Signage is displayed outside a permanently closed Bed Bath & Beyond retail store in Hawthorne, California, on May 1, 2023.
Patrick T. Fallon | AFP | Getty Images
The billionaire activist investor Ryan Cohen won the dismissal on Tuesday of a shareholder lawsuit accusing him of profitably cashing out of Bed Bath & Beyond shares too quickly as the home goods retailer was hurtling toward bankruptcy.
U.S. District Judge Dale Ho in Manhattan said two former Bed Bath & Beyond shareholders could not force Cohen to return profits from selling his estimated 11% stake because the retailer's subsequent bankruptcy mooted their claims.
Theshareholders suedCohenunder a federal law requiring corporate insiders including largeshareholders to give up "short-swing" profits from buying and selling a company's stock in a six-month period, with sums being returned to the company.
Cohenfounded online pet supplies retailer Chewyand is now chief executive of video game retailer GameStop.
He became known as "meme king" to ordinaryinvestors who drove the early 2021 meme stock craze, typically in online forums. Forbes magazine estimates his fortune at $4.2 billion.
Lee Squitieri, a lawyer for theshareholders, declined immediate comment, saying he was reviewing the decision.Cohen, through his lawyer Dave Wollmuth, declined to comment.
Cohenrevealed a 9.8% stake inBedBath&Beyondin March 2022 and pushed for changes that would include new directors and exploring a sale of the Buy Buy Baby brand.
He angered othershareholders byabruptly selling his stake, whose percentage had grown because of stock buybacks, five months later for an estimated $60 million profit.
BedBathfiled for bankruptcyin April 2023, and its common shares were canceled when its Chapter 11 plan became effective in September.
Ho said the plaintiffshareholders, Todd Augenbaum and JudithCohen, had standing to sue when thelawsuitbegan in October 2022, but that was no longer true.
He rejected arguments that they still had a financial stake because they had bought stock in aBedBath&Beyondcreditor, could have collected incentive awards or attorney's fees, and deserved reimbursem*nt for their canceled stock.
The case is In reBedBath&BeyondInc Section 16(b) Litigation, U.S. District Court, Southern District of New York, No. 22-09327.
