Emmis Gets Favorable Ruling In Shareholder Suit
March 4, 2014

Judge Sarah Evans Barker of the United States District Court, Southern District of Indiana, has ruled in favor of Emmis Communications in a 2012 suit filed by dissident preferred shareholders. Back in March 2012, Emmis sued five of its shareholders, seeking a court ruling to declare its complex stock plan legally valid. Then in April 2012, those five shareholders countersued the company, alleging violations of federal securities and state corporate laws. The suit claimed that Emmis was in the midst of a "brazen scheme" to remove the rights of its own preferred shareholders and not pay out $10 million in owed dividends.

In a copy of the ruling, which can be found here, the judge granted Emmis' motion for judgment on the pleadings of the complaint, and Partial Summary Judgment as to all other claims. The plaintiffs' motion for Partial Summary Judgment is denied. Judge Barker wrote that the shareholders failed to prove any wrongdoing on Emmis' part.

"Plaintiffs have done nothing more than cursorily assert that, because Emmis' statements regarding having 'no plans, proposals, or negotiations' were material and communicated to the public, reliance should be presumed under the fraud-on-the-market doctrine. No evidence has been designated nor arguments advanced to establish that Emmis' stock was being traded in an 'efficient market' at the time the December 2011 TO-I filing and January amendments were made," reads the ruling. "Because Plaintiffs bear the burden of proof on the issue of reliance and have invoked the fraud-on-the-market analysis, we agree with Emmis that it was incumbent on them to make such a showing. Having completely failed in that regard, the fraud-on-the-market doctrine is not available to Plaintiffs as a substitute for the individual reliance theory."

"We were confident in our position, and the federal court has confirmed it," stated Emmis President and CEO Jeff Smulyan.

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Mark Adams
San Francisco

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