FirstEnergy Corp. Shareholder Derivative Litigation
CASE UPDATE: February 14, 2022, FirstEnergy Corp. and shareholders have agreed to a global settlement, subject to court approval, that will provide extensive corporate governance reforms and monetary relief in the amount of $180 million to be paid by the company’s directors and officers insurance carriers. This settlement will fully resolve the pending shareholder derivative litigation in both state and federal courts.
Under the terms of Settlement, FirstEnergy will receive $180 million, less a court-approved award of attorneys’ fees and expenses, and six directors who have been on the Board a minimum of five years will not stand for re-election. Additionally, FirstEnergy will adopt governance reforms that relate to the Company’s political spending and lobbying. This settlement was reached after more than 18 months of hard-fought litigation, in which more than ten contested motions were filed in three different courts. Settlement negotiations were facilitated by retired United States District Court Judge Layn R. Phillips, a preeminent mediator of complex shareholder representative actions.
The corporate governance enhancements include:
- Six members of the Board of Directors who have served on the Board for a minimum of five years will not stand for re-election at the company’s 2022 annual shareholder meeting.
- A special committee will be formed at the direction of the Board of at least three recently appointed independent directors to initiate a review process of the current executive team, to begin within 30 days of the 2022 annual shareholder meeting.
- The Board will oversee the company’s lobbying and political activities, including periodically reviewing and approving political and lobbying action plans prepared by management.
- The Board will form a committee of recently appointed independent directors to oversee the implementation and third-party audits of the Board-approved action plans.
- The company will implement enhanced disclosure to shareholders of political and lobbying activities.
- The company will further align the financial incentives of senior executives with proactive compliance with legal and ethical obligations.
Edelson Lechtzin LLP represents the plaintiff in the first-filed federal shareholder derivative action in the United States District Court for the Northern District of Ohio. The parallel federal shareholder derivative action is pending before Chief Judge Marbley in the United States District Court for the Southern District of Ohio under the caption Employees Retirement System of the City of St. Louis, et al. v. Jones, et al., Case No. 2:20-cv-4813, and the parallel Ohio state court case is captioned Gendrich v. Anderson et al., Case No. CV-2020-07-2107 (Ohio Ct. of Common Pleas, Summit Cnty.).
Edelson Lechtzin LLP has commenced a derivative case on behalf of shareholders of FirstEnergy Corporation alleging that the Board of Directors and certain officers of the corporation have breached their fiduciary duties to the company, were unjustly enriched, wasted corporate assets, and committed various violations of federal securities laws. It is further alleged that the various defendants engaged in a concerted effort to curtail losses from nuclear energy operations managed by a subsidiary in order to keep their positions with the company and to increase their compensation. In furtherance of their scheme Defendants sanctioned the corporate policy of illegal payments to government officials including the Ohio House Speaker, Larry Householder, and other individuals, which resulted in a significant reduction in shareholder value when it was subsequently exposed.
On July 17, 2020, U.S. officials filed a criminal complaint of conspiracy against Householder and others in the Southern District of Ohio arising out of the illegal payments made by FirstEnergy causing the stock of the Company to decline by up to 45% of its value within hours of the announcement.
The firm seeks to hold accountable the directors and officers of FirstEnergy whose actions caused and/or permitted the wrongdoing that the Company has engaged in.
If you wish to discuss this case, please click here to submit your contact information. The name of the case is Miller v. Michael J. Anderson, et al., No.: 5:20-cv-01743 (N.D. Ohio).