Nieman v. Duke Energy Corp.
Largest Recovery Ever in a Securities Class Action in North Carolina and One of the Five Largest Recoveries in the Fourth Circuit
On November 2, 2015,United States District Court Judge Max O. Cogburn, Jr. granted final approval of a $146.25 million settlement on behalf of plaintiffs in the securities class action Nieman v. Duke Energy Corp. The recovery is the largest ever in North Carolina for a case involving securities fraud, and one of the five largest recoveries in the Fourth Circuit.
Originally filed on July 24, 2012, the case concerned false statements by Duke Energy and its senior officers and board members regarding an impending merger with Progress Energy, Inc. Amalgamated Bank, Trustee to the LongView Funds, along with Gerald and Carolyn Friesen and the Janice and Craig Bacino Trust, were appointed lead plaintiffs by Judge Cogburn. Lead plaintiffs’ allegations focused on statements made in connection with the merger of Duke and Progress regarding the future leadership of the combined company. Specifically, defendants assured investors that, following the merger, the well respected CEO of Progress, William D. Johnson, would serve as CEO of the combined company.
Prior to the merger, however, defendants were already planning to immediately oust Johnson from this role and replace him with Duke’s then-CEO James Rogers. On July 2, 2012, less than two hours after the merger became effective, defendants carried out their premeditated coup, and the newly constituted board of Duke voted to demand Johnson’s resignation and re-install Rogers as CEO. Johnson was paid $44 million to leave quietly. The next day, Duke announced that Johnson had “resigned” and that Rogers had been named as CEO. Duke’s stock price fell precipitously and, almost immediately, the North Carolina Utilities Commission (“NCUC”) and North Carolina Department of Justice (“NCDOJ”) announced investigations related to Duke’s forced removal of Johnson as CEO. As the former lead director of Progress, John Mullin III, stated in a letter to the editor published in The Wall Street Journal, Johnson’s ouster was an “incredible act of bad faith,” “the most blatant example of corporate deceit that I have witnessed during a long career on Wall Street,” and “one of the greatest corporate hijackings in U.S. business history.”
Robbins Geller prosecuted claims under both the Securities Act of 1933 and Securities Exchange Act of 1934 on behalf of Amalgamated Bank and all investors in Duke Energy during the June 11, 2012 to July 9, 2012 class period, including investors who exchanged Progress shares for Duke shares at the time of the July 2, 2012 merger. In a decisive early victory, lead plaintiffs prevailed in a fight over defendants’ liability for statements made in the prospectus and offering documents. After considering defendants’ initial legal arguments, Judge David S. Cayer found in a July 2013 ruling that lead plaintiffs alleged “ample facts, many supported by documentation and/or testimony, establishing that [d]efendants’ statements regarding Johnson’s role as CEO were false” and supporting a cogent inference that defendants “concealed from investors their plan to remove Johnson as CEO.”
Following the July 2013 ruling, the parties engaged in settlement negotiations that lasted more than 12 months. During that period, Robbins Geller and the lead plaintiffs continued to investigate the allegations, incorporating the work of experts and consultants. Ultimately, the parties agreed to settle the case for $146.25 million in cash.
With its long history of pursuing corporate governance reforms, Amalgamated Bank, the largest union-owned bank in the United States, played an integral role in obtaining this significant monetary settlement for Duke investors. Commenting on what he described as a “historic settlement,” Keith Mestrich, President and CEO of Amalgamated Bank, said, “Our financial markets work best when public companies that rely on our investments act with integrity and transparency, and we won’t hesitate to act on behalf of all investors when they don’t.”
News coverage regarding the settlement highlighted that it was an outstanding result for Duke investors. Prominent securities law professor James Cox was quoted by ABC News describing the settlement as “off the charts.” As The Wall Street Journal pointed out, lawsuits such as this one, “which typically allege that boards sold for too little, failed to disclose key points about the deal, or both, have long been common but rarely yield any additional money for investors.”
In approving the settlement, the court noted that “plaintiffs’ attorneys were able [to] achieve the big success early” in the case and obtained an “excellent result.” The “extraordinary” settlement was because of “good lawyers . . . doing their good work.”
Nieman v. Duke Energy Corp., et al., No. 12-cv-00456 (W.D.N.C.).