Louisianans with shareholder concerns will be interested in a recently filed shareholder lawsuit affecting the nation’s largest utilities provider. The lawsuit comes close on the heels of a $17.8 billion merger between utilities giant Duke Energy and Progress Energy, a former Fortune 500 company. Progress CEO William D. Johnson became the CEO of the combined energy companies, but only for a few minutes, as newly formed board of directors voted to replace him with Duke Chairman James E. Rogers.
The business law action, filed by a Duke shareholder, claims that Duke’s chairman and other directors knew in advance of the July 2 merger that they intended to oust the former Progress CEO. The shareholder’s complaint also alleges that three other Progress executives, who were expected to assume high ranking positions in the combined company, immediately resigned in the wake of the CEO shakeup.
The shareholder claims that Duke’s directors misled investors and that the company faces potential financial damage due to a “devastating” loss of reputation over the CEO firing. The lawsuit seeks a court order for the directors to reimburse the company with interest for losses, in addition to reimbursement for the shareholder’s attorney fees. As consequences of the CEO swap, the plaintiff cites potential loss of rate hike opportunities and increased borrowing costs, as well as possible expenses related to future litigation. Duke Energy stock prices have fallen 0.6 percent since the merger.
The new CEO testified before the state utilities commission on July 10 and stated that the change in CEO was not announced in advance because the decision could not be finalized prior to the merger. Until the merger closed, he said, Duke’s directors had no authority to remove any officer of Progress Energy. A spokesman for Duke said the lawsuit lacks merit, and the company intends to respond with its own defense.
Our firm here in Baton Rouge handles such business law disputes. If you would like to know more about this kind of litigation, please visit our Louisiana business law page.
Source: Bloomberg Businessweek, “Duke Energy Directors Sued Over Progress CEO Switch,” Michael Bathon and Phil Milford, July 17, 2012