The settlement, which requires court approval, comes out of In re Massey Energy Co. Securities Litigation (No. 5:10-cv-00689), a class action taken up by the U.S. District Court for the Southern District of West Virginia. Court documents show that the securities fraud claims at the heart of the class action centered on Massey’s misrepresentation of its safety practices, and the financial losses suffered by investors when the market learned of those misrepresentations.
Under the settlement, Massey and its officials are found liable for misleading investors by regularly touting safety improvement initiatives established after a deadly fire at one of its coal mines in 2006. Case documents show public statements about those safety improvement initiatives were frequently conflated and not based on the business’s actual operational practices.
The abuses, according to case documents, contributed to an April 2010 explosion in which 29 miners died at Massey’s Upper Big Branch mine in West Virginia—one of the deadliest U.S. coal mining accidents in 40 years. News of the explosion, subsequent criminal investigations and Congressional testimony revealed that, despite Massey’s public statements of putting “safety first,” the company had in fact disregarded industry safety standards and routinely concealed safety violations from federal safety inspectors.
As a result, shares of Massey’s common stock underwent a substantial decline that reduced the company’s market capitalization by more than $3 billion and caused massive losses to investors. That translated to the price of Massey common stock declining to $9.47, or about 17%, over the two days following the explosion.
Despite Massey’s efforts to manage public opinion, the intense focus on its operations by government regulators and the media in the weeks and months following the explosion further revealed the extent of the safety and regulatory violations affecting the company’s operations, causing additional losses in the market.
The suit’s class includes investors who purchased or otherwise acquired Massey’s publicly traded common stock between February 1, 2008, and July 27, 2010, and were damaged thereby. As of March 16, 2010, more than 102 million shares of Massey common stock were outstanding and actively traded on the New York Stock Exchange (NYSE). While the exact number of class members is still unknown pending additional discovery, court documents show the plaintiffs believe there are thousands of members in the class.
“We are very pleased to achieve this settlement on behalf of investors,” says Joel Bernstein, a partner at the law firm of Labaton Sucharow, which served as counsel for MA PRIM and co-lead counsel for the class together with the law firm of Robbins Geller Rudman & Dowd.
“This settlement should remind corporate leaders of the importance of taking good care not only of the financial capital of their investors, but also the human capital of their employees,” adds Chris Supple, MA PRIM’s deputy executive director and general counsel, who led the litigation effort along with Michael Sweeney, deputy general counsel to the state treasurer, and Assistant Attorney General Matthew Gendron.
MA PRIM invests the retirement assets the Massachusetts Pension Reserves Investment Trust (MA PRIT), which has more than $41 billion in total assets pooled by the state’s teachers’ and public employees’ retirement systems.
Case documents are available here for review.
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