Supreme Court to Review Shareholders’ Right to Sue
The Supreme Court said Monday that it will decide whether stockholders may sue a company that denies it is holding merger negotiations with another firm while preliminary contacts are in progress.
The court, in a case that could have widespread repercussions on Wall Street, will review a ruling that cleared the way for an investor suit against an Ohio manufacturer of refractory materials and specialized chemicals.
The company, Basic Incorporated of Cleveland, and its executives asked the Supreme Court to overturn the lower court ruling and throw out the suit.
Basic merged with CEBAS Inc., a subsidiary of Combustion Engineering with headquarters in Connecticut, in December, 1978.
Stockholders said Basic management falsely denied for 14 months before the merger that the two companies were holding at least preliminary talks.
As a result, many investors said they sold their stock at far less than its value.
In other business-related cases, the Supreme Court:
- Rejected a challenge to a federal ban on cross-ownership of television stations and cable systems in the same market.
The court, without comment, let stand a 1984 federal law prohibiting a TV station’s owner from acquiring interest in a cable television system serving the same area.
The law was attacked as an infringement of free speech by Marsh Media Ltd., owner of five television stations in Texas, New Mexico and Oklahoma.
- Left intact rulings that the maker of Aspercreme, sold as a remedy for minor arthritis pain, engaged in false and misleading advertising about the product.
The justices, without comment, refused to hear an appeal by the New York-based Thompson Medical Co., which markets the non-prescription Aspercreme.
The Federal Trade Commission issued a complaint against Thompson in 1981, and after months of hearings ruled that the advertising was false and deceptive because it suggested that Aspercreme contains aspirin, its references to “clinical tests” proving the product’s effectiveness were misleading and its statements that Aspercreme effectively relieves minor arthritis and rheumatic conditions were not supported by valid test results.
