Aracruz Celulose S.A.

Case Details

Class Period: April 7, 2018 - October 2, 2008
Date Filed: November 26, 2008
Case Number: 1:08-cv-23317
Jurisdiction: Southern District of Florida
icon-casetype Case Type: Securities Case

Case Summary

The Complaint brought forth claims for violations of the Securities Exchange Act of 1934 against Aracruz Celulose S.A., and certain of its senior executives. The Complaint alleged that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Aracruz ADRs during the class period.

Aracruz is a major Brazilian manufacturer of forest products and one of the largest pulp manufacturers in the world. The Company’s main products are bleached eucalyptus pulp and high-grade hardwood, which it markets to manufacturers of consumer paper products around the world. Unbeknownst to shareholders, the Company also ran a currency trading operation whose scale grew in size and scope equal to an entire fiscal year’s revenue from all other operations.

Specifically, the Complaint alleged that Aracruz secretly entered into derivatives that were far larger and riskier than necessary, thereby speculating on the currency exchange rate, while simultaneously telling investors that the derivatives were used only as a hedge to protect against foreign currency exposure.

On August 7, 2009, the Court appointed the City Pension Fund for Firefighters and Police Officers in the City of Miami Beach as Lead Plaintiff and Saxena White P.A. as Lead Counsel. On October 5, 2009, Lead Plaintiff filed its amended complaint. The Amended Complaint added significant detail and refinement to the fraud allegations, focusing on the proper use of currency hedging and knowledge about Aracruz’s use and misuse of its currency derivatives.

Aracruz moved to dismiss the Amended Complaint on November 13, 2009. On September 16, 2011, the Court issued an order denying in part Defendants’ motions to dismiss. The Court upheld claims based on Aracruz’s statements in its April 7 and July 7, 2008 Form 6-Ks that it “may use derivative instruments to protect against foreign exchange” volatility, and false and/or misleading statements in its July 7 earnings report.

Having overcome the Defendants’ motions to dismiss, Lead Plaintiff embarked upon a massive discovery undertaking. Because of the complex nature of the issues involved, Lead Plaintiff worked closely with several renowned and highly prestigious experts in the fields of economics, international finance, and derivatives. Lead Plaintiff’s motion for class certification was pending when the Court stayed proceedings as a result of the settlement on November 21, 2012.

The negotiations that produced this settlement were substantial. The parties conducted a formal, day-long mediation session in New York on October 16, 2012. Over the course of the next month, the parties continued their good faith, arm’s-length negotiations through the mediator, which occurred on an almost daily basis. As part of these discussions, the parties submitted supplemental mediation briefs on various issues relating to loss causation and damages. During this time, Lead Plaintiff continued to work very closely with its experts. On November 16, 2012, the parties engaged in a second formal, day-long mediation. Continuing negotiations into the night, the parties finally reached mutually agreeable terms for the resolution of this action, including a $37,500,000 cash payment to class members. On March 14, 2013, the Court preliminarily approved the settlement, and then on July 17, 2013,  entered a final judgment finding the settlement to be fair, reasonable and adequate in all respects