Caption: Kates v. Fat Brands Inc., et al.
Case No.: 2:24-cv-04775-MWF-MAA
Jurisdiction: U.S. District Court, Central District of California
Judge: Hon. Michael W. Fitzgerald
Summary
On October 15, 2025, Judge Michael W. Fitzgerald granted Defendants’ Motion to Dismiss the Amended Complaint. The Court dismissed all Section 10(b), Rule 10b-5, and Section 20(a) claims. Leave to amend was granted.
Allegations Against Fat Brands Inc.
Plaintiff alleged that Fat Brands and executives Andrew A. Wiederhorn, Kenneth J. Kuick, and Robert G. Rosen made false and misleading statements during the Class Period, March 23, 2022, and May 10, 2024. The complaint claimed that defendants concealed that Fat Brands’ CEO received improper payments through related-party transactions tied to its merger with Fog Cutter Capital Group, misled investors about the company’s cooperation with government probes, and understated its exposure to criminal and regulatory risk. Plaintiff said the truth emerged with a federal indictment and SEC charges in May 2024, triggering sharp declines in FAT stock.
Defendants’ Motion to Dismiss
Defendants moved to dismiss under Rule 12(b)(6), Rule 9(b), and the PSLRA. They argued that statements about investigations were opinion or forward-looking. They contended that related-party disclosures were sufficient and that the complaint failed to plead falsity or scienter. Defendants also sought dismissal of the Section 20(a) claims.
Plaintiffs’ Opposition
Plaintiffs argued that the Company’s opinion that it was not a target of the investigation lacked factual basis. They said related-party loans of $9.6 million were undisclosed despite Item 404 and GAAP duties. They contended that Wiederhorn’s knowledge of wrongdoing imputed scienter to the Company and executives.
Court’s Ruling
The Court dismissed all Section 10(b) and Rule 10b-5 claims. The Section 20(a) claims were dismissed as derivative. The Requests for Judicial Notice and Supplemental Request for Judicial Notice were granted.
Court’s Rationale
Falsity: The Court held that statements about government investigations were non-actionable opinion or forward-looking under the PSLRA safe harbor. The Court found that the 2021 Annual Report and 2022 Prospectus statements about related-party transactions were not pled as false with particularity because the complaint did not address disclosed transactions or explain why the challenged statements were misleading.
Scienter: The Court determined that the complaint failed to allege a strong inference of scienter as to Kuick and Rosen regarding related-party statements. No facts showed their knowledge or motive.
Section 20(a): The Court dismissed the control-person claims because the primary Section 10(b) claims failed.
Other Issues: The Court incorporated by reference the Harris derivative complaint, the indictment, the SEC complaint, and the 2021 Annual Report. The Court took judicial notice of the order dismissing the indictment.
Case Status
The case continues in part. Plaintiff may file a Second Amended Complaint no later than November 7, 2025. Defendants’ response is due no later than December 1, 2025. No further amendments will be permitted.
