Judge Tosses Shareholder Suit Against AmEx, Hits ‘Hydra-Like Complaint’
A federal judge in Manhattan has dismissed a proposed shareholder class action against American Express, calling the allegations “a classic example of fraud by hindsight.”
U.S. District Judge William Pauley said there was no evidence that the company’s chief financial and executive officers were aware of fraud or acted in reckless disregard, Bloomberg reports. Plaintiffs had accused the company of misleading investors about its underwriting guidelines and its exposure to delinquent-cardholder payments.
“AMEX pursued its expansionary strategy at the wrong time,” Pauley said in the decision issued on Monday. “That a business plan turned out to be ill-timed and, in hindsight, ill-advised, does not transmogrify it into a securities fraud.”
Pauley also criticized the writing style of the lawyers who drafted the complaint (PDF). “While securities fraud claims must be pled with particularity, a plaintiff need not lard a pleading with streams of consciousness from confidential witnesses and block quotes from analyst calls,” he wrote in the decision. “Plaintiffs’ hydra-like complaint sprawls over 243 paragraphs, some silted with more than 500 words.”
The law firm representing the lead plaintiffs is Scott & Scott in New York City.
