Small Win for Idealab in Shareholder Suit
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Former high-flying dot-com incubator Idealab got some good news and some bad news late Thursday when a California judge dismissed portions of a lawsuit by investors but ruled that the litigation can proceed on some counts.
The investor group filed suit in March, alleging Idealab's management abused its authority and diverted corporate assets to the harm and detriment of minority shareholders. It also alleged an improper distribution of corporate assets and called for the dissolution and liquidation of the company and removal of all directors.
However, Los Angeles Judge Ralph Dau ruled the investor group must refile the complaint as a derivative action on behalf of the corporation, rather than on behalf of the investor group. The judge also ruled that the investors can proceed to trial on their claim to remove directors and management of Idealab. The case is expected to go to trial early next year.
Idealab welcomed the judge's ruling, claiming it was a "major victory" against the shareholders who own about 9 percent of the company's stock. "We have maintained all along that the plaintiffs have no case based both on the facts and on the law itself. For the second time, the judge has tossed out the plaintiffs' claims because they have failed to state an adequate legal basis even to bring a claim," said Doug McPherson, Idealab's general counsel.
The shareholder group is asking the court to find that the Pasadena, Calif.-based Idealab, which has launched the dot-com careers of sites like PETsMART.com, Tickets.com and New.net, pay about $1 billion in damages.
Besides Idealab, the lawsuit names as defendants its Chairman and CEO Bill Gross; his fiancee Marcia Goodstein whom he appointed as Idealab's President and COO; CFO Bradley Ramberg; other Idealab officers and directors Robert Kavner, Howard Morgan, Benjamin M. Rosen and Lawrence Gross (Bill Gross' brother); as well as Douglas McPherson.