In re Royal Ahold N.V. Securities & Erisa Litig.

351 F.Supp.2d 334

In re ROYAL AHOLD N.V. SECURITIES & ERISA LITIGATION.

No. CIV.1:03-MD-01539.

United States District Court, D. Maryland.

December 21, 2004.

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Seth D. Goldberg, Seth D. Goldberg PC, Steven J. Toll, Daniel Stephen Sommers, Robert Joseph Barton, Cohen Milstein Hausfeld and Toll PLLC, Washington, DC, Andrew J. Entwistle, Robert Nicholas Cappucci, Stephen David Oestreich, Entwistle and Cappucci LLP, Robert Ira Harwood,

Wechsler Harwood LLP, Robert S. Schachter, Zwerling Schachter and Zwerling LLP, Lester Levy, Wolf, Popper, Ross, Wolf & Jones, Fred Taylor Isquith, Wolf, Haldenstein, Adler, Freeman and Herz LLP, Ralph M. Stone, Lee S. Shalov, Shalov, Stone and Bonner LLP, Steven G. Schulman, Milberg, Weiss, Bershad and Schulman LLP, Daniel L. Berger, Hannah Greenwald, Jeffrey Neil Leibell, Bernstein, Litowitz, Berger and Grossmann, Edward J. Schindler, Bernstein, Liebhard and Lifshitz LLP, Jonathan M. Plasse, Goodkind, Labation, Rudoff and Sucharow LLP, Christopher Lometti, Frank R. Schirripa, Schoengold and Sporn PC, New York, NY, Gregory M. Kline, Howard Scott Jones, Adelberg, Rudow, Dorf and Hendler LLC, Charles J. Piven, Marshall N. Perkins, Law Offices of Charles J. Piven PA, Steven Donald Silverman, Silverman and Thompson, Robert K. Jenner, Janet and Jenner LLC, Baltimore, MD, Samuel Howard Rudman, Robert Michael Rothman, Cauley, Geller, Bowman and Rudman LLP, Melville, NY, Conor R. Crowley, Much, Shelist, Freed, Denenberg, Ament and Rubenstein PC, Chicago, IL, Ronald B. Rubin, Rubin and Rubin Chtd., Rockville, MD, Marc A. Topaz, Schiffrin, Craig and Barroway LLP, Bala Cynwyd, PA, for Plaintiffs.

Douglas P. Baumstein, Glenn M. Kurtz, Joseph B. Schmit, White and Case LLP, Elizabeth Ann Quinlan, William Andrew Krohley, Kelley, Drye and Warren LLP, Amy Neuhardt, Shearman and Sterling LLP, George A. Salter, Richard Bloom, Steven F. Barley, Tracey A. Tiska, Hogan and Hartson LLP, New York, NY, Andrew Gendron, G. Stewart Webb, Jr., Gabrielle S. Moses, Venable, Baetjer and Howard LLP, Gerard J. Gaeng, David Matthew Wyand, Rosenberg, Martin, Funk and Greenberg LLP, Stephen J. Nolan, Law Offices of Stephen J. Nolan Chartered, Baltimore, MD, John Arak Freedman, Angela Joy Showalter, Leslie Wharton, Scott B. Schreiber, Arnold and Porter, Alexandre de Gramont, Richard J. Morvillo, Crowell and Moring LLP, Richard L. Brusca, Skadden, Arps, Slate, Meagher and Flom LLP, Kevin Marcus Colmey, Laurin H. Mills, Nixon Peabody LLP, Washington, DC, Carolyn G. Nussbaum, Richard A. McGuirk, Nixon Peabody LLP, Rochester, NY, for Defendants.

Robert Joseph Barton, Cohen, Milstein, Hausfeld and Toll PLLC, Washington, DC, Charles J. Piven, Marshall N. Perkins, Law Offices of Charles J. Piven PA, Virginia B. Evans, Office of the United States Attorney, Thomas M. Dibiagio, Baltimore, MD, Jeffrey Alan Barrack, Barrack, Rodos and Bacine, Philadelphia, PA, Robert N. Kaplan, Kaplan, Fox and Kilsheimer, James G. Cavoli, United States Attorneys Office, Stephen R Diprima, Wachtell, Lipton, Rosen and Katz, Sander Bak, Scott Alexander Edelman, Milbank, Tweed, Hadley and McCloy LLP, New York, NY, John Christopher Pasierb, Cohen, Gettings and Caulkins PC, Arlington, VA, for Movants.

MEMORANDUM

BLAKE, District Judge.

Multiple motions to dismiss are pending in these consolidated securities fraud actions transferred here by the Judicial Panel on Multidistrict Litigation. The claims arise out of an approximately $ 1.1 billion restatement of earnings, together with a $24.8 billion reduction in revenue, announced in 2003 by Royal Ahold N.V. ("Royal Ahold"), a Netherlands company heavily involved in the supermarket and food service business in the United States. A voluminous amended complaint names as defendants various Royal Ahold entities, including its Maryland-based subsidiary U.S. Food Service, Inc. ("USF"), as well as accountants, underwriters, and individuals, alleging violations of the securities laws.

Preliminarily, I will state a summary of my rulings on the various motions.

The Fed.R.Civ.P.12(b)(2) motions to dismiss for lack of personal jurisdiction submitted by foreign individual defendants Fahlin, Boonstra and de Ruiter will be granted. The motions to dismiss for lack of personal jurisdiction submitted by foreign individual defendants Van der Hoeven, Meurs, and Andreae will be denied.

The Fed.R.Civ.P. 12(b)(1) motions submitted by all defendants to dismiss the claims of foreign purchasers of Royal Ahold shares on foreign exchanges for lack of subject matter jurisdiction will be denied.

The global underwriter defendants' Fed.R.Civ.P. 12(b)(1) motion to dismiss the § 11 and § 12(a)(2) claims for lack of subject matter jurisdiction will be granted.

The Fed.R.Civ.P. 12(b)(6) motions submitted by all defendants to dismiss all allegations concerning conduct that pre-dates July 30, 1999 as barred by the statute of limitations will be granted.

The Fed.R.Civ.P. 12(b)(6) motions to dismiss the § 10(b) and Rule 10b-5 claims submitted by defendants Tobin, Grize, Resnick, Deloitte & Touche LLP ("Deloitte U.S."), Deloitte & Touche Accountants ("Deloitte Netherlands"), Ahold USA and Ahold USA Holdings will be granted. The motions to dismiss the § 10(b) and Rule 10b-5 claims submitted by defendants Kaiser, Lee, Andreae, and Meurs will be denied. Van der Hoeven's motion to dismiss the § 10(b) and Rule 10b-5(b) claims will be denied; his motion to dismiss the § 10(b) and Rule 10b-5(a) and (c) claims will be granted. Miller's motion to dismiss the § 10(b) and Rule 10b-5(b) claims will be granted, but his motion to dismiss the Rule 10b-5(a) and (c) claims will be denied.

The Deloitte & Touche LLP ("Deloitte U.S.") Fed.R.Civ.P. 11 motion to strike certain allegations will be granted.

The Royal Ahold defendants' (along with individual defendants Van der Hoeven and Meurs) Fed.R.Civ.P. 12(f) motion to strike all allegations concerning misconduct at Ahold USA subsidiaries Tops and Giant-Carlisle and allegations concerning the realization of synergies and the integration of acquisitions will be denied; their motion to strike all allegations concerning accounting irregularities with the Argentine subsidiary Disco will be granted.

The Fed.R.Civ.P. 12(b)(6) motions to dismiss the § 11 and § 12(a)(2) claims submitted by Royal Ahold, the lead underwriters, the Deloitte defendants, and the individual defendants will be granted. The plaintiffs are granted 60 days to seek leave to amend the § 12(a)(2) claims.

The Fed.R.Civ.P. 12(b)(6) motions to dismiss the control person liability claims under § 20(a) submitted by defendants Miller, Resnick, Kaiser, Van der Hoeven, Meurs, Andreae, Tobin and Grize will be denied. Lee's motion to dismiss the § 20(a) claim will be granted. All motions to dismiss the § 15 claims will be granted; the plaintiffs are granted 60 days to seek leave to amend the § 15 claims.

TABLE OF CONTENTS

I. Background

A. Factual History

B. Prior and Related Proceedings

C. The Parties

1. The Plaintiffs

2. The Corporate Defendants

3. The Auditors

4. The Lead Underwriters and Global Underwriters

5. The Foreign Individual Defendants

6. The Domestic Individual Defendants

II. Discussion

A. Standard of Review

B. Personal Jurisdiction

1. Cees Van der Hoeven, Michiel Meurs, Jan Andreae

2. Roland Fahlin

3. Cor Boonstra

4. Henny de Ruiter

C. Subject Matter Jurisdiction

1. Foreign Purchasers of Royal Ahold Securities on Foreign Exchanges

2. The Global Underwriters ("Dutch Banks")

D. Statute of Limitations

E. Section 10(b) and Rule 10b-5 Claims

1. Cees Van der Hoeven and Michiel Meurs

2. Jan G. Andreae

3. Mark Kaiser and Timothy J. Lee

4. James L. Miller

5. Michael Resnick

6. Robert G. Tobin

7. William J. Grize

8. The Deloitte Defendants

9. Ahold USA

10. Ahold USA Holdings

F. Royal Ahold Defendants' Motions to Strike

1. Disco

2. Tops and Giant-Carlisle

3. Statements Concerning Royal Ahold's Integration of its Acquisitions

G. Section 11 and Section 12

H. Control Person Liability Under Section 20(a) and Section 15

III. Conclusion

I. BACKGROUND

A. Factual History

On February 24, 2003 Royal Ahold announced that it was restating its reported earnings by $ 500 million for fiscal years 2001 and 2002 due to a series of accounting inaccuracies related to promotional allowances at its U.S. Foodservice, Inc. ("USF") division. (See Compl. ¶ 184.)¹ The announcement also advised investors that Royal Ahold would be adjusting historical financial statements to no longer fully consolidate its joint ventures and that the company was investigating "the legality of certain transactions" at its Argentine subsidiary Disco. (Id.) The announcement caused the price of Royal Ahold common stock trading on foreign exchanges to drop 63% and the price of Royal Ahold ADRs trading on the New York Stock Exchange ("NYSE") to fall 61%. (¶ 1.) Since the February 2003 announcement, Royal Ahold has made additional restatements of earnings totaling $ 24.8 billion in revenues and approximately $ 1.1 billion in net income. (¶¶ 1, 30.)

Regulators in the United States and Europe have launched civil and criminal investigations of individuals and entities associated with Royal Ahold. Among the agencies conducting such investigations are: the United States Department of Justice, the United States Attorney's Office for the Southern District of New York, the Securities and Exchange Commission ("SEC"), the NYSE, the National Association of Securities Dealers, the Office of the Dutch Public Prosecutor, the Euronext Amsterdam Exchange, and the Dutch Authority for Financial Markets. (¶¶ 209-228.) Investigations by these entities as well as Royal Ahold have revealed that the accounting discrepancies stemmed mainly from two company practices: (1) inflated reporting of income from vendor...