NEW YORK -- Lawyers representing Omnicom Group sought dismissal of a lawsuit alleging insider trading in documents submitted in New York State Supreme Court today, as attorneys for 11 plaintiffs suing the company in a federal class-action suit have requested that a federal judge put all state court activity on hold, sources said.
Sources close to both cases say that Omnicom lawyers and lawyers for the plaintiffs in the federal suit have asked a federal judge to grant a "stay" in the state court proceedings, which would require that that lawsuit to be held in abeyance until the federal case is concluded. The federal court judge is expected to rule this week. In federal court, Omnicom faces 11 class-action lawsuits related to similar charges of insider trading by top company executives, according to court documents. Those suits are expected to be consolidated into a single filing, sources said.
The lawsuit filed in NY State Supreme Court was brought by a shareholder named Gary Otterbach on behalf of the company. He alleges insider trading on the part of company chairman Bruce Crawford and the top executives at two Omnicom operating subsidiaries: Keith Reinhard, CEO of DDB, and Allen Rosenshine, CEO of BBDO [Adweek, Oct. 6]. Others named in the suit are Omnicom board members, including CEO John Wren.
The Otterbach suit charges that the three were acting on "material non-public information" related to the transfer of Omnicom's Internet assets to a new entity called Seneca, an Internet investment unit, allowing the three a combined profit of $25,573,637 by selling a total of 298,100 shares between August 1, 2001 and May 20, 2002.
In pursuing its motion to dismiss the case against it, Omnicom says that New York State law stipulates that only the company's board of directors -- not a lone shareholder -- can file a lawsuit on behalf of the company.
"Otterbach has not alleged with detail any reasons ... why the authority to make business decisions for Omnicom should be seized from the board and given to him," Omnicom's response to the lawsuit says. A "derivative lawsuit," such as this, should a be a means of last resort when other methods of addressing alleged corporate misdeeds have failed, Omnicom's documents add.
Patrick Broderick, a partner at Jones, Day Reavis & Pogue who is representing the individual defendants, could not be reached. Omnicom's lawyer, Ken Puhala, a partner with Layton Brooks & Hecht, a New York law firm, declined to comment. Curtis Trinko, Otterbach's attorney in this case, did not return calls.
Representatives for Omnicom were unavailable for comment.