Investors Can’t Base Lawsuits on Activist Claims

Investors can’t piggyback on an activist’s claims as the basis for a lawsuit.

That’s the takeaway from a ruling on Tuesday by a federal judge in a suit brought against Herbalife Ltd. An investor had alleged he lost money after hedge-fund manager William Ackman claimed the nutrition company is a pyramid scheme.

Ackman’s allegations aren’t evidence that Herbalife committed fraud, U.S. District Judge Dale S. Fischer in Los Angeles wrote in a March 16 ruling.

The decision won’t stop other investors from suing if they can independently claim that a drop in the company’s stock price was caused by fraud. ...