Login | September 18, 2021

9th District reverses Goodyear shareholder suit ruling

Legal News Reporter

Published: July 23, 2021

A group of shareholders sued 14 current and former directors and officers of Goodyear Rubber & Tire Company for allegedly concealing safety issues related to the company’s G159 tire.
The Steven A. Ettinger Inc. Profit Sharing Plan alleged Goodyear executives breached their fiduciary duties, engaged in fraudulent conduct and committed ultra vires acts.
After a Summit County trial court dismissed the shareholder derivative complaint, the plaintiffs appealed, claiming the trial court erred by finding the lawsuit failed to allege sufficient particularized facts demonstrating that a pre-suit demand would have been futile.
Ettinger argued the trial court’s analysis was incomplete because the trial court focused exclusively on the complaint’s allegations about the excessive compensation received by the board. The 9th District Court of Appeals recently sustained Ettinger’s assignment of error.
According to the complaint:
• Goodyear manufactured the G159 tire from 1996 until 2003. While originally intended for pickup and delivery trucks, it was later sold for use on motorhomes. Since the G159 tire was designed to withstand a temperature of 194 degrees Fahrenheit, using the tires on vehicles travelling long distances caused the tire’s temperature to exceed 194 degrees. When used on motorhomes, the G159 tire was prone to overheating, which resulted in tread separation, which, in turn, resulted in crashes, accidents, and – ultimately – lawsuits.
• When the speed limits on the nation’s highways increased to 75 MPH, Goodyear increased the speed rating on the G159 tires from 65 MPH to 75 MPH, and falsely claimed the increased speed rating was safe and did not compromise the tire’s safety margin.
• Goodyear quietly and confidentially settled multiple lawsuits while only internally
acknowledging the problems with the G159 tires. In addition, these settlements were done without full disclosure of the problems with the tires, and Goodyear required the plaintiffs to execute confidentiality agreements to prevent disclosure of any evidence of defects in the G159 tires.
The complaint highlighted two lawsuits related to the G159 tires: Haeger v. Goodyear Tire & Rubber Co. and Schalmo v. Goodyear Tire & Rubber Co.
Schalmo resulted in a $5.6 million jury verdict against Goodyear. The complaint alleged Schalmo provided previously unknown information to the Haeger plaintiffs about the G159 tires, including test results that called into question the safety of those tires when used on motorhomes.
As a result of the Schalmo decision, the Haeger plaintiffs pursued additional litigation. The Haeger court determined Goodyear and its attorneys, including its associate general counsel, Deborah Okey, provided false and misleading information to the court prior to that case being settled. The Haeger court sanctioned Goodyear and its lawyers $2.7 million, which was affirmed on appeal.
The defendants argued the complaint was not properly verified under Civil Rule 23.1, and that Ettinger lacked standing due to its failure to submit a pre-suit demand to the board.
In her recent 3-0 opinion, appellate Judge Jennifer Hensal noted the trial court did not address many of the allegations contained in Ettinger’s complaint regarding demand futility, including allegations regarding the board’s illegal and ultra vires acts, or the individual directors’ exposure to liability.
Nor did the trial court address many of the arguments raised by the parties in their motion-to-dismiss briefing, including the defendants’ argument that Ettinger’s claims were barred by the statute of limitations.
“While a trial court is not required to address and dispose of each argument, the nature of this case and the number of arguments presented differentiates this case from others,” Judge Hensal wrote. “This case involves a 34-page derivative shareholder complaint, multiple defendants, and extensive briefing that raises numerous arguments and legal issues concerning demand futility. It requires a comprehensive review and analysis of all of the allegations of the complaint to determine whether Ettinger alleged sufficient particularized facts demonstrating that a pre-suit demand would have been futile. That analysis does not turn on the allegations regarding the board’s compensation, or the motives related thereto, alone. Yet that is what the trial court’s order in this case suggests.”
The appellate court reversed and remanded the case so the trial court to submit a proper analysis. Ninth District judges Lynne Callahan and Betty Sutton concurred.
The case is cited Steven A. Ettinger, Inc. v. Kramer, 2021-Ohio-2219.