RATIONAL SOFTWARE - Legal Case Documents

UNITED STATES COURT OF APPEALS

RATIONAL SOFTWARE CORPORATION, SG COWEN SECURITIES

UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF CALIFORNIA,

STEEFEL, LEVITT & WEISS

MANDAMUS REVIEW IS APPROPRIATE

THE DISTRICT COURT'S DISCOVERY ORDER IS CLEARLY ERRONEOUS

The Reform Act Prohibits Discovery for the Purpose of Rectifying Deficiencies in a Complaint

Petitioners Rational Software Corporation, SG Cowen Securities Corporation, Paul D. Levy and

The issue presented by this petition is whether plaintiffs' inability to satisfy the

On December 4, 1998, after having granted defendants' motions to dismiss, the District Court

On December 18, 1998, and December 22, 1998, respectively, petitioners Rational and Cowen

On March 11, 1999, plaintiffs filed the Response of Real Parties in Interest in Opposition to

Plaintiffs, however, have not alleged any improper personal benefit that Petitioner Levy

plaintiffs devote the vast majority of their brief to arguing that a discovery stay will

With respect to the second factor, plaintiffs contend that the third-party discovery does not

It also conflicts with Congress' explicit intent to preclude plaintiffs from engaging in

petitioners respectfully request this Court to issue a writ of mandamus directing the

Two months later, in its Discovery Order, the District Court authorized discovery for the

The District Court dismissed plaintiffs' state law claims for failure to allege the privity

The accompanying Reply Memorandum in Support of Petition for Writ of Mandamus Enforcing the

2 . PETITION FOR WRIT

DISTRICT COURT
REFORM ACT
SECURITIES
DEFENDANTS
MANDAMUS
UNITED STATES
PROVISIONS
RATIONAL SOFTWARE CORPORATION
PETITION
WRIT
LEVY
INTENT
PLAINTIFFS
APPEALS
PRIVATE SECURITIES LITIGATION
UNDUE PREJUDICE
DISMISSAL ORDER
PETITIONERS
ORDER STAYING DISCOVERY
PLEADING STANDARD
CALIFORNIA
FACTUAL BACKGROUND
SECURITIES LAWS
MANDAMUS REVIEW
LEGISLATIVE HISTORY
DIRECTING ENTRY
PLEADING REQUIREMENTS
PARTICULARIZED DISCOVERY
HEIGHTENED PLEADING STANDARDS




                                             No. [98-71501]

                          UNITED STATES COURT OF APPEALS
                                FOR THE NINTH CIRCUIT

     RATIONAL SOFTWARE CORPORATION
     AND PAUL D. LEVY

                           Defendants-Petitioners,

                v.

     UNITED STATES DISTRICT COURT,
     NORTHERN DISTRICT OF CALIFORNIA,

                           Respondent,

     TOM RANDALL, et al., On Behalf Of Themselves And All Others Similarly
     Situated,

                           Real Parties In Interest.

                             From The United States District Court
                             For the Northern District of California
                                           No. C 97-21001 JF

                          PETITION FOR WRIT OF MANDAMUS
                       ENFORCING THE STAY PROVISIONS OF THE
        PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

                         WILSON SONSINI GOODRICH & ROSATI
                          BORIS FELDMAN (State Bar No. 128838)
                         DOUGLAS J. CLARK (State Bar No. 171499)
                           DAVID SLOSS (State Bar. No. 189954)
                                           650 Page Mill Road
                                   Palo Alto, CA 94304-1050
                                    Telephone: 650.493.9300
                             Attorneys for Defendants-Petitioners
                        Rational Software Corporation and Paul D. Levy


                                 TABLE OF CONTENTS

UNITED STATES COURT OF APPEALS

RATIONAL SOFTWARE CORPORATION AND PAUL D. LEVY

UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF CALIFORNIA,

PETITION FOR WRIT OF MANDAMUS

Factual Background

The Dismissal Order

A WRIT OF MANDAMUS VACATING THE DISCOVERY ORDER AND DIRECTING ENTRY OF AN ORDER STAYING

Mandamus Review is Appropriate in This Case.

Petitioners Rational Software Corporation and Paul D. Levy respectfully submit this Petition

This Court has previously issued a writ of mandamus directing a district court to respect

See Order Granting in Part and Denying in Part Plaintiffs' Motion for Limited Discovery at 8

the District Court's ruling is contrary to the legislative history discussing the exceptional

petitioners respectfully request that the Court exercise its jurisdiction under the All Writs

Petitioners further ask that the Court grant a peremptory writ of mandamus directing the

Rational is a software company based in Cupertino, California that develops, markets, and

The operative Complaint was filed on May 28, 1998 and named as defendants Rational, Levy,

Complaint alleges that Rational and Levy violated the federal and state securities laws by

the District Court's 13-page Discovery Order focused on interpreting the Reform Act phrase

his Court holds that a securities class action plaintiff may establish the existence of undue

Did the District Court err in concluding that the Reform Act's mandatory discovery stay was

The Reform Act purposefully creates a zero-sum game: if you satisfy the pleading

3 . OPINION

PLAINTIFFS
COURT
DISTRICT
UNITED STATES
SECURITIES
DEFENDANTS
ACT
PETITIONERS
FACTS
CIR
WRIT
COMPLAINT
MOTION
APPEALS
CALIFORNIA
LEVY
LAW
DISMISS
UNDUE PREJUDICE
CLASS ACTION
PARTY
LIMITED DISCOVERY
ALLEGES
REFORM ACT
STOCK
REQUEST
PLEADING
PERMITTING
BAUMAN



FOR PUBLICATION


UNITED STATES COURT OF APPEALS



FOR THE NINTH CIRCUIT



SG COWEN SECURITIES

CORPORATION; REHAN SYED,

Petitioners,



v.



UNITED STATES DISTRICT

                                     No. 98-71501

COURT FOR THE NORTHERN

                                     D.C. No.

DISTRICT OF CALIFORNIA,

                                     CV-97-21001-JF

Respondent,


THOMAS RANDALL, et al., on behalf

of themselves and all others

similarly situated,

Real Party in Interest.

UNITED STATES COURT OF APPEALS

Petitioners,

DISTRICT OF CALIFORNIA,

Real Party in Interest.

CORPORATION AND PAUL D. LEVY,

The defendants in this securities class action lawsuit seek

a writ of mandamus vacating the district court's order for limited discovery.

stay provision of the Private Securities Litigation Reform Act

The plaintiffs filed this class action lawsuit alleging violations of federal and state

The complaint alleges

Rational's stock

Plaintiffs filed this class action lawsuit against defendants

The defendants moved to dismiss the action,

Plaintiffs subsequently filed a motion for leave to take limited discovery for the purpose of

The court granted the request, and defendants filed this petition for a writ of mandate.

the court finds upon the motion of any party that particularized discovery is necessary to

to meet the heightened pleading requirements of the

that permitting the discovery will not defeat the

99 F.3d 325, 328 (9th Cir.

first articulated in Bauman

4 . LITIGANTS 5 98CV20588

DISTRICT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
RATIONAL SOFTWARE CORPORATION
PAUL
LEVY
ROBERT
BOND



5:98cv20588             Dolnick v. Rational Software, et al

                                                                       RELATE
                                 U.S. District Court
U.S. District for the Northern District of California (San Jose)


RICHARD DOLNICK                             Jeffrey C. Zwerling
           Plaintiff                        [COR NTC]
                                            Zwerling Schachter & Zwerling
                                            LLP
                                            767 Third Avenue
                                            New York, NY 10017-2023
                                            (212) 223-3900

                                            Richard A. Speirs
                                            [COR LD NTC]
                                            Zwerling Schachter & Zwerling
                                            767 Third Avenue 22nd floor
                                            New York, NY 10017
                                            (212) 223-3900


     v.


RATIONAL SOFTWARE CORPORATION
           defendant


COWEN & COMPANY INC
           defendant


PAUL D. LEVY
           defendant


ROBERT T. BOND
           defendant

U.S. District for the Northern District of California (San Jose)

5 . LITIGANTS 5 98CV20563

NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
DEFENDANT



5:98cv20563             Sieger v. Rational Software, et al

                                                                     RELATE
                                 U.S. District Court
U.S. District for the Northern District of California (San Jose)


CHAIM SIEGER                                Saul Roffe
           Plaintiff                        (212) 759-5555
                                            [COR LD NTC]
                                            Sirota & Sirota
                                            747 Third Ave.
                                            New York, NY 10017


     v.


RATIONAL SOFTWARE CORPORATION               Kenneth R. Puhala
           defendant                        [COR LD NTC]
                                            Layton Brooks & Hecht
                                            400 Park Ave
                                            New York, NY 10022
                                            (212) 980-8500


COWEN & COMPANY INC.
           defendant


PAUL D. LEVY                                Kenneth R. Puhala
           defendant                        (See above)
                                            [COR LD NTC]


ROBERT T. BOND                              Kenneth R. Puhala
           defendant                        (See above)
                                            [COR LD NTC]

U.S. District for the Northern District of California (San Jose)

COWEN & COMPANY INC. defendant

6 . LITIGANTS 5 98CV20314

LYNCH
RATIONAL SOFTWARE
REFER
DISTRICT COURT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
DEFENDANT



5:98cv20314 Lynch v. Rational Software, et al
REFER
                                                                             TRANSF
                                                                   RELATE REFER
                                                                   TRANSF
                          U.S. District Court
U.S. District for the Northern District of California (San Jose)


MICHAEL LYNCH, on behalf of          Roger L. Amole, Jr.
himself and all others               [COR LD NTC]
similarly situated                   Watts & Amole
           Plaintiff                 437 North Lee St
                                     P.O. Box 817
                                     Alexandria, VA 22313
                                     (703) 836-7400


     v.


RATIONAL SOFTWARE CORPORATION        Stephen M. Colangelo
           defendant                 [COR LD NTC]
                                     McGuire Woods Battle & Boothe
                                     8280 Greensboro Dr Ste 900
                                     Tysons Corner
                                     McLean, VA 22102
                                     (703) 712-5000


COWEN & COMPANY, INC
           defendant


PAUL D. LEVY                         Stephen M. Colangelo
           defendant                 (See above)
                                     [COR LD NTC]


ROBERT T. BOND                       Stephen M. Colangelo
           defendant                 (See above)
                                     [COR LD NTC]

5:98cv20314 Lynch v. Rational Software,

REFER

U.S. District for the Northern District of California (San Jose)

7 . LITIGANTS 5 97CV21086

DISTRICT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
PLAINTIFF
RATIONAL SOFTWARE CORPORATION
PAUL
LEVY
ROBERT
BOND



5:97cv21086             Weiner, et al v. Rational Software, et al

                                                                         CONSOL
                                 U.S. District Court
U.S. District for the Northern District of California (San Jose)


SEYMOUR WEINER, individually                Joseph D. Ament
and on behalf of all others                 [COR LD NTC]
similarly situated,                         Much Shelist Freed Denenberg
           Plaintiff                        Ament & Eiger PC
                                            200 N LaSalle St Ste 2100
                                            Chicago, IL 60601
                                            (312) 346-3100

                                            Kevin J. Yourman
                                            [COR LD NTC]
                                            Jordan L. Lurie
                                            [COR LD NTC]
                                            James E. Tullman
                                            [COR LD NTC]
                                            Weiss & Yourman
                                            10940 Wilshire Blvd
                                            24th Flr
                                            Los Angeles, CA 90024
                                            (310) 208-2800


SHIRLEY WEINER, individually                Joseph D. Ament
and on behalf of all others                 (See above)
similarly situated,                         [COR LD NTC]
           Plaintiff
                                            Kevin J. Yourman
                                            (See above)
                                            [COR LD NTC]
                                            Jordan L. Lurie
                                            (See above)
                                            [COR LD NTC]
                                            James E. Tullman
                                            (See above)
                                            [COR LD NTC]


     v.

U.S. District for the Northern District of California (San Jose)

Plaintiff

COWEN AND COMPANY, INC. defendant

8 . LITIGANTS 5 97CV21079

DISTRICT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
RATIONAL SOFTWARE CORPORATION
PAUL
LEVY
ROBERT
BOND



5:97cv21079             Kalapa v. Rational Software, et al

                                                                         CONSOL
                                 U.S. District Court
U.S. District for the Northern District of California (San Jose)


PRAMOD KALAPA, on behalf of                 William S. Lerach
himself and all others                      [COR LD NTC]
similarly situated                          Darren J. Robbins
           Plaintiff                        [COR LD NTC]
                                            Milberg Weiss Bershad Hynes &
                                            Lerach LLP
                                            600 W Broadway Ste 1800
                                            One America Plaza
                                            San Diego, CA 92101
                                            (619) 231-1058

                                            Wendy H. Zoberman
                                            [COR LD NTC]
                                            Chimicles Jacobsen & Tikellis
                                            222 Lakeview Ave Ste 960
                                            West Palm Beach, FL 33401
                                            (407) 835-9400

                                            Michael J. Pucillo
                                            [COR LD NTC]
                                            Burt & Pucillo
                                            222 Lakeview Ave Ste 960
                                            West Palm Beach, FL 33401
                                            (407) 835-9400


     v.


RATIONAL SOFTWARE CORPORATION
           defendant


COWEN & COMPANY INC.
           defendant


PAUL D. LEVY
           defendant

U.S. District for the Northern District of California (San Jose)

COWEN & COMPANY INC. defendant

9 . LITIGANTS 5 97CV21001

NTC
DISTRICT
DEFENDANT
RATIONAL SOFTWARE
SAN
BORIS FELDMAN
DOUGLAS
CLARK
RANDALL
CONSOL
DISTRICT COURT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
RATIONAL SOFTWARE CORPORATION
JOHN
HALFPENNY
STEEFEL LEVITT
WEISS
EMBARCADERO
FLOOR
SAN FRANCISCO
PAUL
LEVY BORIS FELDMAN
CYNTHIA
DAVID SLOSS
ROBERT
BOND DOUGLAS





5:97cv21001 Randall v. Rational Software, et al
                                                                          STAY
CONSOL
                                                                RELATE STAY
                                                                CONSOL
                        U.S. District Court
U.S. District for the Northern District of California (San Jose)


TOM RANDALL                        Joel C. Feffer
           Plaintiff               [COR LD NTC]
                                   Wechsler Harwood Halebian &
                                   Feffer, LLP
                                   488 Madison Avenue
                                   8th Floor
                                   New York, NY 10022
                                   (212) 935-7400

                                   Lionel Z. Glancy
                                   [COR LD NTC]
                                   Lionel Z. Glancy Law Offices
                                   1801 Avenue of the Stars
                                   Ste 308
                                   Los Angeles, CA 90067
                                   (310) 201-9150

                                   Kevin J. Yourman
                                   [COR LD NTC]
                                   Weiss & Yourman
                                   10940 Wilshire Blvd
                                   24th Flr
                                   Los Angeles, CA 90024
                                   (310) 208-2800


     v.


RATIONAL SOFTWARE CORPORATION      Boris Feldman
           defendant               [COR LD NTC]
                                   Douglas J. Clark
                                   [COR LD NTC]
                                   Cynthia A. Dy
                                   [COR LD NTC]

5:97cv21001 Randall v. Rational Software,

U.S. District for the Northern District of California (San Jose)

RATIONAL SOFTWARE CORPORATION Boris Feldman

defendant [COR LD NTC]

John P. Halfpenny

Steefel Levitt & Weiss

One Embarcadero Center

30th Floor

San Francisco, CA 94111

PAUL D. LEVY Boris Feldman defendant

Cynthia A. Dy

David Sloss

ROBERT T. BOND Douglas J. Clark defendant

10 . LITIGANTS 5 97CV21

DISTRICT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
RATIONAL SOFTWARE CORPORATION
PAUL
LEVY
ROBERT
BOND



5:97cv21000             Sachs v. Rational Software, et al

                                                                       CONSOL
                                 U.S. District Court
U.S. District for the Northern District of California (San Jose)


VELVEL SACHS                                William S. Lerach
           Plaintiff                        [COR NTC]
                                            Darren J. Robbins
                                            [COR NTC]
                                            Milberg Weiss Bershad Hynes &
                                            Lerach LLP
                                            600 W Broadway Ste 1800
                                            One America Plaza
                                            San Diego, CA 92101
                                            (619) 231-1058

                                            Jules Brody
                                            [COR NTC]
                                            Eduard Korsinsky
                                            [COR NTC]
                                            Stull Stull & Brody
                                            6 East 45th St 4th Flr
                                            New York, NY 10017
                                            (212) 687-7230

                                            Edward P. Dietrich
                                            [COR LD NTC]
                                            Michael D. Braun
                                            [COR NTC]
                                            Stull Stull & Brody
                                            10940 Wilshire Blvd.
                                            Ste 2300
                                            Los Angeles, CA 90024
                                            (310) 209-2468


     v.


RATIONAL SOFTWARE CORPORATION
           defendant


COWEN & COMPANY INC.

U.S. District for the Northern District of California (San Jose)

COWEN & COMPANY INC. defendant

11 . CIVIL DOCKET FOR CASE 98-CV-20314

COUNSEL
JUDGE
CGD
DHM
DOCKET
DISTRICT
JEREMY FOGEL
COURT
SAN JOSE
MAG
JUDGE PATRICIA
TRUMBULL
USDC
VIRGINIA
MANAGEMENT
MOTIONS
MANAGEMENT STATEMENT
MANAGEMENT CONFERENCE
ROBERT
BOND
ASSIGNMENT COMMITTEE GRANTING
SENIOR JUDGE SPENCER
JUDGE SPENCER WILLIAMS
WITHDRAW ATTORNEY
DISCOVERY
JEREMY FOGEL RELATING
COURT ADOPTS
DEADLINES
C/R PETER TORREANO





Docket as of March 25, 1999 [retrieved 4/28/99]

Proceedings include all events.
RELATE
5:98cv20314 Lynch v. Rational Software, et al
REFER
                                                                              TRANSF
                                                                    RELATE REFER
                                                                    TRANSF
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 98-CV-20314

Lynch v. Rational Software, et al                                   Filed:
02/17/98
Assigned to: Judge Jeremy Fogel                   Jury demand: Plaintiff
                 Referred to: Mag. Judge Patricia V. Trumbull
Demand: $0,000                                    Nature of Suit: 160
Lead Docket: 97-CV-21000                          Jurisdiction: Federal
Question
Dkt # in USDC Virginia : is 97cv2081

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


2/17/98 1            ORIGINAL file, certified copy of transfer order and
docket
                     sheet received from USDC, Eastern District of Virginia
(no
                     process). Fee status tran; jury demand       [3:98-cv-
00633]
                     (cgd) [Entry date 02/18/98] [5:98cv20314]

2/24/98 2            ORDER RE COURT PROCEDURE and SCHEDULE by Judge Susan
                     Illston : Proof of service to be filed by 4/10/98 ;
                     counsels' case management statement to be filed by
6/16/98 ;
                      initial case management conference will be held 2:00
                     6/26/98 . (cc: all counsel) (cgd) [Entry date
02/27/98]
                     [5:98cv20314]

Docket as of March 25,

U.S. District for the Northern District of California (San Jose)

Referred to: Mag.

Judge Patricia V. Trumbull

sheet received from USDC, Eastern District of Virginia (no

[Entry date 02/18/98]

counsels' case management statement to be filed by

initial case management conference will be held 2:00

Robert T. Bond of related caseC97-21000 SW,

4/9/98 6 ORDER by Assignment Committee granting related case

reassigned to Senior Judge Spencer Williams (Date

withdraw attorney [Entry date

for discovery to Mag.

6/5/98 10 ORDER by Judge Jeremy Fogel relating cases to C97-21000JF

All motions will be heard by 9:00 9/28/98;

8/5/98 12 ORDER by Judge Jeremy Fogel The Court adopts all of the

dates and deadlines and any other matter reflected in the

9/30/98 13 MINUTES: (C/R Peter Torreano) (Hearing Date:

12 . CIVIL DOCKET FOR CASE 97-CV-21001

CGB
MOTION
PLAINTIFF
COUNSEL
DEFENDANT
JUDGE
DISMISS
COMPLAINT
CLASS ACTION
RATIONAL SOFTWARE
LEVY
JEREMY FOGEL
CONSOL
DEFENDANT PAUL
DISCOVERY
BRIEFING SCHEDULE
OPPOSITION
APPOINTMENT
STIPULATION
ORDER PERMITTING
CERTIFICATION
NOTICE SET
MEMORANDUM
PLAINTIFF TOM RANDALL
DECLARATION
EXTENDING
DEFTS
CONSOLIDATED AMEND CLASS
LIMITED DISCOVERY





Docket as of March 16, 1999 [retrieved 4/28/99]

Proceedings include all events.
RELATE
5:97cv21001 Randall v. Rational Software, et al
                                                                           STAY
CONSOL
                                                                 RELATE STAY
                                                                 CONSOL
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 97-CV-21001

Randall v. Rational Software, et al                              Filed:
10/10/97
Assigned to: Judge Jeremy Fogel                   Jury demand: Both
Demand: $0,000                                    Nature of Suit: 850
Lead Docket: 97-CV-21000                          Jurisdiction: Federal
Question
Dkt# in other court: None

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


10/10/97 1           COMPLAINT Summons(es) issued; Fee status pd entered on
                     10/10/97 in the amount of $ 150.00 (Receipt No.
503787);
                     jury demand    [3:97-cv-03740] (gba) [Entry date
10/28/97]

10/10/97 2           ORDER RE PROCEDURE and SCHEDULE by Mag. Judge Phyllis
J.
                     Hamilton : Plaintiff to file requisite certificate on
                     10/10/97 ; Last day for pltf to file copy of class
action
                     notice 10/30/97 ; Proof of service to be filed by
11/24/97 ;
                      (cc: all counsel) Plaintiff to file motion to serve as
                     lead plaintiff 60 days after publication of notice.
(gba)
                     [Entry date 10/28/97] [5:97cv21001]

Plaintiff to file requisite certificate on

jury demand [Entry date

Rational Software, defendant Paul D. Levy, defendant Robert

10/31/97 7 RECUSAL ORDER by Judge Susan Illston (Date Entered:

12/8/97 13 NOTICE OF MOTION AND MOTION before Senior Judge Spencer

Williams by Plaintiff in 5:97-cv-21001 for appointment of

counsel with Notice set for 1/28/98 at 10:00 a.m.

12/8/97 14 MEMORANDUM of Law for appointment as lead plaintiffs and

6/1/98 39 STIPULATION and ORDER by Judge Jeremy Fogel:

consolidated amend class action complaint with Notice set

Rational Software in 5:97-cv-21001 re motion to dismiss

and briefing schedule

7/1/98 40 STIPULATION and ORDER by Judge Jeremy Fogel: extending

hearing and briefing schedule for class certification (cc:

declaration, memorandum, motion to dismiss

the briefing schedule and hearing date on defts' motion to

8/17/98 54 STIPULATION to extend time for plaintiff to file opposition

10/13/98 69 NOTICE by Plaintiff Tom Randall in 5:97-cv-21001 re

support of motion for order permitting limited discovery

13 . ORDER GRANTING IN PART AND DENYING IN PART MOTION

DISCOVERY
COURT
RATIONAL STOCK
DEFENDANTS
MOTION
LEVY
SECURITIES
REFORM ACT
TRADING
MARKET
ALLEGE
FIRMS
DISTRICT COURT
ALLEGATIONS
UNDUE PREJUDICE
STATE LAW
CLASS ACTION
INSIDER STOCK TRADING
SELL RATIONAL STOCK
PARTICULARIZED DISCOVERY
AMENDED COMPLAINT
PROVISIONS
THIRD PARTY
THRESHOLD SHOWING
UNITED STATES
CALIFORNIA
SAN JOSE DIVISION
UNEXPECTEDLY LOW THIRD
LIABILITY




                           DESIGNATED FOR PUBLICATION

               IN THE UNITED STATES DISTRICT COURT

             FOR THE NORTHERN DISTRICT OF CALIFORNIA

                           SAN JOSE DIVISION



IN RE RATIONAL SOFTWARE            | Case No. C-97-21001-JF
SECURITIES LITIGATION              || ORDER GRANTING IN PART AND
                                   | DENYING IN PART PLAINTIFFS'
                                   | MOTION FOR LIMITED DISCOVERY
                                   | COMPLAINT WITH LEAVE TO AMEND
                                   | [filed Dec. 4, 1998]
                                   | [Docket No. 70]
________________________________|


     Plaintiffs' motion for limited discovery was heard on

November 30, 1998. For the reasons set forth below, the motion

is granted in part and denied in part.

                            I. BACKGROUND

     This class action arises from Plaintiffs' allegations that

they were injured as a result of insider stock trading which

occurred on October 8, 1997. On that date, the Chief Executive

Officer of Defendant Rational Software, Paul Levy ("Levy"),

allegedly told a market analyst named Rehan Syed ("Syed") that

Rational would be announcing unexpectedly low third quarter and

year end earnings. Plaintiffs allege that this information was

IN THE UNITED STATES DISTRICT COURT

SAN JOSE DIVISION

Plaintiffs' motion for limited discovery was heard on

This class action arises from Plaintiffs' allegations that

Officer of Defendant Rational Software, Paul Levy,

Rational would be announcing unexpectedly low third quarter and

Plaintiffs allege that this information was

to sell Rational stock.

Large blocks of Rational stock in fact

drop nearly nineteen percent by the end of the trading day.

consolidated amended complaint on May 29, 1998, asserting federal

and state law insider trading claims against Rational, Levy,

claims lacked the particularity required by the provisions of the

Private Securities Litigation Reform Act of 1995,

Plaintiffs now seek discovery in order to obtain

the court finds, upon the motion of any party, that particularized discovery is necessary to

Plaintiffs also submit a proposed Third Party Subpoena directed to the NASD which requests

the Court agrees with Defendants that the

will shield the defendants from liability for securities fraud.

If this threshold showing is made,

Plaintiffs' state law claims are asserted pursuant to California Corporations Code §§ 25402

The Court assumes that Plaintiffs are referring to brokerage firms.

14 . CIVIL DOCKET FOR CASE 97-CV-21

COUNSEL
DEFENDANT
SLH
JUDGE
DEFENDANT PAUL
LEVY
DEFENDANT ROBERT
BOND
DOCKET
RATIONAL SOFTWARE
DISTRICT
PLAINTIFF
EDIT
JEREMY FOGEL
CONSOL
COURT
RELATING
REASSIGN
CONFERENCE
SERVE
PUBLICATION
MEMBER
JUDGE SUSAN ILLSTON
JUDGE SPENCER WILLIAMS
CONFERENCE SET
PENDENCY
ASSIGNMENT COMMITTEE
LMM
CONFERENCE RESET




Docket as of October 16, 1998 [retrieved 4/28/99]

Proceedings include all events.
CONSOL
5:97cv21000       Sachs v. Rational Software, et al

                                                                    CONSOL
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 97-CV-21000

Sachs v. Rational Software, et al                                   Filed:
10/21/97
Assigned to: Judge Jeremy Fogel                    Jury demand: Plaintiff
Demand: $0,000                                     Nature of Suit: 850
Lead Docket: 98-CV-20588                           Jurisdiction: Federal
Question
Dkt# in other court: None

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


10/21/97 1           COMPLAINT Summons(es) issued; Fee status pd entered on
                     10/21/97 in the amount of $ 150.00 (Receipt No.
129318);
                     jury demand      [3:97-cv-03845] (slh) [Entry date
10/24/97]

10/21/97 2           ORDER RE PROCEDURE and SCHEDULE by Chief Judge Thelton
E.
                     Henderson: Plaintiff to file requisite certificate on
                     10/21/97; Last day for pltf to file copy of class
action
                     notice 11/10/97; Proof of service to be filed by
12/5/97;
                     (cc: all counsel) Plaintiff to file motion to serve as
lead
                     plaintiff 60 days after publication of notice. (slh)
                     [Entry date 10/24/97] [5:97cv21000]

10/21/97 3           NOTICE by Plaintiff to preserve documents pursuant to
Local

Docket as of October 16,

5:97cv21000 Sachs v. Rational Software,

U.S. District for the Northern District of California

jury demand (slh) [Entry date

Plaintiff to file requisite certificate on

Plaintiff to file motion to serve as lead

plaintiff 60 days after publication of notice.

[Edit date 11/12/97]

relating cases 3:97-cv-3740 with member case

Case reassigned to Judge Susan Illston

Judge Spencer Williams (cc: all

Conference set for 2:00 3/19/98;

1/8/98 10 NOTICE of pendency by defendant Rational Software in

5:97-cv-21000, defendant Paul D. Levy in 5:97-cv-21000,

defendant Robert T. Bond in 5:97-cv-21000

5/7/98 16 ORDER by Assignment Committee to reassign to Judge

Jeremy Fogel

6/5/98 18 ORDER by Judge Jeremy Fogel relating cases;

15 . CIVIL DOCKER FOR CASE 97-CV-21086

ENTRY
JUDGE
EDIT
DOCKET
DISTRICT
PLAINTIFF
MEMBER
JEREMY FOGEL
CONSOL
COURT
RELATING
REASSIGN
SENIOR
JUDGE SPENCER WILLIAMS
CONFERENCE
AMOUNT
JURY DEMAND
FILE REQUISITE CERTIFICATE
PLTF
CLASS ACTION NOTICE
FILE MOTION
SERVE
PUBLICATION
MANAGEMENT
CONFERENCE SET
ASSIGNMENT COMMITTEE
LMM
CONFERENCE RESET
SBA





Docket as of October 15, 1998 [retrieved 4/28/99]

Proceedings include all events.
CONSOL
5:97cv21086       Weiner, et al v. Rational Software, et al

                                                                    CONSOL
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 97-CV-21086

Weiner, et al v. Rational Software, et al                           Filed:
12/08/97
Assigned to: Judge Jeremy Fogel                   Jury demand: Plaintiff
               Referred to: Mag. Judge Patricia V. Trumbull
Demand: $0,000                                    Nature of Suit: 850
Lead Docket: 98-CV-20588                          Jurisdiction: Federal
Question
Dkt# in other court: None

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


12/8/97 1            COMPLAINT Summons(es) issued; Fee status pd entered on
                     12/8/97 in the amount of $ 150.00 ( Receipt No.
504055);
                     jury demand    [5:97-cv-21086] (mp) [Entry date
12/10/97]

12/8/97 2            ORDER RE PROCEDURE and SCHEDULE by Judge James Ware :
                     Plaintiff to file requisite certificate on 12/8/97 ;
Last
                     day for pltf to file copy of class action notice
12/29/97 ;
                     Proof of service to be filed by 1/22/98 ; (cc: all
                     counsel) Plaintiff to file motion to serve as lead
                     plaintiff 60 days after publication of notice. (mp)
                     [Entry date 12/10/97] [5:97cv21086]

12/8/97 3            NOTICE by Plaintiff of related case(s)
                     c97-21000SW/c97-21001SW [5:97-cv-21086] (mp)

Docket as of October 15,

U.S. District for the Northern District of California

Judge Patricia V. Trumbull

12/8/97 in the amount of $ 150.00;

jury demand [Entry date

Plaintiff to file requisite certificate on 12/8/97;

day for pltf to file copy of class action notice

counsel) Plaintiff to file motion to serve as lead

plaintiff 60 days after publication of notice.

member cases 5:97-cv-21086, Case reassigned to Senior

12/19/97 5 ORDER by Senior Judge Spencer Williams Case Management

Conference set for 2:00 3/19/98;

5/7/98 6 ORDER by Assignment Committee to reassign to Judge

Jeremy Fogel

[Edit date 10/15/98]

conference reset for 1:30 7/14/98

6/5/98 8 ORDER by Judge Jeremy Fogel relating cases;

5:97-cv-21079, 5:98-cv-20314, 98-01608 SC, 98-01939 SBA

16 . ORDER GRANTING MOTIONS TO DISMISS

ALLEGE
SECURITIES
DISCLOSURE
DISMISS
INSIDER
BREACH
CORPORATIONS
FIDUCIARY DUTY
FACTS
MOTION
ALLEGATIONS
LEVY
ACT
TRADING
TRADES
DEFENDANTS
CIR
COMPLAINT
LIABILITY
CALIFORNIA CORPORATIONS
RATIONAL STOCK
DIRKS
IMPOSES
AMEND
EARNINGS
SECURITIES EXCHANGE
CALIFORNIA CORPORATIONS CODE
TIPPEE
RECOMMENDS TRADES




                               NOT FOR PUBLICATION
               IN THE UNITED STATES DISTRICT COURT

             FOR THE NORTHERN DISTRICT OF CALIFORNIA

                           SAN JOSE DIVISION


IN RE RATIONAL SOFTWARE            | Case No. C-97-21001-JF
SECURITIES LITIGATION              || ORDER1 GRANTING DEFENDANTS'
                                   | MOTIONS TO DISMISS AND
                                   | DISMISSING CONSOLIDATED
                                   | COMPLAINT WITH LEAVE TO AMEND
                                   | [filed Oct. 5, 1998]
                                   | [Docket Nos. 36, 46]
________________________________|


     Defendants' motions to dismiss were heard on September 28,

1998. For the reasons discussed herein, the motions are granted

and the consolidated complaint is dismissed with leave to amend.

                             I. BACKGROUND

     Defendant Rational Software, Inc. ("Rational") designs,

markets and supports software applications and provides software

products and services. This class action arises from Plaintiffs'

allegations that they were damaged as a result of insider trading

of Rational stock. Specifically, Plaintiffs allege that on

____________________

     1    This disposition is not appropriate for publication and
may not be cited.




October 8, 1997 Rational's CEO, Paul Levy ("Levy"), disclosed to

and the consolidated complaint is dismissed with leave to amend.

This class action arises from Plaintiffs'

allegations that they were damaged as a result of insider trading

Specifically, Plaintiffs allege that on

October 8, 1997 Rational's CEO, Paul Levy, disclosed to

an analyst named Rehan Syed that Rational's as-yet-unannounced third quarter and year end

allegedly began selling large blocks of Rational stock,

Based upon these allegations, Plaintiffs, who also

asserted under §§ 10And 20A of the Securities and Exchange

Act of 1934, Rule 10b-5, and the California Corporations

Defendants Rational and Levy have filled a motion to dismiss

(9th Cir.

Section 10of the Securities Exchange Act Of 1934 makes

an insider's use of such information in breach of a

fiduciary duty owed to the corporation is considered fraudulent

Accordingly, an insider who trades on material, non-public

information to the tippee and the tippee knows or should know

Whether an insider's disclosure of information is a breach

particularity facts giving rise to a strong inference that the

In addition to the liability imposed under § 10and Rule

provision also imposes liability on any person who discloses

Claims Under The California Corporations Code

17 . REPLY MEMO IN SUPPORT OF MOTION TO DISMISS

COMPLAINT
DEFENDANTS
SCIENTER
EXCHANGE ACT
ALLEGE
PERSONAL BENEFIT
SUPP
COURT
PLEAD
VIOLATION
COMPLAINT FAILS
REGULATIONS THEREUNDER
DISMISS
LEVY
MEM
SECURITIES
CORPORATIONS CODE CLAIM
ALLEGATIONS
RATIONAL STOCK
PREDICATE VIOLATION
REFORM ACT
SECURITIES ANALYST
SELECTIVE DISCLOSURE
INSIDER TRADING
CALIFORNIA
ADEQUATELY PLEAD
CCH
OPPOSITION
SECURITIES CLASS ACTIONS





BORIS FELDMAN, State Bar # 128838
DOUGLAS J. CLARK, State Bar # 171499
CYNTHIA A. DY, State Bar # 172761
DAVID SLOSS, State Bar # 189954
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (650) 493-9300

Attorneys for Defendants
RATIONAL SOFTWARE CORPORATION and
PAUL D. LEVY

                             UNITED STATES DISTRICT COURT

                            NORTHERN DISTRICT OF CALIFORNIA

                                   SAN JOSE DIVISION

                                                )  MASTER FILE NO.: C 97-21001 JF
                                                )
IN RE RATIONAL SOFTWARE                         ) REPLY MEMORANDUM OF POINTS AND
SECURITIES LITIGATION                           ) AUTHORITIES IN SUPPORT OF
                                                ) RATIONAL DEFENDANTS' MOTION TO
                                                ) DISMISS
                                                ) [filed Sep. 14, 1998]
                                                )
This Document Relates To:                       ) DATE: September 28, 1998
                                                ) TIME: 9:00 a.m.
           All Actions.                         ) DEPT: Courtroom 3
                                                ) JUDGE: Hon. Jeremy Fogel
________________________________________ )


                                 TABLE OF CONTENTS
INTRODUCTION

ARGUMENT

I. THE COURT MAY DISMISS THE COMPLAINT FOR FAILURE TO ALLEGE
SCIENTER

II. THE COMPLAINT DOES NOT PLEAD SCIENTER

NORTHERN DISTRICT OF CALIFORNIA

THE COURT MAY DISMISS THE COMPLAINT FOR FAILURE TO ALLEGE SCIENTER

THE COMPLAINT DOES NOT ADEQUATELY PLEAD "PERSONAL BENEFIT"

THE COMPLAINT FAILS TO STATE A CLAIM UNDER SECTION 20A OF THE EXCHANGE ACT

The Complaint Does Not Plead a Predicate Violation of the Exchange Act or the "Rules or

THE CORPORATIONS CODE CLAIM MUST BE DISMISSED

Application of Prudential Sec., Inc., 795 F. Supp.

Sec. L. Rep. (CCH) ¶ 93,339 (4th Cir.

Securities and Exch.

Plaintiffs still decline to answer the critical question: why Rational Software Corporation

As shown in the Rational Defendants' opening brief, without this crucial allegation, the

Plaintiffs' opposition, like the Complaint, assumes that mere speculation is sufficient to

the Complaint fails to allege particular facts creating a strong inference of scienter.

the Complaint does not allege that the Rational Defendants received a personal benefit in

plaintiffs do not adequately plead an insider trading claim.

This argument flies in the face of the Private Securities Litigation Reform Act of 1995 and

Mem.") demonstrated that the Complaint does not meet the heightened scienter pleading

The Rational Defendants established that Mr. Levy's failure to sell his Rational stock, which hat information to his advantage, is fatal to the Complaint.

Second, plaintiffs persist in arguing that a violation of SEC rules, exchange rules, or

The Rational Defendants demonstrated in their opening brief that the fact that Mr. Levy held

See Dirks, 463 U.S. at 663 n.23 (noting that in insider trading case, "cienter.

18 . MOTION TO DISMISS

DEFENDANTS
LEVY
CIR
SCIENTER
PERSONAL BENEFIT
SECURITIES EXCHANGE ACT
COMPLAINT FAILS
PLEAD
SUPP
CORPORATIONS CODE
FACTS
PLAINTIFFS
ADEQUATELY PLEAD
ALLEGE
STOCK
RATIONAL SOFTWARE
CALIFORNIA
INSIDER TRADING
MEMORANDUM
ALLEGATIONS
REFORM ACT
IMCERA GROUP
CCH
PARTICULARITY
SELECTIVE DISCLOSURE
PROFESSIONAL CORPORATION
NORTHERN DISTRICT
AUTHORITIES
BURLINGTON INDUS





BORIS FELDMAN, State Bar # 128838
DOUGLAS J. CLARK, State Bar # 171499
CYNTHIA A. DY, State Bar # 172761
DAVID SLOSS, State Bar # 189954
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone: (650) 493-9300

Attorneys for Defendants
RATIONAL SOFTWARE CORPORATION AND
PAUL D. LEVY

                             UNITED STATES DISTRICT COURT

                            NORTHERN DISTRICT OF CALIFORNIA

                                   SAN JOSE DIVISION

IN RE RATIONAL SOFTWARE SECURITIES  )  MASTER FILE NO.: C 97-21001 JF
LITIGATION                                      )
                                                ) RATIONAL DEFENDANTS' NOTICE OF
                                                ) MOTION AND MOTION TO DISMISS;
This Document Relates To:                       ) SUPPORTING MEMORANDUM OF
                                                ) POINTS AND AUTHORITIES
           All Actions.                         ) [filed Jun. 29, 1998]
                                                ) DATE: September 28, 1998
                                                ) TIME: 9:00 a.m.
                                                ) DEPT.: Hon. Jeremy Fogel
                                                )
________________________________________ )


                                 TABLE OF CONTENTS
NOTICE OF MOTION AND MOTION

MEMORANDUM OF POINTS AND AUTHORITIES

INTRODUCTION

STATEMENT OF FACTS

ARGUMENT

RATIONAL SOFTWARE CORPORATION AND PAUL D. LEVY

Professional Corporation

Attorneys for Defendants

NORTHERN DISTRICT OF CALIFORNIA

IN RE RATIONAL SOFTWARE SECURITIES) MASTER FILE NO.:

MEMORANDUM OF POINTS AND AUTHORITIES

THE COMPLAINT DOES NOT PLEAD SCIENTER

THE COMPLAINT DOES NOT ADEQUATELY PLEAD "PERSONAL BENEFIT"

THE COMPLAINT FAILS TO STATE A CLAIM UNDER SECTION 20A OF THE SECURITIES EXCHANGE ACT

THE COMPLAINT FAILS TO STATE CLAIMS UNDER THE CALIFORNIA CORPORATIONS CODE

Acito v. IMCERA Group, Inc., 47 F.3d 47 (2d Cir.

Sec. L. Rep. (CCH) ¶ 93,339 (4th Cir.

Sec. Litig., 970 F. Supp.

The Rational Defendants request that the Court dismiss the Complaint with prejudice for

P. 9and the Private Securities Litigation Reform Act of 1995; for failure to plead a strong

Although the Complaint alleges that Mr. Levy owned 1.8 million shares of Rational stock, it

the Complaint has failed to plead with particularity facts giving rise to a strong inference

plaintiffs must allege with particularity that the Rational Defendants received a "personal

To sustain their claim for insider trading under Sections 10and 20A, plaintiffs must

(holding that scienter was not adequately plead; "many of the individuals who had large

The Complaint's only allegations of scienter stem from the Rational Defendants' alleged

The Complaint should be dismissed on an independent ground: it fails to allege adequately

compare Complaint ¶ 29 with Burlington Indus., Inc. v. Edelman, 666 F. Supp.

19 . CIVIL DOCKET FOR CASE 97-CV-21079

ENTRY
JUDGE
DEFENDANT
JEREMY FOGEL
DOCKET
DISTRICT
MANAGEMENT
CONFERENCE
SENIOR JUDGE
SPENCER WILLIAMS
RELATING
CONSOL
RATIONAL SOFTWARE
COURT
LEVY
DEFENDANT ROBERT
BOND
REASSIGN
MEMBER
LMM
FLOOR
WEST MONROE STREET
JACKSONVILLE
PANEL
ASSIGNMENT COMMITTEE
SCHEDULING ORDER
CONFERENCE RESET
AMENDMENT
PRE-TRIAL ORDER





Docket as of June 16, 1998 [retrieved 4/28/99]

Proceedings include all events.
CONSOL
5:97cv21079       Kalapa v. Rational Software, et al

                                                                  CONSOL
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 97-CV-21079

Kalapa v. Rational Software, et al                                Filed:
10/31/97
Assigned to: Judge Jeremy Fogel                    Jury demand: Plaintiff
Demand: $0,000                                     Nature of Suit: 850
Lead Docket: 98-CV-20588                           Jurisdiction: US Plaintiff
Dkt# in other court: None

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


10/31/97 1           COMPLAINT yes Summons(es) issued; Fee status pd entered
on
                     10/31/97 in the amount of $ 150.00 ( Receipt No.
44540);
                     jury demand      [3:97-cv-04008] (pb)

10/31/97 2           NOTICE by Plaintiff to preserve documents [3:97-cv-
04008]
                     (ab) [Entry date 11/03/97] [5:97cv21079]

10/31/97 3           NOTICE by Plaintiff of related case(s) C-97-3740 PJH
and
                     C-97-3845 TEH [3:97-cv-04008] (ab) [Entry date
11/03/97]
                     [5:97cv21079]

10/31/97 4           ORDER RE COURT PROCEDURE and SCHEDULE by Judge Maxine
M.
                     Chesney : Proof of service to be filed by 12/15/97 ;
                     counsels' case management statement to be filed by

Docket as of June 16,

U.S. District for the Northern District of California

C-97-3845 TEH [Entry date

initial case management conference will be held 60 days after publication of notice.

Levy, defendant Robert T. Bond of related case

defendant Rational Software, defendant Cowen & Company

Spencer Williams, relating cases; 5:97-cv-21001 with

member cases 5:97-cv-21001, 5:97-cv-21079 (Date

Judge Spencer Williams (Date

12/19/97 11 ORDER by Senior Judge Spencer Williams Case Management

Courthouse #2, 5th Floor, 311 West Monroe Street,

Jacksonville, FL 32202

Panel (lmm)

5/7/98 14 ORDER by Assignment Committee to reassign to Judge

Jeremy Fogel

5/20/98 15 SCHEDULING ORDER by Judge Jeremy Fogel:;

6/8/98 17 AMENDMENT TO PRE-TRIAL ORDER No. 1 by Judge Jeremy Fogel

20 . CIVIL DOCKET FOR CASE 98-CV-20588

DOCKET
DISTRICT
MMR
ENTRY
JUDGE JEREMY FOGEL
JEREMY FOGEL
ASSIGNMENT
MANAGEMENT
DISTRICT COURT
NORTHERN DISTRICT
CALIFORNIA
SAN JOSE
CIVIL DOCKET
DKT
USDC
SECURITIES EXCHANGE ACT
PARTY
YORK
FEE
ARMSTRONG
MANAGEMENT STATEMENT
MANAGEMENT CONFERENCE
LEVY
DEFENDANT ROBERT
BOND
JEREMY FOGEL GRANTING
RELATING
MEMBER
ASSIGNMENT COMMITTEE





Docket as of June 5, 1998 [retrieved 4/28/99]

Proceedings include all events.
RELATE
5:98cv20588       Dolnick v. Rational Software, et al

                                                                    RELATE
                           U.S. District Court
U.S. District for the Northern District of California (San Jose)

                  CIVIL DOCKET FOR CASE #: 98-CV-20588

Dolnick v. Rational Software, et al                                 Filed:
05/11/98
Assigned to: Judge Jeremy Fogel
Demand: $0,000                                      Nature of Suit: 850
Lead Docket: None                                   Jurisdiction: Federal
Question
Dkt # in USDC - Eastern NY : is 98civ0268(ARR)

Cause: 15:78m(a) Securities Exchange Act

[Party and Counsel List]


5/11/98 1            ORIGINAL file, certified copy of transfer order and
docket
                     sheet received from USDC- Eastern District of New York
(no
                     process). Fee status ex      [4:98-cv-01939] (mmr)
                     [Entry date 05/15/98]

5/11/98 2            ORDER RE COURT PROCEDURE and SCHEDULE by Judge Saundra
B.
                     Armstrong : Proof of service to be filed by 6/25/98;
                     counsels' case management statement to be filed by
8/31/98;
                     initial case management conference will be held 3:00
p.m.
                     on 9/9/98. (cc: all counsel) (mmr) [Entry date
05/15/98]

5/18/98 3            CLERK'S NOTICE Case Management Conference set for
9/9/98

Docket as of June 5,

U.S. District for the Northern District of California (San Jose)

CIVIL DOCKET FOR CASE #:

Assigned to: Judge Jeremy Fogel

Dkt # in USDC - Eastern NY:

Cause: 15:78mSecurities Exchange Act

sheet received from USDC- Eastern District of New York (no

Fee status ex (mmr)

[Entry date 05/15/98]

Armstrong: Proof of service to be filed by 6/25/98;

counsels' case management statement to be filed by

initial case management conference will be held 3:00 p.m.

Levy, defendant Robert T. Bond of related caseC981608

6/5/98 5 ORDER by Judge Jeremy Fogel granting related case notice

relating cases; 5:97-cv-21000 with member cases

6/5/98 6 ORDER by Assignment Committee Case reassigned to Judge

21 . CIVIL DOCKET FOR CASE 97-CV-2081

PAUL
LEVY
ROBERT
BOND
MOTION
MICHAEL LYNCH
ENTRY
BSHA
JURY
SUPPORT
DOCKET
PLAINTIFF
COR
NTC
COLANGELO DEFENDANT
BSEE
MEMORANDUM
DECLARATION
LTUN
MOTION HEARING SET
CLAR
DISTRICT
JUDGE ALBERT
BRYAN
JURY DEMAND
LAW
ALEXANDRIA
SECURITIES
AMOLE



Docket as of February 24, 1998 Proceedings include all events. 1:97cv2081 Lynch v. Rational Software
Co, et al CLOSED JURY CLOSED JURY U.S. District Court Eastern District of Virginia (Alexandria)
CIVIL DOCKET FOR CASE #: 97-CV-2081 Lynch v. Rational Software Co, et al Filed: 12/30/97
Assigned to: Judge Albert V. Bryan, Jr. Jury demand: Plaintiff Demand: $0,000 Nature of Suit: 160
Docket: None Jurisdiction: Federal Question Dkt# in other court: None Cause: 28:1331 Fed. Question:
Securities Violation MICHAEL LYNCH, On Behalf of Roger L. Amole, Jr. Himself and All Others [COR
LD NTC] Similarly Situated Watts & Amole plaintiff 437 N Lee St PO Box 817 Alexandria, VA 22313
(703) 836-7400 v. RATIONAL SOFTWARE CORPORATION Stephen M. Colangelo defendant [COR
LD NTC] McGuire, Woods, Battle & Boothe 8280 Greensboro Drive Suite 900, Tysons Corner McLean,
VA 22102 703 712-5000 COWEN & COMPANY, INC. defendant PAUL D. LEVY Stephen M. Colangelo
defendant (See above) [COR LD NTC] ROBERT T. BOND Stephen M. Colangelo defendant (See above)
[COR LD NTC] 12/30/97 1 COMPLAINT Filing Fee $150 Receipt # 100 118389; jury demand (bsee)
[Entry date 01/06/98] 12/30/97 -- Jury Trial Flag (bsee) [Entry date 01/06/98] 12/30/97 --
(org. & 4) issued and given to atty for service by SPS as to Rational Software Co, Cowen & Company,
Paul D. Levy, Robert T. Bond (bsee) [Entry date 01/06/98] 12/30/97 2 Certification of Named
pursuant to Federal Securities Laws filed by plaintiff Michael Lynch (bsee) [Entry date 01/06/98]
MOTION by Robert T. Bond, Paul D. Levy, Rational Software Co to Transfer Case to the Northern Dist.
CA (bsha) 1/20/98 4 MEMORANDUM by Rational Software Co, Paul D. Levy, Robert T. Bond in support
of [3-1] motion by Robert T. Bond, Paul D. Levy, Rational Software Co to Transfer Case to the
Dist. of CA by Robert T. Bond, Paul D. Levy, Rational Software Co (bsha) 1/20/98 5 DECLARATION OF
Douglas J. Clark Re: [3-1] motion by Robert T. Bond, Paul D. Levy, Rational Software Co to Transfer
Case to the Northern Dist. of CA by Robert T. Bond, Paul D. Levy, Rational Software Co (bsha)
DECLARATION OF Paul D. Levy Re: [3-1] motion by Robert T. Bond, Paul D. Levy, Rational Software
Co to Transfer Case to the Northern Dist. of CA by Robert T. Bond, Paul D. Levy, Rational Software
(bsha) 1/20/98 7 NOTICE of Hearing: Motion Hearing set for 10:00 1/30/98 for [3-1] motion by Robert
Bond, Paul D. Levy, Rational Software Co to Transfer Case to the Northern Dist. of CA (bsha)
DECLARATION by Paul D. Levy Re: in support of [3-1] motion by Robert T. Bond, Paul D. Levy,
Rational Software Co to Transfer Case to the Northern Dist. of CA (mcke) 1/22/98 9 COPY of MOTION
by Michael Lynch to Transfer Case, by Michael Lynch to Consolidate Cases- filed w/MDL Panel (jsol)
[Entry date 01/26/98] 1/22/98 10 COPY of MEMORANDUM by Michael Lynch in support of [9-1]
motion by Michael Lynch to Transfer Case , [9-2] motion to Consolidate Cases as filed w/MDL Panel
(jsol) [Entry date 01/26/98] 1/28/98 -- Deadline updated; Motion Hearing set for 10:00 2/6/98 for
motion by Robert T. Bond, Paul D. Levy, Rational Software Co to Transfer Case to the Northern Dist.
CA (bsha) 1/30/98 11 Memorandum of Law by Michael Lynch in opposition to [3-1] motion by Robert T.
Bond, Paul D. Levy, Rational Software Co to Transfer Case to the Northern Dist. of CA (clar) [Entry
02/02/98] 2/3/98 12 Reply MEMORANDUM of Law by Rational Software Co, Cowen & Company, Inc,
Paul D. Levy, Robert T. Bond in support of [3-1] motion by Robert T. Bond, Paul D. Levy, Rational
Software Co to Transfer Case to the Northern Dist. of CA (clar) 2/3/98 13 DECLARATION of David Sloss
in Support of Rational Software Co, Paul D. Levy, Robert T. Bond Re: [3-1] motion by Robert T. Bond,
Paul D. Levy, Rational Software Co to Transfer Case to the Northern Dist. of CA (clar) 2/4/98 14
OBJECTION to and MOTION by Michael Lynch to Strike [13-1] Paragraph 4 of affidavit of David Sloss
by Robert T. Bond, Paul D. Levy, Rational Software Co (bsha) [Entry date 02/05/98] 2/6/98 15 ORDER
granting [3-1] motion by Robert T. Bond, Paul D. Levy, Rational Software Co to Transfer Case to the
Northern Dist. of CA (see order for details) - ent. & filed ( signed by Judge Albert V. Bryan Jr. )
Mailed: yes (ltun) 2/6/98 -- CASE assigned to Judge Albert V. Bryan Jr. (ltun) 2/6/98 --
transfer in one volume of pleadings to the Northern District of California (ltun) 2/20/98 -- USDC

Docket as of February 24,

1:97cv2081 Lynch v. Rational Software Co, et al CLOSED JURY CLOSED JURY U.S. District Court

Jury demand: Plaintiff Demand: $0,000 Nature of Suit: 160 Lead Docket: None Jurisdiction:

Securities Violation MICHAEL LYNCH, On Behalf of Roger L. Amole, Jr.

of CA 1/22/98 8 DECLARATION by Paul D. Levy Re: in support of motion by Robert T. Bond, Paul

of CA 1/30/98 11 Memorandum of Law by Michael Lynch in opposition to motion by Robert T.

& filed (signed by Judge Albert V. Bryan Jr.

yes (ltun) 2/6/98 -- CASE assigned to Judge Albert V. Bryan Jr.

22 . COMPLAINT B 3

RATIONAL SOFTWARE
CLASS ACTION
DEFENDANTS
ACT
ALLEGE
COMPLAINT
ANALYSTS
ATTORNEYS
SEYMOUR WEINER
PAUL
LEVY
MEMBERS
SECURITIES
MARKET
DISSEMINATION
COMMON STOCK
NASDAQ SYSTEM
CALIFORNIA
MISLEADING
BLOCK TRADES
CLASS PERIOD
RATIONAL SOFTWARE CORPORATION
YOURMAN
AMENT BELL
SHIRLEY WEINER
PERSONAL KNOWLEDGE
COMPETITION
RELEVANT TIMES
FEDERAL SECURITIES LAWS

WEISS & YOURMAN
KEVIN J. YOURMAN #147159
JORDAN L. LURIE #130013
JAMES E. TULLMAN #175008
10940 Wilshire Blvd, 24th Floor
Los Angeles, California 90024
Phone: (310) 208-2800

JOSEPH D. AMENT
MUCH SHELIST FREED DENENBERG
AMENT BELL & RUBENSTEIN, P.C.
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601-1095
Phone: (312) 346-3100

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
SEYMOUR WEINER and SHIRLEY WEINER, ) Case No. [ 97-CV-21086]
individually and on behalf of all others similarly )
situated, ) CLASS ACTION COMPLAINT
) FOR VIOLATIONS OF THE
Plaintiff, ) FEDERAL SECURITIES LAWS
v. ) [filed Dec. 8, 1997]
RATIONAL SOFTWARE CORPORATION, ) JURY TRIAL DEMANDED
COWEN & COMPANY, INC., PAUL D. LEVY, )
and ROBERT T. BOND, ))
Defendants. )
________________________________________ )))
Plaintiffs, by their attorneys, for his Class Action Complaint (the "Complaint") allege the
following upon personal knowledge as to themselves and their own acts, and upon
information and belief based upon the investigation of plaintiffs' attorneys as to all other
matters. The investigation includes the thorough review and analysis of public
statements, publicly-filed documents of Rational Software, Inc. ("Rational" or the
"Company"), press releases, news articles and the review and analysis of accounting rules
and related literature. Plaintiffs believe that further substantial evidentiary support will
exist for the allegations set forth below after a reasonable opportunity for discovery.

SUMMARY OF ACTION

JOSEPH D. AMENT MUCH SHELIST FREED DENENBERG AMENT BELL & RUBENSTEIN,

Plaintiffs, by their attorneys, for his Class Action Complaint allege the following upon

The investigation includes the thorough review and analysis of public statements,

This is a securities class action on behalf of public investors who purchased the common

Plaintiffs complain of Rational's material dissemination of material inside information

The Complaint will be amended to add as defendants the tippees who traded on the information

Rational, a corporation whose headquarters are in Cupertino, California, develops, markets

This Court has jurisdiction over this action pursuant to Section 27 of the Securities

Many of the acts giving rise to the violations complained of, including the dissemination of

Plaintiffs Seymour Weiner and Shirley Weiner purchased shares of Rational common stock during

Defendant Paul D. Levy is and was at all relevant times the Chief Executive Officer of

Defendant Robert T. Bond is and was at all relevant times the Chief Operating Officer and

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

Members of the Class have sustained damages arising out of defendants' wrongful conduct in

EDT and throughout the course of the day, while there was no news pending available to the

EDT, three large block trades consisting of 35,000, 31,500 and 50,000 shares were reported to

NEW YORK -- Rational Software Corp. tumbled 19% Wednesday as the company advised analysts to

Oct 8/PR Newswire/ -- Rational Software Corporation will announce its 2Q98 earnings on

Based on the company's current operating plan and anticipate increases in competition, the

23 . COMPLAINT B 2

NON-PUBLIC INFORMATION
DEFENDANT
PLAINTIFF
EXCHANGE ACT
COMMON STOCK
REASON
CLASS ACTION
VIOLATION
POSSESSION
REVENUE
EARNINGS
SECURITIES
MEMBERS
TRADING
COMPLAINT
DISSEMINATION
PROJECTED REVENUE
DEFENDANTS LEVY
EASTERN TIME
RATIONAL SOFTWARE CORPORATION
NEWS SERVICE
STOCK PRICE
LERACH LLP
PUCILLO
PRAMOD KALAPA
COMMUNICATION
DOWNWARD ADJUSTMENTS
SUSTAINED DAMAGES
SELECTED CLIENTS





MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
DARREN J. ROBBINS (168593)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
 BURT & PUCILLO
MICHAEL J. PUCILLO
WENDY H. ZOBERMAN
222 Lakeview Avenue
Suite 300 East
W. Palm Beach, FL 33401
Telephone: 561/835-9400
Attorneys for Plaintiff


                                     UNITED STATES DISTRICT COURT

                               NORTHERN DISTRICT OF CALIFORNIA


PRAMOD KALAPA, On Behalf of Himself                     No. C-97-4008-MMC
and All Others Similarly Situated,                      CLASS ACTION
                      Plaintiff,                        CLASS ACTION COMPLAINT
           vs.                                          FOR VIOLATIONS OF THE
                                                        FEDERAL SECURITIES LAWS
RATIONAL SOFTWARE CORPORATION,  [filed Oct. 31, 1997]
COWEN & COMPANY, INC., PAUL D.
LEVY and ROBERT T. BOND,                                Plaintiff Demands
                                                        A Trial By Jury
                      Defendants.
______________________________________


Plaintiff, Pramod Kalapa, for his Class Action Complaint (the "Complaint") alleges as
follows:

                                     JURISDICTION AND VENUE
1. This Court has jurisdiction of this action under §27 of the Securities Exchange Act of
1934 (the "Exchange Act") and 28 U.S.C. §§1331 and 1337 by reason of the federal

MILBERG WEISS BERSHAD HYNES & LERACH LLP WILLIAM S. LERACH DARREN J. ROBBINS

BURT & PUCILLO MICHAEL J. PUCILLO WENDY H. ZOBERMAN

Telephone: 561/835-9400 Attorneys for Plaintiff

Plaintiff, Pramod Kalapa, for his Class Action Complaint alleges as follows:

This Court has jurisdiction of this action under §27 of the Securities Exchange Act of 1934

This is an action on behalf of investors who purchased the common stock of Rational Software

The acts, conduct and transactions complained of, including the dissemination of material

Plaintiff Pramod Kalapa purchased 500 shares of Rational Software common stock on October 8,

Rational Software is a growth oriented, high technology company, the stock price of which is

By reason of his position, defendant Levy had the authority and ultimate responsibility for

Eastern Time and the halt of trading at 2:18 p.m., 11,450,500 shares traded on the NASDAQ

prior to the halt in trading of Rational Software stock the Dow Jones News Service reported:

After the close of trading on October 8, the Company held a conference call with analysts in

together with the large blocks of stock trading at significantly lower prices demonstrate

On October 9, 1997, the day following the downward adjustment in projected revenue and

The claims asserted by the plaintiff are typical of the claims of absent Class members.

Each member of the Class sustained damages arising out of Rational Software and its senior

Plaintiff has retained counsel competent and experienced in securities and class action

Whether defendant Cowen wrongfully released material, non-public information regarding

Further, defendants Levy and Bond are liable pursuant to §20Aof the Exchange Act by reason of

24 . COMPLAINT B 1

PLAINTIFF
CLASS ACTION
RATIONAL SOFTWARE
ACT
NEWS
ALLEGES
RATIONAL SOFTWARE CORPORATION
ANALYSTS
STULL
ATTORNEYS
FEDERAL SECURITIES LAWS
INDIVIDUAL DEFENDANTS
MEMBERS
MARKET
REVENUE
BRODY
CLASS ACTION COMPLAINT
COMMON STOCK
DISSEMINATION
BLOCK TRADES
JONES NEWS SERVICE
VELVEL SACHS
PUBLICLYFILED DOCUMENTS RELATING
NON-DISCRIMINATORY BASIS
ANTICIPATE
COMPETITION
PUBLISHED ESTIMATES
RELEVANT TIMES
FOREGOING INFORMATION





STULL, STULL & BRODY
EDWARD P. DIETRICH (176118)
MICHAEL D. BRAUN (167416)
10940 Wilshire Blvd.
Suite 2300
Los Angeles, CA 90024
Telephone: 310/209-2468
 STULL, STULL & BRODY
JULES BRODY
EDUARD KORSINSKY
6 East 45th Street
4th Floor
New York, NY 10017
Telephone: 212/687-7230
 Attorneys for Plaintiff
[Additional counsel appear on signature page.]


                                     UNITED STATES DISTRICT COURT

                               NORTHERN DISTRICT OF CALIFORNIA


VELVEL SACHS, On Behalf of Himself and  No. C-97-3845-TEH
All Others Similarly Situated,                          CLASS ACTION
                      Plaintiff,                        CLASS ACTION COMPLAINT
           vs.                                          FOR VIOLATIONS OF THE
                                                        FEDERAL SECURITIES LAWS
RATIONAL SOFTWARE CORPORATION,  [filed Oct. 21, 1997]
COWEN & COMPANY, INC., PAUL D.
LEVY and ROBERT T. BOND,                                Plaintiff Demands
                                                        A Trial By Jury
                      Defendants.
______________________________________


Plaintiff, by his attorneys, for his Class Action Complaint (the "Complaint") allege the
following upon personal knowledge as to himself and his own acts, and upon information
and belief based upon the investigation of plaintiff's attorneys as to all other matters. The