Ex-employees of a freight company owned by Apollo Global Management won a key court ruling in a closely watched case against the private equity giant.
Former executives at freight-management company Ceva Logistics have alleged in a lawsuit that Apollo bilked them out of their shares in a complex debt-for-equity swap in 2013 as the company went bankrupt.
Apollo — which of late has been rocked by the surprise exit of Chairman and CEO Leon Black amid controversy over his business ties to dead pedophile Jeffrey Epstein — retained control of Ceva after the bankruptcy.
In a Tuesday ruling that denied Apollo’s motion for summary judgment and sets up a likely trial, US judge Timothy Corrigan ruled that a jury could reasonably find that Apollo fraudulently concealed a stock incentive plan from fired Ceva employees as it wiped out their equity stakes in the bankruptcy.
“There is a genuine question of material fact as to whether there was actual artifice [falseness and trickery] in concealing the creation of the 2013 Long Term Incentive Plan that precludes summary judgment,” the judge ruled.
Plaintiff Michael McEvoy claims Ceva execs who stayed with the company post-bankruptcy got to keep some of their equity, while others like him lost all their money. All stakeholders in the same class are supposed to be treated equally, and the fired executives allege they never knew of the alternative plan, according to the lawsuit.
Apollo said it still expects to prevail in court. “Today’s ruling was procedural only and did not address the merits of any claim,” an Apollo spokeswoman said. “Apollo believes that the court will reject the only remaining claim against Apollo.”
The Ceva case is among a handful that are being pursued by plaintiffs outside of private equity’s long-preferred legal enclaves — namely the US Bankruptcy Court in New York and Delaware Chancery Court.
In the Ceva dispute, New York bankruptcy Judge James Garrity in early 2018 threw out McEvoy’s case, ruling that his claim wasn’t separate from the overall bankruptcy.
But McEvoy appealed, and US Judge Jed Rakoff ruled that an argument could be made for a separate trial. Judge Garrity, in turn, transferred McEvoy’s suit to Florida.