Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

GORDON v. DIAGNOSTEK

January 21, 1993

MARC R. GORDON, on behalf of himself and all others similarly situated
v.
DIAGNOSTEK, INC., MEDCO CONTAINMENT SERVICES, INC., NUNZIO P. DeSANTIS, ARTHUR C. SOLOMON, JULIUS GOLDEN, and MILES M. STUCHIN



The opinion of the court was delivered by: BY THE COURT; J. WILLIAM DITTER, JR.

 Ditter, J.

 January 21, 1993

 This is a shareholder class action suit against Diagnostek, Inc., certain of its directors and officers, ("the Diagnostek defendants") and Medco Containment Services, Inc., a company which had intended to acquire Diagnostek. Before me is the Diagnostek defendants' motion to transfer the case to New Mexico, which the plaintiffs do not oppose, and Medco's motion to dismiss plaintiffs' amended complaint. For the following reasons, I will grant the transfer motion after having granted Medco's motion to dismiss.

 I. Deciding Medco's Motion to Dismiss before Ruling on the Transfer Motion

 Those cases do not prevent my granting Medco's motion to dismiss, however. Concerned with fairness to the transferee court and judicial economy in general, McDonnell Douglas sought to bar district courts from making case-management decisions which would later bind the transferee court if indeed the case were transferred. *fn1" Cases following McDonnell Douglas have involved comparable issues, see, e.g., All Terrain Vehicles, supra, (class certification decision deferred to transferee court); Matra Et Manurhin v. Intern. Armament Co., 628 F. Supp. 1532 (S.D.N.Y. 1986) (arbitrability question deferred to transferee court). By contrast, however, my deciding Medco's motion to dismiss will not interfere with the case transferred to the District Court for the District of New Mexico. In fact, it will cleanly excise one defendant and permit the rest of the case to be transferred with all parties' consent to New Mexico. Such a resolution serves the goals of fairness and judicial economy which McDonnell Douglas emphasized.

 II. Medco's Motion to Dismiss

 For purposes of the motion to dismiss, therefore, I accept the following allegations as true. On September 1, 1992, Medco and Diagnostek announced Medco would acquire Diagnostek in a stock swap valued at over $ 400 million. Diagnostek's shares were valued at more than $ 17 per share, based on the price of Medco's stock. The proposed agreement would have allowed Medco to adjust the swap ratio to ensure that Diagnostek's shareholders got stock with a value of at least $ 15 per share.

 On November 9, 1992, before the agreement went into effect, Diagnostek disclosed that it had made certain "accounting errors" which had caused it to inflate the report of its first quarter fiscal year 1993 earnings. That inflated report is the basis of the underlying securities fraud suit against Diagnostek. Plaintiffs also sued Medco, however, because on the day Diagnostek made its announcement, Medco issued a press release declaring it was reconsidering its proposed stock swap. On November 11, 1992, Medco stated the acquisition was off. Citing these announcements and Medco's underlying relationship with Diagnostek, plaintiffs have charged Medco both with independent violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. ยง 78j, and secondary liability for Diagnostek's fraud.

 I find plaintiffs fail to state a claim under either theory.

 III. Primary Liability

 Plaintiffs charge Medco with failing to disclose material, adverse information it knew about Diagnostek between September 1, 1992, and November 9, 1992. Amended Complaint PP 13, 15, 29, 32, 36. Plaintiffs also claim Medco "actively concealed" this information. Id. P 23. Furthermore, plaintiffs charge Medco with affirmatively misrepresenting Diagnostek's situation by announcing its plans to acquire Diagnostek without stating that this acquisition was "conditioned" on the accuracy of Diagnostek's reported earnings. Id. P 31.


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.