April 2008 – LAWFUEL – Law Firm Newswire – On April 18, 2008, the federal district court dismissed with prejudice all of the lead plaintiff’s claims in a consolidated class action where Jones Day represented Michaels Stores, Inc. and certain of its former officers and directors. The actions were filed by purported former shareholders of Michaels who claimed that the defendants solicited proxy statements by means of materially false or misleading statements in violation of section 14(a) of the Securities Exchange Act of 1934 and S.E.C. Rule 14a-9. Specifically, the lead plaintiff alleged that Michaels’ 2004-2006 proxy statements failed to disclose that, prior to 2001, defendants had back-dated stock option grants and also failed to disclose the full extent of two former directors’ alleged holdings of Michaels stock.
In its order, the court ruled that (1) claims could not stand against those defendants who had left Michaels years before the relevant proxies were issued, (2) allegedly inaccurate statements in Form 10-Ks were not actionable because the proxy statements did not specifically incorporate those Form 10-Ks by reference, and (3) the lead plaintiff failed to plead that the proxy statements were an “essential link” in any purported loss suffered by the class.
The Court stated, “with these claims for proxy fraud, plaintiffs essentially attempt to do through the backdoor what they are barred from doing through the front.”