In re Eaton Corporation Securities Litigation

Updated: November 29, 2018

Status: Ongoing Case

On December 13, 2016, Labaton Sucharow was appointed lead counsel in a securities class action lawsuit against Eaton Corporation plc (Eaton) and certain of its senior executives. Eaton is an Ireland-based manufacturer of engineered products for the industrial, agricultural, construction, aerospace, and vehicle markets.

The action alleges that between November 13, 2013 and July 28, 2014 (the class period), the defendants issued false and misleading statements regarding the company’s unencumbered ability to divest its automobile-part manufacturing business. For most of its 100-year history, Eaton primarily was a vehicle component manufacturer. Since 2008, however, the company has been making strategic shifts away from its vehicle business, while growing its electrical component businesses.

In 2012, the company engaged in a merger with the Irish-headquartered Cooper Industries plc. (Cooper), which reincorporated Eaton in Ireland. Following the merger, and during the class period, in response to questions from securities analysts about the effect of the merger on the company’s ability to spin-off its business, Eaton executives falsely assured investors and the market of the continued feasibility of divesting the company’s automobile-part manufacturing business on a tax-free basis. This prospect was key to investors’ and analysts’ ability to value the company. As a result, Eaton and its executives artificially inflated the price of Eaton stock.

On July 29, 2014, Eaton CEO Alexander M. Cutler finally informed investors that, contrary to the company’s prior assurances, Eaton could not feasibly divest its vehicle business until late 2017 due to tax-law restrictions related to the merger with Cooper. Cutler further revealed that the company had been “well aware” of these restrictions “all along.” This disclosure caused a material decline in the price of Eaton stock.

The plaintiffs filed a consolidated class action complaint on January 13, 2017, which was dismissed on September 20, 2017. The plaintiffs then filed a second amended consolidated complaint on June 8, 2018, which was dismissed on August 20, 2018. The plaintiffs appealed the decision to the Second Circuit, and filed their appellant brief on November 29, 2018. Defendants' opposition brief will be filed on or about February 21, 2019. 

The case is In re Eaton Corp. Securities Litigation, No. 16-cv-05894 (S.D.N.Y.). Labaton Sucharow represents the lead plaintiff South Carolina Retirement Systems Group Trust. The defendants are Eaton Corporation plc and certain of its senior executives.

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