(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

Prospectus Should Have Disclosed Impaired Assets, Contingent Losses

Shareholders survived a motion to dismiss their Sections 11 and 15 claims against a glass company that failed to disclose in its prospectus its manufacturing plant's asset impairments and contingent losses after failing to renew a production contract that accounted for 50 percent of the plant's activity. Because the plant housed equipment designed specifically for production under the lost contract, had limited means of finding replacement customers within its distribution area, and in fact failed to find replacement customers, the court (MD Fla) found that the plant's assets were sufficiently impaired as to require disclosure.

Additionally, the court found that the company was under an obligation to disclose in the prospectus the contingent liability of the possibility of the plant closing due to the loss of 50 percent of its production and sales. The court also refused to dismiss the shareholders' control person liability claim as there was a sufficiently pleaded underlying violation.

Davidco Investors, LLC v. Anchor Glass Container Corp. (MD Fla) is reported at ¶93,923.