October 10, 2024
Willkie secured a significant victory for private equity client CCMP Capital Advisors, LP in a securities class action before Judge William J. Martini in the District of New Jersey.
In City of Southfield Fire and Police Retirement System v. Hayward Holdings, Inc., et al., the plaintiff, a public pension fund, brought securities fraud claims against Hayward, a designer and manufacturer of pool equipment, and its private equity sponsors, including Willkie client CCMP. In an 81-page consolidated complaint, the plaintiff alleged that, after achieving substantial growth during the COVID-19 pandemic, Hayward made false or misleading statements regarding its inventory and distribution channels. The plaintiff also alleged that CCMP could be held directly liable for Hayward’s alleged misstatements and that CCMP controlled Hayward and could therefore be held secondarily liable as a “control person.”
The Court rejected all of plaintiff’s arguments and dismissed the case. The Court dismissed the direct liability claims against CCMP with prejudice based on Willkie’s argument that, although CCMP-affiliated funds owned equity in Hayward and appointed directors to Hayward’s board, CCMP was not the “maker” of Hayward’s statements under the Supreme Court’s decision in Janus Capital Group, Inc. v. First Derivative Traders. The Court also agreed with Willkie’s argument that CCMP is an improper party because it is an investment advisor that did not, and never has, owned any Hayward stock, which was owned by affiliated funds. And the Court dismissed all claims against Hayward as inadequately pleaded under the PSLRA, and therefore also dismissed the control person claim against CCMP because there was no adequately pleaded underlying primarily violation.
This dismissal continues Willkie’s track record of obtaining dismissal for private equity sponsors in securities litigation and establishing case law that private equity sponsors cannot be held directly liable even when they own equity and appoint directors.
The Willkie team was led by partner Tariq Mundiya, counsel Joshua Levy and law clerk Matthew Davis.
In City of Southfield Fire and Police Retirement System v. Hayward Holdings, Inc., et al., the plaintiff, a public pension fund, brought securities fraud claims against Hayward, a designer and manufacturer of pool equipment, and its private equity sponsors, including Willkie client CCMP. In an 81-page consolidated complaint, the plaintiff alleged that, after achieving substantial growth during the COVID-19 pandemic, Hayward made false or misleading statements regarding its inventory and distribution channels. The plaintiff also alleged that CCMP could be held directly liable for Hayward’s alleged misstatements and that CCMP controlled Hayward and could therefore be held secondarily liable as a “control person.”
The Court rejected all of plaintiff’s arguments and dismissed the case. The Court dismissed the direct liability claims against CCMP with prejudice based on Willkie’s argument that, although CCMP-affiliated funds owned equity in Hayward and appointed directors to Hayward’s board, CCMP was not the “maker” of Hayward’s statements under the Supreme Court’s decision in Janus Capital Group, Inc. v. First Derivative Traders. The Court also agreed with Willkie’s argument that CCMP is an improper party because it is an investment advisor that did not, and never has, owned any Hayward stock, which was owned by affiliated funds. And the Court dismissed all claims against Hayward as inadequately pleaded under the PSLRA, and therefore also dismissed the control person claim against CCMP because there was no adequately pleaded underlying primarily violation.
This dismissal continues Willkie’s track record of obtaining dismissal for private equity sponsors in securities litigation and establishing case law that private equity sponsors cannot be held directly liable even when they own equity and appoint directors.
The Willkie team was led by partner Tariq Mundiya, counsel Joshua Levy and law clerk Matthew Davis.
