June 27--Hertz has asked a federal judge to throw out a class-action suit that accuses the company of misleading investors, arguing the claims are based on "legally flawed criticisms."
In a court filing Monday, Hertz Global Holdings Inc. said the complaint wrongly attempts to hold the company and its executives liable for "not continuously and instantaneously updating investors on every event pertaining to Hertz's business," in the six months covered by the suit.
Hertz is building its new world headquarters in Estero, relocating from New Jersey.
The lawsuit, originally filed in November against the rental car giant in U.S. District Court in New Jersey, alleges fraud and violations of federal securities laws. It also targets Hertz's CEO Mark Frissora and its former chief financial officer, Elyse Douglas, accusing them of misleading investors about company finances and future prospects, and artificially driving up the company's stock price.
The time span covered by the suit is March 4 to Sept. 25, 2013. In those months, Hertz faced many challenges, including dealing with a federal government sequester, and the integration of Dollar Thrifty's fleet, following its $2.3 billion acquisition of one of its largest rivals.
In the filing, Hertz argues the plaintiffs took a "kitchen sink" approach in their pleadings, criticizing the company and its executives for misstatements about:
-- The fleet size
-- The optimism for financial performance
-- The value of the Advantage fleet
-- The impact of a government sequester
The criticisms, Hertz said in its court filing, are broad; ignore statutory protections; repeated disclosures and cautionary statements made by the company and its executives; and are based on "the beliefs of certain low-level confidential witnesses."
The complaint alleges Hertz made false statements in its public filings with the U.S. Securities and Exchange Commission, violating federal securities laws.
Hertz contends that the plaintiffs have failed to allege specific, concrete misstatements made by the company, "much less the precise reasons why any particular statement was misleading."
A flurry of law firms announced investigations and plans to file class-action cases against Hertz after it reported disappointing third-quarter earnings on Nov. 5. The disappointing results came after Hertz revised its financial guidance for the year in September, lowering its revenue and earnings projections for 2013 based on weaker demand for car rentals at U.S. airports. Its stock price fell by more than $4 a share on that news.
The class-action case also alleges investors were deceived when stock sales were made in unusual amounts at unusual times by Douglas and other company executives, and by Hertz's former private equity owners, in the months covered by the suit.
In its court filing, Hertz argued the number of investors selling stock during that time was limited and "no more than coincidence."
Pedro Ramirez Jr., who lives in Riverside, Connecticut, was the first to sue on Nov. 20, though he was just a small investor. Court records show he purchased 175 shares of Hertz's stock on July 29, paying $26.25 a share.
Ramirez's case was later combined with a similar one.
The lead plaintiff is Sheet Metal Workers Local No. 80, which filed an amended complaint in May. According to court documents, the trust fund purchased tens of thousands of Hertz shares during the months covered by the class action case. It estimates its losses at more than $100,000. There are thousands of others in the class, but none have a larger investment.
A hearing on Hertz's motion to dismiss the case is scheduled for July 21. The judge's decision will be based on court papers.
Meanwhile, another class action case has been brought in U.S. District Court in New Jersey against Hertz. That suit, filed June 13, also alleges the company and its officers made misleading statements and violated federal securities laws, but it covers a much longer time span, from Feb. 22, 2012, to June 6, 2014.
The suit, filed by shareholder Paul Ansfield, who lives in Wisconsin, includes new allegations based on Hertz's more recent revelation of accounting errors discovered in its financial statements for the past three years.
The action includes Frissora, Douglas and Hertz's current chief financial officer, Thomas Kennedy, as defendants.
Richard Broome, Hertz's executive vice president for corporate affairs and communications, said the company doesn't generally comment on pending litigation.
"We do deny the allegations and we'll defend the lawsuits vigorously," he said.
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