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NY Judge Dismisses Securities Suit Against Eminence

An investor for Men's Wearhouse Inc. ("Men's Wearhouse"), Larry Morrison ("Morison"), claimed that Eminence Capital LLC ("Eminence") illegally gained $17 million from an insider-trade deal by selling its Men's Wearhouse shares in 2015.

According to Morrison, Eminence entered into an agreement in February 2014 that stated the hedge fund would vote in accordance with the Men's Wearhouse Board of Directors. In return the agreement made Eminence the beneficial owner of at least 10 percent in common stock. The agreement was intended to further support of the $1.8 billion merger between Men's Wearhouse and Jos. A. Bank Clothiers. Later, in December 2014, Eminence bought 1.125 million shares of Men's Wearhouse common stock making it a statutory insider under the law. When Eminence quickly sold its shares after the initial deal in early 2015, it gained $17 million.

Eminence argued that although Morrison bought Men's Wearhouse shares, those shares became Tailored Brands Inc. ("Tailored Brands") shares in January 2016 due to a reorganization, which occurred before he filed his lawsuit in May 2016. And according to the Supreme Court decision, Gollust v. Mendell, 501 U.S. 115 (1991), the plaintiff must be the owner of a security of the issuer.

Morrison argued that because Tailored Brands was the successor of Men's Wearhouse shares, he remained an owner of the relevant security. However, Judge Ronnie Abrams of the U.S. District Court of the Southern District of New York, disagreed and dismissed the lawsuit holding Morrison failed to show that Tailored Brands was the technical issuer as the successor-in-interest.

The legal team at SFMS has significant experience litigating securities matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier (nlussier@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

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SOURCES

O'Sullivan, Martin. "Judge Says High Court Bars $17M Eminence Short-Swing Suit," Law360. Last modified on March 2, 2017.

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