In Re European Aeronautic Defence & Space Co. Securities Litigation.
| Decision Date | 26 March 2010 |
| Docket Number | No. 08 Civ. 5389(WHP).,08 Civ. 5389(WHP). |
| Citation | 703 F.Supp.2d 348 |
| Parties | In re EUROPEAN AERONAUTIC DEFENCE & SPACE CO. SECURITIES LITIGATION. |
| Court | U.S. District Court — Southern District of New York |
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Samuel H. Rudman, Esq., David A. Rosenfeld, Esq., Jarrett S. Charo, Esq., Coughlin, Stoia, Geller, Rudman & Robbins, LLP, Melville, NY, for Plaintiff.
Christopher J. Keller, Esq., Mark S. Arisohn, Esq., Michael H. Rogers, Esq., New York, NY, for Plaintiff.
Warren R. Stern, Esq., George T. Conway III, Esq., Michael S. Winograd, Esq., Jonathan E. Goldin, Esq., Wachtell, Lipton Rosen & Katz, New York, NY, for Defendants.
Lead Plaintiff Bristol County Retirement System (“Bristol County”) brings this putative securities class action lawsuit against European Aeronautic Defence & Space Co. (“EADS”) and Noel Forgeard (“Forgeard”), Thomas Enders (“Enders”), Hans Peter Ring (“Ring”), and Jean-Paul Gut (“Gut” and, collectively the “Defendants”) alleging that Defendants misled investors about production delays in the Airbus A380 super-jumbo aircraft. Bristol County asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b), 78t(a). Defendants move to dismiss the Second Amended Class Action Complaint (the “Complaint”) pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2) and 12(b)(6), and on forum non conveniens grounds. For the following reasons, Defendants' motion to dismiss for lack of subject matter jurisdiction is granted.
Bristol County is a contributory retirement system for employees of a municipal subdivision in Massachusetts. Plaintiff purports to represent a class “consisting of all persons and entities residing in the United States who purchased or otherwise acquired EADS common stock from July 27, 2005 through March 9, 2007, inclusive, and who were damaged thereby.” (Second Am. Compl. ¶ 43.)
Defendant EADS is a public limited liability company organized under Dutch law, headquartered in the Netherlands, with facilities throughout Europe. (Second Am. Compl. ¶ 25.) EADS has a U.S. holding company for North America with an office in Arlington, Virginia. (Declaration of David A. Rosenfeld dated Mar. 17, 2009 (“Rosenfeld Decl.”) Ex. C: EADS North America Overview; Rosenfeld Decl. Ex. P: EADS Direct Corporate News dated Apr. 8, 2006.)
Defendants Forgeard, Enders, Ring, and Gut (collectively, the “Individual Defendants”) served in high-ranking positions at EADS during the Class Period. (Second Am. Compl. ¶¶ 28-42.) Forgeard and Enders were Co-CEOs of EADS during part of the Class Period. (Second Am. Compl. ¶ 28.) Ring served as both EADS's Chief Financial Officer and Chief Operating Officer throughout the Class Period. (Second Am. Compl. ¶¶ 28-42.) Gut was EADS's Chief Operating Officer for Marketing, Strategy, and Global Development. (Second Am. Compl. ¶ 40.) Forgeard and Gut are no longer employed by EADS. All of the Individual Defendants reside and work in France or Germany. (Declaration of Dr. Peter M. Kleinschmidt dated Dec. 19, 2008 ¶ 10.)
EADS shares are listed on the Eurolist of Euronext Paris SA (the Paris stock exchange), the Amtlicher Markt of the Frankfurter Wertpapierbörse (the Frankfurt stock exchange), and the Madrid, Bilbao, Barcelona, and Valencia Stock Exchanges (the Spanish stock exchanges). EADS shares are also listed on “European electronic exchanges including Virtix Europe, Chi-X Europe, and Euro Composite among others.” (Second Am. Compl. ¶ 26.)
EADS's investor disclosures are governed by the laws of the European Union and its member states. (Stern Decl. Ex. A2: EADS Financial Statements and Corporate Governance 2005 at 3; Ex. B2: EADS Financial Statements and Corporate Governance 2006 at 3; Ex. C2: EADS Financial Statements and Corporate Governance 2007 at 3.) Its annual registration documents and financial statements are approved by the Autoriteit Financiele Markten (the Netherlands Financial Markets Authority). (Stern Decl. Ex. A2: EADS Financial Statements and Corporate Governance 2005 at 3; Ex. B2; EADS Financial Statements and Corporate Governance 2006 at 3; Ex. C2: EADS Financial Statements and Corporate Governance 2007 at 3.)
While EADS shares are not traded on any securities market in the United States, three depositary banks-Bank of New York, Citibank, and Deutsche Bank-have issued unsponsored American Depositary Receipts (“ADRs”) 1 in EADS shares. EADS does not make any filings with the Securities and Exchange Commission under federal securities laws or regulations.2
Bristol County purchased its EADS shares in Europe.3 It relied on public filings with the Autorité des marches financiers (the “AMF,” France's Financial Markets Authority) and the Bundersanstalt für Finanzdienstleinstungaufsicht (Germany's Federal Financial Supervisory Authority). (Second Am. Compl. ¶ 49.) Notably, the Complaint is bereft of any allegation that putative class members purchased EADS common stock or ADRs in the United States.
Airbus is EADS's largest division and “consistently captures about half of the world's orders for commercial aircraft.” (Second Am. Compl. ¶¶ 53, 72, 256.) In December 2000, Airbus introduced the A380 and slated the first delivery for 2006. (Second Am. Compl. ¶¶ 65-66.) In early 2005, Airbus learned that electrical wiring harness systems could not be installed in the aircraft being assembled in Toulouse, France. (Second Am. Compl. ¶¶ 8, 55, 63, 112-13.) Quoting Business Week, the Complaint alleges the cause of the problem was a “software debacle” stemming from incompatible versions of computer-aided design software at German and French facilities. In short, the Germans created component parts that did not fit into the aircraft being assembled by the French. (Second Am. Compl. ¶ 55.)
By May 20, 2005, it was clear that the A380 delivery schedule needed “substantial revision.” On June 1, 2005, EADS announced delivery delays of two to six months that would subject the company to “financial penalties” with its customers. (Stern Decl. Ex. L: Agence France Presse article dated June 1, 2005 ( “Agence France Presse article”).) EADS did not attribute the delays to any design problem. Instead, it characterized them as “linked to the cabin fittings demanded by the different clients,” including “notably the installation of new entertainment systems.” ( Agence France Presse article.)
On July 27, 2005, EADS announced its financial results for the first half of 2005. That press release reported that “Airbus has received 159 firm orders and commitments from 16 customers for the A380” and that “[t]he aircraft has entered its test flight phase and is yielding good results.” Later that day, during an earnings conference call, Ring commented on EADS's financial outlook and the A380, but did not mention delivery delays. An analyst from Lehman Brothers in New York participated in the call by asking a question. (Q2 2005 Earnings Call at 6-7.)
On November 9, 2005, EADS announced its third quarter results and raised its 2005 earnings guidance based on additional A380 orders. During an analyst call that day, Ring addressed delays in A380 production by stating that EADS had Ring did not mention any additional A380 delivery delays.
EADS's internal rules permit senior officers and directors to trade in EADS shares during brief windows following announcements of quarterly results. In the trading window following this announcement, Forgeard, Enders, and Gut exercised options for, and sold, 67,000; 50,000; and 100,000 EADS shares respectively. (Second Am. Compl. ¶ 145(a)-(c).)
By the end of 2005, Airbus had deployed nearly 1,000 German employees to the Toulouse factory to re-engineer the wiring harness systems. (Second Am. Compl. ¶ 112.) In February 2006, that “work had fallen so far behind that Airbus ... suspend[ed] shipments of components from other factories to the final assembly line.” (Second Am. Compl. ¶ 126.) According to the AMF Report, “[a]t the latest by March 1, 2006, the members of the...
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