New York, NY, May 20--A judge ruled Monday that an investor lawsuit against Martha Stewart's company may proceed through the discovery process.
District Judge John E. Sprizzo made the ruling from the bench on a lawsuit alleging Stewart sold shares of her own stock because she knew she would be investigated on suspicion of insider trading involving shares she sold of ImClone Systems Inc.
The lawsuit was filed last August on behalf of Howard Rosen, a shareholder in Martha Stewart Living Omnimedia Inc. It seeks unspecified damages. In the discovery process, lawyers will be permitted to seek evidence to support their case.
According to the lawsuit, Stewart and other company executives sold about 5.3 million shares worth more than $79 million to avoid losses they would have incurred after the ImClone scandal surfaced in June.
Federal authorities are investigating Stewart to learn if she sold ImClone shares because she had insider knowledge that the Food and Drug Administration was going to reject the company's application for its new colon cancer drug. Stewart has denied any wrongdoing in her ImClone sale.
The civil lawsuit named Stewart and nine other defendants. It sought class action status for investors who bought shares of
Martha Stewart Omnimedia from Jan. 8, 2002, to last July 24.
Sprizzo said he would decide later whether to grant class action status.
A spokeswoman for Martha Stewart Omnimedia did not immediately return a telephone message for comment.
