City of Taylor General Employees Retirement System v. Astec Industries, Inc., No. 21-5602 (6th Cir. 2022)
Annotate this Case
Astec sold its first wood-pellet plant to Hazlehurst in 2013, providing $60 million in financing. In 2015, Astec sold its second wood-pellet plant to Highland for $152.5 million. Highland required the plant to pass a “Reliability Run” by April 2018; otherwise, Astec was to refund the purchase price. Astec did not inform its investors of this clawback provision. Both plants failed to perform. Astec CEO Brock repeatedly told investors that everything was progressing well. In 2017, Astec issued a press release that described the issues occurring at the wood-pellet plants. Brock asserted that Astec had just discovered the design flaws and still had a rosy outlook. The plants’ performance never improved. During secret negotiations with Highland, Brock reassured investors but was aware of inspection results. In 2018, Astec filed a Form 10-K, reporting the possibility that Astec would have to refund the Highland purchase price. Brock sold his Astec stock, earning $3.2 million. Days later, Astec filed its quarterly 10-Q Form, publicly disclosing Highland’s clawback provision. Brock announced Astec’s decision to “exit” the Highland plant. Astec’s stock price dropped 20%, A subsequent poor earnings report drove the stock price further down.
Investors filed a securities-fraud action under the Securities Exchange Act of 1934 and Rule 10b-5 and Section 20(a) of the Exchange Act. The district court dismissed the complaint, holding that plaintiffs had not met the heightened pleading requirements of FRCP 9(b) and the Private Securities Litigation Reform Act of 1995. The Sixth Circuit reversed in part. The plaintiffs pleaded plausible claims against Astec and Brock but have abandoned or forfeited their claims against the other individual defendants.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.