A group of shareholders who lost money when Education Management Corp.'s stock plummeted in 2010 have agreed to drop an appeal of a federal judge's decision dismissing the case, according to court records.
The shareholders claimed that Downtown-based Education Management, several of its officers and the financial institutions that underwrote the company's 2009 initial public offering misled investors about the source of the company's growth.
They echo allegations in a lawsuit by the Justice Department and 13 states that are suing the company to recover more than $11 billion in state and federal student aid under false claims laws. The lawsuit claims that the for-profit educator knowingly violated federal regulations covering the recruitment of students while telling regulators it was in compliance.
U.S. District Judge Nora Barry Fischer ruled in September that the shareholders failed to provide enough evidence that the company had defrauded them. The shareholders appealed the lawsuit to the 3rd U.S. Circuit Court of Appeals but, on Tuesday, filed a motion to withdraw the appeal. The 3rd Circuit approved the dismissal.
A spokesman for the Boston law firm of Berman DeValerio, which represented the shareholders in the appeal, declined to comment. An Education Management spokeswoman couldn't be reached for comment. The company filed a notice about the dismissal with the Securities and Exchange Commission.