The Class Action Case Files
Portfolio monitoring and asset recovery of growing global securities class actions can be daunting. Broadridge can help simplify the complex.
Just the Facts
Kraft Heinz Company (NASDAQ: KHC), the third-largest food and beverage company in North America, was formed in 2015 from the merger between Kraft Foods Group, Inc. and H.J. Heinz Holding Corporation. Berkshire Hathaway Inc. and global investment firm, 3G Capital, facilitated this merger with the hopes of implementing cost cutting measures and ultimately increasing company revenue. However, in February 2019, Kraft Heinz reported a $15.4 billion write-down (one of the largest in corporate history), which caused a 27.5% decline of its share price.
Immediately thereafter, the first securities class action lawsuit against Kraft Heinz was filed on February 24, 2019. Within this action, which was brought under the Securities Exchange Act of 1934, Plaintiffs alleged that Kraft Heinz made materially false or misleading statements and omissions regarding, among other things, Kraft Heinz’s cost-cutting measures, and its valuation and testing for impairment of goodwill and intangible assets which in turn artificially inflated the price of Kraft Heinz’s common stock. On May 5, 2023, after more than 4 years of litigation, the parties came to term and reached a $450 million settlement.
The $450 million settlement ranks as the 41st largest federal securities class action settlement of all time, but it is only the second largest settlement year to date – 2023 is shaping up to be another historic year.
In addition to the securities class action settlement, the U.S. Securities and Exchange Commission (“SEC”) had earlier ordered Kraft Heinz to pay approximately $62.3 million in civil money penalties after finding that the company “engaged in various types of accounting misconduct” the sum of which will be distributed to harmed investors in a Fair Fund, thus bringing the total recovery to harmed investors here to over half a billion dollars.
Although the securities class action and the SEC Fair Fund concern similar alleged misconduct, harmed investors will need to file claims in both settlement administrations.
|
Opportunity #1: Securities Class Action Settlement |
Opportunity #2: SEC Fair Fund |
| Claim Deadline |
October 10, 2023 |
August 31, 2023 (extended) |
| Settlement Amount |
$450 Million |
$62.3 Million |
| Class Definition |
All persons or entities who purchased or otherwise acquired Kraft Heinz common stock or call options on Kraft Heinz common stock, or sold put options on Kraft Heinz common stock, from November 6, 2015 through August 7, 2019, inclusive, and were damaged thereby. |
Any person or entity who purchased or acquired shares of Kraft Heinz common stock listed on a U.S. exchange during the period from February 26, 2016 through February 21, 2019. |
| Security |
Kraft Heinz Common Stock, Kraft Heinz Call and Put Options |
Kraft Heinz Common Stock |
| Claims Administrator |
JND Legal Administration |
RCB Fund Services LLC |
| Class Counsel |
Bernstein Litowitz Berger & Grossman LLP and Kessler Topaz Meltzer & Check, LLP |
U.S. SEC |
| Lead Plaintiffs |
Sjunde AP-Fonden and Union Asset Management Holding AG |
N/A |
Case Challenges
RECENT COMPANY MERGER
On July 2, 2015, only 4 months before the class period began, Kraft Foods Group, Inc. and H.J. Heinz Holding Corporation merged to create The Kraft Heinz Company. This merger presents significant complexity to the recovery process because of its close proximity to the beginning of the class period, which occurred 8 years ago, and the delay that institutional investors may experience with updating their data. Transactional records associated with shares acquired pursuant to a merger are not always consistently recorded and updated, either contemporaneously, or at all. Thus, extra steps and reviews must be performed to ensure that any shares exchanged during the merger are properly accounted for because failure to do so can lead to a claim being found of lower value or even ineligible for recovery.
SELLERS ARE ELIGIBLE
Unlike most securities settlements, the settlement class in Kraft Heinz is not limited to class period purchasers, but also includes entities that sold options during the class period, which presents significant opportunity for harmed investors to recover. In line with this opportunity, the settlement specifies that, those options must have remained open through at least one of those days when corrective information was released to the market and partially removed the artificial inflation from the price of Kraft Heinz put options.
OPTION CONTRACTS
While the only eligible security is Kraft Heinz common stock in the SEC Fair Fund, there are several eligible securities, including Kraft Heinz common stock and call and put options in the securities class action settlement. Of the securities class action settlement’s net settlement fund, roughly $18 million will be available for the Kraft Heinz call options acquired and the put options sold during the class period. This presents greater complexity as it is difficult to identify the securities that have been impacted through standard portfolio-monitoring process when holders of equity, various debt instruments, and derivative securities are all eligible to recover in the settlement.
OLD CLASS PERIOD
Here, the alleged unlawful conduct occurred as far back as 8 years ago, with the class period being between 2015 and 2019. Because most financial institutions and individuals only retain accounting information and data for 7 years, class members may face difficulties compiling all relevant supporting documentation necessary to obtain compensation.
MULTIPLE RECOVERIES
The Kraft Heinz case presents two opportunities for recovery that parties must pursue in order to recover losses incurred due to the alleged Kraft Heinz scandal: the securities class action with a settlement amount of $450 million and the SEC Fair Fund of $62.3 million. Although the opportunities relate to the same conduct with overlapping eligibility (in part), to maximize recoveries, investors must submit claims and the relevant documentation in both opportunities.
Each year billions of dollars are being left on the table.
Find the right advocate who can help you maximize recoveries.