This time a securities law firm has filed a class action suit in a New York federal court purporting to represent all holders of either the common stock or preferred stock of Emmis Communications. The lawsuit announced Thursday comes just a day before a state court in Indiana is expected to rule on whether to grant a temporary restraining order to block the planned buyout by Emmis CEO Jeff Smulyan with financial backing from Alden Global Capital.
Wolf Haldenstein Adler Freeman & Herz LLP claims in its lawsuit on behalf of Richard Neal Frank as the initial plaintiff that Emmis and certain of its officers and directors have violated various sections of the federal securities law in connection with the proposed “going private” transaction.
“The Complaint alleges that the Proposed Transaction is the product of an unfair sales process that seeks to: (i) divest the Company’s public shareholders of their valuable investment in the Company at an unfair price, and (ii) deprive the preferred shareholders of their right to elect two directors. In an attempt to secure shareholder support for the unfair Proposed Transaction, on May 27, 2010, Emmis filed with the SEC the materially false and misleading May 27th Preliminary Proxy Statement on Schedule 14A and subsequently, on June 2, 2010, filed with the SEC the TO Recommendation on Schedule 14D-9, which contained several material misrepresentations and omissions. The Defendants attempted to remedy the misleading nature of the previous filings by twice amending the May 27th Preliminary Proxy, first by filing the June 23rd Preliminary Proxy and then by filing the July 1st Preliminary Proxy. Despite the numerous filings, the Defendants still omit and/or misrepresent material information necessary for Emmis shareholders to make an informed decision regarding the Proposed Transaction,” the law firm claimed.
RBR-TVBR observation: Regardless of what the Indiana court does or doesn’t do on Friday, there are still big hurdles for Jeff Smulyan to clear to get this buyout to closing. First and foremost he has to come to terms with the preferred holders who have the votes necessary to block the deal, no matter what the courts do. Jeff, we would note, is a USC School of Law graduate and it looks like he is now providing employment for many of his fellow attorneys.
