Dana Corporation (“Dana” or the Company) is an American supplier of automotive parts such as axles, drive shafts, transmissions, and digital equipment.
Several purported shareholder class action lawsuits have been filed against Dana and certain of its executive officers and directors alleging violations of the Securities Exchange Act of 1934. Specifically, the Complaint alleges that by the beginning of the Class Period, Dana's profits were being negatively impacted by an increase in the price of raw materials - steel, in particular - which was disconcerting to investors. In order to assure the market that the Company's business was performing according to plan, and would continue to perform well even if steel prices did not decline materially, Defendants artificially inflated Dana's net income through improper accounting and, in addition, issued earnings guidance that lacked any reasonable basis given the Company's true performance and prospects, which were known to Defendants but not the investing public.
In particular, Defendants' Class Period representations regarding Dana's historical financial performance and condition and its expected 2005 earnings were materially false and misleading because: (a) the Company had improperly accounted for price increases, which materially artificially inflated its second quarter of 2005 income; (b) the individual Defendants' assurances, made in written certifications filed with the SEC, that the second quarter Form 10-Q was free from misstatements and fairly presented the Company's financial condition and results of operations was patently false; (c) the Company's apparent success was the result of improper accounting, did not reflect the reality of its business and deceived investors; and (d) in light of these facts, which were known to Defendants, Defendants' guidance lacked any rational basis and could not be met without a material drop in raw material prices, contrary to Defendants' repeated assurances to the contrary.
The Complaint further alleges that on or around September 15, 2005, before the open of ordinary trading, Dana issued a press release announcing that it would likely restate second quarter 2005 financial results and that it had dramatically lowered its 2005 earnings guidance, to $0.60 to $0.70 per share from $1.30 to $1.45, a more than 100% reduction. Because of the expected earnings shortfall, the Company may have to write down its U.S. deferred tax assets and may be in violation of covenants contained in a loan agreement, according to the press release. A main reason given for the halving of the 2005 guidance was high steel costs, a factor that Defendants repeatedly assured the market was already considered, and accounted for, in the guidance.
In reaction to this announcement, the price of Dana stock fell dramatically, from $12.78 per share on September 14, 2005 to $9.86 per share on September 15, 2005, a one-day drop of 22.8% on unusually heavy trading volume.
NOTE: Under the Bankruptcy Code, the filing of the Company’s petition on March 3, 2006 automatically stayed most actions against the Company.
On January 18, 2006, the Court entered the Order signed by U.S. District Chief Judge James G. Carr granting the motions to consolidate the related actions, with 05-CV-7388 deemed as lead consolidated case. On March 27, 2006, the Court entered the Order granting the City of Philadelphia's motion to be appointed lead Plaintiff and approving the City of Philadelphia's selection of Barrack, Rodos & Bacine as lead Counsel. On April 7, 2006, the Court entered the Plaintiff Johnson’s Notice of Voluntary Dismissal Without Prejudice. According to the Notice, Plaintiff does not intend by this voluntary dismissal to dismiss the other consolidated actions or to waive his right to participate and recover as a class member or shareholder in any action. Although the first filed civil action 05-CV-7388 was closed, the securities class action continued in related civil action 05-CV-07393.
As summarized by the Company’s FORM 10-Q for the quarterly period ended September 30, 2008, in a consolidated Complaint filed in August 2006, lead Plaintiffs alleged violations of the U.S. securities laws and claimed that the price at which the Company’s stock traded at various times between April 2004 and October 2005 was artificially inflated as a result of the Defendants’ alleged wrongdoing. In June 2007, the District Court denied lead Plaintiffs’ motion for an order partially lifting the statutory discovery stay which would have enabled them to obtain copies of certain documents produced to the SEC. By order dated August 21, 2007, the District Court granted the Defendants’ motion to dismiss the consolidated Complaint and entered a judgment closing the case. In September 2007, the lead Plaintiffs filed a notice of appeal from the District Court’s order and judgment. The appeal has been fully briefed and oral argument on the appeal was held on October 30, 2008.
According to an article dated November 20, 2008, a federal appellate court has vacated and remanded a lower court's dismissal of a securities class action against two former officers of bankrupt auto parts maker Dana Corp., saying the district court didn't appropriately consider a recent Supreme Court decision when dismissing the case. A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit said that Judge James G. Carr of the U.S. District Court for the Northern District of Ohio should have considered the high court's ruling in Tellabs Inc. v. Makor Issues & Rights Ltd. differently.
On April 1, 2009, the Defendants filed a motion to dismiss the Consolidated Complaint. On August 25, 2009, Judge James G. Carr granted the motion to dismiss. Judge Carr issued an Amended Order and Judgment Entry on August 28, 2009. The case is closed.
On September 23, 2009, the lead Plaintiffs filed a Notice of Appeal.
According to a press release dated June 10, 2011, the U.S. Court of Appeals for the Sixth Circuit May 25 reinstated class securities fraud claims against two executives of an auto parts manufacturer who painted a rosy picture of the entity's financial well-being, even though they allegedly knew the entity was failing (Frank v. Dana Corp., 6th Cir., No. 09-4233, 5/25/11). In a decision by Judge Boyce Martin Jr., the court concluded that viewing the Complaint “holistically,” the Plaintiffs adequately pleaded the requisite strong inference of scienter.
According to a news article dated November 9, 2011, the U.S. Supreme Court on Monday refused to consider the Sixth Circuit's revival of a shareholder class action accusing two former Dana executives of accounting fraud in connection with a restatement the auto parts maker made in 2005. The high court rejected the Defendants' contention that the Sixth Circuit decision warranted review because the Complaint failed to meet the heightened securities fraud pleading requirements under the Private Securities Litigation Reform Act.
On December 21, 2011, the Court issued an order granting the motion to reconsider and limit the scope of disclosure to that which Plaintiffs' Counsel represent they have provided in their Rule 26 disclosures the names and contact information of those persons whom they interviewed.
On June 3, 2013, the Court issued an order granting the Plaintiffs' motion for class certification with respect to purchasers of Dana stock during the class period.
The parties filed a Stipulation of Settlement on July 13, 2016. The Court granted preliminary approval of the Settlement on July 19. On November 30, the Court granted final approval of the Settlement and entered Final Judgment.
