Bill Hopkins, a lawyer in our firm’s Consumer Fraud Section, is working with the Law Firm of Robbins, Geller, Rudman & Dowd, L.L.P. in a securities class action lawsuit that is pending in a South Carolina court. The case, which is proceeding to trial, was filed by the City of Ann Arbor Employees’ Retirement System, on behalf of itself and all others similarly situated, against Sonoco Products Company, its Chairman of the Board and CEO Harris E. DeLoach, Jr. and former CFO Charles J. Hupfer. The lawsuit alleges the Defendants violated Section 10(b) of the Securities Exchange Act of 1934.
Sonoco is a global supplier of industrial and consumer packaging and packaging services headquartered in Hartsville, S.C. While Sonoco met or exceeded earning estimates for fourteen consecutive reporting periods, in late 2006, the company provided certain key customers price concessions and deductions. Additionally, the company’s flexible packaging division lost an account with one of its largest customers when it decided not to match a competing bid for the customer’s business. The Plaintiff contends that while the Defendants knew these issues would adversely impact financial results, they failed to report this information and also allegedly cushioned the 2007 forecasts from the deleterious effects of the price concessions and lost business by artificially inflating gains from productivity.
On February 7, 2007, Sonoco issued a press release announcing its financial results for the fourth quarter and year end 2006. Sonoco did not disclose any information regarding the price concessions and lost volume or the impact these issues could have on the company’s financial performance in 2007. Soon thereafter, DeLoach sold 155,000 shares of stock. On September 18, 2007, Sonoco officially lowered its third quarter 2007 earnings guidance and, for the first time, disclosed “lower volumes” and “price reductions in certain flexible packaging without offsetting reductions in costs”.
On September 30, 2010, the South Carolina district court entered an order granting Plaintiffs’ Motion for Class Certification. The Class was certified for those purchasers of Sonoco’s common stock between February 7, 2007 and September 18, 2007. Defendants sought permission from the Fourth Circuit Court of Appeals to appeal the order granting class certification. The Fourth Circuit denied their petition.
On September 22, 2011, the South Carolina district court denied the Defendants’ Motions for Summary Judgment. The Defendants again sought permission to file an interlocutory appeal with the Fourth Circuit Court of Appeals and permission was again denied. The Court has just approved the Plaintiffs’ proposed Class Action Notice for class members and approved the Plaintiffs’ Motion to Distribute the Class Notice. It is anticipated this case will be set for trial in the Spring of 2012.
If you or someone you know has purchased stock or another security and believe the decision to make the purchase was based upon false or misleading information, there may be a viable case for violation of the securities laws. If you have any questions about this case, or about securities litigation generally, contact Bill Hopkins at Bill.Hopkins@BeasleyAllen.com.
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