News & Announcements

Weil Defeats Securities Fraud Suit Relating to $270 Million Merger Agreement

On September 12, 2017, Weil secured the dismissal of all claims in a securities fraud litigation arising out of the $270 million purchase of U.S. Manufacturing Company by USM Holdings from Weil’s clients, the selling shareholders. In a 33-page order, the U.S. District Court for the Eastern District of Michigan (which previously had granted Weil’s motion to dismiss the original complaint) granted the defendants’ motions to dismiss all 16 of plaintiff’s claims in its amended complaint, including 12 with prejudice.

In its complaint, USM Holdings alleged that U.S. Manufacturing (USM), a manufacturer of automotive components, and certain of its former directors, officers, and shareholders made misrepresentations or misleading omissions in the Merger Agreement that defrauded plaintiff into entering into the sale. Among other things, these alleged misrepresentations and omissions related to upkeep of and budgeted capital expenditures on manufacturing equipment, as well as the state of USM’s relationships with its largest and second-largest customers. Plaintiff asserted 16 different claims, including for violations of Section 10(b) and 20(a) of the Securities Exchange Act, and the Michigan Uniform Securities Act, as well as for various forms of common-law fraud and misrepresentation, and sought damages worth tens of millions of dollars.

In its order granting the defendants’ motions to dismiss, the Court agreed with our position that plaintiff, a sophisticated private equity fund purchaser, had failed to state any misrepresentation claims, and it dismissed the federal and Michigan securities fraud and common law fraud claims with prejudice. Narrowing the case to plaintiff’s contractual damage claims, the Court then declined to exercise supplemental jurisdiction, as these claims arose under Michigan state law and addressed predominately state interests, and it dismissed them without prejudice in state court.

The Weil team was led by Complex Commercial Litigation partner Peter Isakoff in Washington, DC and Securities Litigation partner Irwin Warren in New York, and included Securities Litigation associate Ondrej Staviscak-Diaz in New York.