FEDERAL COURT DISMISSES PUTATIVE SECURITIES CLASS ACTION AGAINST PILLSBURY CLIENT CENTURY ALUMINUM

March 4, 2011
San Francisco—On March 3, 2011, Judge Susan Illston of the United States District Court for the Northern District of California dismissed a putative class action alleging that Century Aluminum Company, headquartered in Monterey, California, and certain of its directors and officers, along with underwriters Credit Suisse Securities (USA) LLC and Morgan Stanley & Co., had misled shareholders by failing to adhere to GAAP in the presentation of certain financial information on an interim statement of cash flows. As it did almost a year ago when it dismissed the first amended consolidated complaint with leave to amend, the court held that the lead plaintiffs failed to state a claim under either the Securities Exchange Act of 1934 or the Securities Act of 1933. This time, however, the court dismissed the third amended consolidated complaint with prejudice, dismissed the action in its entirety, and entered judgment in favor of all defendants.

The lead plaintiffs alleged that Century had misstated cash flows resulting from the termination of certain forward financial contracts with an affiliate by presenting them using the net method, rather than the gross method, in a Form 10-Q filed in November 2008 and incorporated by reference into a prospectus supplement filed in connection with a shelf offering of common stock in January 2009. The complaint charged that Century, by using the net method, had falsely portrayed Century as "liquid and cash-rich, when – in reality – it was not." The complaint further alleged that the truth about Century’s financial condition was revealed when the company issued a restatement in March 2009, and that upon news of the restatement, the price of Century’s stock had dropped.

The court held that plaintiffs failed to state a claim under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 because they had failed sufficiently to allege the element of scienter (or wrongful intent). The court also held that plaintiffs had failed to state a claim under Section 11 of the Securities Act of 1933 because they had failed sufficiently to allege that they had purchased Century’s common stock traceable to the shelf offering, rather than in the secondary market.

In its prior April 27, 2010 order dismissing the complaint, the court had granted plaintiffs leave to amend their allegations. But this time, noting that the plaintiffs had failed to allege facts and address deficiencies described in the court’s prior order, the court dismissed the complaint with prejudice and entered judgment in favor of all defendants.

Partner Bruce Ericson, co-leader of Pillsbury's Securities Litigation Team, and litigation associate Jeffrey Jacobi represented Century Aluminum Company and the individual defendants. Robert P. Varian and Stephen M. Knaster of Orrick, Herrington & Sutcliffe LLP, represented the underwriters. Francis M. Gregorek, Betsy C. Manifold and Richele R. Rickert of Wolf Haldenstein Adler Freeman & Herz represented the lead plaintiffs.

The case is In re Century Aluminum Company Securities Litigation, No. C-09-1001-SI, in the U.S. District Court for the Northern District of California.

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