EXIDE BANKRUPTCY UPDATE: California federal judge certifies additional class of investors accusing Exide of covering up its failure to comply with environmental regulations
Exide Investors Get Another Class Certification In Enviro Suit
Law360, New York (December 21, 2015, 3:33 PM ET) — A California federal judge has certified an additional class of investors accusing bankrupt automotive and industrial battery makerÂ Exide Technologiesâ€™ executives of covering up the companyâ€™s failure to comply with environmental regulations, finding claims concerning the companyâ€™s control over the executives are common among class members.
U.S. District Judge Stephen V. Wilson on Thursday certified a class of noteholders pursuing Securities Exchange Act of 1934 violations against Exide, afterÂ certifying a liability-only stock classÂ in July, agreeing that the claims present a unified question of the â€œpower and controlâ€ exerted by the company over executives that allegedly made numerous misleading statements in theÂ run-up to a 2013 bankruptcy.
â€œThe â€˜controlling personâ€™ issue is intensely factual, but it constitutes a common question for all class members because if plaintiffs are able to prove a primary violation, the controlling person inquiry would not be specific to individual class members,â€ Judge Wilson said.
In addition, Judge Wilson ruled that the securities notes class â€œdoes not need to prove relianceâ€ on general market statements, as Exide has held, because noteholders included in the class all purchased their notes before the company issued an earnings statement that covered at least one year, according to the order.
The judge also appointed Steamfitters Fund to act as the representative for the securities note class andÂ Federman & SherwoodÂ as class counsel, both of which are in the same positions with the liability class.
Lead plaintiff David M. LoritzÂ pushed for certificationÂ of the class in early November, rejecting Exideâ€™s attacks on the merits of proposed calculations for investorsâ€™ damages.
Loritz has argued investors have â€œempirical evidenceâ€ supporting a cause and effect relationship between certain 2013 disclosures by Exide and the damages suffered by noteholders and that the damages method they have developed is capable of being applied to the entire proposed class.
Exide defendants have responded by calling the investors’ purported evidence â€œunscientific and unreliableâ€ in an October opposition to class certification, saying their expert relied on â€œunsupported methodologiesâ€ to reach the cause and effect conclusions.
The investors initially filed the suit in April 2013, accusing Exide and its top executives of failing to disclose that a plant located in Vernon, California, was releasing high levels of arsenic, lead and other hazardous materials, leading to state regulators toÂ suspend operationsÂ at the plant and calling for environmental remediation. One regulator eventually filed suit over the environmental damages and isÂ seeking $40 millionÂ in penalties against the company.
Instead of informing investors of environmental compliance issues, the company touted its compliance with environmental standards, including specifically stating that the Vernon plant met air quality standards, according to the investors.
The case was consolidated with two similar cases in July 2013, and Exide was voluntarily dropped as a defendant after entering Chapter 11 bankruptcy in the wake of the plant shutdown. The individual defendants subsequently won their motion to dismiss the suit in December, without prejudice, and a second amended complaint followed in January.
ExideÂ denied the investors’Â amended claims in May, arguing it made â€œregular disclosuresâ€ to its investors and that the proposed class is too broad because it includes noteholders that purchased shares in a private offering.
Counsel for plaintiffs and the Exide defendants could not be reached Monday for comment.
The investors are represented by William B. Federman and A. Brooke Murphy of Federman & Sherwood and Robert S. Green of Green & Noblin PC.
James R. Bolch, Phillip A. Damaska, R. Paul Hirt, Louis E. Martinez, John P. Reilly, Herbert F. Aspbury, Michael R. Dâ€™Appolonia, David S. Ferguson, John Oâ€™Higgins, and Dominic J. Pileggi of Exide are represented by Edwin V. Woodsome Jr., David H. Kistenbroker and Carl E. Volz ofÂ Dechert LLP.
The case is David M. Loritz v. Exide Technologies et al., case numberÂ 2:13-cv-02607, in the U.S. District Court for the Central District of California.
â€” Additional reporting by Dani Meyer, Jeff Sistrunk and Daniel Siegal. Editing by Ben Guilfoy.