Ryanair has agreed to pay $5 million to settle a class action securities lawsuit filed by an Alabama pension fund that claimed it suffered investment losses due to alleged false and misleading statements made by the Irish airline about its operations.
The lawsuit, brought in U.S. District Court for the Southern District of New York in 2018 by the City of Birmingham Firemen’s and Policemen’s Supplemental Pension System, alleged that during the class period, which spanned from late May 2017 through late September 2018, Ryanair “made false and misleading statements and/or failed to disclose adverse information regarding Ryanair’s business and operations,” adding that “the state of the company’s labor relations was far worse than had been publicly represented.”
The pension fund claimed that as a result of the allegedly false statements, the airline’s American depositary shares traded at “artificially inflated prices.” In particular, the complaint alleged that Ryanair misled the market about the sustainability of its labor practices. It said that, “for years,” CEO Michael O’Leary “touted the airline’s low-cost business model and expressed antipathy to unionization.”
However, according to the complaint, the September 2017 cancellation of hundreds of Ryanair flights due to a pilot “rostering” error “caused some observers to question Ryanair’s labor practices and the sustainability of its anti-unionization stance.” The complaint noted that by December 2017, Ryanair had changed its position and announced it would accept the unionization of its employees.
“During and after these events, Ryanair downplayed the effect on its bottom line,” the complaint said. “But subsequent announcements about increased personnel costs and decreased profitability caused Ryanair’s stock price to fall.”
The lawsuit also argued that O’Leary had a “motive and opportunity to commit fraud” because he had sold 6 million shares of Ryanair stock during the class period, which it claimed “establishes an incentive to inflate the stock price.” However, a court ruling shot down that argument, noting that O’Leary still retained the vast majority of his stock, which “substantially undermines” the claim that he was motivated to commit fraud.
A spokesperson for Ryanair said the airline “welcomed” the settlement, and the $5 million settlement amount is “considerably less than the legal costs that would have been incurred had this action gone all the way to trial.”
Ryanair issued a statement that the lawsuit had been settled following recent mediation between the airline and the pension fund and that it came after the court “dismissed many of the claims made by the plaintiff, considerably narrowing the grounds for action,” in June 2020.
The 2020 ruling by U.S. District Judge J. Paul Oetken stated that “Plaintiff has failed to establish falsity, materiality, and scienter for all of the potentially actionable statements listed in this complaint, with the sole exception of Defendants’ statements regarding the likelihood of unionization.”
Ryanair maintains that “there was no lawful basis for this claim, but that the settlement is in the interest of all shareholders due to the very modest settlement amount.”
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Tags: City of Birmingham Firemen’s and Policemen’s Supplemental Pension System, Class Action, Lawsuit, Litigation, Michael O’Leary, Pension Fund, Ryanair, securities lawsuit, settle, Settlement