Newark, NJ – A federal judge has dismissed a shareholder derivative lawsuit accusing Avis Budget Group’s board and its largest investor, SRS Investment Management, of orchestrating an improper control scheme that misled investors and violated securities laws.
U.S. District Judge Julien Xavier Neals issued the 39-page opinion on December 23, granting motions to dismiss filed by Avis executives and SRS, including SRS founder Karthik Sarma and company president Jagdeep Pahwa. The ruling ends a case brought by shareholder Paula DeAngelis, who claimed the investment firm’s near-50% stake in Avis was obtained through deceptive and undisclosed maneuvers.
DeAngelis alleged that from 2015 to 2023, SRS expanded its position in Avis to nearly 49.3% through purchases, swaps, and options, giving it de facto control of the car rental company without triggering public disclosure or tender offer requirements. She further claimed Avis’s board—led by CEO Joseph Ferraro and directors Bernardo Hees, Anu Hariharan, Lynn Krominga, and Glenn Lurie—breached fiduciary duties by allowing SRS to consolidate control and by misrepresenting the company’s financial condition during a 2023 earnings call.
Judge Neals found that DeAngelis failed to meet the heightened pleading standards required for shareholder derivative suits under Federal Rule of Civil Procedure 23.1, and that her Section 14(a) securities claim under the Exchange Act of 1934 did not adequately allege material misstatements or omissions.
In dismissing the case, the court ruled that the complaint lacked sufficient facts to show fraud, bad faith, or concealment of SRS’s ownership structure. “Plaintiff’s allegations, while detailed, do not establish that the Board acted with intent to mislead shareholders or that SRS’s acquisitions violated disclosure obligations,” the opinion stated.
The dismissal ends the lawsuit unless DeAngelis seeks to amend her complaint or appeal.