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Printing company settles fraud claims for $50M

Staff //August 29, 2018//

Printing company settles fraud claims for $50M

Staff //August 29, 2018//

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A Rock Hill-based 3D printing company has agreed to pay shareholders $50 million to settle claims that the company’s management made false statements that caused its stock price to boom — and then crash just as fiercely once those misrepresentations were corrected.

3D Systems’ share price rocketed earlier this decade, apparently fueled by investor euphoria over the economic potential of additive manufacturing technology, commonly known as 3D printing. From the start of 2012 to the start of 2014, prices soared from less than $10 a share to nearly $100.

But shareholders claim that the ascent was also fueled by additive manufacturing of an entirely different sort. They allege that managers made false statements about the company’s performance, particularly related to its product quality, revenue growth projections and manufacturing capacity. When the truth emerged, and stock prices corrected, the affected shareholders sued the company under the federal Securities Exchange Act.

The case was set to go trial in August, but on June 25, the parties instead agreed to the $50 million settlement. Attorneys for Motley Rice in Mount Pleasant, the co-lead counsel for the plaintiffs, said they believe the agreement to be one of the largest, if not the largest, securities fraud class action settlements in S.C. history.

Bill Narwold, Jim Hughes, Josh Littlejohn, Christopher Moriarty and Kelly Quillin of Motley Rice represented the class, along with Andrew Rees, Elizabeth Shonson, Ellen Gusikoff Stewart, Jack Reise, Kathleen Douglas and Robert Robbins of Robbins Geller Rudman & Dowd LLP in Boca Raton, Fla.

Littlejohn said he believes the settlement is an excellent result for 3D Systems’ shareholders.

“I think any time you have a fraud case, it’s never easy to prove that case to a jury,” Littlejohn said. “I think there were risks on both sides. I thought we felt good about where we could have potentially ended up if we had to try the case, but we also recognized that the other side had defenses.”

The agreement was mediated by Layn Phillips of Corona del Mar, Calif., a former federal judge who has helped mediate several nationwide securities fraud class action lawsuits.

He’s very good at what he does,” Littlejohn said. “Being able to work with a neutral like Layn really helps both parties get real.”

The class consists of shareholders who purchased the company’s common stock between Oct. 29, 2013, and May 5, 2015, and suffered losses allegedly related to fraud. Littlejohn said that the firm did not know how many class members exist. The firm sent out more than 400,000 notices to potential class members, although the actual class will end up being smaller.

3D Systems’ share price has yet to return to anything close to its early 2014 peak. Since 2015, it has consistently traded for less than $20 a share.

Nikole Setzler Mergo and Susi McWilliams of Nexsen Pruet in Columbia represented 3D Systems along with Courtney Quiros, Elizabeth Gingold Clark and John Jordak of Alston and Bird in Atlanta. Jordak declined to comment on the settlement, directing inquiries to the publicly filed stipulations in the case.

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