Will Misdated Report About United Airlines Bring Legal Consequences?
Updated: A report yesterday that United Airlines had filed for Chapter 11 bankruptcy sent the company’s stock plunging from over $12 to less than $3, in under an hour, before the erroneous news was corrected and the share price largely recovered. But it’s unclear whether there will be any legal consequences over the mistaken information.
According to the New York Times and a Bloomberg article, the airline has asked the South Florida Sun-Sentinel for a retraction and is exploring its legal options.
The Times article says yesterday’s snafu occurred when a researcher at Income Securities Advisors mistakenly identified as current news a December 2002 article in the Chicago Tribune about the airline’s Chapter 11 bankruptcy filing at that time—and posted it to a Bloomberg website, which led the news agency, in its turn, to send out a news alert based on the old article.
However, reports differ about who made the mistake: United blamed the Sun-Sentinel, which is owned by the Tribune’s parent company, for posting the old article on its website, the Times writes. But representatives of the newspaper and the Tribune Co. say the article could only be found in archives.
The Tribune Co. initially blamed Google Inc., saying that the company’s search engine apparently brought the article to the researcher’s attention by highlighting it, according to the Los Angeles Times (which is also owned by Tribune Co.). “But Google said the only reason its search engine ‘crawler’ bothered with the story was that it was listed on the Sun-Sentinel page of most-viewed stories—and with the weekend date on it, instead of the 2002 date.”
“It’s unclear whether the Tribune Co. or Income Security Advisors will face formal charges from the Securities and Exchange Commission, but stockholders, already venting on the Web, are calling for an SEC investigation,” reports the Denver Post.
Bloomberg says Jim Corridore, an equity analyst at Standard & Poor’s, tells investors in a note that “We expect regulatory review of today’s events, as well as shareholder litigation.” But “we do not believe UAL will have major legal issues resulting from today’s strange events,” he writes.
Tom Tew, a Miami lawyer, says that securities litigation will require a showing of gross negligence, reports McClatchy News Service. But attorneys are already working on ways to prove such a case, he predicts. “Certainly, lawyers will be crafting a theory, and it won’t be long before (a lawsuit) will emerge for those people who sold in a declining market and then the stock recovered.”
Despite yesterday’s wild ride in the airline’s stock, the Nasdaq Stock Market reportedly does not plan to cancel United Airlines trades.
Subsequent related coverage:
Reedbiz/Bob Reed: “Who Pays For Bogus UAL Bankrupcty Post?”
Chicago Tribune: “Tribune: Google warned over ‘bot’”
Updated at 1:15 p.m. to include information from McClatchy News Service. Updated at 6:23 p.m. on Sept. 11, 2008 to include links to subsequent related coverage.
