Cooper Tire Ducks Claims Over Failed $2.5B Merger

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By Cameron Finch

Aug. 23 — Investors lost their bid to revive class claims against Ohio-based tire manufacturer Cooper Tire & Rubber Co. over its failed $2.5 billion merger with Apollo Tyres Ltd. ( OFI Asset Mgmt. v. Cooper Tire & Rubber Co., 2016 BL 271668, 3d Cir., No. 15-2664, 8/22/16 ).

Investors didn't adequately plead that Cooper's statements during merger negotiations were false or misleading, Judge Kent A. Jordan of the U.S. Court of Appeals for the Third Circuit said Aug. 22. In addition, under the Private Securities Litigation Reform Act, forward-looking statements—when accompanied by meaningful cautionary language—are protected under the act's safe harbor provision.

Failed Merger

In 2014, OFI Asset Management and Timber Hill LLC sued Cooper for concealing risks that ultimately caused its merger with Apollo to fail (194 SLD, 10/7/14). According to the investors' complaint, Cooper “touted the deal to the company's shareholders as an unbeatable offer” despite knowing that opposition from Cooper's joint venture partner would likely jeopardize the merger.

The U.S. District Court for the District of Delaware dismissed the case in July 2015, finding that the investors didn't allege facts with the particularity required under PSLRA.

The Third Circuit agreed. “It is difficult to discern precisely which statements OFI alleges to be actionable, let alone what specific facts are asserted to support each allegation,” the appeals court said. The investors' “kitchen-sink pleading has been a hindrance at every stage of these proceedings,” the Third Circuit said.

The appeals court also held that the investors didn't adequately plead scienter—culpable intent.

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The potential merger also led to insider trading charges against entrepreneur Amit Kanodia—whose wife was Apollo's general counsel—and his friend, Steven Watson (64 SLD 64, 4/3/15).

Watson pleaded guilty to the charges and agreed to settle related Securities and Exchange Commission allegations (223 SLD, 11/19/15).

The civil and criminal proceedings against Kanodia are still pending.

The investors were represented by Bernstein Litowitz Berger & Grossmann, New York; and Entwistle & Cappucci, New York.

Copper was represented by Jones Day and Potter, Anderson & Corroon, Wilmington, Del.

Attorneys couldn't be immediately reached for comment.

To contact the reporter on this story: Cameron Finch in Washington at cfinch@bna.com.

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com.

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