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(Reuters) — Ryanair Holdings PLC and Chief Executive Michael O'Leary failed to persuade a U.S. judge to dismiss a securities fraud lawsuit accusing Europe's largest budget airline of defrauding shareholders by downplaying its willingness to recognize labor unions.
While dismissing much of the proposed class action, U.S. District Judge Paul Oetken said shareholders could try to prove that Ryanair intended to mislead them with statements indicating a “near certainty” it would not welcome unions, the recognition of which could increase costs and reduce profitability.
The Manhattan judge said this included Mr. O'Leary's statement at Ryanair's September 2017 annual general meeting that hell would “freeze over” before the Dublin-based carrier accepted unions.
Such statements “are impossible to reconcile with O'Leary's subsequent admission that he had 'long anticipated' unionization,” and were “direct evidence” of possible intent to mislead shareholders, Judge Oetken wrote.
Ryanair offered that December to recognize pilot unions, to avert a possible strike, and its American depositary shares fell 5.2% that day.
Judge Oetken also dismissed claims concerning other statements about Ryanair's labor relations, profitability and growth targets, finding no proof the statements were false.
Ryanair and its law firm did not immediately respond to requests for comment. Lawyers for the lead plaintiff did not immediately respond to similar requests.
The lawsuit was filed in November 2018 by an Alabama fund, the City of Birmingham Firemen's and Policemen's Supplemental Pension System, on behalf of Ryanair ADS investors from May 30, 2017, to Sept. 28, 2018.
Ryanair cited labor issues when it cut its full-year profit forecast on Oct. 1, 2018. Its share price closed that day more than one-third below its level in mid-March.
Mr. O'Leary has been Ryanair's chief executive since 1994.
The case is City of Birmingham Firemen's and Policemen's Supplemental Pension System v Ryanair Holdings Plc et al, U.S. District Court, Southern District of New York, No. 18-10330.