In Re European Aeronautic Defence & Space Co. Securities Litigation., No. 08 Civ. 5389(WHP).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtWILLIAM H. PAULEY III
Citation703 F.Supp.2d 348
PartiesIn re EUROPEAN AERONAUTIC DEFENCE & SPACE CO. SECURITIES LITIGATION.
Decision Date26 March 2010
Docket NumberNo. 08 Civ. 5389(WHP).

703 F.Supp.2d 348

In re EUROPEAN AERONAUTIC DEFENCE & SPACE CO. SECURITIES LITIGATION.

No. 08 Civ. 5389(WHP).

United States District Court,
S.D. New York.

March 26, 2010.


703 F.Supp.2d 349

COPYRIGHT MATERIAL OMITTED

703 F.Supp.2d 350
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,
703 F.Supp.2d 351
Rosen & Katz, New York, NY, for Defendants.
MEMORANDUM & ORDER
WILLIAM H. PAULEY III, District Judge:

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.

BACKGROUND
I The Parties

Bristol County is a contributory retirement system for employees of a municipal subdivision in Massachusetts. (Second Amended Complaint dated Nov. 3, 2008 (“Second Am. Compl.”) ¶ 24.) 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. (Reply Declaration of Dr. Peter M. Kleinschmidt dated Apr. 23, 2009 (“Kleinschmidt Reply Decl.”) ¶ 3.) All of the Individual Defendants reside and work in France or Germany. (Declaration of Dr. Peter M. Kleinschmidt dated Dec. 19, 2008 ¶ 10.)


II The EADS Securities

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). (Second Am. Compl. ¶ 26; Declaration of Warren R. Stern dated Jan. 2, 2009 (“Stern Decl.”) Ex. A3: EADS Business, Legal and Corporate Responsibility 2005

703 F.Supp.2d 352
at 96; Ex. B3: EADS Business, Legal and Corporate Responsibility 2006 at 88; Ex. C3: EADS Business, Legal and Corporate Responsibility 2007 at 86.) 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. (Second Am. Compl. ¶¶ 22, 26; Stern Decl. Ex. Fl: printout of SEC listing for European Aeronautic Defence & Space Co EADS NV Unsponsored ADR Facility dated Dec. 29, 2008; Ex. F2: SEC Form F-6EF for EADS ADS filed by The Bank of New York; Ex. F3: SEC Form F-6EF for EADS ADS filed by Citibank, N.A.; Ex. F4: SEC Form F-6EF for EADS ADS filed by Deutsche Bank Trust Company Americas.) 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.


III. The Airbus A380

Airbus is EADS's largest division and “consistently captures about half of the

703 F.Supp.2d 353
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.” (Second Am. Compl. ¶¶ 13, 84(a), 118, 122; Stern Decl. Ex. H: Translation of Investigative Report On The Markets For EADS Shares And Financial Disclosures Provided By EADS Starting On May 1, 2005 (the “AMF Report”).) 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. (Second Am. Compl. ¶ 156; Stern Decl. Ex. O: EADS Press Release dated July 27, 2005 (“July 27, 2005 Press Release”).) 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.” (Second Am. Compl. ¶ 156; July 27, 2005 Press Release.) Later that day, during an earnings conference call, Ring commented on EADS's financial outlook and the A380, but did not mention delivery delays. (Second Am. Compl. ¶ 157; Stern Decl. Ex N: Second Quarter 2005 EADS Earnings Conference Call dated July 27, 2005 (“Q2 2005 Earnings Call”) at 14.) 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 “rescheduled the program.... [T]here is no reason, currently, to believe that we are not on track.... I am not aware of any unusual things, or additional problems, which would create a problem with the current frame we have given to Airbus.” (Second Am. Compl. ¶ 173; Stern Decl. Ex Q: Third Quarter 2005 EADS Earnings Conference Call dated Nov. 9, 2005 (“Q3 2005 Earnings Call”) at 14.) Ring did not mention any additional A380 delivery delays. (Second Am. Compl. ¶ ¶ 171-74; Q3 2005 Earnings Call.)

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

703 F.Supp.2d 354
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.”...

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    ...payment of dividends, and other services." ADR Bulletin at 1-2; See also, In re European Aeronautic Defence & Space Co. Sec. Litig., 703 F. Supp.2d 348, 352 n.1 (S.D.N.Y. 2010) ("A sponsored ADR is established with the active participation of the issuer of the underlying security and often ......
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    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 4, 2017
    ...had only purchased shares in Europe and did "not allege that any class member acquired its EADS shares as ADRs in the United States." 703 F. Supp. 2d 348, 358 (S.D.N.Y. 2010). For these reasons, Plaintiffs' choice of forum in the United States should be accorded considerable deference. Ther......
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8 cases
  • Mucha v. Volkswagen Aktiengesellschaft, 17-cv-5092 (DLI)(PK)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 20, 2021
    ...payment of dividends, and other services." ADR Bulletin at 1–2; See also, In re European Aeronautic Defence & Space Co. Sec. Litig. , 703 F. Supp.2d 348, 352 n.1 (S.D.N.Y. 2010) ("A sponsored ADR is established with the active participation of the issuer of the underlying security and often......
  • R.J. Reynolds Tobacco Co. v. City of Edina, Case No. 20-CV-1402 (PJS/LIB)
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • August 31, 2020
    ...by minors, state and local governments are not limited to enacting age-related restrictions. See U.S. Smokeless Tobacco Mfg. Co. , 703 F. Supp. 2d at 348 (noting that, given the background of the Act, the reference to " ‘individuals of any age’ was Congress’ way of saying that the carve-out......
  • Mucha v. Volkswagen Aktiengesellschaft, 17-cv-5092 (DLI)(PK)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 20, 2021
    ...payment of dividends, and other services." ADR Bulletin at 1-2; See also, In re European Aeronautic Defence & Space Co. Sec. Litig., 703 F. Supp.2d 348, 352 n.1 (S.D.N.Y. 2010) ("A sponsored ADR is established with the active participation of the issuer of the underlying security and often ......
  • In re Volkswagen "clean Diesel" Mktg., MDL No. 2672 CRB (JSC)
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 4, 2017
    ...had only purchased shares in Europe and did "not allege that any class member acquired its EADS shares as ADRs in the United States." 703 F. Supp. 2d 348, 358 (S.D.N.Y. 2010). For these reasons, Plaintiffs' choice of forum in the United States should be accorded considerable deference. Ther......
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