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Federal Judge Sustains Complaint Against Westwood One; Rules Pompano Helicopters' $362 Million Lawsuit May Proceed to Trial
4/9/2008
A Federal Judge sustained multiple charges contained in a $362 million lawsuit against Westwood One (NYSE: WON - News), which alleges that America's largest radio network used unfair, slanderous and deceptive trade practices to drive a vendor and potential competitor, Pompano Helicopters, Inc., out of business.
U.S. District Judge William J. Zloch denied Westwood One's motion to dismiss Pompano Helicopters' lawsuit, thereby allowing it to proceed to trial here in Federal Court. The federal judge ruled Pompano Helicopters provided sufficient cause for the lawsuit to be brought to trail, including Breach of Contract, Slander, Wrongful Taking of Trade Secrets and Unfair Trade Practices.
If punitive damages are awarded, damages could rise to over $400 million, which would exceed Westwood's current market capitalization. Westwood's largest client, CBS, owns nearly 20 percent of Westwood's stock.
With the Federal Court ruling, Westwood One will now have to disclose the lawsuit in SEC filings, something that has not been done since the first lawsuit in state court was filed against Westwood's subsidiary, Metro Networks, Inc. in 2002, according to Jim Howard, Jr., former Pompano Helicopters' CEO.
In the federal case, Pompano Helicopters says executives and other staff of Westwood One perpetrated a smear campaign against the helicopter company and its owner, Howard. The suit charges Westwood One executives deliberately spread false allegations of poor maintenance, bankruptcy and ongoing problems with the Federal Aviation Administration, all of which were untrue and slanderous.
The suit further contends a former engineer at Pompano Helicopters stole its business plan and turned it over to top corporate personnel at Westwood One and Metro Networks. The plan, created by Howard, details strategies for establishing a nationwide and eventually a global electronic news gathering service.
The federal court ruling comes one month, to the day, after CBS and Westwood One put into effect a new programming and management agreement. Also, Gores Radio Holdings had recently begun a series of equity investments designed to purchase a major interest in Westwood One. It is unknown what impact the ruling might have on Gores' investment plans.
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