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February 14, 2013

US judge dismisses shareholders lawsuit against Facebook

The lawsuit was filed by the company's shareholders last year

By CBR Staff Writer

A US judge has dismissed a group of cases filed by Facebook’s shareholders against the social network over over its initial public offering (IPO) in May 2012.

Last year, the company’s shareholder’s filed a lawsuit against CEO Mark Zuckerberg and several banks for allegedly hiding critical information before the IPO issue.

The Wall street Journal quoted the US District Judge Robert Sweet ruling which said that a group of four lawsuits didn’t show that Facebook’s board members had a duty to disclose these forecasts in its filings and that the company had already "made express and extensive warnings’ related to the challenges in its mobile business.

Richard Bernstein, a lawyer at Willkie Farr & Gallagher representing Facebook, told the news agency the original lawsuits, most of which have now been consolidated into one case, leaned heavily on the same argument.

"This allegation of so-called selective disclosure has been the dominant allegation in every case filed to date," Bernstein said.

The plaintiffs, at the time of filing lawsuit, argued the information said to be withheld was "a severe and pronounced reduction" in forecasts for Facebook’s revenue growth.

The plaintiffs assert that the forecast information was only told to a select group of preferred investors and not the entire community.

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Rob Prongay, an attorney at Glancy Binkow & Goldberg representing plaintiffs, said his firm is still in the process of reviewing the ruling.

"While we disagree with certain aspects of the court’s ruling, once we have had a chance to fully digest the decision, we will proceed accordingly," Prongay said.

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