Shareholder Suit Against Martha Stewart Proceeds

A federal judge on Monday reportedly declined to dismiss a shareholder lawsuit against Martha Stewart and her company.

The judge set a pretrial hearing for the case in November, according to a Reuters report. The case involves allegations that Stewart sold shares of ImClone Systems just before the stock fell on disappointing news about a drug. Shareholders say Stewart didn't disclose that she knew about an Securities and Exchange Commission investigation into her activity at ImClone, and that her own company's shares were hurt when the news was disclosed, the report said.

"The motion to dismiss the case against all defendants should be denied," Judge John Sprizzo told a courtroom in Manhattan, Reuters said.

Shares of Stewart's company, Martha Stewart Living Omnimedia ( MSO), have dropped since allegations of her insider trading emerged. On Monday, they fell 7.4% to $10.61.

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