A New York federal judge on Wednesday certified a class of investors accusing Barrick Gold Corp. of repeatedly and knowingly misleading them about whether its troubled $8.5 billion South American mining project complied with environmental regulations.
Granting plaintiffs' motion for class certification, U.S. District Judge Shira A. Scheindlin ruled that individualized damages issues don't predominate in the suit. Plaintiffs allege that the company knew it was violating its environmental commitments during construction on the Pascua-Lama mine, located on the border of Argentina and Chile, as early as April 2010.
The judge had previously granted in part the defendants' motion to dismiss the proposed class action, rejecting claims that the company misrepresented the mine's projected cost and construction schedule. However, she had found plaintiffs sufficiently claimed Barrick knew that the project was not in compliance with applicable environmental regulations based on monthly progress reports from the project's manager, but nevertheless issued repeated statements leading investors to believe otherwise.
Judge Scheindlin on Wednesday certified a class consisting of all investors who bought Barrick stock from May 7, 2009, through and including November 1, 2013.
The judge said she found "nothing improper about plaintiffs' decision not to proffer expert damages analysis at this stage, given that plaintiffs are not required to establish loss causation — let alone proffer a damages model — on class certification."
Barrick acquired the untapped Pascua-Lama gold mine in 1994. The company intended to carve a massive open-pit gold mine into the Andes.
The company sought environmental approval from the Chilean and Argentine governments from 2000 until 2006 before gaining the requisite approvals, which required Barrick to abide by 400 environmental conditions in the Chilean environmental impact assessment.
Barrick announced the commencement of construction in May 2009, alongside statements extolling Pascua-Lama as "one of the lowest-cost gold mines in the world," according to the opinion.
Environmental compliance issues arose in January 2010, when Barrick was sanctioned for its failure to implement measures aimed at reducing particulates, which had begun to collect on top of nearby glaciers. Then Barrick decided to change plans to construct canals near the mine that would remove runoff water to cut costs, ultimately causing environmental problems so severe that it had to inform the Chilean government.
The company was then slapped with an injunction halting work on the project.
Despite these setbacks, the company made numerous statements claiming it was in compliance with environmental regulations and that the project was not adversely impacting the surrounding glaciers, according to the opinion.
Then, in April 2013, media reports said that a Chilean appeals court had issued an orderhalting construction work at the project and that the company could be fined millions for noncompliance with environmental rules.
A series of additional setbacks over the next few months finally culminated in Barricksuspending the project indefinitely in October 2013.
Judge Scheindlin in April found that although Barrick had warned investors that the Chilean government alleged noncompliance with its environmental regulations that could lead to litigation, the company's alleged misstatements on environmental compliance issues meant that investors could not accurately weigh that risk. She allowed allegations of loss causation to continue in the suit.
The judge on Wednesday ruled that plaintiffs' theory of out-of-pocket damages could be measured on a classwide basis, thus, individualized damages issues didn't predominate. She said securities actions often seek such damages for fraudulent misrepresentations.
Judge Scheindlin added that, while the investors might "face substantial hurdles" in proving loss causation and out-of-pocket damages, they weren't required to make those showings until the merits stage.
An attorney for Barrick declined to comment. Attorneys for the plaintiffs didn't immediately respond to requests for comment late Wednesday.
The plaintiffs are represented by James M. Hughes, Robert T. Haefele, Christopher F. Moriarty and William H. Narwold of Motley Rice LLC and Jonathan Gardner and Serena P. Hallowell ofLabaton Sucharow LLP.
The defendants are represented by Bruce E. Yannett, Jonathan Tuttle, Ada Fernandez Johnson, Elliot Greenfield, Miranda Holmes Turner and Zachary Saltzman of Debevoise & Plimpton LLP.
The case is In Re: Barrick Gold Securities Litigation, case number 1:13-cv-03851, in the U.S. District Court for the Southern District of New York.