Plumbers and Steamfitters Local 137 Pension Fund v. American Express Co.
Status: Ongoing Case
Labaton Sucharow to reveal American Express’ hidden cost of losing its Costco partnership
On November 17, 2015, Labaton Sucharow was appointed co-lead counsel for lead plaintiff in a securities class action against American Express Company (American Express). Lead plaintiff alleges that American Express made false and misleading statements, and concealed material information about the size and state of its relationship with Costco Wholesale Corporation (Costco).
On January 19, 2016, the lead plaintiff filed an amended complaint. Defendants moved to dismiss the amended complaint on March 21, 2016, and the lead plaintiff opposed the motion on May 23, 2016. The defendants filed their reply on June 30, 2016.
On September 30, 2017, the court granted defendants’ motion to dismiss. Lead plaintiff filed a notice of appeal on December 28, 2017 and is set to file its opening appellate brief on April 12, 2018.
The action alleges that American Express failed to disclose the status and impact of deteriorating negotiations with Costco to renew its key co-brand and merchant agreement. Unbeknownst to investors, American Express was in danger of losing the Costco U.S. co-branding agreement, set to expire on March 31, 2016. Moreover, because American Express never reported the amount of business derived from the Costco agreement, investors could not appreciate the true financial loss of the agreement. When American Express finally told investors that it had lost the relationship with Costco, the company revealed for the first time the true, significant financial impact. In reaction to this news, the company’s stock price fell $7.93 per share to $78.08, or more than nine percent.
The case is Plumbers and Steamfitters Local 137 Pension Fund v. American Express Co., No. 15-cv-05999 (S.D.N.Y.). Labaton Sucharow represents lead plaintiff Pipefitters Union Local 537 Pension Fund. In addition to American Express, the defendants include Kenneth I. Chenault, Chairman of the Board and CEO; and Jeffrey C. Campbell, Senior Vice President and CFO.
In addition to issuing its own proprietary cards, American Express also issues cards under co-brand agreements with selected commercial firms in the United States. American Express’s Costco portfolio accounted for approximately nine percent of its worldwide billed business, and 20 percent of worldwide lending receivables. Yet, American Express never disclosed the size and importance of this relationship with Costco until it was lost.
Despite knowing that its accelerated negotiations with Costco had soured, on October 15, 2014 and again on January 21, 2015, American Express misled investors by assuring that all was well with its U.S. co-brand agreement with Costco. Finally on February 13, 2015, American Express announced that it would not renew the Costco agreement and informed investors of the true size of the relationship. In response, over two trading days the company’s share price declined, wiping out approximately $7.7 billion in market capitalization.