The original complaint charges Constar and certain of its officers and directors with
violations of the Securities Act of 1933. Constar is a wholly owned subsidiary
of Crown Cork & Seal Co. ("Crown"). In November 2002,
Constar completed an IPO of 10.5 million shares of stock pursuant to a
Prospectus/Registration Statement. The IPO, which was solely comprised of
shares sold by Crown, was priced at $12 per share for total proceeds of $117
million after underwriting discounts and commissions. The complaint alleges
that the Prospectus/Registration Statement was materially false and misleading
and failed to disclose, among other things, that: (a) The Company was then
experiencing an unseasonably low demand in its carbonated soft drink bottle
business; (b) The Company was then experiencing an adverse impact in the
Company's revenue stream due to the "pass-through" of lower resin costs; (c)
The Company was then experiencing an adverse trend in the Company's
conventional PET container shipments; (d) The Company's management had changed its focus just prior to the IPO and purposely reduced its higher volume
preforms, causing a Q4 revenue shortfall; and (e) The Company's goodwill was
impaired and defendants failed to timely take an impairment charge. As this adverse information was disclosed, the Company's shares eventually
plummeted to $5.00 per share. Public investors who purchased shares traceable
to the IPO based on Constar's representations, paying $12 per share for Constar
stock, have suffered tens of millions of dollars in damages.
According to the Company’s FORM 10-Q For Quarterly Period Ended June 30, 2006, the Company and certain of its present and former directors, along with Crown Holdings, Inc., as well as various underwriters, have been named as defendants in a consolidated putative securities class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania, In re Constar International Inc. Securities Litigation (Master File No. 03-CV-05020). This action consolidates previous lawsuits, namely Parkside Capital LLC v. Constar International Inc et al.(Civil Action No. 03-5020), filed on September 5, 2003 and Walter Frejek v. Constar International Inc. et al. (Civil Action No. 03-5166), filed on September 15, 2003. The consolidated and amended complaint, filed June 17, 2004, generally alleges that the registration statement and prospectus for the Company’s initial public offering of its common stock on November 14, 2002 contained material misrepresentations and/or omissions. Plaintiffs claim that defendants in these lawsuits violated Sections 11 and 15 of the Securities Act of 1933. Plaintiffs seek class action certification and an award of damages and litigation costs and expenses. Under the Company’s charter documents, an agreement with Crown and an underwriting agreement with Crown and the underwriters, Constar has incurred certain indemnification and contribution obligations to the other defendants with respect to this lawsuit. The court denied the Company’s motion to dismiss for failure to state a claim upon which relief may be granted on June 7, 2005 and the Company’s answer was filed on August 8, 2005. The Special Master issued a Report and Order denying the Company’s motion for judgment on the pleadings on February 22, 2006. The Company filed objections to the Report and Order on March 6, 2006. The court heard the objections on May 1, 2006 and issued an order overruling the objections on May 24, 2006. The case is now proceeding with class certification and discovery.
As summarized by the Company’s FORM 10-Q For Quarterly Period Ended June 30, 2009, Plaintiffs seek class action certification and an award of damages and litigation costs and expenses. Under the Company’s charter documents, an agreement with Crown and an underwriting agreement with Crown and the underwriters, Constar incurred certain indemnification and contribution obligations to the other defendants with respect to this lawsuit. On May 7, 2007, the Special Master issued a Report and Order granting plaintiffs’ motion for class certification. The Company filed objections to the Special Master’s Report and Order. On March 5, 2008, the Court entered an Order overruling the Company’s objections, adopting the Special Master’s Report and Order, and granting plaintiffs’ motion for class certification. On March 18, 2008, the Company filed a Rule 23(f) Petition with the United States Court of Appeals for the Third Circuit seeking leave to take an immediate appeal from the class certification ruling. On April 30, 2008, the Third Circuit entered an Order granting the Company’s Rule 23(f) Petition. The parties have briefed the appeal, and oral argument was held on July 13, 2009. At the Company’s request, the Special Master and the District Court have agreed to stay all further proceedings before the District Court pending the outcome of the appeal, with the exception of certain limited discovery. The Company believes the claims in the action are without merit and intends to defend against them vigorously In connection with the Company’s emergence from Chapter 11 and in accordance with the Plan, all such claims are to be subordinated pursuant to Section 510(b) of the Bankruptcy Code and treated as equity interests. The Plan further provides that all pre-petition equity interests in Constar will be extinguished, as will any claims relating to, or arising in connection with, such equity interests (or the purchase or sale of such interests), including all indemnification and contribution obligations referred to above. The Company intends to file papers with the District Court asking to be dismissed from the action based on the Plan. The Company does not expect any loss to result from this matter.
On November 5, 2009, a Stipulation and Order was entered dismissing the claims against Constar with prejudice due to bankruptcy.