A federal judge has dismissed two of the six securities lawsuits filed against MGM Resorts International over the decline of its stock price between 2007 and 2009.
U.S. District Judge Gloria Navarro in Las Vegas suggested Tuesday that attorneys for the shareholders and bondholders in the two suits had failed to adequately connect the dots. In dismissing the suits, she gave them until April 17 to file an amended consolidated complaint.
Four more similar lawsuits have been combined into two cases and remain pending in state and federal courts against MGM Resorts in Las Vegas. It’s unknown when or how they’ll be resolved.
Navarro issued her ruling Tuesday in a case that started with two lawsuits. They were later combined into one complaint representing both stockholders and bondholders.
The lead plaintiffs are pension funds, including the Arkansas Teacher Retirement System, the Philadelphia Board of Pensions and Retirement, the Luzerne County (Pa.) Retirement System and Netherlands-based pension fund manager Stichting Pensioenfonds Metaal en Techniek.
The investors claim to have lost $4.6 million and had hoped to represent other stockholders and bondholders in the class-action lawsuit.
They complained the stock price of MGM Resorts International — then called MGM Mirage — was inflated by false or overly optimistic comments company officials had made about its business prospects in the 2007-2009 period.
They also said that even as MGM Resorts officials failed to disclose the company was dealing with construction problems at CityCenter and was having problems finalizing financing for the $8.5 billion development in 2008 and 2009, insiders privy to the true condition of the company sold close to $90 million of their own stock.
In response to the problems disclosed in early 2009, MGM’s stock dropped from more than $15 in early January 2009 to close at $1.89 on March 5, 2009, the investors contended.
After a series of debt and equity issuances, refinances and asset sales — and because of stronger financial results in China and Las Vegas — MGM Resorts is now considered by analysts to be on stronger financial ground.
Attorneys for MGM Resorts, in fighting the lawsuit, denied wrongdoing and complained the plaintiff attorneys had failed to spell out who at the company said what and how that may have caused shareholders and bondholders to lose money.
These ''heightened pleading standards'' are required by the federal Private Securities Litigation Reform Act, the MGM Resorts attorneys said.
''Plaintiffs seek to blame MGM for failing to foresee the greatest economic collapse since the Great Depression. Instead of acknowledging the global economic crisis, its harsh effects on Las Vegas in particular and the severe slump in the real estate development and gaming industries, plaintiffs cherry-pick positive statements from MGM’s public filings and earnings calls made before and during this crisis, claim those statements were made with knowledge of their alleged falsity and seek to hold MGM and its officers liable for securities fraud,'' MGM’s court response said.
''The complaint fails to allege with particularity a false or misleading statement and the facts that make the statement misleading,'' MGM Resorts attorneys wrote in their motion to dismiss the suit.
Navarro, in her ruling Tuesday, agreed the 106-page lawsuit is not specific enough.
Navarro said the suit was similar to a puzzle in which alleged misstatements are spelled out and are then followed by several paragraphs detailing why they are allegedly misleading.
''Plaintiffs never indicate which paragraphs relate to which misstatements,'' Navarro wrote in her order. ''The court and defendants are forced to shift through the allegations to attempt to match up the reasons.''
''Plaintiffs have failed to draft a complaint in such a way that the reader can decipher, without much effort, which statements are alleged to be false or misleading, and the corresponding reason or reasons why each statement is false or misleading as required by PSLRA,'' Navarro wrote in her order.
The shareholders’ lead attorney couldn’t immediately be reached for comment on Navarro’s order or whether an amended lawsuit would be filed.
The shareholders are represented by law firms that regularly file class-action shareholder lawsuits including Robbins Geller Rudman & Dowd LLP in San Diego.
MGM Resorts is represented in the lawsuit by the law firms Munger, Tolles & Olson LLP in Los Angeles and Pisanelli Bice PLLC in Las Vegas.