* Shareholder lawsuit dismissed
* Judge says executives used best efforts to transform Kodak
By Jonathan Stempel
NEW YORK, Nov 9 Eastman Kodak Co
executives did not mislead investors about the photography
pioneer's deteriorating financial health in the year prior to
its bankruptcy, a Manhattan federal judge ruled.
U.S. District Judge Harold Baer on Thursday dismissed a
shareholder lawsuit against Chief Executive Antonio Perez and
three former Kodak executives. The Rochester, New York-based
company was not a defendant because it is in Chapter 11.
Shareholders led by Bret Jones, who claimed to have lost
$720,384 by investing in Kodak stock, accused the company of
making false and misleading statements that suggested optimism
it would become profitable, maintain sufficient liquidity, and
sell a digital patent portfolio once thought to be worth as much
as $3 billion.
The shareholders also said that in the four months leading
up to Kodak's Jan. 19, 2012 bankruptcy filing, the company
misled investors about its intention to seek protection from
Baer concluded, however, that there was no showing that the
executives intended to defraud anyone, and indeed they had used
their "best efforts" to successfully transform the company.
The judge said there are "serious policy reasons" not to
force nearly-insolvent companies to disclose their plans too
soon. "No multi-billion dollar company would file for bankruptcy
without first engaging in internal deliberations," he said.
Baer added that many of the alleged fraudulent statements,
including Perez's expression of confidence on Feb. 3, 2011 that
Kodak would transform into a "sustainable, profitable company,"
were too general for reasonable investors to rely on.
Other defendants included former chief operating officer
Philip Faraci; former chief financial officer Antoinette
McCorvey; and Pradeep Jotwani, a former president of Kodak's
The class period ran from Jan. 26, 2011 to Jan. 19, 2012,
during which Kodak's share price fell to 30 cents from nearly
$4. Kodak shares once traded above $94.
Aelish Baig, a partner at Robbins Geller Rudman & Dowd
representing the investors, did not immediately respond to
requests for comment.
Jonathan Dickey, a partner at Gibson, Dunn & Crutcher
representing the defendants, did not immediately respond to
Kodak filed for bankruptcy after failing to keep up as
consumers and rivals shifted to digital photography from film
The company has shuttered its digital camera business, set
plans to stop selling inkjet printers, and been exploring
options to sell the digital patents after failing to win
acceptable bids in an August auction. Kodak has said it hopes to
emerge from Chapter 11 next year.
The case, whose named plaintiff is not the lead plaintiff,
is Hutchinson et al v. Perez et al, U.S. District Court,
Southern District of New York, No. 12-01073.