taking depositions.

ORDER GRANTING APPLICATION OF NICOLE K. SERFOSS
As Beerbud1 pointed out, Nicole Serfoss of Morrison & Foerster’s Colorado office was recognized as “Pro Hac Vice” member of Prosper’s legal team. 

definition PRO HAC VICE:  Latin for “for this occasion” or “for this event,” (literally, “for this turn”) is a legal term usually referring to a lawyer who has not been admitted to practice in a given jurisdiction (officially licensed and recognized there) but is being allowed to participate in a particular case in that jurisdiction.

Read the original post here.

Following a flurry of paper flying back and forth, it’s beginning to look like a scheduled May 7 hearing may actually take place.  Plaintiff’s counsel filed new documents with the court late Friday, but the court’s web site is notoriously slow to scan and post.

Stay tuned.

As the Internet evolved, we have become accustomed to a certain speed and efficiency in having transactions completed. Sadly, the justice system is not home to the same experience (yet).

For some of us, the notion of waiting six months before the court will hold its first case management meeting, will come to wear on our patience.

At the same time, it should also bring some level of comfort to those wanting time to pull additional funds out of their Prosper accounts, in the hope of minimizing losses from what is perhaps prematurely seen as the inevitable demise of Prosper.com. If you are not already pulling your free cash out of your account, what are you waiting for? You can’t make loans, you are not being paid interest on your deposit, the SEC just told them to stop selling more loans, and a class action suit has now been filed. Prosper’s future could at this point best be described as “unclear.”

Personally, I am of the opinon that there are indeed viable scenarios under which Prosper could continue to operate. Regardless of the outcome of the proposed class action, however, Prosper has already exposed itself to a number of potentially actionable issues that could seriously impair its business.

Ironically, Prosper put itself in this situation and I am perhaps perplexed that it took this long to get litigation put in process.