Securities Law News

Granite Construction Trims Investor Claims in Accounting Fight

May 21, 2020, 9:08 PM

Granite Construction Inc. must face part of a proposed class action alleging it abused accounting methods to conceal losses after a California federal district judge partially denied its dismissal motion.

The construction firm’s investors properly alleged that Granite violated generally accepted accounting principles when it inflated revenue and didn’t disclose extra costs, the U.S. District Court for the Northern District of California said. But some of the investors’ control person claims focus on the wrong time period, so those can’t move forward, the Wednesday order said.

Granite argued that the complaint didn’t explain why any of the alleged misrepresentations were false. But the complaint included “great detail” and “specific facts sufficient to establish” some of the allegations, Judge William Alsup’s order said.

The company also argued that the investors never alleged that Granite management disbelieved what it was telling investors and that the allegedly actionable statements were opinions, not factual assurances.

But the complaint didn’t “premise its misrepresentation theory on forward-looking opinions, but rather on then-presently known facts,” Alsup said. The investors alleged that Granite’s “statements misrepresented existing, rather than future, overruns.”

Granite also asked the court to toss the investors’ control person liability claims against two defendants who served as the company’s chief financial officer. Alsup declined to dismiss the claims as a whole, but granted the motion for claims against the first CFO after the second CFO took over and vice versa.

Bleichmar Fonti & Auld LLP served as lead counsel to the class. Munger, Tolles, & Olson LLP represented Granite.

The case is Police Ret. Sys. of St. Louis v. Granite Constr. Inc., 2020 BL 188581, N.D. Cal., No. 19-cv-04744, partially dismissed 5/20/20.

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

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Carmen Castro-Pagan at ccastro-pagan@bloomberglaw.com

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