NEW YORK (Legal Newsline) – A class action plaintiff is urging a federal judge not to toss its lawsuit against the World Wrestling Entertainment over a relationship with Saudi Arabia that didn’t materialize.
A Warren, Ohio, police and firefighter pension fund has sued the WWE over a stock drop that occurred when the WWE announced that it failed to reach a broadcasting deal in the country. In a motion to dismiss filed in June, the WWE called the shareholder lawsuit “fraud-by-hindsight” and a “strained attempt” to place blame for the stock drop.
New York federal judge Jed Rakoff has appointed Labaton Sucharow as lead counsel for the plaintiffs. The firm filed a response to the motion to dismiss on July 14.
“Defendants’ Motion is a scattershot effort to offer their own alternative version of numerous alleged facts, which is not appropriate at this stage of the case. In fact, even before Plaintiff filed the Complaint, Defendants threatened Plaintiff’s counsel with sanctions, arguing that the initial complaints on file (none of which were filed by Plaintiff or its counsel) included allegations that conflicted with what Defendants contend actually happened,” the plaintiff’s response says.
“Defendants frequently take the same approach in the Motion, which should be denied in its entirety.”
Multiple cases were filed earlier this year against the WWE. They 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.
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 WWE says despite the deal falling through, its financial performance ended up in the range of where it predicted it would be.
“This is an impermissible fraud-by-hindsight case focused on WWE’s efforts to enter into a business arrangement that ultimately did not come to fruition,” the motion to dismiss says.
“The (lawsuit) represents a strained attempt by Plaintiff to assert securities fraud claims based upon rank speculation, innuendo, uninformed and unreliable internet postings and statements by persons unconnected to Defendants or the subject business dealings.”
Labaton Sucharow says the defense ignores key facts and that the complaint has met its burden, making dismissal inappropriate.