NEW YORK (AdAge.com) -- A federal judge granted class action status to plaintiffs suing Interpublic Group of Cos. and several of its former and current executives, a move that may raise the financial impact of legal matters facing the holding company.
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Because the individual plaintiffs become part of an entire group, the lawsuit "becomes much higher stakes," said Ron Marmer, a partner at Jenner & Block and co-chair of the firm's securities litigation practice group.
The decision was handed down Nov. 7 by Judge Denise Cote in U.S. District Court, Southern District of New York.
In May, Judge Cote denied most of Interpublic's motion to dismiss the class action lawsuit. Of four counts alleged in the complaint -- that Interpublic and top executives misled investors by overstating net income and earnings per share from 1997 through 2000 -- Judge Cote dismissed only the allegation that each of the eight executives named acted with an intent to defraud investors. That decision allowed attorneys for both sides to move into the next phase of the legal process, discovery.
On Tuesday, Interpublic announced a net loss of $327.1 million, or 85 cents a share, for the third quarter, vs. a loss of $89.6 million, or 24 cents a share, for the year ago period. The losses include a charge of $127.6 million to cover the potential cost of settling pending legal actions. The suit seeks unspecified damages.
Chris Coughlin, Interpublic's chief operating officer, did not elaborate during Tuesday's conference call on the status of the lawsuits. Court documents show that parties have held settlement talks in recent months. No agreement has been reached.
The suit pits two classes of plaintiffs against Interpublic and some current and former executives. One class consists of investors who bought Interpublic shares between Oct. 28, 1997, and Oct. 16, 2002. The second class is comprised of investors who acquired shares of Interpublic common stock in exchange for shares of True North Communications' common stock as a result of Interpublic's purchase of True North. Interpublic's request to limit the class to investors who bought before Aug. 13, 2002, was denied by Judge Cote.
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CORRECTION: The original version of this story incorrectly reported that the class certification clears the way for discovery to begin. In fact, those proceedings began following a May denial of most of Interpublic's motion to dismiss the lawsuit.