Granite Construction’s $129 Million Class Deal Wins Final Nod

Granite Construction Inc.'s $129 million settlement to resolve a securities suit alleging that it manipulated financial statements in 2018 to overstate revenues and profits from certain projects won final approval from a California federal court.

Judge William Alsup of the U.S. District Court for the Northern District of California approved the deal Thursday. He also approved an award of attorneys fees totaling $20.9 million, $19.9 of which will be awarded to class counsel. The remaining $1 million will go to the lawyers that represented an intervenor in the lawsuit. The fee award represents 16.33% of the settlement fund, after adjustments for expenses.

The intervenor prompted reconsideration of the allocation plan in the settlement and helped to increase recoveries for those shareholders with stronger Section 11 Securities Act claims. But in the court’s view, the $129 million recovery was “almost entirely the result of the hard work of class counsel.”

The lawsuit, filed in 2019, triggered an internal investigation, which eventually led to Granite issuing a restatement in February 2021, which restated all of its financial statements during the class period.

The restatement concluded that “members of management applied pressure on individuals charged with operational finance responsibilities in the Heavy Civil operating group, which resulted in management directives to produce forecasts of revenues and costs that were overly optimistic and not in compliance with the Company’s standard operating procedures.”

Class members with both Section 11 claims and Section 10(b) Exchange Act claims will receive 2.1 times as much recovery as those with only Section 10(b) claims.

The settlement represents “approximately 20-30% of the estimated range of recoverable damages of $424 million to $670 million, which is nearly 400% more than the median recovery in cases alleging claims under Section 10(b) and Section 11,” according to the motion for settlement approval.

The settlement class includes anyone “who purchased or otherwise acquired Granite common stock during the period of April 30, 2018 through October 24, 2019,” and experienced damages as a result.

There were between 40 and 49 million in Granite common shares outstanding during the class period.

The Police Retirement System of St. Louis, lead plaintiff, is represented by Bleichmar Fonti & Auld LLP.

Granite Construction is represented by Munger, Tolles & Olson LLP, O’Melveny & Myers LLP, and Dechert LLP. Ericson is a partner at Pillsbury Winthrop Shaw Pittman LLP.

The case is Police Ret. Sys. of St. Louis v. Granite Constr. Inc., N.D. Cal., No 3:19-cv-04744, 3/17/22.