Corporate Governance

Importing International Litigation: Bobin v. Lagardere (the Complaint)

By J. Robert Brown

As the US economy suffers and oil prices escalate upward, perhaps comfort can be taken from the knowledge that we continue to import foreign litigation.  A recent example is the securities litigation brought against Lagardere and Daimler, the two owners of Airbus. 

In Bobin v. Lagardere, a case filed on June 12, 2008 (and posted on the DU Corporate Governance web site), the suit alleges securities violations by the European Aeronautic Defense and Space Company (EADS), a joint venture owned mainly by Daimler of Germany and Lagardere of France.  The company makes the airbus.  The suit involves allegations of false statements in connection with the roll out of the mammoth A380, a double-deck, four-engine plane that will be the largest available commercial aircraft and capable of holding over 500 passengers.  As the complaint notes:

• defendants knowingly and affirmatively misrepresented contemporaneous material facts concerning EADS's true financial condition and its ability to meet delivery targets for the Airbus A380.  While defendants continued to report that its A380 program was "progressing as planned" and "certification was on target," defendants knew (but failed to disclose) that the significant production delays in connection with the A380 would negatively impact the Company's financial condition.

A second suit (Bristol County Retirement v. EADS) has been filed, with the putative class all US shareholders who purchased shares on foreign exchanges. 

There are a number of notable things worth mentioning about the case.  First, it is being brought on behalf of all purchasers of shares of EADS, including those located outside the United States.  This is true even though the shares are not traded in the United States.  EADS is a Dutch company and trades on exchanges in Spain, France and Germany.  The company does, however, offer ADRs in the United States. 

Second, EADS is currently embroiled in an insider trading scandal and is under investigation by the French government.  The government is looking into trading by company officials who knew before the market about production delays involving the A380.  Government investigators may, therefore, find themselves intersecting with US lawyers using US discovery tools to nose around the same set of facts (assuming plaintiffs get past the inevitable motion to dismiss and PSLRA discovery stay).

Third, EADS has in place a rube goldberg system of governance.  We will address this in a subsequent post.  Suffice it so say that even though there have been reforms (EADS no longer has two CEOs and two Chairmen), the system continues to be bureaucratic and inefficient.

Fourth, the shareholders of EADS, in at least some cases, are companies controlled by governments.  One of the two controlling shareholders, Sogeade, is a holding company owned jointly by Lagardere and the French government.  It is perhaps because of this that the plaintiffs are suing Lagardere but not Sogeade. 

We have posted the complaints on the DU Corporate Governance web site.

Full post as published by The Race to the Bottom on June 24, 2008 (boomark / email).