Tuesday, April 04, 2006

Scare Tactics

Plaintiffs allegations that management in the Belo Corp securities class action engaged in “scare tactics” against their own employees just didn’t cut it with Judge Sidney A. Fitzwater (N.D. Tex.). Instead, it seems to have prompted Judge Fitzwater to say that “it is clear that plaintiffs are accusing Moroney and Decherd of nothing more than techniques that shareholders -- including, presumably, the plaintiff-shareholders -- would expect management of a publicly-held company to undertake: stress among employees the importance of increasing circulation to bolster revenues; inform them that revenue positively impacts shareholder value; make each employee understand that person's individual role in contributing to the company's success; remind them of the consequences (employee layoffs) of not increasing circulation; and emphasize each employee's individual, daily obligation to increase circulation.”

Judge Fitzwater noted that it is simply not “wrong for management to direct, persuade, or create incentives for those whose work they manage.” So what is wrong? Why, to “manipulate figures, fabricate numbers, or misrepresent the publication's actual circulation,” of course. Unfortunately for Plaintiffs, Judge Fitzwater said their complaint did not achieve this standard.

The result on this one is total loss on the motions to dismiss for Plaintiffs, although they were granted 30 days to try again with a new and improved amended complaint if they so desire.

You can read Fener v. Belo, issued March 30, 2006, at 2006 U.S. Dist. LEXIS 14376.

Nugget: “It is essential to gain an understanding from the complaint -- unadorned by the embellishment and characterizations that a lawyer's pen can add through use of intensifiers, adjectives, and adverbs -- of what plaintiffs say the scheme actually was and how a given defendant played a part in it.”

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