Mergers & Acquisitions

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Reed Smith LLP

Chauncey Lane

Executive Editor, Mergers & Acquisitions


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International M&A

Judge Rules Harman International and Ex-Directors Must Face Shareholder’s Suit

By Noah Lewis, Bass, Berry & Sims PLC

On December 14, 2021, the District of Connecticut (the “Court”) denied a motion for judgment on the pleadings (the “Motion”) filed by Harman International Industries Inc., an American audio electronics company (“Harman”), and its former directors (the “Directors”) in a lawsuit brought by a former shareholder (the “Shareholder”). The Court ruled that the Shareholder’s suit plausibly alleged that Harman, by and through the Directors, issued a false and misleading proxy statement (the “Proxy Statement”) to downplay Harman’s value and garner shareholder support for a merger of Harman with Samsung Electronics Co., Ltd., a South Korean multinational electronics corporation (“Samsung”).

In February of 2017, the Shareholder filed suit against Harman and the Directors, alleging that Harman used a false Proxy Statement that misled shareholders in violation of Section 14(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”). In particular, the suit alleged that the Proxy Statement misled shareholders on the current and future value of Harman to encourage shareholders to support the merger with Samsung. Two years later, in October 2019, the Court partially granted a motion to dismiss the complaint, ruling that under the Exchange Act, certain statements in the Proxy Statement were nonactionable.

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