Law360 (September 21, 2020, 4:37 PM EDT) — World Wrestling Entertainment Inc. executives urged a Connecticut federal judge Friday not to remand back to state court a shareholder derivative lawsuit alleging it lied about business dealings with Saudi Arabia, telling the judge the suit raises matters of federal law and is closely related to other suits in that court.
Investor Rodney Nordstrom filed the June 2 suit in Connecticut Superior Court, alleging WWE executives made “materially false and misleading statements” about business dealings between WWE and Saudi Arabia. But WWE got it removed to U.S. District Court for the District of Connecticut in July, which Nordstrom has asked to remand back to the state court.
The 13 current and former WWE officers and directors named in the suit argued the federal court — which is hearing two of four other suits — has jurisdiction over the alleged securities violations.
“Remanding this case to state court will result in an unnecessary waste of judicial resources because it would require different judges to decide the same issue with the concomitant risk of inconsistent rulings,” the wrestling entity said Friday.
The suit echoes others claiming securities fraud against the WWE for allegedly hiding a cancelled media rights deal, inflating the stock price and costing investors money when tensions with the Middle Eastern country came to light.
Four other lawsuits against WWE — two putative class actions filed in the Southern District of New York and two “nearly identical” shareholder derivative suits pending in the District of Connecticut — all claim that WWE hid for months that its deal for media rights in the Middle East-North Africa region with Orbit Showtime Network had ended early.
When the expired deal was disclosed, WWE executives lied to investors when telling them the company was close to a new deal, which never came to fruition, stockholders allege.
Stock prices dropped when news of the failed deal spread, but not before WWE executives sold off $282 million worth of shares, investors claim.
The Nordstrom suit, which alleges breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets, is similar to the Merholz shareholder derivative suit and the Kooi shareholder derivative suit in Connecticut federal court.
All three derivative suits were based on “nearly identical factual allegations copied from the federal securities lawsuits, ostensibly without conducting any independent investigation,” the WWE executives said in their Friday filing opposing the motion to remand back to state court.
They had argued in their Aug. 28 motion to dismiss that the plaintiffs didn’t satisfy the demand pleading requirements for shareholder derivative actions, so the action can’t be brought in any court.
“Accordingly, this court should decide — and dismiss — this action on the threshold ground that plaintiff has failed to meet the demand requirements in a shareholder derivative action before reaching the issue of subject matter jurisdiction,” the filing argued.
But if the case isn’t dismissed, the WWE executives said the federal question at issue should be argued in federal court with the other suits.
“Even if this court were to reach the jurisdictional issue, this court has subject matter jurisdiction over this action because it raises a substantial and disputed federal question,” the defendants argued.
Counsel for the parties didn’t immediately respond to requests for comment Monday.
Nordstrom is represented by Fletcher W. Moore of Moore Kuehn LLP.
WWE and its executives are represented by Jeffrey P. Mueller of Day Pitney LLP; Theodore V. Wells Jr., Daniel J. Kramer, Richard C. Tarlowe and Justin Anderson of Paul Weiss Rifkind Wharton & Garrison LLP; and Jerry S. McDevitt, Curtis B. Krasik, Stephen G. Topetzes and Theodore L. Kornobis of K&L Gates LLP.
The case is Nordstrom v. McMahon et al., case number 3:20-cv-00904, in the U.S. District Court for the District of Connecticut.
–Editing by Alyssa Miller.