Rayonier, executives named defendants in shareholder class action suit

Rayonier Securities Litigation: The manufacturing company Rayonier Advanced Materials and two of its executives were recently named as defendants in a securities class action lawsuit, which alleges a number of failed disclosures on the part of the defendants in 2014 and 2015.

Specifically, the shareholder class action alleges that the company either knew or “recklessly disregarded” a number of facts which it failed to disclose, including that its long-time partner Eastman Chemical had been informing Rayonier about lower pricing from competitors since 2013. This potentially led the companies to begin a dispute over a provision in their initial agreement. And by not disclosing these facts to shareholders, the suit alleges Rayonier lacked a reasonable basis for the positive statements it made throughout the class period.

The suit was filed in the U.S. District Court for the Middle District of Tennessee and has a class period from October 29, 2014, to August 19, 2015. In addition to the company itself, the suit also tabs chairman, president and chief executive officer Paul Boynton; and chief financial officer and senior vice president of finance and strategy Frank Ruperto as defendants.

Rayonier Advanced Materials faces a shareholder class action suit.Rayonier Advanced Materials faces a shareholder class action suit.

Taking a closer look

These issues came to light in mid-August 2015, at the close of the class period, when Rayonier formally announced the dispute with Eastman, only about three weeks after posting positive results for the second quarter of that year. This came as a result of a suit filed in a Georgia court to clear up the dispute over the “meet and release” language in Rayonier’s contract with Eastman.

Rayonier sought to have the court “confirm its interpretation of certain provisions of the Supply Agreement which impact the price and, in some cases, the volume required to be purchased by Eastman,” the company announced. The contract began at the start of 2012 and was meant to run through the end of 2018, though Rayonier clarified that the dispute pertained only to 2016, 2017 and 2018, and would not impact sales prices or volumes for 2015.

“Pricing negotiations are always spirited debates around a number of factors and threatened or actual litigation is one tool that parties can employ,” Boynton said. “Although Rayonier Advanced Materials would have preferred to address any concerns or negotiations around pricing privately, Eastman’s August 4 action required us to take the necessary steps to protect our contractual arrangement.”

How did the stock price move?

At the start of the class period, stock in Rayonier Advanced Materials was trading at about $26.62 per share, but that price declined for much of the next year. By the start of 2015, it has declined to just $22.54, and just before the revelation of the company’s lawsuit, it had dropped to $13.97. Just a few days after the revelation, the price had fallen by more than half, to just $7.29. Today, stock in RYAM trades at $13.65.

 

For more information on this case or other class action litigations, please contact Sam Wankel, Senior Vice President, Research, Battea Global Litigation Research, Inc., at 203-987-4949 or info@battea.com.