Weingarten Brown LLP: Bulk of Investor Claims Against Gerova Financial Dismissed

LOS ANGELES, March 8, 2012 /PRNewswire/ -- Weingarten Brown LLP announced today that Federal District Court Judge Shira A. Scheindlin dismissed the bulk of the case – including all of the breach of fiduciary duty and related claims – in an investor suit against Gerova Financial Group, Ltd.  The case arises from Gerova's acquisition of the assets of a family of hedge funds managed by Stillwater Capital Partners, LLC. 

"The Court granted virtually all of our motion to dismiss these claims against Gerova," said Ethan Brown of Weingarten Brown in Los Angeles, who represents Gerova.  Brown added, "The court agreed with our argument that the shareholders could not approve the merger, and then seek to circumvent federal securities laws by alleging state law claims that do not require proof of the defendants' misrepresentations in connection with that merger."  All that remains of Plaintiffs' claims against Gerova is one cause of action for supposed breach of contract.

Gerova was found to owe no direct fiduciary duties to its shareholders; that some claims were derivative in nature and that the shareholders lacked standing to assert them individually; and that some claims are barred by the Securities Litigation Uniform Standards Act ("SLUSA"), the federal law that pre-empts class actions based on state law claims alleging misrepresentation, omission, or manipulation in connection with a purchase or sale of securities.

"[U]nless plaintiffs were misled by misrepresentations or by material omissions," wrote the court, "it is impossible to understand why they would approve a merger that provided such lucrative management fees at plaintiffs' expense.  Because of this, a material misrepresentation or omission in connection with the merger is a 'necessary component' of plaintiffs' claim and such a claim is precluded by SLUSA." 

This decision provides strong support for SLUSA pre-emption in cases alleging state law class action claims relating to corporate transactions requiring a shareholder vote, even when the alleged claims do not purport to be based on fraud, misrepresentations or omissions.

"Gerova has been plagued by negative publicity caused by baseless rumors and innuendo spread by short sellers and gossipmongers," added Brown.  "Rulings like this are an important step toward putting all that to rest and allowing the company to move forward."

The case is In Re Stillwater Capital Partners Inc. Litigation, (11 Civ. 2737 SAS) (S.D N.Y 2012). http://www.wbllp.com/images/uploads/Order_on_Motio_to_Dismiss_In_re_Stillwater.pdf

About Weingarten Brown LLP (www.wbllp.com)

Weingarten Brown LLP is a Los Angeles-based law firm of business trial lawyers with sterling credentials, having graduated from top law schools and formerly practiced with some of the nation's most prestigious law firms. The Firm's practice emphasizes entertainment, technology, corporate, finance, securities, insurance coverage, intellectual property, and real estate litigation.  The Firm represents clients in forums across the nation.

SOURCE Weingarten Brown LLP