In re Mobilemedia Securities Litigation
Citation | 28 F.Supp.2d 901 |
Decision Date | 21 October 1998 |
Docket Number | No. CIV. A. 96-5723 (AJL).,CIV. A. 96-5723 (AJL). |
Parties | In re MOBILEMEDIA SECURITIES LITIGATION. |
Court | U.S. District Court — District of New Jersey |
Milberg Weiss Bershad Hynes & Lerach, Deborah Clark-Weintraub, William C. Fredericks, New York, NY, Lead Counsel for the Secondary Offering Plaintiffs.
Latham & Watkins, Michael Chertoff, Newark, NJ, for Defendants David Bayer, Santo Pittsman, Kenneth Mitchell, and Clifford Bean.
Kevin H. Marino, Newark, NJ, Richards Spears Kibb & Orbe, New York, NY, for Defendants Gregory Rorke and John Kealey.
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, Jeffrey J. Greenbaum, Newark, NJ, Simpson Thacher & Bartlett, New York, NY, for the Underwriter Defendants.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, David Fernandez, Newark, NJ, Wachtell Lipton Rosen & Katz, New York, NY, for Defendants Mitchell Cohen, John Bunce and Tully Friedman.
Bressler Amery & Ross, Dominick Evangelista, Florham Park, NJ, Brobeck Phleger & Harrison, San Francisco, CA, for Defendant Kenneth McVay.
This is a consolidated class action1 brought on behalf of all purchasers of Class A common stock of MobileMedia Corporation ("MobileMedia") ("MobileMedia Stock") during the period running from 29 June 1995 to 27 September 1996 ("the Class Period") (the "Section 10(b) Class") and all purchasers of Mobile Media Stock or 9-3/8% Senior Subordinated Notes due in the year 2007 (the "Notes") issued in an offering (the "Secondary Offering") pursuant to a prospectus (the "Secondary Offering Prospectus") and registration statement (the "Secondary Offering Registration Statement"), dated 7 November 1995, (the "Secondary Offering Class").
The consolidated amended complaint (the "Amended Complaint") alleges violations of section 11 ("Section 11"), as amended 15 U.S.C. § 77k, section 12(a)(2) ("Section 12(a)(2)"), as amended 15 U.S.C. § 771(2), section 15 ("Section 15"), as amended 15 U.S.C. § 77o, of the Securities Act of 1933 (the "Securities Act"). See Amended Complaint at ¶¶ 117-143, Counts 1-3. The Amended Complaint further alleges violations of section 10(b) ("Section 10(b)"), as amended 15 U.S.C. § 78j(b), and section 20 ("Section 20"), as amended 15 U.S.C. § 78t, of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 ("Rule 10b-5") of the Securities and Exchange Commission ("SEC"), 17 C.F.R. § 240.10b-5. See Amended Complaint at ¶¶ 144-163, Counts 4-5.
Federal question jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337 is alleged based upon Section 22 of the Securities Act, as amended 15 U.S.C. § 77v, and Section 27 of the Exchange Act, as amended 15 U.S.C. § 78aa. See Amended Complaint at ¶ 14.
Presently pending is the Defendants'2 motion to dismiss the Amended Complaint for failure to state a claim (the "Motion to Dismiss")3 pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.4 For the reasons set forth below the Motion to Dismiss is granted as to the allegations contained in paragraphs 54 and 90 to 92 of the Amended Complaint. In all other respects, the Motion to Dismiss is denied.
MobileMedia is a Delaware corporation with its principal offices and corporate headquarters in Ridgefield Park, New Jersey. See Amended Complaint at ¶ 19(b). MobileMedia was incorporated in September 1993 to acquire the paging business of Metromedia Telecommunications, Inc. See id. at ¶ 19(c). MobileMedia became a public company on 29 June 1995 in an initial public offering of more than eight and three-quarters million shares of MobileMedia Stock (the "IPO")6. See id. In August 1995, MobileMedia acquired Dial Page, Inc. ("Dial Page"), a regional paging company operating primarily in the southeastern United States. See id. at ¶ 19(e). In September 1995, Mobile acquired Mobile Communications Corporation of America ("MobileComm"), a subsidiary of BellSouth. See id.
MobileMedia is not named as a defendant in this matter because litigation concerning MobileMedia was stayed following the filing of a petition for bankruptcy by MobileMedia on 30 January 1997. See Amended Complaint at ¶ 19(a).
As of 15 March 1996, there were approximately forty-five million shares of MobileMedia stock outstanding. See Amended Complaint at ¶ 29. These shares were held by 222 record owners on behalf of thousands of beneficial owners throughout the United States. See id. In addition, 15,525,000 shares of MobileMedia Stock and $250 million of MobileMedia Notes were sold in the Secondary Offering. See id.
During the Class period, the following purchased shares of MobileMedia Stock in the open Market:
Plaintiff Purchase Date Price No. Shares Norman Bobrow 23 August 1995 $24.50 700 Dr. David Kirschner 8 November 1995 24.50 500 Defined Benefit 9 January 1996 21.87 500 Pension Plan & Trust 7 June 1996 14.625 1000 12 August 1996 9.025 2000 Lawrence Robbins 11 December 1995 26.00 1000 10 January 1996 21.125 500 Sidney Isaacs 3 April 1996 20.375 1000 12 July 1996 20.00 2000 Lenore Isaacs 11 June 1996 14.875 2000 13 June 1996 13.375 2000 Samuel Tave 13 June 1996 13.375 3000 Jackson Hawkins 27 August 1996 6.87 200 Vincent Romei 18 January 21.25 1000
See Amended Complaint at ¶ 17. These Plaintiffs (the "Section 10(b) Plaintiffs") seek to represent the Section 10(b) Class and bring Counts IV and V of this action. See id. at ¶ 28(a). The Section 10(b) Plaintiffs and the members of the Section 10(b) Class allege they relied upon materially false and misleading reports, press releases and public statements made by MobileMedia and were damaged as a result. See id. at ¶ 17(b).
The following Plaintiffs purchased MobileMedia Stock7 in the Secondary Offering (the "Secondary Offering Plaintiffs"):
Plaintiff Date of Purchase Price No. Shares Howard Fienman 7 November 1995 $23.75 300 DDS PA Pension Plan Trust Vincent Romei 7 November 1995 23.75 2000
See Amended Complaint at ¶ 18(a). These Plaintiffs (the "Secondary Offering Plaintiffs") seek to represent the Secondary Offering Class and bring Counts, I, II and III of this action. See id. at ¶ 18(b).
Gregory M. Rorke ("Rorke") was Chief Executive Officer of Mobile Media from October 1994 to approximately 27 September 1996, when he resigned. See Amended Complaint at ¶ 20. Rorke was a director of MobileMedia from May 1995 until shortly after his resignation as CEO in September 1996. See id. Rorke signed the IPO and Secondary Offering Registration Statements and the SEC Form 10-k for the fiscal year ended 31 December 1995 (the "1995 Form 10-k") filed with the SEC 1 April 1996. See id.
John M. Kealey ("Kealey") was President of MobileMedia from October 1994 to 15 September 1996, when he resigned. See Amended Complaint at ¶ 21. Kealey was a director of MobileMedia, and President and Chief Operating Officer of a MobileMedia subsidiary, from December 1993 until his resignation as President in September 1996. See Amended Complaint at ¶ 21. Kealey signed the IPO and Secondary Offering Registration Statements and the 1995 Form 10-K. See id.
David A. Bayer ("Bayer") has been a director of MobileMedia since February 1994. Bayer was named Chairman of the Board of Directors on 15 July 1996. See Amended Complaint at ¶ 22. From 15 July 1996 to 3 September 1996, Bayer also served as interim CEO of MobileMedia. See id. Bayer signed the IPO and Secondary Offering Registration Statements and the 1995 Form 10-K. See id.
Santo J. Pittsman ("Pittsman")8 was the Vice President and Chief Financial Officer of MobileMedia during all periods relevant to the instant action. See Amended Complaint at ¶ 23. Pittsman signed the IPO and Secondary Offering Registration Statements and the 1995 form 10-K. See id.
Kenneth R. McVay ("McVay")9 was the Secretary and Senior Vice President and General Counsel of MobileMedia at all relevant times. See Amended Complaint at ¶ 24. McVay signed amendments to the annual reports of MobileMedia on SEC Forms 8-K ("Form 8-K"), including a Form 8-K filed on 19 July 1996 (the "1996 Form 8-K"). See id. McVay is also alleged to have authorized the signing of various certifications and representations concerning the compliance by MobileMedia with the Federal Communications Commission (the "FCC") rules and regulations, including certifications and representations required by the FCC and the creditors of MobileMedia. See id.
Defendants Rorke, Kealey, McVay, and Bayer, by reason of their "direct and substantial management position and responsibilities during the time relevant to [the Amended Complaint]," are alleged to be controlling persons within the meaning of Section 20 of the Exchange Act and section 15 of the Securities Act. See Amended Complaint at ¶ 25.
Clifford A. Bean, John L. Bunce ("Bunce"), Jr., Mitchell R. Cohen ("Cohen"), Tully M. Friedman ("Friedman") and Kenneth P. Mitchell (collectively, the "Outside Director Defendants") were, at all relevant times,...
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