Duke Energy shareholder lawsuit over CEO firing moves forward
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Jim Rogers, CEO of Duke Energy speaks during the Charlotte Chamber's Economic Outlook Conference in Charlotte, North Carolina December 17, 2012. REUTERS/Chris Keane
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By David Bailey
(Reuters) - Duke Energy Corp's (NYSE: DUK) board must face a shareholder lawsuit over its abrupt 2012 firing of its newly installed chief executive, a Delaware judge has ruled.
In a decision on Wednesday, Delaware Vice Chancellor Sam Glasscock denied Duke's bid to end the case, finding the shareholder plaintiffs plausibly argued that the defendants might have concealed information about their actions from the public and regulators.
As part of its $18 billion deal to acquire Progress Energy, Duke had agreed to install Progress head William Johnson as CEO of the combined company. But within hours of the acquisition's closing in July 2012, the new Duke board met and fired Johnson, reinstating former Duke CEO James Rogers, in a vote along company lines.
Johnson left with a pre-negotiated $44 million severance package. Shareholders almost immediately sued Duke, arguing the decision to terminate him was reached in May 2012 and concealed from the public, investors and regulators. Duke's share price subsequently fell and the S&P lowered the company's credit rating.
Duke and the executives and directors named in the lawsuit strongly deny the lawsuit's allegations and any wrongdoing related to the CEO change after the 2012 merger, Duke said in a statement on Thursday.
Duke said the company, executives and directors would continue to vigorously defend themselves in the litigation.
In his decision, Glasscock said the plaintiffs plausibly alleged the holdover Duke board members had second thoughts about Johnson in the 18 months between the deal's announcement and its closing. According to the lawsuit, the board decided to conceal its plan to oust Johnson because it did not want to risk trying to renegotiate the merger terms or face further questions from state regulators that could delay its approval.
They chose instead to wait until a meeting after the acquisition closed to say Johnson was not a good fit to lead the combined company, the lawsuit alleged.
The abrupt CEO change brought other federal and state claims in North Carolina and an investigation by the state utilities regulator in North Carolina, where Duke and Progress were headquartered.
A settlement with regulators formalized Rogers' exit in 2013. Duke in 2015 settled a securities class action related to the merger in North Carolina federal court for $146 million. Duke and the named executives and directors denied the class allegations of misrepresentations related to the CEO change.
(Reporting by David Bailey in Minneapolis; Editing by Anthony Lin and Peter Cooney)
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