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Another Day in Court (Investar’s perspective)

July 10, 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)

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.

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.

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.

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