Re: 4/28/00 - Hitsgalore.com Files Libel Lawsuit Against Bloomberg, L.P., and David Evans
Hitsgalore.com Files Libel Lawsuit Against Bloomberg, L.P., and David Evans
RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--April 28, 2000--Hitsgalore.com Inc. (OTCBB: HITTE) announced that on April 27, 2000, it filed a Complaint for Libel in the Superior Court of the State of California for the County of Los Angeles, Case No. BC 228991 against Bloomberg, L. P. ("Bloomberg"), a Delaware limited partnership, and David Evans ("Evans"), a reporter with Bloomberg's news service, Bloomberg News. The Complaint was served on Bloomberg on April 27th at its Los Angeles, Calif., offices.
The lawsuit alleges that Bloomberg and Evans, through Bloomberg News, published a series of "Defamatory Articles" on May 11 and May 12, 1999, which contained certain false and defamatory statements regarding the Company. As a result of the publication of the articles, the Complaint alleges, the price of the Company's stock dropped about 53% in one day. On May 10, 1999, the day before the publication of the first Defamatory Article, the price for the Company's common stock reached a high of approximately $20.6875 per share. The Company's stock closed at 9 3/8 on May 11, 1999. The Complaint seeks damages against Bloomberg and Evans in excess of five hundred million dollars ($500,000,000).
Within two days of the publication of the first Defamatory Article, entitled "Hitsgalore.com Omitted Founder's Link to Fraud in SEC Filing," the first of several class action lawsuits were filed against the Company, Dorian Reed and Steve Bradford in the United States District Court for the Central District of California (the "Court"). The Company believes that the lawsuits were based on the false and misleading impression created by Evans' in the Defamatory Articles that the defendants intentionally and improperly failed to disclose in a February 1999 filing with the United States Securities and Exchange Commission the existence of a civil action brought by the Federal Trade Commission against Dorian Reed and others relating to Internet Business Broadcasting, Inc., an online advertising company that closed in 1997 with which Mr. Reed had been previously associated.
The class action lawsuits, separately filed and subsequently consolidated by the Court under the caption "In re HITSGALORE.COM, INC. SECURITIES CLASS ACTION," Case No. 99-CV-5060 (the "Class Action Lawsuit"), alleged that the Company and Messrs. Reed and Bradford violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and engaged in a "fraudulent scheme" to "artificially inflate" the price of the Company's stock during the periods specified in the complaints, by not disclosing the FTC action and subsequent default judgment entered against Mr. Reed. According to one of the initial complaints filed in the Class Action Lawsuit, "the truth of defendants' deception was finally revealed to the public on May 11, 1999," when Bloomberg and Evans reported that "(o)n Feb. 11, Hitsgalore.com went public by merging with Systems Communications Inc., a publicly traded shell company. In the merger agreement, filed with the SEC, Hitsgalore.com said there were no suits or governmental investigations against any of its officers, directors or employees. It didn't disclose the FTC's case against Reed in its subsequent filings." Although the Company and Messrs. Reed and Bradford immediately and vigorously denied the allegations of the Class Action Lawsuit and the defamatory statements made by Evans and Bloomberg in the Defamatory Articles, the damage to the Company caused by their publication, including a loss of market capitalization of approximately $534 million, had already been done.
On February 22, 2000, the Company's attorneys, Schoeppl & Burke, P.A., of Boca Raton, Fla., won a dismissal of the Class Action Lawsuit, with prejudice, meaning that the Court made a final adjudication in favor of the Company and Messrs. Reed and Bradford on the merits of the plaintiffs' claims. Dismissals of securities class action lawsuits at the pleading stage are rare, and are generally granted only if it clearly appears from the complaint that on the facts pleaded (accepted as true by the court for purposes of the motion to dismiss), the plaintiff will not be entitled to any relief. Although the plaintiffs in the Class Action Lawsuit have appealed the Court's decision to the United States Court of Appeals for the Ninth Circuit, the Company is confident that the suit was without merit and believes that the dismissal was therefore proper and should be affirmed.
The Company believes that the dismissal of the Class Action Lawsuit on its merits confirms that the Defamatory Articles published by Bloomberg and Evans were, in fact, false and misleading when published, an important issue inherent in any suit for libel, and therefore justifies the filing of the libel action against Bloomberg and Evans at this time. The Company also believes that, had Bloomberg and Evans properly investigated the facts before publishing the Defamatory Articles, they would have known that their allegations of fraud were false and unjustified, and therefore defamatory of the Company, and that the publication of the Defamatory Articles would unfairly and unlawfully cause the Company and its shareholders significant damages.
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Contact:
Schoeppl & Burke, P.A.
Carl F. Schoeppl, Esq., 561/394-8301
or
Daniel J. Becka, Esq., 561/394-8301
sbpa@schoepplburke.com
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