EXIDE VERNON UPDATE: Exide executives pay $15 million to settle investors’ environmental suit
Exide Execs Pay $15M To Settle Investors’ Enviro Suit
Law360, New York (March 8, 2016, 12:36 PM ET) — Investors in Exide Technologies told a California federal court Monday that they have reached a $14.75 million settlement with executives at the bankrupt automotive battery maker to end class allegations that they helped the company cover up its failure to comply with environmental regulations.
The investors said that in addition to their concern about their ability to prove damages at the trial, they’re also worried about the defendants’ ability to pay a greater figure given Exide’s current financial situation, leading the investors to reach what they called a fair settlement.
“Given the complexities of this action and the continued depletion of the wasting insurance policies, the settlement represents a reasonable resolution of the action and eliminates the risk that the class might recover less or nothing at all from defendants,” the investors said.
A trial had been scheduled in the suit for Jan. 19, but was called off in late December when the parties reached a settlement after a full day of mediation.
The investors said they face substantial risks if they pursue their suit against the Exide executives and pointed out that the proposed settlement as a percentage of the estimated damages is significantly higher than the median settlement percentages reached in similar securities suits.
“Plaintiffs and lead counsel believe that the settlement is in the best interest of the class, satisfies the governing standards for approval in the Ninth Circuit, and is well within the range of fairness, adequacy and reasonableness so as to warrant the court’s preliminary approval and authorization for dissemination of notice of its terms to class members,” the investors said.
William B. Federman, an attorney for the investors, told Law360 in a Tuesday email that he’s pleased with the settlement, which he noted was reached with help from former district court judges Layn R. Phillips and Gary A. Feess.
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 state regulators to suspend operations at the plant and calling for environmental remediation.
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.
Exide denied the investors’ amended claims in May, arguing it made “regular disclosures” to its investors and that the proposed class is too broad because it includes noteholders that purchased shares in a private offering.
A representative for the defendants declined to comment Tuesday.
The investors are represented by William B. Federman and A. Brooke Murphy of Federman & Sherwood and James R. Noblin of Green & Noblin PC.
The defendants are represented by Edwin V. Woodsome Jr., David H. Kistenbroker, Carl E. Volz and Joni S. Jacobsen of Dechert LLP.
The case is Loritz v. Exide Technologies et al., case number 2:13-cv-02607, in the U.S. District Court for the Central District of California.
–Additional reporting by Kali Hays. Editing by Rebecca Flanagan.