Milling company Kruse-Western Inc.’s board of directors must face a proposed class action for allegedly overcharging its employees in a $244 million stock deal before an animal feed contamination problem drove the company’s share value down, a California federal judge has ruled.
U.S. District Judge Dale Drozd ruled on Monday that the lawsuit from former Kruse-Western worker Armando Zavala can proceed against various defendants including Kruse-Western’s board of directors, the plan’s administration committee, employee stock ownership plan trustee GreatBanc Trust and Kevin Kruse, the president of Western Milling, which is one of Kruse-Western’s companies.
Judge Drozd found that Zavala had sufficiently alleged that the selling shareholders, Kruse and GreatBanc were fiduciaries to the company’s employee stock ownership plan and had engaged in a prohibited transaction in violation of the Employee Retirement Income Security Act. However, the judge granted a motion to dismiss a second cause of action brought by Zavala against the plan’s administration committee, charging that the complaint failed to properly purport foul play in the orchestration of the deal by the stock ownership plan’s administration committee.
Zavala filed the suit in February 2019, claiming that a $244 million sale of Kruse-Western stock to its employee stock ownership plan was far over fair market value. Zavala claimed that merely two months after the challenged sale, the Kruse-Western stock was worth just $26.6 million and that a year later, it was worth $24.8 million — meaning the purchase of stock had occurred at nearly 10 times its actual value.
In a separate order, the judge also rejected the argument from the defendants that Zavala’s complaint should be tossed because he signed a severance agreement when he left Kruse-Western containing a release that barred him from suing under ERISA and other laws.
. . .
The proposed class is represented by Michelle C. Yau and Mary J. Bortscheller of Cohen Milstein Sellers & Toll PLLC, and Daniel Feinberg and Nina Wasow of Feinberg Jackson Worthman & Wasow LLP.
Animal feed company Kruse-Western Inc. must face the bulk of a lawsuit claiming it forced workers to pay $244 million for company stock worth only $27 million following a contamination and recall, according to a California federal judge’s ruling.
The proposed class action by former Kruse-Western employee Armando Zavala states a valid claim for a prohibited transaction between the company’s employee stock ownership plan and a party in interest to the plan under the Employee Retirement Income Security Act, Judge Dale A. Drozd of the U.S. District Court for the Eastern District of California said Monday. That’s because the relief Zavala seeks—the return of money allegedly in the defendants’ possession—is equitable in nature and therefore allowable under the statute, Drozd said.
. . .
The case centers on Kruse-Western’s employee stock ownership plan, which was created two months after the company issued a recall for Western Blend Horse Feed due to a possible contamination in 2015. Zavala says the defendants caused the stock plan to pay $244 million for all the company’s stock in a debt-financed transaction that relied on unreliable valuations and unrealistic management projections that didn’t adequately account for the contamination issues.
On the same day Drozd ruled on Kruse-Western’s motion to dismiss, he issued a separate opinion denying the company’s motion for summary judgment, which argued Zavala had released his claims against the company under a severance agreement.
Feinberg Jackson Worthman & Wasow LLP and Cohen Milstein Sellers & Toll PLLC represent Zavala.
FOR IMMEDIATE RELEASE
Lawsuit Alleges LensCrafters Misrepresented to Customers the Superiority of Its AccuFit System
NEW YORK, NY – The Eastern District of New York District Court today certified a class action lawsuit against Luxottica Retail North America, also known as LensCrafters, that alleges the company misrepresented to customers the supposed superiority of its AccuFit measurement system and overcharged for glasses made using AccuFit. According to the lawsuit, LensCrafters falsely claims and markets AccuFit as capturing measurements five times more accurate than manual measurements.
The plaintiffs are represented by national firm Cohen Milstein Sellers & Toll in the class action lawsuit.
“With today’s class certification in three states — New York, Florida and California — we are one step closer to holding LensCrafters accountable for misleading and overcharging its customers,” said Theodore J. Leopold, Partner at Cohen Milstein, co-chair of the firm’s Consumer Protection practice group, and Lead Counsel in the case. “We look forward to moving forward with our lawsuit, adding more states, all of which aims to defend consumers’ rights in the face of LensCrafters’ material misrepresentations.”
“The Court’s thorough and well-reasoned decision makes clear that these claims should – and will be – tried before a single jury. We look forward to seeking redress on behalf of the class and holding LensCrafters accountable,” said Geoffrey Graber, Partner with Cohen Milstein and counsel in the case.
If you think you may be affected by this lawsuit, please email information@cohenmilstein.com.
Media Contact: Berlin Rosen / cohenmilstein@berlinrosen.com
About Cohen Milstein Sellers & Toll
Cohen Milstein Sellers & Toll PLLC is recognized as one of the premier law firms in the country handling major, complex plaintiff-side litigation. With more than 100 attorneys, Cohen Milstein has offices in Washington, D.C., Chicago, Ill., New York, N.Y., Palm Beach Gardens, Fla., Philadelphia, Pa. and Raleigh, N.C.
There may be more discrimination-related lawsuits coming in the near future thanks to a recently passed New York City bill governing the use of artificial intelligence in hiring.
One of the major implications of the bill, which New York’s city council passed in November and has now “lapsed” into law, is that companies will be required to disclose to job candidates whether they used A.I. in the recruiting process. This means that job recruits will now be able to learn whether companies they applied to used A.I.-powered hiring software that study people’s facial movements or analyze voices during job interviews, among other tasks.
This is a big deal because it could provide people some transparency when it comes to learning why they weren’t hired, explains Christine Webber, a civil rights attorney for plaintiffs’ firm Cohen Milstein. She believes that there haven’t been many A.I.-related employments lawsuits filed against companies because people are typically unaware that the technology may have been used on them.
“People don’t know what’s going on,” Webber said. “They don’t come and complain, ‘Hey, a computer denied me a new job.’”
For people of color, knowing whether A.I. was used to determine if they were a good fit for the job could be revelatory. After all, facial recognition software is widely known to not work as well on women and people of color as white men.
Webber brought up the scenario of a company using A.I.-powered facial recognition software that looks for facial cues and “micro expressions” during job interviews that could lead hiring managers to believe a person is deep in thought and therefore may make a better candidate than others. An example may be a person furrowing their brow, creating a little crease in their forehead.
Putting aside whether or not it’s even possible to deduce a person’s fit for the job by using A.I. to scan their face (there are many critics of this kind of use of the technology), Webber noted the potential problem that such a task would pose for people of color.
“It’s really important to be able to see the crease in everybody’s forehead,” she said.
In the chance that a company does use such technology during the hiring process, people of color will finally get more details about why they may have been overlooked for a role, at least those who live in New York City.
The A.I.-related hiring law isn’t expected to come into effect until 2023, which gives companies some time to evaluate the technology they currently use. But other states could pass similar laws, Webber said, also noting that the Equal Employment Opportunity Commission is also taking a tougher look at this kind of hiring software.
Either way, Black and brown people in New York City have something to look forward to: more information about how A.I. is used on their communities.
“New York is a large city, it’s a diverse city, so there’s a chance that somebody is going to be turned down for a job and thinks it’s discrimination and now they know there’s A.I.,” Webber said.
“I feel like it gives us a chance whereas before, there just wasn’t opportunity,” Webber said regarding people bringing up A.I.-related hiring lawsuits.
Two former Performance Sports Group executives will pay $13 million through company insurance to end a proposed class action alleging they lied to shareholders about the now-bankrupt athletic gear manufacturer’s sales tactics, according to a proposed deal filed Wednesday.
The all-cash deal requires former PSG CEO Kevin Davis and ex-CFO Amir Rosenthal, through the company’s directors & officers insurance policy, to compensate potentially thousands of class members who purchased the company’s common stock between January 2015 and October 2016, according to a preliminary approval motion in the 5-year-old Manhattan federal court case.
If approved, the $13 million settlement would supplement a $1.2 million deal that PSG inked with investors in its Delaware bankruptcy case in 2017 as part of a Chapter 11 plan that sold off $575 million of PSG’s assets.
The shareholders, led by the Plumbers & Pipefitters National Pension Fund, told U.S. District Judge Gregory H. Woods that they struck a deal with Davis and Rosenthal at a JAMS mediation session in September. The agreement followed the depositions of numerous former PSG executives and relied on documents subpoenaed from the company’s auditor KPMG and former investor Kohlberg & Co., the investors said.
“The settlement was reached after extensive litigation, including … extensive fact discovery including the service of more than 40 subpoenas by the parties on non-party witnesses and production and review of over 21.2 million pages of documents produced by PSG’s bankruptcy estate and various non-parties,” the investors wrote.
. . .
PSG held an initial public offering in 2014, just months after it was formed in a $330 million tie-up between sports gear company Bauer Hockey and iconic baseball equipment maker Easton.
After the company reported significantly reduced earnings in January 2016, investors filed suit alleging PSG, Davis and Rosenthal had for years juiced quarterly profits by threatening to reduce wholesale discounts unless retail chains increased their order sizes.
This aggressive sales tactic blew up in PSG’s face, shareholders said, when demand plummeted over the course of 2016 because retailers were faced with a buildup of unused inventory. Investors said the company and its top brass silenced internal critics of these ill-fated sales strategies and lied to the public with a rosy picture of a well-run company and solid earnings.
. . .
The proposed class is represented by Carol V. Gilden, S. Douglas Bunch, Steven J. Toll and Joshua C. Handelsman of Cohen Milstein Sellers & Toll PLLC.
Social media platform Pinterest agreed to a series of diversity, equity and inclusion workplace reforms to settle a lawsuit by shareholders lead by the Rhode Island pension system, General Treasurer Seth Magaziner announced.
The reforms are valued at $50 million and resolve shareholder complaints that Pinterest’s Board of Directors failed to respond to allegations of discrimination against women and people of color working at the company.
Magaziner, who is running for governor, called the settlement the “first of its kind to embrace diversity goals around a company’s product.”
“The proposed settlement calls for sustained efforts by Pinterest that will put diversity, equity, and inclusion (“DEI”) at the forefront of its internal goals and business operations,” the proposed settlement filed in federal court Wednesday said. “Additionally, it will resolve this highly contested, complex derivative action while delivering long-term meaningful benefits to Pinterest and its stockholders.
The terms of the settlement include having Pinterest do regular pay equity assessments, making the platform user experience more inclusive, creating “executive accountability for DEI culture” and releasing former employees who made race or gender discrimination claims from non-disclosure agreements.
Pinterest has settled a lawsuit brought against it by shareholders who claimed that the company’s workplace discrimination against women and racial minorities hurt its reputation, according to NBC News. The company reportedly agreed to spend $50 million on improving its diversity and equity, and will let former employees talk about racial or gender discrimination they experienced, even if they were bound by a non-disclosure agreement. Other financial details of the settlement weren’t disclosed.
The lawsuit was filed against the company’s executives in November 2020, with shareholder claiming that the company was acting irresponsibly by doing nothing to address “widespread claims of race and gender discrimination.” The complaint also accused the company’s CEO of “surrounding himself with yes-men and marginalizing women who dared to challenge Pinterest’s White, male leadership clique.”
Pinterest pledged $50 million to overhaul its corporate culture and promote diversity as part of an agreement to resolve allegations that it discriminated against women and people of color, according to court documents and statements from the plaintiffs and the company.
The settlement was announced on Wednesday by Seth Magaziner, the general treasurer of Rhode Island, who was acting on behalf of the Employees’ Retirement System of Rhode Island and other Pinterest shareholders that had sued the company, which is known for its colorful virtual pinboards.
The shareholders had accused Pinterest’s board of directors of failing to respond to a culture of discrimination and retaliation against women and people of color. By allowing the discrimination to continue, the shareholders argued, the board had failed to act in the best interests of stockholders.
. . .
Under the settlement, an audit committee of the board will help oversee changes intended to create equal opportunities for employees. The changes require that a board member act as a co-sponsor with the chief executive on diversity, equity, and inclusion initiatives, according to the plaintiff’s legal team.
The settlement also releases former employees from nondisclosure agreements and creates an external ombuds office for employees and external audits that review performance ratings, promotions and compensation across gender and racial categories.
Ranbaxy Pharmaceuticals Inc. didn’t need to ever sell a dose of a drug to have wielded monopoly power over it, a Boston federal judge ruled Monday, rejecting the company’s bid for an early win on antitrust claims in the multidistrict suit.
. . .
The antitrust suit, set for a Jan. 10 trial, alleges that Ranbaxy manipulated the Food and Drug Administration’s generic drug approval process to ice out competitors from developing generic versions of antiviral drug Valcyte, high blood pressure drug Diovan, and reflux medication Nexium.
The first to file a complete application for a generic drug blocks competitors for 180 days from marketing the same generic. The plaintiffs who paid for the three drugs claim Ranbaxy fooled the FDA into granting the exclusivity periods by filing applications with missing, incorrect or fraudulent information.
Ranbaxy countered that while it applied to develop the three drugs, it never got so far as to sell generics of Nexium or Valcyte, making it impossible for the company to have had a monopolistic hold on the market.
But the lack of sales doesn’t doom the case, the judge said.
“Within the highly regulated market for pharmaceuticals, plaintiffs have proffered sufficient evidence to create a genuine dispute of material fact as to whether Ranbaxy maintained monopoly power due to its first-filer status and the resulting exclusionary periods,” Judge Gorton said.
Looking at Ranbaxy’s alleged conduct this way, the judge added, “provides strong evidence that Ranbaxy maintained the ‘ability to lessen or destroy competition in the relevant market,’ the determining factor in assessing monopoly power.”
. . .
The suit was consolidated from multiple cases in April 2019. Two groups of buyers — direct purchasers such as drug wholesalers and end-payors such as health care plans — were granted class certification in May.
The buyers contend Ranbaxy wrongly obtained the exclusivity periods and that this delayed the eventual launch of generic versions of all three drugs by other manufacturers, resulting in higher prices. The suit includes claims for violation of the Racketeer Influenced and Corrupt Organizations Act, federal and state antitrust laws, and state consumer protection laws.
The litigation followed investigations into Ranbaxy by the FDA and U.S. Department of Justice that resulted in guilty pleas and a $500 million fine against the drugmaker for lying to regulators and selling drugs that fell short of federal safety standards.
. . .
The direct buyers are represented by Hagens Berman Sobol Shapiro LLP, Hilliard Shadowen LLP, Radice Law Firm PC, Sperling & Slater PC, Kessler Topaz Meltzer & Check LLP, Wexler Wallace LLP, Cohen Milstein Sellers & Toll PLLC and Nussbaum Law Group PC.
Grant & Eisenhofer PA and Cohen Milstein Sellers & Toll PLLC have agreed to a stipulation that would consolidate two lawsuits filed in Delaware Chancery Court over a $1 billion merger that created XL Fleet Corp., and are seeking to serve as co-lead counsel for the proposed shareholder class.
In a stipulation and proposed order filed with Chancellor Kathaleen S. McCormick on Tuesday, the two firms said they “agree that the related actions involve the same subject matter and [the] same common questions of law and fact and that the administration of justice will be served by consolidating the related actions.” The chancellor had yet to sign off on the proposed order as of early Wednesday afternoon.
In September, investor Cody Laidlaw filed a proposed class action, alleging that directors of the special purpose acquisition company Pivotal Investment Corp. II pushed for the December merger with Boston-based startup XL Hybrids Inc., which manufacturers systems to convert combustion engines into electric hybrids, even though they knew it was bad for shareholders.
Laidlaw asserted that insiders drove an unfair “value-destroying” deal process that misled shareholders. He sued the company and a raft of its former or current officers and directors, including former Pivotal Chairman and CEO Jonathan J. Ledecky. Ledecky remained on XL Fleet’s post-merger board, the complaint said.
Created for the purposes of doing a deal, Pivotal raised $230 million in an initial public offering in July 2019 with promises it would return investors’ cash with interest if it failed to find an acquisition target within 18 months, the complaint said.
But Pivotal’s founders and controlling shareholders, whose founders’ shares had no redemption rights, would have lost their investment if the company was liquidated, the complaint said.
Motivated to strike a deal, officers failed to disclose they had family ties with XL Hybrids, and didn’t tell Class A shareholders how the deal would dilute the value of their shares, the complaint alleges. The officers also failed to disclose that Pivotal would contribute under $7 per share to the merger, even though public investors had paid $10 per share, according to the complaint.
The company’s per-share price dropped to a low of $5.41 within months of the merger. Pivotal stockholders would have gotten $10.09 per share if it had liquidated rather than merged, Laidlaw’s complaint said.