A federal district court denied in part defendants’ motion to dismiss a putative shareholder class action complaint filed against a corporation and its directors and officers based upon alleged omissions and misrepresentations in a proxy statement relating to a shareholder vote on a merger transaction pursuant to which the company would be sold. Plaintiff alleged that the proxy statement circulated by defendants and filed with the Securities and Exchange Commission in August 2005 failed to disclose current revenues and profits of the company’s “crown jewel” asset (the popular MySpace website) and internal management projections forecasting the growth of the company based upon the operations of its “crown jewel.”

In denying the portion of defendants’ motion to dismiss based on their contention that the alleged omissions were not material, the court ruled that the omission of current financial information showing the rapid growth of the “crown jewel” was material—notwithstanding defendants’ public filing of its 10-Q, which disclosed the company’s financial performance (including that of its “crown jewel”) through June 30, 2005. The court specifically found that there was a reasonable likelihood that a reasonable shareholder would have considered specific, current information about a “critical asset” important in deciding how to vote on the merger. Similarly, the court ruled that the failure to disclose management projections for the years 2005 to 2009 was a material omission, citing Ninth Circuit precedent recognizing that such data would “surely [pique] the average investor’s interest.” (Brown v. Brewer, et al., 2:06-cv-03731 (C.D. Cal. July 14, 2008))