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Fraud Class Action Against Former Midway Games Executives Dismissed
The American Lawyer
October 27, 2009
Is it finally game over for the shareholders of Midway Games? Midway, the maker of such fine entertainment as Mortal Kombat, filed for bankruptcy last February. Its assets were later sold to Warner Brothers, but not before the company's former shareholders sued its former executives for securities fraud. Now, however, it looks like their claims are in mortal distress: Last week, Chicago federal district court judge David Coar granted the defendants' motion to dismiss.
The plaintiffs, represented by Coughlin Stoia Geller Rudman & Robbins, alleged that the former Midway executives artificially pumped up the company's stock price through a variety of misrepresentations and omissions about Midway's financial condition. They complained, for example, that Midway belatedly announced $13 million in restructuring charges as a result of closing down a gaming company it acquired. To show scienter, the plaintiffs also threw in allegations of insider trading.
"They thought that was their money shot," defense counsel David Kistenbroker of Katten Muchin Rosenman told us Monday.
Coar ruled that he didn't even need to address scienter, finding that the alleged omissions and misrepresentations were not material. But he also noted that if he had reached the question of the defendants' intent, the plaintiffs' insider trading allegations would not have passed muster.
Plaintiffs counsel Tom Egler of Coughlin Stoia had no comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
