Title: Public Employees’ Retirement System of Mississippi v. McDermott International, Inc., 4:19-cv-135
Court: United States District Court for the Southern District of Texas
Proposed Class: All persons and entities that held McDermott International, Inc. common stock as of April 4, 2018, and had the right to vote on the Chicago Bridge & Iron Company N.V. merger pursuant to the Proxy Statement dated March 29, 2018.
Securities: MDR (NYSE)
Wolf Popper LLP is Lead Counsel to Lead Plaintiff the Public Employees’ Retirement System of Mississippi in a class action lawsuit against McDermott International, Inc. (“McDermott”), Chicago Bridge & Iron Company N.V. (“CB&I”), and certain of their officers and senior executives on behalf of all persons and entities that held McDermott common stock as of April 4, 2018, and had the right to vote on the transaction through which McDermott acquired CB&I (the “Merger”) pursuant to the Proxy Statement dated March 29, 2018.
The Amended Complaint alleges, among other things, that the defendants hid well over $1 billion in undisclosed costs related directly to four large construction projects (dubbed the “Focus Projects”) acquired from CB&I as part of the Merger, and that the March 2018 Proxy Statement for the Merger contained materially false and misleading statements in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and SEC Rule 14d-9.
On October 30, 2018, after the Merger closed, McDermott announced that “for the third quarter of 2018, [it] recorded $744 million of changes in estimates” for the Focus Projects. The disclosure caused McDermott’s stock price to drop 40% from the day before and 60% from its Merger-date price of $20.70 per share on May 10, 2018.
The claims asserted in this Action are different than the claims asserted in Edwards v. McDermott International, Inc., Case No. 4:18-cv-04330 (S.D. Tex.). Edwards asserts claims on behalf of purchasers of McDermott common stock during the period January 24, 2018 through October 30, 2018, pursuant to Section 10(b) of the Exchange Act, whereas this litigation asserts claims on behalf of holders of McDermott common stock as of April 4, 2018, who had the right to vote on the CB&I Merger, pursuant to Section 14(a) of the Exchange Act.
Wolf Popper LLP Defeats Defendants’ Motion to Dismiss
On April 14, 2021, U.S. District Judge George C. Hanks Jr., issued an opinion denying defendants’ motion to dismiss the case. Specifically, the Judge found that McDermott International, Inc. must face a securities fraud suit over its acquisition of Chicago Bridge & Iron Co., denying its motion to dismiss and finding that stockholders sufficiently pled that proxy statements from McDermott were made “with actual knowledge that they were misleading.” The Opinion said McDermott cannot escape the allegations it concealed material problems with the integration of CB&I’s business and the likelihood that its Focus Projects would incur higher-than-expected costs.
The judge rejected the argument that statements made by the defendants are protected under the Private Securities Litigation Reform Act’s safe harbor provisions because he found Lead Plaintiff backed up its claims with internal McDermott and CB&I documents.
“Defendants did not disclose the existence of the estimates, which ultimately proved to be correct,” the judge said. “Defendants’ repeated assurances regarding the Focus Projects” – four of CB&I’s construction projects – “omitted material facts about the costs of the Focus Projects and those omissions are actionable.”
Wolf Popper LLP Appointed to Lead Proxy Statement Claims Against McDermott International, Inc.
Wolf Popper LLP, on behalf of its client which has been appointed the Lead Plaintiff, has been appointed by the Court to lead the litigation brought under §14(a) of the Exchange Act against the defendants in the action. McDermott shares closed at $20.70 on May 10, 2018, the closing date of the Merger. On October 30, 2018, after the market closed, McDermott disclosed a $744 million change in the value of certain long-term contracts it had acquired as part of its acquisition of CB&I. As a result of this news, McDermott declined $5.14 per share or approximately 40% that day, to close at $7.73 per share on October 31, 2018. McDermott shareholders who were entitled to vote on the Merger lost approximately two-third of the value of their shares as a consequence of the Merger.
The litigation alleges that the Proxy Statement contained materially false and misleading statements concerning the Merger and seeks to recover damages for violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934.
For more information about this case, please contact:
Robert C. Finkel
Chet B. Waldman