Ajamie LLP Appointed Liaison Counsel in Venator Class Action

Oct 2019 // Law360

Law360 (October 21, 2019, 4:48 PM EDT) — Bernstein Litowitz was appointed lead counsel in a putative class action in Texas federal court against pigment and additive company Venator, whose shareholders claim downplayed the seriousness of a fire at one of its facilities in the months leading up to its 2017 initial and secondary public offerings.

U.S. District Judge Lee H. Rosenthal said Monday that Bernstein Litowitz Berger & Grossmann LLP will represent a class that will be led by a trio of public pension funds: the City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, the Fresno County Employees’ Retirement Association, and the City of Pontiac General Employees’ Retirement System. Ajamie LLP will serve as liaison counsel in the case.

The three funds claim that, together, they sustained losses totaling $1.4 million when the price of their collective 114,000 Venator shares tumbled as the company revealed the full extent of the damage caused by the plant fire, both in terms of the physical damage and its impact on the company’s ability to produce titanium dioxide and performance additives that are used in products ranging from food and drugs to plastics and coating for industrial furnaces.

Judge Rosenthal noted that the Miami Retirement Trust had been the first to sue, bringing an action against Venator in the Southern District of New York in July. The Texas suit that the Miami fund is now part of was filed in September. The judge cited Bernstein Litowitz’s “extensive experience in securities class actions” and Ajamie’s extensive experience as liaison counsel in the Southern District of Texas in her approval.

The shareholders brought their suit in September, claiming that for more than a year between August 2017 and October 2018, the price of Venator stock was artificially inflated because shareholders who bought stock as part of the company’s August 2017 IPO or its December 2017 secondary public offering had no idea how bad the January 2017 fire at a critical company facility in Pori, Finland, had been.

Public statements issued in January by Huntsman Corp., a company that Venator was a division of at the time, included claims that the fire had been extinguished quickly and that the insurance policy for the facility would cover property damage and earnings losses.

When Venator spun off from Huntsman eight months later, the investors claim, Huntsman raised $522 million in proceeds by issuing more than 26 million shares at a price of $20 per share.

A prospectus issued at the time of the IPO projected that the Finnish facility would be functioning at full capacity by the end of 2018, and that repairs wouldn’t exceed the limits of the company’s insurance policy.

Statements at the time of the SPO, which raised $533 million, were similarly optimistic, though the repair timeline was extended and Venator acknowledged “escalating costs relating to the fire.”

Nearly a year after the first public offering, though, news about the work in Finland started sounding more dire.

The investors claim that a July 2018 SEC filing that mentioned a possible “full rebuild” nudged share prices down; a September announcement that Venator was giving up on repairing the facility, had lost its lead in the titanium dioxide market, and would have to spend $150 million on the plant closure continued the downward trend; and finally, October news that the company was responsible for a total of $630 million over the next five years sank stock prices by nearly 20%, nearly rendering the shares into penny stocks.

On Monday, Venator shares were trading at $2.42, according to market records.

Venator’s executives during the period of the allegations, several Huntsman entities and four of the company’s underwriters during its IPOs are also named in the suit.

Attorneys for the investors and a spokesperson for Venator did not immediately respond to requests for comment.

Contact information for attorneys for Venator’s executives, the Huntsman entities and the underwriters could not be immediately determined Monday.

The investors are represented by Hannah Ross, Avi Josefson and Michael D. Blatchley of Bernstein Litowitz Berger & Grossmann LLP, and Thomas R. Ajamie and John S. “Jack” Edwards Jr. of Ajamie LLP.

Counsel information for Venator, its executives, the Huntsman entities and the underwriters could not be immediately determined Monday.

The case is Cambria County Employees Retirement System v. Venator Materials PLC et al., case number 4:19-cv-03464, in the U.S. District Court for the Southern District of Texas.