Arconic Wins Dismissal of Grenfell Tower Fire Investor Suit (1)

June 21, 2019, 6:16 PMUpdated: June 21, 2019, 7:12 PM

Investors can’t pursue claims that Arconic Inc. hid the unsafe use of a company product linked to a deadly London fire, a federal judge in Pennsylvania said June 21.

Arconic’s Reynobond PE paneling was part of Grenfell Tower’s exterior cladding system and allegedly contributed to the fire’s speedy growth. But investors didn’t “adequately, plausibly plead” that Arconic hid or misled them about sales of Reynobond PE for unsafe uses, the U.S. District Court for the Western District of Pennsylvania said. It dismissed the case without prejudice.

The June 2017 fire killed 71 people and injured an additional 70. Arconic’s share price dropped almost $4 (9.5%) when Reynobond PE was identified less than two weeks later as a potential contributor to the fire’s rapid spread, the opinion said. Arconic stopped selling Reynobond PE for use on high-rise buildings the same day the company’s stock dropped.

A U.K.-based sales employee allegedly had reason to know that a third party planned to improperly use Reynobond PE on the tower, the would-be class suit said. Arconic should have disclosed that a subsidiary had inappropriately sold the product for unsafe use on tall buildings, the investors said.

But the investors’ complaint “suffers from three related and fundamental flaws,” the opinion said. And its “three hundred and twenty-three (323) paragraphs do not cure these basic defects.”

Even if the sales employee at an Arconic subsidiary knew the Reynobond PE, which isn’t intended for use on buildings over 10 meters, would be used on the 67-meter-high Grenfell Tower, that isn’t “nearly enough” to show the company made multiple unsafe sales, the opinion said.

Nor did the investors properly allege that any Arconic executive knew Reynobond PE was being sold for unsafe uses. “At best,” the allegations support an inference that executives “knew that there was a difference between Reynobond PE and Arconic’s other Reynobond product, ‘FR,’ whose name denotes its fire resistance,” the opinion said.

The investors “repeatedly” accused Arconic of not informing them of the Reynobond PE sale that resulted in the product ending up as part of Grenfell Tower. But although that “may well form the basis of a products liability claim,” the investors haven’t sufficiently alleged that it “provides a basis for a securities law claim,” the court said.

The investors have 30 days to file an amended complaint, even though the previous complaint had so many deficiencies that amendment “may well be futile,” the opinion said.

Judge Mark R. Hornak wrote the opinion.

Wachtell, Lipton, Rosen & Katz and K&L Gates LLP represented Arconic. Pomerantz LLP served as lead counsel for the investors.

The case is Howard v. Arconic Inc., W.D. Pa., No. 17-cv-01057, 6/21/19.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Jennifer Bennett in Washington at jbennett@bloomberglaw.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com

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