At a hearing on November 1, 2016, Judge Sara L. Ellis of the United States District Court of the Northern District of Illinois granted final approval to a $9.1 million all-cash settlement achieved by Plaintiffs Central States, Southeast and Southwest Areas Pension Fund and Norfolk County Retirement System with Defendants Navistar International Corporation (NYSE: NAV) (“Navistar”), and three of its former officers, Daniel C. Ustian, Andrew J. Cederoth, and Jack Allen in Construction Workers Pension Trust Fund – Lake County and Vicinity v. Navistar International Corporation, No. 1:13-cv-02111 (SLE) (N.D. Ill.). Judge Ellis’ ruling finally resolves securities fraud claims asserted under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended by the Private Securities Litigation Reform Act (the “PSLRA”), by the Lead Plaintiff against Defendants for alleged material misrepresentations and omissions concerning the development and marketability of Navistar’s exhaust gas recirculation (“EGR”) technology. Navistar sought development of the technology to meet the U.S. Environmental Protection Agency’s (“EPA”) emissions regulations for truck engines, which were updated in 2010 and imposed new, lower emissions limits. 

The settlement benefits a class of individuals and entities that purchased Navistar International Corporation common stock from March 10, 2010 to August 1, 2012 (the “Class Period”). Cohen Milstein serves as Lead Counsel in this class action.

Case Background

Navistar is a holding company whose subsidiaries and affiliates produce commercial and military trucks, buses, diesel engines, recreational vehicles, and chassis, as well as provide parts and service for trucks and trailers. The complaint in this case charged Navistar and certain of its officers and directors with violations of the Exchange Act. It alleged that beginning in November 2010, Defendants Navistar, Daniel C. Ustian, CEO, and Andrew J. Cederoth, CFO and Executive Vice President, allegedly made materially false and misleading statements concerning Navistar’s financial condition and future prospects. Specifically, Defendants allegedly made false representations concerning Navistar’s engine technology and its compliance with the new 2010 EPA regulations. Two primary engine technologies emerged to meet the new standards: EGR, which reduced emissions by burning off exhaust pollutants within the engine, and Selective Catalytic Reduction (“SCR”), which reduced emissions by treating the engine exhaust with a urea-based chemical after it left the engine. Navistar chose to pursue EGR technology while the rest of the market used SCR technology. Plaintiffs contended that as a result of Navistar’s alleged missteps concerning emissions compliance and its false and misleading statements concerning the Company’s ability to achieve compliant technology by certain EPA deadlines, Navistar allegedly faced legal, technological, and liquidity issues, which threatened its business. Plaintiffs claimed that in order to conceal this fact from Navistar’s investors and customers, Navistar repeatedly falsely represented that it had EPA-compliant EGR engines ready to be certified and that would imminently be released to the market. Plaintiffs also contended that due to Defendants’ alleged false statements, the price of Navistar common stock traded at artificially inflated prices, reaching a high of $70.17 per share on April 26, 2011. 

Eventually, Navistar was forced to make certain public disclosures that revealed the falsity of Defendants’ prior statements. On June 7, 2010, Navistar reported a $172 million loss for the second quarter of 2012 as a result of warranty reserves taken to repair early 2010 and 2011 vehicles and speculation surrounding the Company’s EGR technology engine certification. On July 6, 2012, Navistar finally admitted its failure to achieve an EPA-compliant EGR engine and announced that in order to remain in business it was adopting the same SCR technology that its competitors had been using for years. Then, on August 2, 2012, Navistar issued a press release announcing it was withdrawing its full-year fiscal 2012 guidance until the release of its third fiscal quarter 2012 results in September, and announcing that it had received a formal letter of inquiry from the U.S. Securities and Exchange Commission (“SEC”). Plaintiffs contend that as a result of these disclosures, the price of Navistar’s common stock dropped from a closing price of $24.77 per share on August 1, 2012 to $21.44 per share on August 2, 2012, a decline of approximately 13% in one trading day on a volume of nearly 7.6 million shares.

Because Lead Plaintiff was not able to utilize the discovery tools provided by the Federal Rules of Civil Procedure due to the standard discovery stay imposed by the PSLRA, Lead Counsel conducted a substantial fact investigation using other investigative techniques. Cohen Milstein reviewed numerous SEC filings and public statements made by Navistar and its officers, researched market data and various news reports, and interviewed more than two dozen percipient fact witnesses. After Lead Plaintiff filed a Second Consolidated Amended Complaint, the Court ultimately sustained as sufficiently alleged to be false and misleading two statements made by the Company’s CEO, Daniel Ustian. Pursuant to the Court’s minute orders on July 9 and 22, 2015, Plaintiffs and Defendants pursued potential settlement by exchanging ample mediation briefing and engaging in a day-long mediation on October 1, 2015. The parties reached an impasse at mediation, but eventually arrived at a settlement in principle. Lead Counsel then conducted an in-depth and comprehensive analysis of substantial confirmatory discovery produced by Defendants to assess events at the Company during the Class Period and in light of Plaintiffs’ claims. Upon completion of that discovery, and further negotiations, Plaintiffs and Defendants ultimately agreed to a mediator’s recommendation of a $9.1 million all-cash settlement that received final approval by the Court on November 1, 2016. Cohen Milstein is currently overseeing implementation of the Court-approved Plan of Allocation, pending Court approval of a motion for distribution. 

Lead Plaintiff and the Class are represented by Steven J. Toll, Carol V. Gilden, and S. Douglas Bunch, all of Cohen Milstein.