Judge allows most of bond suit against Marriott

April 24, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

A federal judge in Baltimore has refused to dismiss most of a suit by bondholders challenging Marriott Corp.'s plan to divide itself into two companies, turning aside Marriott's plea that the bondholders hadn't come up with enough facts to back up their charges of fraud.

U.S. District Senior Judge Alexander Harvey II scheduled a May 26 conference to plan the schedule for the lawsuit. The bondholders' suit claims that Marriott sold them their bonds -- effectively borrowing money from them -- while considering a plan the plaintiffs contend would hurt Marriott's ability to repay the bonds.

The suit claimed Marriott committed securities fraud -- violating two federal securities laws -- as well as common-law fraud and negligence. Marriott moved to dismiss the suit, citing a procedural rule that requires fraud complaints to include more detail than other civil claims.

But Judge Harvey on Thursday dismissed only the negligence claim, leaving the fraud claims intact.

The bondholders "have identified specific documents which contained allegedly fraudulent statements, as well as specific, allegedly fraudulent statements made by one or more of the individual defendants," Judge Harvey wrote.

"At this stage, you'd have to call it a victory, a clear roadblock to Marriott's restructuring," Allan Ripp, a spokesman for the New York law firm representing PPM America, a Chicago-based investment adviser, said. PPM America holds more than $120 million in Marriott bonds.

The judge dismissed the bondholders' claim of negligent misrepresentation and said he would not consider claims of bondholders who purchased their bonds before April 1992.

The ruling does not resolve the remaining four charges.

A Marriott spokesman said the company remained confident it would win the case on the merits.

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