The case involved Rule 10b-5 claims stemming from a stock price decline following a June 12, 2002, Wall Street Journal article.
Retained by Latham & Watkins
On January 29, 2008, the U.S. District Court of Southern New York granted summary judgment in favor of our client, Omnicom Group Inc. (Omnicom), in a securities fraud class action. The court rejected the claims in their entirety on the basis that plaintiffs had not proven loss causation. The U.S. Court of Appeals for the Second Circuit affirmed this ruling on March 9, 2010.
The case involved Rule 10b-5 claims stemming from a stock price decline following a June 12, 2002, Wall Street Journal article. The plaintiffs claimed that the article was a class-ending corrective disclosure that revealed allegedly improper accounting for Omnicom’s investments in certain interactive advertising companies. The plaintiffs alleged damages in the billions of dollars.
Cornerstone Research worked with Omnicom’s counsel, and three testifying experts. An accounting expert reviewed Omnicom’s accounting for its investments in interactive advertising companies and confirmed that the accounting judgments of Omnicom’s management were reasonable. An expert in venture capital discussed typical business practices in venture capital transactions and concluded that the restructuring activities for Omnicom’s interactive advertising investments were reasonable. A finance expert concluded that the information about Omnicom in the article had previously been disclosed and opined that the stock price decline was attributable to the article’s negative tone.
The court found that the “Wall Street Journal’s interpretation of previously disclosed facts is not a corrective disclosure” and concluded that the absence of a corrective disclosure was “fatal.” The court went on to say that even if plaintiffs could establish that the article was a corrective disclosure, they failed to “distinguish the alleged fraud from ‘the tangle of [other] factors’ that affect a stock’s price” as required by the Supreme Court’s landmark Dura ruling.