Neptune slapped with two more shareholders' rights lawsuits
Both of the latest shareholders’ rights lawsuits have been filed in the US District Courof o the Southern District of New York, one by law firm Robbins Umeda LLP, the other by Rigrodsky & Long P.A. Investigations has been announced by law firm Glancy Binkow & Goldberg LLP and by the law offices of Howard G. Smith.
The actions stem from a Nov. 8, 2012 explosion and fire that destroyed the company’s production facility in Sherbrooke, Québec, killing 3 and injuring 18. The ignition of the solvent acetone (used in the company’s krill oil extraction process) stored in tanks at the site was a major contributing cause to the severity of the fire. In addition to devastating the original portion of the company’s production facility, the fire consumed all of Neptune’s raw material inventory.
An expansion to the Sherbrook plant was almost complete at the time of the fire, which would have more than tripled Neptune’s annual production capacity. The company has announced a recovery plan that aims to restart production in Sherbrooke using this expansion facility. This facility was not damaged by the fire but will require substantial work to be put into production in the absence of the original facility. Neptune has also said it intends to form relationships with third party manufacturers in the meantime to supply customer needs.
Similar allegations to earlier lawsuit
The allegations in these most recent lawsuits mirror those made in a shareholders’ rights lawsuit filed earlier in December in the same court by law firm Robbin Geller Rudman & Dowd LLP, namely, that:
(a) That the amount of acetone stored at the at the Sherbooke plant exceeded the levels allowed under Neptune’s permit from the Québec Ministry of Environment and that this posed a danger.
(b) The company failed to obtain a permit from the relevant Canadian government agencies to expand the facility.
Trading in Neptune’s shares was suspended on the Toronto and NASDAQ exchanges following the fire and resumed Nov. 26. The shares on the NASDAQ plunged from $3.31 a share to $2.50 on the first day of trading. The share price has declined since, closing at $2.01 on Dec. 31. The 52-week high for Neptune shares was $4.90 on July 2, 2012.
Neptune focused on reconstruction plan
Neptune officials could not be reached for comment regarding the latest lawsuits. The company issued a statement in response to the first lawsuit saying that it believes the allegations are without merit, and that it believes it has a solid legal defense. The company said that it has demonstrated already that the levels of acetone stored at the Sherbrooke plant, whether indoors or outside, did not exceed the levels permitted by the Québec Ministry of Environment. Further, it stated had obtained the required construction permits for its plant expansion and was in the process of obtaining the required environmental permit for the expansion.
The environment ministry did send a notice alleging environmental non-compliance to Neptune on Nov. 16, but the company said at the time and reiterated in its statement before Christmas that the notice pertained to specific equipment acquisitions in the plant expansion and did not have to do with acetone levels.
"You see these kinds of suits in the US by the hundreds almost every single day. If you look at what they are trying to demonstrate it’s all old news and all has been retracted or corrected," Neptune’s chief financial officer Andre Godin told NutraIngredients-USA in response to the filing of the first lawsuit.
Godin said the real news is where Neptune goes from here. He said company officials are confident their plan to restart krill oil production will ultimately be successful.
"Neptune is really focusing on executing its plan to restart Sherbrooke. We have an action plan that is very aggressive and we are extremely satisfied with progress so far," he said.
