Two years after a group of shareholders filed a securities-fraud lawsuit against current and former officials of Owens Corning, a federal judge in Toledo has dismissed the case.
The suit, which sought class-action status and was instigated by national law firms that specialize in securities litigation, is barred by the statute of limitations, Judge David Katz said in a written ruling.
" Their lawsuit, filed in January 2003, is time-barred," he wrote.
The lawsuit alleged that retired Chief Executive Officer Glen Hiner and others hid OC's poor financial condition from investors in the months leading up to the firm's bankruptcy filing in October, 2000.
Neither New York attorney Ira Press nor Cleveland attorney Timothy Fitzgerald, who represented the plaintiffs, returned calls seeking comment.
Chicago lawyer Chad Pekron, who defended Mr. Hiner and the others, also couldn't be reached.
The suit was one of three filed across the United States against Mr. Hiner and certain other executives and board members.
In federal court in Boston, a four-year-old lawsuit filed by bond-holders who contend that they were misled is pending. And in state court in the New York, a similar action by firms holding OC's bank debt has been put on hold by the Delaware judge overseeing the bankruptcy case.
OC, a building products manufacturer that is Toledo's third-largest corporation, is not named in the suits. It continues to operate under Chapter 11 protection, which shields firms from litigation.
The objective of such securities lawsuits, which have become commonplace when a company or its stock goes south, is to tap into rich insurance policies that firms take out on directors and officers, according to legal experts.misled about the success of a program established by the company in 1998 to manage its multibillion-dollar asbestos liability. In filing for Chapter 11, the firm blamed an inability to keep up with claims payments.
Judge Katz, of U.S. District Court in Toledo, didn't address the substance of the allegations but rather accepted defense arguments that the plaintiffs waited too long to file suit.
In the early March ruling, Mr. Katz said shareholders had one year from the discovery of the alleged fraud, or until late 2001, to file suit. Passage of the Sarbanes-Oxley bill extended the time to two years. But in waiting until 2003, the action still was too late, he said.
In written arguments, plaintiffs tried to get around the issue of the statute of limitations by saying that they didn't learn of the alleged fraud until evidence was produced much later in OC's bankruptcy case.
Judge Katz said, however, that there were plenty of "storm warnings" in 2000, and the plaintiffs had a duty under the law to begin their own investigation at that time.
They presented no evidence indicating that they did so, he ruled.
Under OC's proposed bankruptcy exit plan, stock will be voided.
Besides Mr. Hiner, defendants included current Chairman Michael Thaman, who is also OC's chief financial officer; J. Thurston Roach, former CFO; Deyonne Epperson, comptroller; Landon Hilliard, a director, and Maura Abeln Smith, former legal chief.
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