On May 11, 2021, Saxena White secured a major victory with a significant decision issued by Chief Judge Algenon L. Marbley of the Southern District of Ohio in Employees Retirement System of the City of St. Louis v. Jones et al., No. 2:20-cv-04534 (S.D. Ohio). In his order, Chief Judge Marbley denied Defendants’ motion to dismiss the consolidated federal shareholder derivative action in its entirety.
The Consolidated Verified Shareholder Complaint alleged that current and former officers and directors of FirstEnergy illegally funneled over $60 million to Ohio public officials, led by disgraced Ohio Speaker of the House Larry Householder and his co-conspirators, to secure a billion-dollar bailout of the Company’s financially imperiled nuclear power plants. The U.S. Attorney for the Southern District of Ohio described the years-long political bribery scheme as the largest in Ohio history. In violating the law and their fiduciary duties, Defendants greatly damaged FirstEnergy and its shareholders.
In his order, the Court found “extensive and detailed allegations” that Director Defendants issued “numerous” false and misleading Proxy Statements concealing their role in the bribery scheme, while seeking shareholder approval of their own reelection and executive compensation. Additionally, Director Defendants opposed shareholder proposals to increase transparency of the Company’s political spending as the Company contributed millions of dollars towards the bribery scheme. These false statements harmed FirstEnergy and its shareholders when Board members were reelected and the scheme was allowed to perpetuate. When the truth was revealed by a Criminal Complaint and FBI Affidavit detailing the bribery scheme, FirstEnergy’s stock lost 45% of its value.
Further, the Court found that a pre-suit demand on the Company’s Board of Directors was excused as futile due to their own active participation in the scheme and substantial likelihood of liability. First, the Criminal Complaint detailed that the Company’s CEO was “personally involved in the bribery scheme,” and Director Defendants claimed that they maintained an informed status over the Company’s political contributions. Second, Defendants recklessly disregarded “numerous red flags” that the Company was massively funding the bribery scheme, including news articles on the suspicious relationship between Householder and FirstEnergy, the large amounts of contributions made by the Company to Householder, and the unprecedented amount of dark money spent to support the nuclear bailout benefitting FirstEnergy.
In holding that “Defendants face a substantial likelihood of liability,” the Court found that the allegations in the Consolidated Complaint supported the inference that “a majority of the Director Defendants recklessly disregarded their duties to the Company and allowed the criminal scheme to continue unchecked.”
Last year, Judge Marbley appointed Saxena White as co-lead counsel in the action for its track record of successfully prosecuting shareholder derivative actions as well as its “diverse team.”