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CARTERET, N.J. -- Pathmark Stores, Inc. here became the target of class action filed yesterday in the U.S. District Court for the District of Delaware by Philadelphia-based securities and complex litigation law firm Berger & Montague, P.C. on behalf of the grocer's shareholders as of the record date of May 6, 2005.
The complaint, brought under federal securities law, alleges that Pathmark and its board of directors gave materially misleading information to shareholders about a proposal requiring investor approval for an investment in the retailers by Yucaipa Partners, LLC. According to the class action, the proxy solicitation was misleading because it didn't tell investors about another proposal -- through which all of the company's shareholders would have received $8.75 per share -- that had been presented to Pathmark's board June 1. The suit said that although the other offer had a higher value than the Yucaipa proposal, the board rejected it in favor of the Yucaipa deal. The complaint also charges that the defendants breached their fiduciary duties in negotiating with Yucaipa by continuing to recommend that shareholders approve the Yucaipa transaction even after the other offer had been made.
Pathmark s.v.p. retail development, Harvey Gutman told Progressive Grocer, "We haven't seen a copy of the complaint and therefore can't comment." He noted, however, that based on the information contained in Berger & Montague's press release, the grocer believed the suit to be "without merit, and we will vigorously defend [ourselves]."
Berger & Montague attorney Arthur Stock told PG that although the suit had been brought by a single shareholder, the law firm sought to represent all those who were Pathmark shareholders at the relevant time. According to Stock, the final update of the company's proxy statement, on June 7, came too late for the many shareholders who sent in ballots by mail before the June 9 meeting at which the vote was tallied and the Yucaipa transaction was approved by more than an 83 percent margin.
All those who held Pathmark common stock on the record date above and continued to hold shares through June 9, 2005, may apply by Aug. 15 to serve as lead plaintiff in the case. A lead plaintiff acts for class members in directing the litigation.