Lawsuit over Time Warner-AOL merger dismissed

LOS ANGELES (Reuters) - The last in a wave of hundreds of shareholder lawsuits over the 2001 AOL-Time Warner merger was dismissed on Monday by a New York judge who found the claim was filed too late and failed to link investor losses to statements made by AOL’s auditor, Ernst & Young.

U.S. District Judge Colleen MacMahon granted Ernst & Young’s motion to dismiss the complaint brought against it in 2003 by private investigator and former AOL shareholder Dominic Amorosa.

Amorosa filed his case after time limits for securities fraud cases had expired, and failed “to connect specific statements made by the auditor” to stock losses, the judge wrote. Amorosa had originally sued AOL, Time Warner, the merged company, AOL European partner Bertelsmann AG, and 11 executives in addition to Ernst & Young. The other defendants were dismissed from the case in earlier proceedings.

The court also said it was considering sanctions against Amorosa’s lawyer, Christopher Gray, over procedural “shenanigans” in the case. Neither Gray nor Ernst & Young could be reached for comment late on Monday.

Amorosa accused Ernst & Young of approving false and misleading financial statements that were incorporated into the merger registration statement and of concealing AOL’s improper methods of booking online ad revenue.

Those revenue recognition practices became the focus of investigations by the U.S. Securities and Exchange Commission and Justice Department, and AOL later restated some financial results for 2000 through 2002.

The restatements led to hundreds of investor lawsuits, all but about 200 of which were consolidated into a class action in New York federal court. All have been settled or dismissed.

Ernst & Young contended that Amorosa -- who opted out of the class action to file his own suit -- was a “vexatious litigant pursuing clearly frivolous claims,” the judge wrote.

She said she would consider sanctions at a separate proceeding.

The case is Dominic Amorosa vs. Ernst & Young, case no. 03-03902, U.S. District Court for the Southern District of New York.

Reporting by Gina Keating; Editing by Richard Chang