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Nationwide Cellular Service v. American Mobile Communications

1991 Fed. Sec. L. Rep. ¶ 96,435 (1991)

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Nationwide Cellular Service v. American Mobile Communications

United States District Court for the Southern District of New York
1991 Fed. Sec. L. Rep. ¶ 96,435 (1991)

RW

Facts

Nationwide Cellular Service, Inc. (Nationwide) (plaintiff) agreed to transfer shares of its stock to American Mobile Communications, Inc. (American) (defendant) in exchange for American’s assets. After finalizing this transaction, Nationwide learned that American had significantly overstated the value of its assets. Nationwide sued American in federal district court for having violated § 10(b) of the Securities Exchange Act of 1934. Nationwide alleged that it agreed to the transaction in reliance on American’s financial statements and warranties as to the accuracy of those statements and suffered injury as a result of that reliance. Nationwide also alleged that American either knew its statements and warranties to be false or acted in reckless disregard of the truth. American moved to dismiss the suit. American argued that its alleged misstatements involved only the value of its assets, not the value of the securities Nationwide exchanged to acquire those assets, and that, therefore, Nationwide failed to comply with the pleading requirements of Securities and Exchange Commission (SEC) Rule 10b-5.

Rule of Law

Issue

Holding and Reasoning (Sand, J.)

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