A US federal judge’s firm rejection of shareholders’ security fraud lawsuit against Top Ships has spilled over into the legal sparring in a similar action against compatriot Greek shipowner DryShips.
Lawyers for George Economou-led DryShips are asking another US federal judge to take notice of her colleague’s ruling, while the DryShips plaintiffs claim the Top case was wrongly decided and not directly comparable.
Meanwhile, a hearing in the DryShips case originally scheduled for last week has been pushed to January as the arguments continue.
“The factual allegations and legal theories at issue before Judge [Brian] Cogan are substantially similar to those at issue here,” wrote DryShips’ lawyer Peter Coll in reference to the judge in the Top case.
Coll, a lawyer at New York law firm Orrick, Herrington and Sutcliffe, addressed the brief to US District Judge Sandra Feuerstein.
“All of the arguments advanced by the plaintiffs here were expressly rejected by Judge Cogan on analogous facts. Defendants respectfully request that the court consider the Top Ships opinion in connection with their motions and, as Judge Cogan did, dismiss this case in its entirety with prejudice.”
New York lawsuit
As TradeWinds has reported, Cogan tossed out the Top lawsuit in early August after arguments in the Eastern District of New York.
The plaintiffs had contended that Top defrauded investors through a series of shares sales to financial firm Kalani Investments and subsequent reverse stock splits that allegedly were designed to manipulate the share price while enriching Kalani and Top management led by chief executive Evangelos Pistiolis.
The deals destroyed more than 99% of shareholder value, according to arguments adopted by the court.
However, Cogan found that Top had fully disclosed its dealings with Kalani in filings with the US Securities and Exchange Commission, and that plaintiffs had produced no evidence of a fraudulent scheme.
"The disclosures simply put plaintiffs on notice that defendants might do what they ended up doing. That is not securities fraud,” Cogan wrote in one blunt passage.
New information
Cogan also took the unusual step of denying plaintiffs the opportunity to amend their complaint, saying he strongly doubted there was new information that would sway him.
But plaintiffs in the Top matter have appealed to the US Court of Appeals for the Second Circuit. They had good reason to, claim lawyers for plaintiffs in the DryShips case, led by Deborah Clark-Weintraub of New York law firm Scott & Scott.
“Plaintiffs respectfully submit that the decision in Top Ships was wrongly decided and that the facts alleged in the complaint give rise to a strong inference of market manipulation and materially false and misleading statements and omissions,” she wrote.
