Pomerantz Achieves Preliminary Approval of $74 Million Settlement in Arconic Securities Litigation

On May 2, 2023, Chief U.S. District Court Judge Mark R. Hornak of the Western District of Pennsylvania granted preliminary approval to a $74 million settlement on behalf of defrauded investors in Howard v. Arconic et al., No. 2:17-cv-01057 (W.D. Pa.), a securities class action in which Pomerantz is Co-Lead Counsel.

Arconic, Inc. is an American industrial company specializing in lightweight metals engineering and manufacturing. Allegations against Arconic include that, despite having knowledge that its Reynobond PE aluminum insulation panels were combustible and therefore inappropriate for use in the construction of high-rise structures, the company continued selling the panels for this purpose, while publicly downplaying the associated risks.

On June 14, 2017, a devastating fire broke out on in the Grenfell Tower block of flats in London, United Kingdom, resulting in the deaths of 72 people and injuries to more than 70 other tenants. Following the tragedy, numerous investigations were conducted, ultimately revealing that, while an electrical fault within a refrigerator located on the fourth floor caused the fire, Arconic’s aluminum insulation panels, which covered the outside of the building, likely acted as an accelerant, contributing to the rapid spread of the flames to the floors above. Less than two weeks after the fire, Arconic issued a press release announcing that it would discontinue global sales of Reynobond PE for use in high-rise buildings.

In August 2017, Pomerantz filed a securities class action against Arconic concerning their role in the fire. In June 2019, Chief Judge Hornak granted defendants’ motion to dismiss the case while allowing plaintiffs to provide an amended complaint, citing the need for more concrete evidence demonstrating that Arconic and its executives had sufficient knowledge to conclude that the insulation panels they were selling posed a significant safety risk.

In response, Pomerantz filed a Second Amended Complaint in July 2021, which contained new allegations that convinced Chief Judge Hornak to not only change his mind on many of the claims he had previously dismissed, but also to make new law in plaintiffs’ favor on several significant issues, including matters related to risk disclosure statements, loss causation, and scienter.

Partner Emma Gilmore, who led Pomerantz’s litigation in this matter, stated, “We are gratified that the court found that the amplified and new factual allegations in the Second Amended Complaint transform the context in which defendants’ alleged misrepresentations were made. Its decision sets important new precedents in favor of investors.”

The $74 million settlement represents approximately 22% of recoverable damages for defrauded Arconic shareholders, an amount far exceeding the 1.8% median recovery for all securities class action settlements in 2022.

A final approval hearing is scheduled for August 9, 2023.