(Updates with panel’s conclusion in fourth paragraph.)
Dec. 29 (Bloomberg) -- Celestica Inc., a Canadian electronics manufacturer, must face shareholder claims that it misled them about the costs of a corporate restructuring, a U.S. appeals court ruled.
The U.S. Court of Appeals in New York today reversed a lower-court’s dismissal of the fraud lawsuit. Celestica investors, represented by a group of union pension funds, sued the company and its former chief executive officer, Stephen Delaney, and former chief financial officer, Anthony Puppi, in 2007.
The three-judge appeals court panel ruled that the shareholders alleged sufficient facts to support the defendants’ scienter, or knowledge that they knew they were misstating Celestica’s earnings and financial prospects.
“The particular allegations that Delaney and Puppi were specifically informed, and had reason to know, of the growing inventory stockpile in Celestica’s Mexican and American facilities are sufficient to establish the individual defendants’ scienter,” the panel said in the ruling. “Moreover, those allegations are sufficient to establish corporate scienter on behalf of Celestica.”
The ruling reverses a 2010 decision by U.S. District Judge George Daniels dismissing the suit.
Celestica’s misstatements artificially inflated the company’s share price, causing investors to lose money when the true costs associated with the restructuring became public, according to the shareholders’ lawsuit. The group seeks damages on behalf of all those who bought the Toronto-based company’s stock from Jan. 27, 2005, to Jan. 30, 2007.
Celestica representatives didn’t immediately return a voice-mail message to its media contact line seeking comment on today’s ruling.
Celestica fell 1.2 percent to C$7.48 at 12:56 p.m. in trading in Toronto.
The case is New Orleans Employees Retirement System v. Celestica Inc., 10-4702, U.S. Court of Appeals for the Second Circuit (Manhattan).
--Editors: Michael Hytha, Stephen Farr
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