NEW YORK (Legal Newsline) – Shareholders suing World Wrestling Entertainment over its partnership with Saudi Arabia will be represented by Labaton Sucharow.
On May 22, New York federal judge Jed Rakoff designated a firefighters union in Kansas City, Mo., as lead plaintiff in the litigation against WWE, which currently consists of two lawsuits that were consolidated.
Kansas City FPS beat out another plaintiff, John Howland, for lead plaintiff status. Howland lost more than $264,000 when WWE’s stock dropped.
“Howland’s testimony that he lacks meaningful litigation experience… combined with career experience that appears to have no bearing on the management of securities litigation, undermine his claim that he can ‘meaningfully oversee and control the prosecution of this consolidation class action,’” Rakoff wrote.
Howland first admitted he didn’t negotiate before signing a fee agreement with Levi & Korinsky, then claimed he did.
What he signed is “on the high side for a case like this, and very much higher than the percentages negotiate by Kansas City FPS and their counsel.”
“Since every penny paid to plaintiff’s counsel is effectively a penny out of the pockets of the plaintiff class, such minimal and unsuccessful negotiation on Howland’s part strongly suggests that he will not adequately serve as lead plaintiff,” Rakoff wrote.
The Kansas City union touted its experience with shareholder matters and the lengths it went to when it hired Labaton.
The lawsuits allege WWE officers failed to tell investors about difficulties with negotiations with Saudi Arabia and the Orbit Showcase Network (OSN).
The WWE called the Saudi-controlled direct broadcast satellite provider serving the Middle East and North Africa regions a key part of its financial future. However, the suits allege the Saudi deals were in jeopardy when company officials joined fans in criticizing that country’s human rights record.
Things came to a head with the murder of journalist Jamal Khashoggi on Oct. 2, 2018, believed to be directed by the Saudi government. A decision to hold a WWE live event in Saudi Arabia a month later was widely panned. This upset the Saudis, the complaint said.
“In particular, conservative elements of the Saudi government disliked WWE’s portrayal of women and what they viewed as the questionable morality reflected in WWE programming and live shows,” the complaint said.
With traditional consumer segments in decline, WWE had allegedly told investors the Saudi deals were critical. The complaints said that WWE claimed its relationship with Saudi Arabia was strong and that significant progress had been made on renewing the broadcast agreement and business initiatives.
“In reality, however, the prospects for a deal continued to worsen throughout the class period, as the Saudi government failed to make millions of dollars in additional payments owed to WWE following a June 2019 live event held in the country and the negotiations with OSN floundered,” one of the complaints said.
WWE revealed on Oct. 31, 2019, that the media rights deal had been delayed and the Saudi government owed the company tens of millions of dollars. Several wrestlers were stranded by the Saudis when WWE cut the live broadcasting feed of an event in the country.
When the WWE revealed it failed to secure the Saudi broadcasting deal, stocks dropped on Feb. 6 to a low of $40.24 per share.
Senior executives sold off stock in what the complaints alleged was insider trading. Vince McMahon sold more than 3.2 million shares for $261 million on March 27, 2019.
“The declines in the price of WWE shares were the direct result of the nature and extent of defendants’ fraud finally being revealed to investors and the market,” one of the complaints said.