NEW YORK: US District Court Judge William H. Pauley III granted a summary judgment on Tuesday in favour of Omnicom Group, the globe's largest marketing services holding company.
In a class action lawsuit filed in 2002, the adland giant stood accused by investors that it had failed to write-down internet assets transferred to a company specially created for that purpose, Seneca Investments, improperly accounted for those transactions and failed to disclose the value of Seneca on its books.
Among the assets transferred were digital shops in which Omnicom had stakes, among them Agency.com, Organic and Razorfish.
Judge Pauley, however, was unconvinced by the investors' arguments and granted Omnicom's application that the case be dismissed.
In his fifteen-page ruling the judge opined that the "only new facts reported to the market in June 2002 were that Omnicom intended to unwind Seneca by buying back Agency.com and Organic"; plus the resignation of Omnicom board member Robert Callander.
Continued the ruling: "Even assuming plaintiffs could establish that news about Callander's resignation or Omnicom's plans to repurchase Agency and Organic were corrective disclosures, plaintiffs nevertheless cannot demonstrate that the market reacted negatively to the disclosures, rather than to other information subsequently released to the market.
"To prove loss causation, plaintiffs must distinguish the alleged fraud from the 'tangle of other factors' that affect a stock's price."
Omnicom decline to comment on the matter.
Data sourced from AdWeek (USA); additional content by WARC staff