CBS Shareholders Seek Class Certification in Securities Fraud Suit

Les Moonves - Penny Dreadful series world premiere 2014 - Getty - H 2018
Laura Cavanaugh/FilmMagic

CBS shareholders are asking a New York federal judge to certify class action in a securities fraud lawsuit that claims ousted CEO Les Moonves misled investors through statements he made about the #MeToo movement before the misconduct allegations against him became public.

The investors in August 2018 sued Moonves and CBS. They claim defendants issued public statements that misrepresented or omitted material facts which led to their purchases of stock at artificially inflated prices. "When Defendants’ fraudulent conduct was disclosed and became apparent to the market, Class members were damaged as artificial inflation came out of the stock price," argue lawyers from Robbins Geller Rudman & Dowd in a motion for class certification that was filed on Friday.

The proposed class is defined as: "All persons and entities who purchased or otherwise acquired CBS Class B common stock during the period from November 29, 2017 through July 27, 2018, and were damaged thereby. Excluded from the Class are Defendants and their immediate families, the Company’s officers and directors at all relevant times, as well as their immediate families, Defendants’ legal representatives, heirs, successors or assigns, and any entity in which Defendants have or had a controlling interest."

Nov. 29, 2017 is the date Moonves appeared at Variety's Innovate Summit. There, according to the filing, he "described the #MeToo movement as a 'watershed moment' and stressed the importance of having a company culture that does not tolerate harassment and encourages victims to come forward with complaints."

July 27, 2018 is when The Hollywood Reporter broke the news that a forthcoming Ronan Farrow piece for The New Yorker included allegations of sexual misconduct and assault against Moonves. CBS's stock fell 6 percent that day and another 5 percent on July 30.

During that time period, about 641 million shares of CBS stock were traded, and the investors estimate there could be millions of class members.

The investors argue they're entitled to the "fraud-on-the-market presumption of reliance," which holds that the market price of shares reflects all publicly available information and investors make their decisions "in reliance on the integrity of that price."