Rupert Murdoch and his son James Murdoch want an American class action lawsuit against them and News International over the UK phone hacking scandal dismissed. Not because they may have acted badly but, in a motion (read it here) filed late last week, because they believe they didn’t break the Securities Exchange Act of 1934. “Even if plaintiffs disagree about how the misconduct at News of the World was handled, their claims sound in mismanagement, which does not as a matter of law state a securities fraud claim,” the Murdoch’s motion says. “It is well-settled that a plaintiff cannot bootstrap mismanagement claims into a federal securities law action.”
In a suit filed on July 19, 2011, New Corp shareholder Lewis Wilder claimed that the Murdochs, as well as other New International executives like former CEO Rebekah Brooks, violated the 1934 Act by hiding the “existence and extent of illegal and unethical newsgathering practices” at the News Corp-owned company’s British tabloids. The dates in question that the securities fraud occurred were from February 15, 2011 to July 18, 2011. The Avon Pension Fund and the Iron Workers Local Union No. 17 Pension Fund later joined Wilder in the suit. The shareholders claim that revelations of the hacking scandal smacked around News Corp stock, which fell 17% in value in early July 2011.
The Murdoch’s filing also says that News Corp did not, as the shareholder’s suit claims, continue to ignore or cover up the hacking scandal in 2011. “Plaintiffs conveniently ignore the widely publicized reopening of the investigation prior to the class period,” said the Murdoch’s motion. “Faced with these public disclosures, Plaintiffs cobbled together a selective patchwork of statements about past employee misconduct – most of which were made years before the start of the Class Period,” it added. The Murdochs, News International and the NI Group are represented by attorneys Jay Kasner, Scott Musoff and Rachel Barnett of New York firm Skadden, Arps, Slate, Meagher and Flom.
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