Plaintiff Steve Staehr, who has filed shareholder suits in the past, sues Adobe Systems' board of directors, claiming that the company's plan to buy Macromedia breaches its duty to shareholders.Adobe Systems' board of directors has been sued by a shareholder who claims that the company's plan to buy Macromedia breaches its duty to shareholders.
The case, Staehr v. Chizen et al., was filed Monday in Santa Clara, Calif. According to court documents, a restatement of Macromedia Inc.'s earnings on June 10 caused a drop in Macromedia stock, which in turn hurt shareholders.
In its second-quarter results announced Wednesday, Adobe Systems Inc. acknowledged the lawsuit and issued a statement: "Adobe management believes the complaint is without merit and intends to defend the matter vigorously."
Read more here about Adobe's plans to buy Macromedia.
Plaintiff Steve Staehr has filed shareholder suits in the past. In October 2004, Staehr filed a shareholder derivative suit against Netflix, according to SEC (Securities & Exchange Commission) documents.
In that case, Staehr claimed that Netflix allowed false statements to be made regarding subscriber churn. He and co-plaintiff Doris Staehr also alleged that Netflix executives illegally traded stock, abused their control of the company and perpetrated gross mismanagement. That case is still pending.
"Often, suits filed by shareholders just become part of the dynamics of a company, especially if a merger is involved," said Jack Auspitz, a partner with New York-based Morrison & Foerster. "In almost every case, it ends in settlement."
Auspitz was a lead attorney for Harford Financial Services Group when it, too, was sued by Staehr in October 2004.
Although he was unable to comment on that case, or on Staehr specifically, Auspitz did note that some individuals retain shares in a number of companies and launch several lawsuits, usually in pursuit of a settlement. But the practice has become minimized since the passage of legislation 10 years ago that lessened such litigious activity, Auspitz said.
If the Adobe case does go to court, it is likely that one of the first questions a judge will have is whether Staehr, given his spate of lawsuits, will be considered an adequate representative of shareholders, said Tracy Nichols, an attorney with Florida-based Holland & Knight.
"Shareholders who file against several companies aren't viewed favorably by the court," she said. "Usually they're seen as potential pawns for their lawyers, who are the ones who really clean up in a settlement."
Staehr may be justified in his claims, but many shareholder suits like his bring out the cynicism in defense lawyers, Nichols said.
"Sometimes a shareholder who sues during a merger has a legitimate complaint, but in my experience, they're usually just trying to line their pockets."
Neither Staehr nor his attorney, Marc Umeda of Robbins Umeda & Fink in San Diego, returned calls for comment.
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