Liquid Audio (Redwood City, Calif.) announced that it has filed alawsuit against MM Companies Inc. and Steel Partners II, L.P., in U.S.District Court for the Southern District of New York. Liquid Audio isasking the court to prohibit MM Companies and Steel Partners fromviolating the federal securities laws in connection with theircampaigns to take control of Liquid Audio, as well as seekingcompensatory and punitive damages as a result of their allegedviolations.
Liquid Audio’s complaint alleges that MM Companies has failed toregister as an investment company under the Investment Company Act of1940, and that its purchase of Liquid Audio shares and subsequent proxycontest to take control of Liquid Audio’s board of directors istherefore in violation of that Act. The complaint also charges thatSteel Partners is conducting an illegal proxy contest by failing tomake the proper filings with the Securities and Exchange Commission(SEC) and that, in the course of its contest, Steel Partners hasdistributed false and misleading statements to Liquid Audiostockholders.
Liquid Audio is seeking to enjoin MM Companies from continuing itscampaign to take control of Liquid Audio and from communicating withLiquid Audio stockholders. In addition, Liquid Audio is seeking torequire Steel Partners to comply with the SEC’s proxy rules, ttherebyretracting its recent press release concerning Liquid Audio’s proposedmerger with Alliance Entertainment and to disseminate correctivedisclosure.
According to Gerry Kearby, Liquid Audio’s president and CEO, “LiquidAudio’s board of directors remains committed to our combination withAlliance Entertainment. We simply cannot allow MM Companies and SteelPartners to continue to spread misinformation about the transaction. Webelieve that they should be required to play by the rules.”
For updates on the pending merger and this suit, visit www.liquidaudio.com.