Porter v. GrafTech International Ltd.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

JOHN C. PORTER, ) CASE 1:24 CV 00154

Individually and on Behalf of All )

Others Similarly Situated, )

) JUDGE DONALD C. NUGENT

Plaintiff, )

Vv. )

)

GRAFTECH ) MEMORANDUM OF OPINION

INTERNATIONAL LTD., et al., ) AND ORDER

)

Defendants. ) (This Memorandum and Order Applies

) to Documents ECF #64, #65, #66 & #67)

This matter is before the Court on various Motions to Dismiss, filed by Defendants, each

on December 6, 2024, in this Private Securities Litigation Reform Act of 1995 (“PSLRA”)

proposed class action complaint, (see ECF #56, First Amended Complaint for Violations of the

Federal Securities Laws, hereinafter “First Amended Complaint’), asserting alleged violation of

Section 10(b) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule

10b-5,' pled against Defendant GrafTech International Ltd. (“GrafTech”) and individual-person

Defendants David Rintoul, Quinn Coburn, Marcel Kessler, Timothy Flanagan, and Jeremy

Halford (collectively referred to as the “Individual Defendants”), each of whom is or was a

Throughout this Memorandum of Opinion, the Securities Exchange Act of 1934 (which

primarily regulates the transaction of securities in the secondary market) is often referred to as

the “Exchange Act” to contrast it with the Securities Act of 1933 (which primarily regulates the

initial issuance of securities in the primary market). Securities Exchange Commission Rule

10b-5 will often be referred to as simply “Rule 10b-5.”

Senior-level Officer of GrafTech (Count I), and a claim alleging “control person” Liability in

violation of Section 20(a) of the Exchange Act against each of these Individual Defendants as

well as Defendants BCP IV GrafTech Holdings LP, Brookfield Capital Partners Ltd., and

Brookfield Asset Management Ltd. (collectively referred to as “the Brookfield Defendants”)

(Count II), specifically:

(1) Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to

Dismiss the First Amended Complaint for Violations of the Federal

Securities Laws (ECF #64);

(2) Defendant David Rintoul’s Motion to Dismiss the First Amended Complaint

(ECF #65); and

(3) Motion of Defendants BCP IV GrafTech Holdings LP, Brookfield Capital

Partners Ltd., and Brookfield Asset Management Ltd., to Dismiss the First

Amended Complaint for Violations of the Federal Securities Laws (ECF

#66).

In response to these Motions to Dismiss, Lead Plaintiff University of Puerto Rico

Retirement System (“Plaintiff”) filed an Omnibus Memorandum in Opposition to the Motions to

Dismiss (ECF #69) on February 3, 2025. On March 17, 2025, each of the Defendants filed their

respective Replies in support of their Motions to Dismiss. (ECF #72 [Brookfield], ECF #73

[Rintoul] & ECF #74 [Graftech & Individual Officers]). These motions are now ready for

decision.

On May 7, 2024, the Court held a hearing on two competing motions to be named as

Lead Plaintiff, those of Shekhar Agrawal and University of Puerto Rico Retirement System.

(ECF #23 & Un-numbered Docket Entry following ECF #38). There were initially five

competing motions, but three of the movants withdrew their motions prior to the hearing, either

through Notice of Withdrawal or Notice of Non-Opposition. (See ECF #41, n.1). By

Memorandum of Opinion and Order dated May 15, 2024, (ECF #41 & ECF #42), University of

Puerto Rico Retirement System was named as Lead Plaintiff to represent the interests of the

proposed class plaintiffs.

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This matter is also before the Court on Motion of Defendants GrafTech, Kessler, Coburn,

Flanagan, and Halford to Strike Allegations Regarding “Former Engineering Lead” (ECF

#67), which is now also fully briefed, (see ECF #70 & ECF #71), and ready for decision.

Because the Motion to Strike addresses an issue predicate to determination of the Motions to

Dismiss, the Motion to Strike will be addressed first.

For each of the reasons stated below:

(1) Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to

Strike Allegations Regarding “Former Engineering Lead” (ECF #67), is

GRANTED;.

(2) Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to

Dismiss the First Amended Complaint for Violations of the Federal

Securities Laws (ECF #64), is GRANTED;

(3) Defendant David Rintoul’s Motion to Dismiss the First Amended Complaint

(ECF #65), is GRANTED; and

(4) Motion of Defendants BCP IV GrafTech Holdings LP, Brookfield Capital

Partners Ltd., and Brookfield Asset Management Ltd., to Dismiss the First

Amended Complaint for Violations of the Federal Securities Laws (ECF

#66), is GRANTED.

I. FACTUAL BACKGROUND

A. The Parties

Lead Plaintiff University of Puerto Rico Retirement System manages the pension

benefits for employees of the University of Puerto Rico. (ECF #56, First Amended Complaint,

20). It is an investor which, during the proposed Class Period, purchased 226,300 shares of

GrafTech securities, expended $1,690,398.78, had net purchases of 102,900 shares of GrafTech

common stock, and incurred net losses of $623,340.38. (ECF #20-1, Briefin Support of Motion

for Appointment as Lead Plaintiff; PageID #412-#413; ECF #20-4, Certification of Plaintiff,

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PageID #428-429 & ECF #20-5, Gain (Loss) Chart, PageID #431-#433). On May 15, 2024, the

Court appointed University of Puerto Rico Retirement System as Lead Plaintiff. (ECF #41,

Memorandum of Opinion, dated May 15, 2024 & ECF #42, Order; see also ECF #56, □ 20).

Defendant Graffech is a global manufacturer of graphite electrode products and is

headquartered in Brooklyn Heights, Ohio. Graftech common stock is listed on the New York

Stock Exchange as “EAF.” (ECF #56, § 21).

Defendant David Rintoul served as GrafTech’s President and Chief Executive Officer,

and as a member of GrafTech’s Board of Directors, from March 2018 until his resignation from

GrafTech at the end of June 2022. (ECF #56, § 22).

Defendant Quinn Coburn served as GrafTech’s Chief Financial Officer from September

2015 until November 29, 2021. Prior to his role as Chief Financial Officer, he served as

GrafTech’s Vice President of Finance and as Treasurer. (ECF #56, 23).

Defendant Marcel Kessler served as GrafTech’s Chief Executive Officer following

Defendant David Rintoul’s resignation in June 2022, and he held that position until his departure

from GrafTech in November 2023. (ECF #56, 4 24).

Defendant Timothy K. Flanagan served as GrafTech’s Chief Financial Officer and Vice

President of Finance and Treasurer after Defendant Coburn’s resignation in November 2021.

Following the resignation of Defendant Kessler, he became GrafTech’s Interim Chief Executive

Officer from November 2023 to March 2024. Mr. Flanagan now currently serves as GrafTech’s

CEO and President. (ECF #56, § 25).

Paragraph 25 of the First Amended Complaint states that “Kessler currently serves as the

Company’s CEO and President,” but it is clear that the paragraph intended to state “Flanagan.”

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Defendant Jeremy S. Halford has served as GrafTech’s Executive Vice President, Chief

Operating Officer since October 2021. Prior to his role as Chief Operating Officer, he served as

GrafTech’s Senior Vice President, Operations and Development, beginning in May 2019. (ECF

#56, 26).

Defendant Brookfield Asset Management Ltd., is a global alternative asset management

firm based in Canada. (ECF #56, § 30).*

Defendant Brookfield Capital Partners Ltd., is the private equity arm of Defendant

Brookfield Asset Management Ltd. (ECF #56, { 29).°

Defendant BCP IV GrafTech Holdings LP is an indirect wholly-owned subsidiary of

Defendant Brookfield Capital Partners Ltd. (ECF #56, § 28).

B. Background Facts as Asserted in the First Amended Complaint

The following recitation of facts regarding Plaintiffs’ claims is drawn largely from the

paragraphs of the First Amended Complaint, as well as from information contained in

documents referenced in the First Amended Complaint.®

Paragraphs 28-30 of the First Amended Complaint identify Defendants BCP IV Graffech

Holdings LP, Brookfield Capital Partners, Ltd., and Brookfield Asset Management Ltd., in

“ascending” order. These entities are identified here in “descending” order, such that each

entity’s description is stated in relation to an earlier-named parent entity.

Paragraph 29 of the First Amended Complaint identifies Brookfield Capital Partners Ltd.,

as “the private equity arm of [D]efendant Brookfield Asset Management Jnc.” Both the original

Complaint (ECF #1) and Paragraph 31 of the First Amended Complaint appear to indicate that

this reference is intended to state Brookfield Asset Management Ltd.

In considering the Motions to Dismiss, well-pled factual allegations are taken as true.

The Court may also consider documents that are referenced in the complaint and matters of

which it may take judicial notice. See, e.g., Lim v. Hightower, No. 4:23-CV-01454, 2024 WL

4349409, at *6 (N.D. Ohio Sept. 30, 2024) (“Under the Private Securities Litigation Reform Act

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GrafTech, headquartered in Brooklyn Heights, Ohio, is a global manufacturer of graphite

electrode products that are used in the production of electric arc furnace (“EAF”) steel — a

purportedly greener alternative to traditional steelmaking methods. (ECF #56, § 1 & 21).’

Over the nearly 54-month putative Class Period, from February 8, 2019 to August 3,

2023, GrafTech’s executives included Defendants David Rintoul (Chief Executive Officer from

the beginning of the period until June 2022), Marcel Kessler (Chief Executive Officer beginning

in June 2002 to the end of the period), Quinn Coburn (Chief Financial Officer from the

beginning of the period to November 2021), Timothy K. Flanagan (Chief Financial Officer

beginning in November 2021 to the end of the period),* and Jeremy S. Halford (Chief Operating

Officer beginning in October 2021).

GrafTech’s Manufacturing Operations

GrafTech’s customers are manufacturers that use GrafTech’s graphite electrode products

to produce EAF steel. (ECF #56, § 32). In contrast to conventional blast furnaces, which rely

of 1995, ‘courts must consider the complaint in its entirety, as well as other sources courts

ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents

incorporated into the complaint by reference, and matters of which a court may take judicial

notice.” ... The Court may consider documents that are ‘referred to in the complaint and [are]

central to the plaintiff's claim’ without converting a 12(b)(6) motion into a motion for summary

judgment.”) (citations omitted). In examining the Motions to Dismiss, the Court considers these

exhibits in order to “analyze the statements and omissions at issue in their full context.”

Plymouth Cnty. Ret. Ass’n vy. ViewRay, Inc., 556 F. Supp. 3d 772,784 (N.D. Ohio 2021), aff'd

2022 WL 3972478 (6" Cir. Sept. 1, 2022).

The company that is now GrafTech initially went public in 1995 as UCAR International

Inc., before changing its name to GrafTech International, Ltd., in 2002. (ECF #56, {[ 32).

As noted earlier, Mr. Flanagan later became Interim Chief Executive Officer of GrafTech,

after the putative Class Period, from November 2023 to March 2024, and began serving as

GrafTech’s Chief Executive Officer in March 2024. (ECF #56, § 25).

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directly on coal, natural gas, and oil, EAF utilizes graphite electrodes to conduct electricity and

to generate sufficient heat to melt scrap metal, iron ore, or other raw materials used to produce

steel. (ECF #56, 9 32). To be utilized by GrafTech’s customers, each graphite electrode must be

affixed with one “connecting pin,” making the “pin stock” from which such devices are

machined a critical component of GrafTech’s manufacturing process. (ECF #56, 1).

The graphite electrodes and connecting pins used in electric arc furnaces (““EAFs”) must

be strong enough to withstand the steel-melting electricity they conduct and the very high

temperatures the furnaces produce. While the primary raw material used to make these

electrodes and connecting pins — needle coke — has properties that prevent fracturing, it is

GrafTech’s manufacturing process that gives its products their strength and conductivity. (ECF

#64-6, GrafTech International Ltd., Annual Report (Form 10-K), p.16 (Feb. 21, 2020) (“2019

10-K”)).’ There are six steps to GrafTech’s manufacturing process: (1) Screening and

Blending; (2) Extrusion (Forming); (3) Baking; (4) Impregnating; (5) Graphitizing; and

(6) Machining. (ECF #64-6, 2019 10-K, p.16).

GrafTech has four principal manufacturing facilities: (1) Monterrey, Mexico (the

“Monterrey Plant”), operated by a subsidiary called GrafTech México Sociedad Anénima de

Capital Variable (“GrafTech México”); (2) St. Marys, Pennsylvania (the “St. Marys Plant”);

(3) Pamplona, Spain; and (4) Calais, France. (ECF #56, 35). At various times throughout

Copies of the various GrafTech Securities and Exchange Commission filings and other

corporate documents referenced or incorporated into the First Amended Complaint are attached

as Exhibits to the Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to

Dismiss the First Amended Complaint for Violations of the Federal Securities Laws (ECF #64).

A full citation is given the first time each document is cited, with a short-form citation used

thereafter, e.g., “(ECF #64-6, 2019 10-K, p. 16).”

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GrafTech’s history, each facility ran all six steps of the manufacturing process. (ECF #56,

{J 38-39). In the second quarter 2016, GrafTech “warm idled” its St. Marys Plant. (ECF #56,

{ 38). By “warm idling” the St. Mary’s Plant, GrafTech could restart the facility in short order if

additional manufacturing volumes were needed, which would provide GrafTech with flexibility

and variability to meet peak demand or mitigate disruptions within its manufacturing footprint.

(ECF #56, § 38). Following the warm idling of the St. Marys Plant, GrafTech shifted all of its

graphite electrode manufacturing operations to its highest-capacity and lowest-cost facilities, the

Monterrey Plant, and the other Plants located in Pamplona, Spain and Calais, France. (ECF #56,

4 39). Although all three of these manufacturing facilities were each capable of being full-scale

manufacturing facilities, the Monterrey Plant was the sole supplier of connecting pins and pin

stock for all of GrafTech’s manufacturing facilities. (ECF #56, ¢ 39). As a result, the

uninterrupted operation of the Monterrey facility was of paramount importance for GrafTech’s

business and operational performance. (ECF #56, { 39).

All the allegations of the First Amended Complaint relate, either directly or indirectly, to

facts surrounding the Monterrey Plant. Specifically, the allegations relate to GrafTech’s

statements made about the environmental conditions at the Monterrey Plant over the course of

its operations (including a 2019 administrative proceeding brought against GrafTech México,

and a shutdown of the Monterrey Plant between September 16, 2022 and November 18, 2022),

the manufacturing capabilities of the St. Marys Plant during the Monterrey Plant shutdown, and

the financial impact of the Monterrey Plant shutdown."

10

A recitation of each of the statements at issue — including not only the portions cited in

the First Amended Complaint, but also the surrounding text accompanying those portions — is set

forth in full later in this Memorandum of Opinion, at the conclusion of this statement of facts.

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The Monterrey Plant

The Monterrey Plant is located in the municipality of Apodaca within the Monterrey

metropolitan area, in the Mexican state of Nuevo Leon. (ECF #56, {9 1, 4 & 6). The Monterrey

Plant was established over 60 years ago as one of the first industrial investments in the area.

(ECF #64-9, GrafTech International Ltd., 2019 Sustainability Report, p.17 (Sept. 16, 2020)

(“2019 Sustainability Report’); cited at ECF #56, J 111-113). The area experienced significant

growth since the 1960s when it opened, leading some to express environmental concerns about

its operations over the years. (ECF #64-9, 2019 Sustainability Report, p.17).

The gist of Plaintiffs’ allegations related to GrafTech’s statements made about the

environmental conditions at the Monterrey Plant over the course of its operations is captured in

the opening paragraphs of the First Amended Complaint:

“Throughout the Class Period, Defendants repeatedly touted the competitive

advantages of GrafTech’s ‘low-cost’ manufacturing plants to investors, while also

extolling the Company’s purportedly ‘proactive’ commitment to reducing its

environmental impacts and complying with all environmental laws and

regulations. But these representations were materially false and misleading. The

undisclosed truth was that GrafTech’s purported cost leadership was achieved in

substantial part by the Company’s failure to adhere to its professed ‘rigorous

internal environmental protection standards’ at the Monterrey facility.” (ECF #56,

12)

direct contrast to Defendants’ representations, GrafTech had, for decades,

blatantly disregarded environmental regulations and chronically contaminated

neighboring communities with harmful dust and emissions at its Monterrey

facility, resulting in repeated warnings from local authorities. These warnings,

however, were ineffective at curbing GrafTech’s wanton disregard for the health

and wellbeing of the Monterrey facility’s surrounding communities.” (ECF #56,

{ 3).

“As aresult, in March 2019, the Department of Sustainable Development of the

State of Nuevo Leon initiated an administrative proceeding against GrafTech

concerning the Monterrey facility’s failure to control the dust emissions generated

by its manufacturing operations. Among other things, the resolution of the

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proceedings resulted in: (1) a finding that GrafTech’s Monterrey facility operated

‘without the means of control to ensure that dust emissions are avoided, which is

mandatory as established in Article 131 section II of the Environmental Law of

the State of Nuevo Leon, to ensure satisfactory air quality for population well-

being and ecological balance’; (ii) a finding that GrafTech ‘benefitted

economically by evading the expense generated by the implementation of

equipment or systems that guarantee avoiding the generation of dust emissions to

the atmosphere during its operation’; (iii) an order that GrafTech ‘immediately

and permanently .. . carry out the necessary actions, adaptations and/or maneuvers

that guarantee avoiding the generation of emissions of dust or any other

contaminant to the atmosphere’; and (iv) an agreement by Graftech to invest over

$2 million in dust collection and containment projects to remedy its violations.”

(ECF #56, { 4).

“Although Defendants disclosed the administrative proceeding in GrafTech’s SEC

filings, they concealed the full extent and severity of GrafTech’s environmental

misconduct by mischaracterizing the proceeding as ‘involving certain potential

violations of state environmental law’ and reporting that the Company had paid

‘certain fines that were not material to the Company,’ without disclosing

GrafTech’s agreement to invest more than $2 million in dust collection and

containment projects or the order requiring GrafTech to ‘immediately and

permanently’ remedy its deficient emission controls.” (ECF #56, { 5).

“TF Jollowing the administrative proceeding’s resolution, GrafTech quickly

resumed its decades-long practice of failing to follow through on its repeated

commitments to remedy the Monterrey facility’s deficient environmental

safeguards. The Company’s actions led to the filing of multiple environmental

complaints, including one by the mayor of local municipality Apodaca, César

Garza Villareal. Defendants, however, continued to tout their purported

commitment to environmental protections and compliance with environmental

laws and regulations, while concealing from investors the truth that the Monterrey

facility’s failure to operate in accordance with those representations exposed

GrafTech to known material risks regarding government enforcement actions and

corresponding business disruptions.” (ECF #56, § 6).

“There is no doubt that Defendants were aware of the environmental failures at

the Monterrey facility, given: (i) GrafTech’s long history of environmental

disputes with the Monterrey facility’s surrounding communities; (ii) the

significant fallout from the 2019 administrative proceeding, of which Defendants’

SEC filings confirm they were undoubtedly aware; and (iii) Defendants’ repeated

representations touting their active involvement in, and leadership of, GrafTech’s

environmental management systems and initiatives — which, among other things,

provided them with monthly environmental reports from site managers and

weekly communications concerning ‘observations from site walk-throughs.’”

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(ECF #56, § 7).

(ECF #56, First Amended Complaint, {{ 2-7).

The First Amended Complaint does not allege that the Monterrey Plant was the subject

of any environmental enforcement matters prior to the 2019 administrative proceeding. The July

30, 2019 Resolution issued by the Department of Sustainable Development, referenced in the

First Amended Complaint, shows that GrafTech was required to pay fines equivalent to

$140,253.40 and $9,800.84 as a result of the administrative proceeding. (ECF #64-10,

Resolution of the Department of Sustainable Development of Nuevo Leon, p.11 (July 30, 2019)

(“Resolution’’); cited at ECF #56, § 45). After paying the fines, GrafTech disclosed the

following in its Third Quarter 2019 10-Q Report:

On March 1, 2019, the Department of Sustainable Development of the State of

Nuevo Leon provided notice of an administrative proceeding with respect to the

Company’s Monterrey facility. The proceeding requires the Company to design

and implement certain corrective measures involving certain potential violations

of state environmental law relating to emissions. The Company cooperated with

the Department with respect to this matter, including payment of certain fines that

were not material to the Company. In September 2019, the Department of

Sustainable Development formally closed the proceeding.

(ECF #64-11, GrafTech International Ltd., Quarterly Report (Form 10-Q), p.40 (Nov. 7, 2019)

(“Third Quarter 2019 10-Q”)). At about the same time, GrafTech invested approximately $2

million in dust collection and containment projects at the Monterrey Plant. (ECF #56, { 46).

There was no shutdown of the Monterrey Plant.

The First Amended Complaint also states that, on March 11, 2020, the mayor of

Apodaca, César Garza Villareal, along with Apodaca’s Secretary of Urban Development,

Ecology/,] and Transportation, Andres M. Canto Ramirez, filed a complaint against GrafTech

with the Secretary of Sustainable Development for the Nuevo Leon State Government asserting

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violations of “environmental regulations, biosafety and wildlife, among others, affecting matters

of public order and social interest by expending risks or threats of environmental contingency in

neighborhoods, municipality[,] and surrounding municipalities,” and that on September 30,

2021, an individual filed a citizen’s complaint with the Federal Prosecutor’s Office for

Environmental Protection regarding the Monterrey Plant’s dust emissions. (ECF #56, □□ 49-51).

The First Amended Complaint further notes that, “[i]t is unclear what action, if any, the State

Attorney General’s Office of Sustainable Development took in response to the complaint filed

by Mayor Garza and Mr. Ramirez, (ECF #56, J 49), and “[a]s with the 2020 complaint filed by

Mayor Garza and Mr. Ramirez, it is unclear what action, if any, was taken in response to [the

later] citizen’s complaint, (ECF #56, § 51). The First Amended Complaint does not assert that

any enforcement action resulted from either complaint, or that GrafTech or the Individual

Defendants were aware of them. The First Amended Complaint further states that Mayor Garza

“addressed the Apodaca City Council with an impassioned plea for the Council to take action

against the Company” related to the emissions issues. (ECF #56, §] 67-69). The First Amended

Complaint does not allege that GrafTech or any of the Individual Defendants were aware of the

mayor’s remarks.

On September 15, 2022, Nuevo Leon officials (from the State Attorney’s Office for the

Secretary of Environment) inspected the Monterrey Plant’s “facility and certain of the facility’s

environmental and operating permits,” following which the Plant received a temporary

suspension notice requiring it to “wind down operations within seven days.” (ECF #56, § 70;

ECF #64-12, GrafTech International Ltd., [Third] Quarterly Report (Form 10-Q), p.41 (Nov. 4,

2022) (“Third Quarter 2022 10-Q”)). A parallel investigation by another Nuevo Leén official

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(the Director of Integral Air Management of the Undersecretary of Climate Change and Air

Quality of the Ministry of the Environment) concluded that the Plant’s operating license was no

longer in effect, resulting in the indefinite suspension of operations. (ECF #56, § 70; ECF #64-

12, Third Quarter 2022 10-Q, p.41). GrafTech disclosed the suspension one day later in a

“Current Report” filed with the SEC (as well as in its Quarterly Report filed in November 2022),

and noted “At this time, the Company is not able to assess how long operations at the

manufacturing facility will be temporarily suspended. While the Company strongly disagrees

with this course of action, the Company is actively evaluating the notice and the allegations

contained therein and the Company intends to work with the authorities to address these

allegations and will vigorously defend against these allegations.” (ECF #64-8, GrafTech

International Ltd., Current Report (Form 8-K), p.2 (Sept. 16, 2022) (“9/16/22 8-K”); ECF #64-

12, Third Quarter 2022 10-Q, p.24)).

As this is a case alleging that specific statements made by GrafTech were false or

misleading, and the Motions to Dismiss ask the Court to evaluate those statements in light of

whether a legally actionable claim has been stated in the First Amended Complaint based on

those statements, the Court is called upon to examine the actual statements. The specific

statements at issue are set forth at Appendix A of this Memorandum of Opinion and Order."

11

As noted, (see note 6, supra), the Court may look to the actual documents cited in the

First Amended Complaint, and not merely the portions of the allegedly false or misleading

statements cited in the Plaintiffs’ pleadings. The full statements are identified in Appendix A.

The portions of those statements, as quoted in the First Amended Complaint, are shown in plain

text. The remainder of the full statement is shown in italics.

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The St. Mary’s Plant

While the primary focus of Plaintiffs’ allegations of purported false and misleading

statements relate to statements made by GrafTech in various corporate filings made with the

Securities Exchange Commission, and in other communications with investors, about the

environmental conditions existing at the Monterrey Plant, the manufacturing capabilities and

operations of the St. Marys Plant are also a significant focus of the allegations of the First

Amended Complaint. A complete recitation of these statements is attached to this Memorandum

of Opinion and Order as Appendix B.

Plaintiffs’ allegations of misrepresentation about the manufacturing capabilities of the St.

Marys Plant prior to and during the Monterrey Plant shutdown are described in the First

Amended Complaint at paragraphs 53 to 65:"”

“In addition to deceiving investors about the Company’s purported

commitment to environmental compliance and the true basis for

GrafTech’s manufacturing cost advantages, Defendants further misled

investors during the Class Period regarding the Company’s purported

efforts to ‘de[-]risk’ its critical pin production, which was entirely

concentrated at GrafTech’s Monterrey facility, by supposedly

implementing pin production operations at the St. Mary’s facility. (ECF

#56, § 53).

“Specifically, during GrafTech’s August 6, 2021 earnings call for the

second quarter of 2021 (“2Q21”), defendant [Jeremy] Halford told

12

The full text assertions at issue related to the operations at the St. Marys Plant in the

First Amended Complaint are included within this Memorandum of Opinion and Order (as

Appendix B) in that the allegations made within that text are also central to the issues raised in

the Motion to Strike. The paragraphs at issue in the Motion to Strike are highlighted in

boldfaced text here. These paragraphs, as stated in the First Amended Complaint, contain

emphasis on certain words provided by Plaintiffs. Because the Court is highlighting the text of

the paragraphs pertinent to the Motion to Strike in boldfaced text in this portion of the

Memorandum of Opinion and Order, Plaintiffs’ emphasis, as included in the text of the First

Amended Complaint, is designated by italics.

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investors that Graftech was ‘investing in a pin production line at our St.

Marys, Pennsylvania facility that will be online in the third quarter.’ At

the time, Halford further represented that the St. Marys facility’s pin

production line ‘diversifies our pin capability and provides production

flexibility.’ The following quarter, during the Company’s November 5,

2021 earnings call for the third quarter of 2021 (“3Q21”), Halford

continued to promote the St. Mary’s facility’s pin production capabilities,

stating in pertinent part, that ‘[t]he pin production line at our St. Marys,

Pennsylvania facility is now operational, and we are ramping up

production.” Halford then went on to state” ‘Importantly, this provides us

with 2 connecting pin production facilities.” (ECF #56, J 54).

“Analysts and investors credited these representations. For example, in an

August 6, 2021 report, BMO Capital Markets (“BMO”) analyst David

Gagliano identified the ‘[rJestart of St. Marys graphite electrode facility’

as one of the ‘Key Catalysts’ for GrafTech.” (ECF #56, { 55).

“During GrafTech’s February 4, 2022 earnings call for the fourth quarter

and year-end of 2021 (“4Q21”), Halford again touted the purported

benefits of the St. Marys facility’s pin production line, specifically stating:

‘Our investment in the new automated pin line at St. Mary’s continues to

progress well and helps to de[-|risk our pin production capacity.’ The

following quarter, during the Company’s May 6, 2022 earnings call for the

first quarter of 2022 (“1Q22”), Halford reiterated these comments, stating:

‘[Ojur recent investment in the automated pin line at St. Marys continues

to progress and helps to de/-/risk our pin production capacity.” (ECF

#56, 56).

“Defendant Halford’s statements regarding the ‘de[-]risk[ing] of

GrafTech’s ‘pin production capacity’ through St. Mary’s facility’s

supposed ‘pin production line’ were important to investors, because they

conveyed that the Company was insulated from potential commercial

disruptions due to insufficient pin supply in the event that operations at the

Monterrey facility were interrupted.” (ECF #56, 457).

“But according to a former GrafTech Manufacturing Engineering

Lead (the “Former Engineering Lead”) — and Defendants’ own

subsequent admissions — Halford’s statements regarding the

purported ‘de|-]risking’ of GrafTech’s ‘pin production’ were false

and misleading. Contrary to Halford’s statements about the

supposedly “operational’ ‘pin production line’ at the St. Marys

facility, the truth was that the St. Marys facility produced no pins or

pin stock at all during 2021 or 2022 and, in fact, did not even have the

proper ‘operating permits’ to perform such activities.” (ECF #56,

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4 58).

“The Former Engineering Lead was hired by GrafTech in August

2022 to work as part of the team responsible for restarting the St.

Marys facility. In this role, the Former Engineering Lead reported to

GrafTech’s Director of Central Engineering and Reliability, Tom

Knoll. According to the Former Engineering Lead, at the time of his

hiring, the St. Marys facility was not involved in the production or

manufacturing of any pins.” (ECF #56, 4 59).

“One of the Former Engineering Lead’s primary responsibilities upon

being hired was to ensure that the St. Marys facility had the proper

equipment needed for manufacturing graphite electrode products and

pins, which included a large press for extruding graphite, a cooling

pond, and the tools needed to operate such equipment. At the time of

the Former Engineering Lead’s hiring, there was no water in the

cooling pond and it was apparent that the press had not been run in

well over a year, given that the tools for the press were rusted and

covered in dust. As such, it was clear to the Former Engineering Lead

that the St Marys facility had not produced or manufactured pins at

any point within the last year.” (ECF #56, 4 60).

“At the time of the Former Engineering Lead’s hiring, the objectives

for his team included preparing the St. Marys facility to be capable of

producing graphite electrode products at some point in late-2023 or

early-2024. However, shortly after the Monterrey facility was shut

down by Mexican regulators in September 2022, Knoll called an

emergency meeting, which was attended by the Former Engineering

Lead and other members of the team responsible for restarting the St.

Marys facility, during which the employees were informed that the

efforts to restart production at the St. Marys facility would need to be

accelerated. At the time, however, the St. Marys facility did not have

the appropriate operating permits to produce graphite electrode

products and pins, despite Halford’s statement to investors nearly one

year prior that “[t]he pin production line at our St. Marys,

Pennsylvania facility is now operational.’ Indeed, GrafTech did not

begin the process of obtaining the operating permits required for such

production until early 2023.” (ECF #56, ¢ 61).

“Moreover, it was not until late-2023 that the St. Marys facility

conducted its first “pin trial run.” According to the Former

Engineering Lead, the St. Marys facility conducted three trials, but

never actually got the pin production operation up and running.

Thus, according to this former employee, the St. Marys facility never

-16-

produced or manufactured any actual pins at any point during his

tenure with GrafTech, which came to an end in April 2024.” (ECF

#56, § 62).

“According to the Former Engineering Lead, defendant Halford was

aware of and familiar with the activities at the St. Marys facility, and

definitely would have known that the plant was not involved in actual

pin production during 2021 and 2022. According to the Former

Engineering Lead, Halford regularly visited the St. Marys facility,

was ultimately responsible for overseeing GrafTech’s efforts to restart

the plant, and was regularly informed about the activities and issues

at the St. Marys facility by Knoll.” (ECF #56, § 63).

“Because the St. Marys facility was not actually involved in any

manufacturing or production of pins during 2021 or 2022, and the

Monterrey facility remained the Company’s only facility capable of

producing the pin stock needed for all of GrafTech’s electrodes and pins,

Halford’s statements to investors regarding the St. Mary’s facility’s

supposedly ‘operational’ ‘pin production line,’ which purportedly helped

to ‘de[-Jrisk [GrafTech’s] pin production capacity,’ were materially false

and misleading. Halford’s statements misleadingly conveyed to investors

that GrafTech had secured an alternative source of pins through the St.

Marys facility’s ‘pin production,’ thereby insulating GrafTech from

potential commercial disruptions in the event that operations at the

Monterrey facility were interrupted. The truth, however, was that the

Company remained exposed to significant commercial disruptions in the

event that operations at the Monterrey facility were interrupted.” (ECF

#56, 64).

“Indeed, Defendants’ own subsequent admissions confirm as much, while

also serving to corroborate the above facts provided by the Former

Engineering Lead. Specifically, on November 4, 2022, during GrafTech’s

first earnings call following the Monterrey facility’s closure, defendant

Kessler told investors, for the first time, that the Monterrey facility was

‘the only site that produces the pin stock needed for all our electrodes.”

During that same call, Kessler further revealed: ‘We are now actively

pursuing approvals for operating permits to restart the [St. Marys] facility

for pin production.’ Then, on April 28, 2023, defendant Halford

responded to a question from an analyst by admitting that, “when we came

into [2023] our intent was to do the full restart of St. Marys really to de-

risk our pin supply chain,’ further confirming the falsity of his previous

statements from 2022 that the St. Marys facility’s “pin production line...

is now operational’ and ‘help[ing] to de/-/risk our pin production

capacity.” (ECF #56, § 65).

-{7-

(ECF #56, { 53-65) (emphasis as noted).”

13

The Motion to Strike also relates to the allegations of the First Amended Complaint

made at paragraphs 8, 213, and 214, which stated (highlighting conventions same as above

related to paragraphs 53-65: Court’s emphasis in bold highlighting paragraphs related to

Motion to Strike; Plaintiffs’ emphasis in italics):

“In addition, Defendants also misled investors about material facts

that directly bore on the potential impacts of any operational

disruptions at the Monterrey facility. Specifically, over the course of

four earnings calls between August 6, 2021, and May 6, 2022,

Defendants told investors that GrafTech had ‘de/-Jrisk{ed] [its] pin

production capacity,” by opening a ‘pin production line’ at its St.

Marys, Pennsylvania facility (“St. Marys facility”), which was

purportedly ‘operational’ by November 5, 2021, thus providing the

Company with two ‘pin production facilities.’ In truth, however, the

St. Mary’s facility was not actually involved in any production of pins

or pin stock during this time. Indeed, as confirmed by a former

GrafTech employee and Defendants’ own subsequent admissions,

Defendants had not even begun the process of obtaining the

appropriate operating permits required for pin production at the St.

Marys facility, and Monterrey remained GrafTech’s only facility

capable of producing the pin stock needed for all of the Company’s

electrodes. As a result, contrary to Defendants’ statements that they

had ‘de[-]risk[ed] all of GrafTech’s pin production, the Company

remained exposed to significant risks of commercial harm in the event

that the Monterrey facility’s operations were disrupted.” (ECF #56,

4 8).

* oe □ Ok

“Defendant Halford’s knowledge of and access to information directly

contradicting his misrepresentations is confirmed by the allegations

from the Former Engineering Lead, the specific nature of Halford’s

repeated false statements, and Defendants’ subsequent admissions

concerning the falsity of Halford’s statements.” (ECF #56, § 213).

“Specifically, according to the Former Engineering Lead, the St.

Mary’s facility did not produce any pins at all during the time frame

when Halford represented that the St. Marys facility had an

‘operational’ ‘pin production line.’ Indeed, during this time, the St.

Marys facility lacked the appropriate operating permits required for

-18-

The Financial Impact of the Monterrey Plant Shutdown

The final series of Plaintiffs’ allegations of false or misleading statements relates to

various statements released by GrafTech regarding the expected long-term impact of the

shutdown of the Monterrey Plant. Specifically, Plaintiffs contend that statements made in the

following releases of information regarding the effect of the shutdown were false or misleading:

(1) GrafTech International Ltd., Current Report (Form 8-K) (Sept. 16, 2022)

(ECF #64-8); see ECF #56, § 170;

(2) GrafTech International Ltd., Quarterly Report (Form 10-Q) (Nov. 4,

2022) (ECF #64-12); see ECF #56, J 172, 173;

(3) GrafTech International Ltd., Third Quarter 2022 Earnings Call (Nov. 4,

2022) (ECF #64-13); see ECF #56, 99 174, 175, 176; 177;

(4) GrafTech International Ltd., Current Report (Form 8-K) (Nov. 18, 2022)

(ECF #64-14); see ECF #56, § 179;

(5) GrafTech International Ltd., Fourth Quarter 2022 Earnings Call (Feb. 3,

2023) (ECF #64-15); see ECF #56, § 183;

pin production, and GrafTech had not yet even begun the process of

obtaining such permits — and, in fact, did not begin that process until

at least six months after the latest of Halford’s misrepresentations

regarding the St. Marys facility’s purported pin production.

Moreover, according to the Former Engineering Lead, Halford

regularly visited the St. Marys facility, was ultimtely responsible for

overseeing GrafTech’s efforts to restart the plant, and was regularly

informed about the activities and issues at the St. Marys facility by

Knoll [GrafTfech’s Directior of Central Engineering and Reliability].

As a result, it is inconceivable that Halford would have been unaware

that the St. Mary’s facility was not involved in actual pin production

at the time he made the above misrepresentations concerning the St.

Mary’s facility’s supposedly ‘operational’ ‘pin production line.’”

(ECF #56, § 214).

(ECF #56, ff 8, 213 & 214) (explanatory insert supplied).

-19-

(6) GrafTech International Ltd., First Quarter 2023 Earnings Press Release

on Form 8-K (Apr. 28, 2023) (ECF #64-16); see ECF #56, § 184;

(7) GrafTech International Ltd., First Quarter 2023 Earnings Call (Apr. 28,

2023) (ECF #64-33); see ECF #56, J 184

The actual statements at issue are reproduced within this Memorandum of Opinion and

Order, as Appendix C.

GrafTech Ownership and the Brookfield Defendants

Finally, Count II of the First Amended Complaint includes as Defendants three

“Brookfield” entities,'* which at times held various ownership interests in GrafTech: Brookfield

Asset Management Ltd., which is a global alternative asset management firm based in Canada,

(ECF #56, § 30); Brookfield Capital Partners Ltd., which is the private equity arm of Defendant

Brookfield Asset Management Ltd., (ECF #56, § 29); and BCP IV GrafTech Holdings LP, which

is an indirect wholly-owned subsidiary of Defendant Brookfield Capital Partners Ltd., (ECF #56,

{ 28). The specific claims of Count II are described in the First Amended Complaint as follows:

The Individual Defendants acted as controlling persons of GrafTech within the

meaning of § 20(a) of the Exchange Act. By reason of their positions with the

Company, the Individual Defendants had the power and authority to cause

GrafTech to engage in the wrongful conduct complained of herein. Defendant

Brookfield controlled GrafTech and the Individual Defendants for the reasons

detailed herein, including their ownership of a majority of GrafTech voting

stock, control of the Board, influence over GrafTech’s management, historical

relationship with the Company, and the various agreements that these

Defendants caused the Company to enter into. Graf[ech controlled the

Individual Defendants and all of its employees. By reason of such conduct,

Defendants are liable pursuant to § 20(a) of the Exchange Act.

14

The First Amended Complaint refers to Defendants Brookfield Asset Management Ltd.,

Brookfield Capital Partners Ltd., and BCP IV GrafTech Holdings LP collectively as “Defendant

Brookfield.” (ECF #56, § 31).

-20-

(ECF #56, §[ 265).

According to the First Amended Complaint, the history of the Brookfield Defendants’

acquisition of GrafTech traces its roots to 2011.

Beginning in 2011, GrafTech underwent a period of declining demand for its graphite

electrodes, which led to falling revenues and growing losses. By the end of 2014, GrafTech’s

annual net losses had ballooned to more than $285 million, growing 1,000% year-over-year from

a net loss of approximately $27 million in 2013. In April 2015, GrafTech’s then-CEO Joel

Hawthorne warned that the challenges were expected to continue, stating:

[Graphite electrode demand continued to soften as global electric are furnace

(EAF) steel production weakened. Lower end-market demand in certain steel

consuming sectors, continued high Chinese steel exports and other market

dynamics led to lower EAF customer utilization rates, particularly in North

America. These factors are expected to create a challenging environment for

our Company and the industry as a whole for the remainder of 2015.

(ECF #56, § 36). Amid this slump in the market for graphite electrodes, GrafTech announced on

May 17, 2015, that it had entered into an agreement to be purchased by Brookfield. Pursuant to

the Plan of Merger Agreement, Brookfield made a cash tender offer to purchase all outstanding

shares of GrafTech common stock. On August 17, 2015, GrafTfech announced that its

acquisition by Brookfield had been completed and that it had become a wholly owned affiliate of

Brookfield. As a result, trading of Graffech common stock on the New York Stock Exchange

ceased that day. (ECF #56, § 37).

Over the course of the next three years, GrafTech underwent an extensive transformation

that was intended to revamp the Company’s business and return it to profitability. As part of

this transformation, GrafTech “warm idled” its St. Marys facility — which had previously been a

full-scale production facility capable of manufacturing graphite electrodes and pins from their

-21-

primary raw material, needle coke — during the second quarter of 2016. By “warm idling” the

St. Marys facility, GrafTech would be in a position to restart the facility in short order if

additional manufacturing volumes were needed, which would provide GrafTech with flexibility

and variability to meet peak demand or mitigate disruptions within its manufacturing footprint.

(ECF #56, § 38).

Following the warm idling of the St. Marys facility, GrafTech shifted all of its graphite

electrode manufacturing operations to its highest-capacity and lowest-cost facilities, located in

Monterrey, Mexico, Pamplona, Spain, and Calais, France. Although all three of these facilities

were capable of being full-scale manufacturing facilities, the Monterrey facility was the sole

supplier of connecting pins and pin stock for all of GrafTech’s manufacturing facilities. (ECF

#56, ¥ 39).

On April 19, 2018, Brookfield conducted GrafTech’s second IPO (Initial Public

Offering),’° selling roughly 35 million shares, or 12% of its equity stake. An additional 3.1

million shares were sold by Brookfield pursuant to a partial exercise of the underwriters’

overallotment option. As part of the IPO, Brookfield also caused GrafTech to enter into an

agreement to pay Brookfield a special cash dividend, conditioned on GrafTech’s financial results

and certain other factors. (ECF #56, § 40).

C. The Class Action Period

As asserted in the First Amended Complaint, “[t|his is a federal securities class action on

behalf of all persons or entities that purchased or otherwise acquired GrafTech common stock

15

GrafTech first went public, through an IPO, in 1995 as UCAR International, Inc., before

changing its name to GrafTech International Ltd., in 2002. (ECF #56, § 32).

-22-

between February 8, 2019, and August 3, 2023, inclusive (the ‘Class Period’), and were harmed

thereby (the ‘Class’).... Excluded from the Class are: (1) Defendants, . . . and members of their

immediate families; (ii) the officers and directors of GrafTech, at all relevant times, and members

of their immediate families; (111) the legal representatives, heirs, successors, or assigns of any of

the foregoing; and (iv) any entity in which Defendants have or had a controlling interest.” (ECF

#56, First Amended Complaint, § 15 & n.2).

D. Procedural History

On January 25, 2024, Plaintiff John C. Porter filed this action in the U.S. District Court

for the Northern District of Ohio, on behalf of all purchasers of GrafTech common stock between

February 8, 2019 and August 3, 2023, inclusive (the “Class Period’’), against Defendants

asserting violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5

promulgated thereunder. (ECF #1, § 1). On May 7, 2024, the Court held a hearing related to two

competing motions to be named as Lead Plaintiff. On May 15, 2024, University of Puerto Rico

Retirement System was named as Lead Plaintiff to represent the interests of the proposed class

plaintiffs. (ECF #41, Memorandum of Opinion and Order & ECF #42, Order).

ll. THE MOTION TO STRIKE ALLEGATIONS

REGARDING “FORMER ENGINEERING LEAD”

Before addressing the three Motions to Dismiss now before the Court,’ the Court first

16

These motions are: (1) Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and

Halford to Dismiss the First Amended Complaint for Violations of the Federal Securities Laws

(ECF #64); (2) Defendant David Rintoul’s Motion to Dismiss the First Amended Complaint

(ECF #65); and (3) Motion of Defendants BCP IV Graflech Holdings LP, Brookfield Capital

Partners Ltd, and Brookfield Asset Management Ltd., to Dismiss the First Amended Complaint

-23-

turns to the Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to Strike

Allegations Regarding “Former Engineering Lead” (ECF #67).

The “Former Engineering Lead” referenced in the First Amended Complaint, and now the

Motion to Strike, is Joshua Geitner, who was employed at the St. Marys Plant between August

2022 and April 2024. (See ECF #56, 58-63, 8, 213 & 214; ECF #67-3, Declaration of Joshua

Geitner, §§ 1-2). Before the First Amended Complaint was filed, Mr. Geitner spoke with

representatives for Plaintiffs by telephone on two or three occasions. (ECF #67-3, { 3). In an

affidavit filed along with the Motion to Strike, Mr. Geitner states that he was never given a draft

of the First Amended Complaint prior to its filing, or a written summary of what statements

would be attributed to him, so that he could review it for accuracy or note any needed

corrections. (ECF #67-3, 3). Later, when he was shown a copy of the First Amended

Complaint by counsel for GrafTech after its filing, he saw that the First Amended Complaint

plainly misrepresented — or at best misconstrued — what he had said, causing him to later sign a

declaration under penalty of perjury stating, among other things, “Contrary to what is included in

Paragraph 59 of the First Amended Complaint, I do not recall telling the lawyers or investigators

that ‘the St. Marys facility was not involved in the production or manufacturing of any pins.’ I

specifically did not tell the lawyers or investigators for plaintiff that GrafTech was not

graphitizing or machining at St. Marys during my tenure with the Company” (ECF #67-3, { 5)

(emphasis supplied). Thus, the references to “graphitizing pin stock” and “machining pin stock”

made in the declaration confirm directly that the “Former Engineering Lead” does consider

for Violations of the Federal Securities Laws (ECF #66).

-24-

graphitizing and machining to be a part of the “pin production and manufacturing process,” and

thus directly refutes the statement attributed to him by Plaintiffs that “the St. Marys facility was

not involved in the production or manufacturing of any pins.”

The full text of the “Former Engineering Lead’s affidavit is set forth below:

1. During the period between August 2022 and April 2024, I was

employed by GrafTech International Holdings Inc., a subsidiary of GrafTech

International Ltd. (““GrafTech” or “the Company”). I began employment on

August 29, 2022 as a Manufacturing Engineering Lead, and my title changed

to Process Engineer on April 1, 2023. Throughout my employment with

GrafTech, I worked at the Company’s St. Marys, Pennsylvania plant. My

employment ended on April 13, 2024.

2. I believe that I am the individual referred to as “Former Engineering

Lead” in the First Amended Complaint, a copy of which has been provided to

me by counsel to GrafTech.

3. To the best of my recollection, I communicated verbally by

telephone with individuals who called me and identified themselves as

lawyers or investigators seeking information about GrafTech on two or three

occasions in the summer of 2024. The first call involved only one individual;

the second involved multiple. I recall informing the lawyers or investigators

that I did not wish to be referenced in court documents. I never received a

copy of the First Amended Complaint from them, either before or after the

plaintiff filed it. Nor did the lawyers or investigators provide me with a

written version of anything they thought I said, so that I could review it and

confirm its accuracy (or make any corrections).

4. My comments to the lawyers or investigators about operations,

equipment (including a press and cooling pond), and permits at the St. Marys

plant were limited to initial stages of the production process (e.g., forming).

The initial stages, not the later stages (e.g., graphitizing pin stock and

machining the pin stock to produce pins), were the portions of the process on

which I was focused during my employment at the St. Marys facility.

5. Contrary to what is included in Paragraph 59 of the First

Amended Complaint, I do not recall telling the lawyers or investigators that

“the St. Marys facility was not involved in the production or manufacturing

of any pins.” I specifically did not tell the lawyers or investigators for

Plaintiff that GrafTech was not graphitizing or machining at St. Marys

during my tenure with the Company.

-25-

6. To the contrary, during the entirety of my tenure at GrafTech, I

believe that the St. Marys facility was operational from the standpoint of

graphitizing and machining.

7. I declare under penalty of perjury that the foregoing is true and

correct.

Executed on this 26" day of November, /s/ Joshua Geitner

2024

(ECF #67-3, Declaration of Joshua Geitner) (emphasis supplied).

Against this, Plaintiffs represent to the Court in the First Amended Complaint that, “as

confirmed by a former GrafTech employee” or “according to a former GrafTech Manufacturing

Engineering Lead”:

“Tn truth, however, the St. Mary’s facility was not actually involved in any

production of pins or pin stock during this time. Indeed, as confirmed by a

former GrafTech employee ..., Defendants had not even begun the process of

obtaining the appropriate operating permits required for pin production at the

St. Marys facility.” (ECF #56, § 8).

“But according to a former GrafTech Manufacturing Engineering Lead . . . the

truth was that the St. Marys facility produced no pins or pin stock at all during

2021 or 2022 and, in fact, did not even have the proper ‘operating permits’ to

perform such activities.” (ECF #56, 4 58).

“According to the Former Engineering Lead, at the time of his hiring, the St.

Marys facility was not involved in the production or manufacturing of any

pins.” (ECF #56, 4 59).

“At the time of the Former Engineering Lead’s hiring, . . . it was clear to the

Former Engineering Lead that the St Marys facility had not produced or

manufactured pins at any point within the last year.” (ECF #56, § 60).

“According to the Former Engineering Lead, . . . the St. Marys facility never

produced or manufactured any actual pins at any point during his tenure

with GrafTech, which came to an end in April 2024.” (ECF #56, { 62).

“According to the Former Engineering Lead, defendant Halford was aware of

and familiar with the activities at the St. Marys facility, and definitely would

have known that the plant was not involved in actual pin production during

-26-

2021 and 2022. According to the Former Engineering Lead, Halford regularly

visited the St. Marys facility, was ultimately responsible for overseeing

GrafTech’s efforts to restart the plant, and was regularly informed about the

activities and issues at the St. Marys facility by Knoll.” (ECF #56, § 63).

“Specifically, according to the Former Engineering Lead, the St. Mary’s

facility did not produce any pins at all during the time frame when Halford

represented that the St. Marys facility had an ‘operational’ ‘pin production

line.” (ECF #56, § 214) (underlined emphasis in original).

While perhaps not every one of the statements offered by Plaintiffs as being “confirmed”

by the “Former Engineering Lead” is as directly misrepresented (and directly refuted by the

“Former Engineering Lead” as being his statement) as that found in paragraph 59 of the First

Amended Complaint, it is clear that all of these paragraphs are infused with some level of

misrepresentation by Plaintiffs in presenting their First Amended Complaint — or at minimum,

represent an attempt to manipulate the Court’s directive to “accept all factual allegations . . . as

true,” and construe them in the light most favorable to the plaintiff, see Tellabs, Inc. v. Makor

Issues & Rts., Ltd., 551 U.S. 308, 322-23 (2007), in an effort to avoid a well-pled motion to

dismiss under Federal Rule of Civil Procedure 12(b)(6), and the “exacting pleading

requirements” of the PSLRA intended to “screen out frivolous suits.”'’ Tellabs, 551 U.S. at

313, 319-21.

Federal Rule of Civil Procedure 12(f) allows a court to “strike from a pleading . . . any

redundant, immaterial, impertinent, or scandalous matter.” FED. R. Crv. P. 12(f). Immaterial

matters are those that have “no bearing on the subject matter of the litigation”; impertinent

17

The Court, by this reference to the pleading standards of the PSLRA, does not intend to

label the First Amended Complaint as “frivolous,” but rather to highlight that “[N]ot all

allegations that would survive a traditional motion to dismiss under Rule 12(b)(6) are sufficient

to survive dismissal in a private securities class action.” Lim y. Hightower, No. 4:23-CV-01454,

2024 WL 4349409, at *8 (N.D. Ohio Sept. 30, 2024).

-27-

matters are those that “are not necessary to the issues presented”; and scandalous matters are

those that “unnecessarily reflect[] on the moral character of an individual or state[] anything in

repulsive language that detracts from the dignity of the court.” McKinney v. Bayer Corp., No.

10-CV-224, 2010 WL 2756915, at *1 (N.D. Ohio July 12, 2010). Motions to strike “serve a

useful purpose by saving the time and expense which would otherwise be spent in litigating

issues which would not affect the outcome of the case.” Student Res. Ctr., LLC v. E. Gateway

Cmty. Coll., No. 2:22-CV-2653, 2024 WL 3849440, at *7 (S.D. Ohio Aug. 15, 2024). District

courts are endowed with “broad discretion in determining whether to grant a motion to strike.”

McKinney, 2010 WL 2756915, at *2. Courts may exercise this discretion when the allegations

at issue are “both irrelevant to the subject matter of the litigation and prejudicial to the objecting

party,” id., and when they are “designed to improperly illicit sympathy, to curry favor, or to cast

aspersions on the defendants.” Novolex Holdings, LLC v. Wurzburger, No. 19-145-DLB-CJS,

2022 WL 391307, at *3 (E.D. Ky. Feb 8, 2022).

The situation now before the Court presents an unusual, and hopefully rare, case in the

context of a motion to strike. It is not unusual for complaints filed in connection with claims

made under the Private Securities Litigation Reform Act to cite information obtained from

“confidential witnesses.” As the reliance on such confidential witnesses has grown, courts have

responded by closely examining the allegations and “sharply discounting” those that are vague,

conclusory, or irrelevant. Konkol v. Diebold, 590 F.3d 390, 399 (6" Cir. 2009) (“Bare-bones

statements, such as the allegation that the Scorecards were ‘of huge importance to the decision-

making of the Company,’ are the type of vague and conclusory allegations from confidential

witnesses that are properly discounted.”), abrogated on other grounds (related to establishing

-28-

the element of “scienter”) by Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 48-49 (2011);

Higginbotham v. Baxter Int'l, Inc., 495 F.3d 753, 757 (7" Cir. 2007) (“Usually that discount

will be steep.”). What is unusual is for a Court to be presented with a sworn affidavit by the

“confidential witness” directly refuting the statements attributed to him. This calls for more

than a “steep discount” of the allegations, and rather represents grounds to strike the noted

paragraphs as “immaterial and impertinent” by virtue of the fact that they directly misrepresent

what the confidential witness stated, injects unfair prejudice into the Court’s consideration of

the motions to dismiss, and only serves to confuse the issues before the Court. While “[t]he

falsity of a matter alleged is not specifically included among the grounds for a motion to

strike[,] Hughes [v. Lavender, No. 2:10-CV-674], 2011 WL 2945843, at *2 [(S.D. Ohio July 20,

2011)]; [hJowever, although caution is advised, a court may grant a motion to strike for falsity if

the court finds that the allegations are ‘obviously false and clearly injurious to a party.’”

Schlosser vy. Univ. of Tenn., No. 3:12-CV-534, 2014 WL 5325350, at *3 (E.D. Tenn. Oct. 20,

2014) (inserts supplied). This is such a case. Accordingly, the Court GRANTS the Motion of

Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford to Strike Allegations Regarding

“Former Engineering Lead” (ECF #67).'* The Court notes here that this ruling does not have

18 .

In their Memorandum in Opposition to Motion to Strike, Plaintiffs argue that the Motion

to Strike is untimely under Federal Rule of Civil Procedure 12()(2) (“The court may act... □□

motion made by a party either before responding to the pleading or, if a response is not allowed,

within 21 days after being served with the pleading”) and “procedurally improper” under

Federal Rule of Civil Procedure 12(g)(2) (“[A] party that makes a motion under this rule must

not make another motion under this rule raising a defense or objection that was available to the

party but omitted from its earlier motion”). (ECF #70, p.9). As to the first argument, no

Defendant has filed an answer in response to the First Amended Complaint, thus Rule 12((2)

permits the motion. See Tracfone Wireless, Inc. v. Access Telecom, Inc., 642 F. Supp. 2d 1354,

1361 (S.D. Fla. 2009) (“Plaintiffs claim that this [m]otion is untimely under Rule 12(f) is

without merit; despite the fact that this [m]otion was filed over four months after the

-29-

the effect of otherwise altering its independent determination that Defendants are entitled to

judgment on their Motions to Dismiss, in that, as discussed later in this Memorandum of

Opinion and Order, the Court can consider documents that are referenced in the complaint and

matters of which it may take judicial notice, including the numerous times between 2018 and

2022 that GrafTech stated in its filings that the St. Marys Plant was engaged in the graphitizing

and machining steps in pin production and manufacturing at the St. Marys Plant.

Il. LEGAL STANDARDS RELATED TO MOTIONS TO DISMISS

The Motions to Dismiss raise three fundamental questions of law:

First, does the First Amended Complaint plead, with requisite particularity, claims of

materially false or misleading statements, or an omission that rendered another statement

materially misleading, as required to state a claim under Section 10(b) of the Securities Exchange

Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder?

Second, does the First Amended Complaint plead, with requisite particularity, facts

giving rise to a strong inference of scienter as to each Defendant and each alleged misstatement,

as required to state a claim under Section 10(b) of the Securities Exchange Act of 1934 (the

[c]omplaint,” and after the defendants had filed motions to dismiss, “it was timely filed before a

responsive pleading to the [c]omplaint was filed.”). Moreover, even when faced with an

allegedly untimely motion to strike, the Court may strike allegations “on its own.” FED. R. CIv.

P. 12(f)(1). As to the second argument, courts in the Sixth Circuit have long recognized that

“the purpose of Rule 12(g)(2) is to prevent the dilatory motion practice fostered by common law

procedure and many of the codes whereby numerous pretrial motions could be made, many of

them in sequence a course of conduct that often was pursued for the sole purpose of delay,”

Blick v. Ann Arbor Pub. Sch. Dist., No. 19-12127, 2021 WL 10132110, at *2 (E.D. Mich. Sept.

30 2021), “[bJut a line of precedent exists in which the district courts have been willing to

overlook a 12(g) defect where doing so would better serve the purpose underlying subdivision

(g).” Id. There is no indication that the Motion to Strike had any effect of delaying the

proceedings, as it was filed prior to Plaintiffs even responding to the Motions to Dismiss.

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“Exchange Act”) and Rule 10b-5?

Third, does the First Amended Complaint plead a viable claim under Section 20(a) of the

Exchange Act?

In determining the Motions to Dismiss in this case, the Court not only looks to the

standards applicable to motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), but

also to the more exacting and heightened pleading standards applicable to cases alleging

securities fraud under Sections 10(b) and 20(a) of the Securities Act.

A. Motions to Dismiss Generally Under Federal Rule of Civil Procedure 12(b)(6)

In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must contain

“sufficient factual material” which, if accepted as true, would state a valid “claim to relief that is

plausible on its face.” Sampson, 2020 U.S. Dist. LEXIS 231649, at *4; see also Askew v. True

Hearts of Care, LLC, No. 5:19-CV-01619, 2020 U.S. Dist. LEXIS 2187, at *4 (N.D. Ohio Jan. 7,

2020) (“While detailed factual allegations are not required, Fed. R. Civ. P. 8(a)(2) calls for

sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its

face.’”) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), in turn quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)).

“All well-pleaded material allegations of the pleadings of the opposing party must be

taken as true, and the motion may be granted only if the moving party is nevertheless clearly

entitled to judgment.” Colbert v. Cuyahoga Cnty, Ohio, No. 1:23-CV-01414, 2024 U.S. Dist.

LEXIS 173672, at *7 (N.D. Ohio Sept. 25, 2024) (quoting Poplar Creek Dev. Co. v. Chesapeake

Appalachia, L.L.C., 636 F.3d 235, 240 (6" Cir. 2011). Although a court must accept the well-

pleaded allegations of a complaint as true, it “need not accept as true legal conclusions or

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unwarranted factual inferences, and conclusory allegations or legal conclusions masquerading as

factual allegations will not suffice.” Willman v. Attorney General of the United States, 972 F.3d

819, 823 (6 Cir. 2020) (quoting Terry v. Tyson Farms, Inc., 604 F.3d 272, 276 (6" Cir. 2010)).

Under the general standard, as the Supreme Court noted in Twombly, a complaint is “not

require[d] [to include] heightened fact pleading of specifics, but only enough facts to state a claim

to relief that is plausible on its face.” Twombly, 550 U.S. at 570.”

B. The Heightened Standard Applied in Federal Securities Law Cases

Because Sections 10(b) and 20(a) of the Exchange Act involve fraud, the Court also must

apply the pleading requirements set forth in Federal Rule of Civil Procedure 9(b). While a court

interprets all facts in the complaint as true, a plaintiff must, at minimum, “detail[] the “who,

what, when, where, and how’ of the alleged fraud.” Bondali v. Yum! Brands, 620 F. App’x 483,

489 (6" Cir. 2015). In addition to this, for securities fraud cases, a plaintiff must satisfy the

“exacting pleading requirements” of the PSLRA. Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308, 313 (2007). The legislative history of the PSLRA states that it was enacted by

Congress to act as a “check against abusive litigation by private parties” and to “screen out

frivolous suits,” Tellabs, 551 U.S. at 319-21, based on a concern that private securities actions

can be ripe for abuse. Jd. at 308-09. The PSLRA demands that a securities complaint state

“with particularity” “each statement alleged to have been misleading” and “the reason or reasons

why the statement is misleading.” /d. at 321. A complaint must also allege particularized facts

19

As noted below, in the discussion on the standards applied under the PSLRA, securities

fraud claims must meet a higher standard of specificity than that applied under the general

standard of FED. R. Civ. P. 12(b)(6) analysis.

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giving rise to a “strong” inference of scienter. Jd. “Scienter” is not the product of mistake,

miscalculation, overoptimism, or unfulfilled prediction, but rather a is a mental state embracing

an intent “to deceive, manipulate, or defraud.” Jd. at 313. Pleading a violation of the federal

securities laws is not easy. The pleading standards of the PSLRA have been described by the

Sixth Circuit as creating an “elephant-sized boulder” that must be surmounted to successfully

state a claim. Jn re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 461 (6 Cir. 2014). “[N]ot all

allegations that would survive a traditional motion to dismiss under Rule 12(b) are sufficient to

survive dismissal in a private securities action.” Lim v. Hightower, No. 4:23-CV-1454, 2024

WL 4349409, at *8 (N.D. Ohio Sept. 30, 2024).

IV. THE LAW GOVERNING THE CLAIMS ASSERTED IN THIS CASE

A. Section 10(b) of the Exchange Act and Rule 10b-5

To state a claim under Section 10(b) of the Exchange Act and Rule 10b-5,” a plaintiff

20

Securities Exchange Act Rule 10b-5 is the vehicle by which violations of Securities

Exchange Act of 1934 Section 10(b) is pursued. Section 10(b) of the Exchange Act provides:

It shall be unlawful for any person, directly or indirectly, by the use of any

means or instrumentality of interstate commerce or of the mails, or of any

facility of any national securities exchange . . . (b) [t]o use or employ, in

connection with the purchase or sale of any security registered on a national

securities exchange . . . any manipulative or deceptive device or

contrivance in contravention of such rules and regulations as the

Commission may prescribe as necessary or appropriate in the public

interest or for the protection of investors.

15 U.S.C. § 78j(b).

Rule 10b-5 provides:

It shall be unlawful for any person, directly or indirectly, by the use of any

means or instrumentality of interstate commerce, or of the mails or of any

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must establish: “(1) a material misrepresentation or omission by the defendant; (2) scienter;

(3) a connection between the misrepresentation or omission and the purchase or sale of a

security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss

causation.” Bondali, 620 F. App’x at 489 (quoting Stoneridge Inv. Partners, LLC v. Scientific-

Atlanta, Inc., 552 U.S. 148, 157 (2008)). Here, the dispositive elements are those of “material

misrepresentation or omission” and “scienter.” The Court first examines the element of

“material misrepresentation or omission.”

1. Actionable Material Misrepresentations or Omissions

To successfully plead an actionable material misrepresentation or omission, a plaintiff

must allege facts demonstrating two things: (1) that a defendant made a statement or omission

that was false or misleading; and (2) that the statement or omission concerned a material fact.

Omnicare, 769 F.3d at 470. “Materiality” is dependent on the significance a reasonable investor

would place on the withheld or misrepresented information. Basic v. Levinson, 485 U.S. 224,

240 (1988); see also In re Nat’l Auto Credit, Inc. Sec.Litig., No. 1:98-CV-0264, 1999 WL

33919791, at *11 (N.D. Ohio Oct. 12, 1999) (holding that facts are material only if a reasonable

investor would have viewed the misrepresentation or omission as “having significantly altered

the total mix of information made available”) (citations omitted). It is not enough for a

facility of any national securities exchange, (a) [t]o employ any device,

scheme, or artifice to defraud, (b) [t]o make any untrue statement of a

material fact or to omit to state a material fact fact necessary in order to

make the statements made, in the light of the circumstances under which

they were made, not misleading, or (c) [t]o engage in any act, practice, or

course of business which operates or would operate as a fraud or deceit

upon any person, in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5.

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statement to be “false or incomplete, if the misrepresented fact is otherwise insignificant.”

Basic, 485 U.S, at 238.

A key concept that almost always arises in determining whether an allegedly false or

misleading statement is “material,” and actionable, is whether the statement concerns “hard” or

“soft information.” “Hard information” is “typically historical information or other factual

information that is objectively verifiable” — and it is actionable if a plaintiff pleads facts showing

that the statement concerned a material fact and that it was objectively false or misleading.

Omnicare, 769 F.3d at 470 (citations omitted). If the statement is one concerning“soft

information,” which “includes predictions and matters of opinion,” a plaintiff must additionally

plead facts showing that the statement was “made with knowledge of its falsity.” Indiana State

Dist. Council of Laborers Pension & Welfare Fund v. Omnicare, 583 F.3d 935, 945-46 (6" Cir.

2009).

“Soft information,” and “‘puffery” do not constitute a material misrepresentation upon

which stockholders would reasonably rely. Lim, 2024 WL 4349409, at *9 (citing Zaluski v.

United Am. Healthcare Corp., 527 F.3d 564, 576 (6" Cir. 2008); Indiana State Dist. Council of

Laborers, 583 F.3d at 943). Statements are not actionable if they are overly general, “lack[ing]

the sort of definite projections that might require later correction.” Lim, 2024 WL 4349409, at

*9 (citing In re Express Scripts Holdings Co. Sec. Litig., 773 F. App’x 9,12 (6 Cir. 2019)).

Any generally optimistic or overly broad statements cannot be the basis for a Section 10(b)

claim. Jd. And, particularly pertinent to many of the claims at issue in this case, “a generic

claim of legal compliance, absent any specifics, does not form the basis for a misrepresentation

actionable under Rule 10b-5” (and thus Section 10(b) as well). Jn re Sotera Health Company

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Sec. Litig., No. 1:23-CV-00143, 2025 WL 860897, at *25 (N.D. Ohio Mar. 19, 2025) (citing

Dailey v. Medlock, 551 F. App’x 841, 849 (6" Cir. 2014), in turn citing Indiana State Dist.

Council of Laborers, 583 F.3d at 945-947). In Indiana State Dist. Council of Laborers,” the

Sixth Circuit affirmed a district court’s ruling that the company’s general assertions of legal

compliance — that it “complied with state law and regulations and had a policy of complying

with the law” — were not actionable because the plaintiffs failed to show the defendants knew the

statements were untruthful. Indiana State Dist. Council of Laborers, 583 F.3d at 945-47.

Plaintiffs’ allegations of “material misstatements or omissions” involve three categories:

(1) those related to purported non-disclosures about the Monterrey Plant, particularly about its

compliance with applicable environmental laws and the Administrative Proceeding in 2019;

(2) statements related to the operations and activities at the St. Marys Plant; and (3) statements

about the anticipated effects of the Monterrey Plant shutdown in November 2022.

The Court first looks to the statements related to the Monterrey Plant.

a. Statements About the Monterrey Plant

A key factor in determining whether an alleged statement or omission is actionably false

or misleading is whether the statement was false when made. An actionable assertion cannot be

based on what has come to be known as allegations of “fraud by hindsight.” See Jn re

Huntington Bancshares Inc. Sec. Litig., 674 F. Supp. 2d 951, 959 (S.D. Ohio 2009) (“[W]e have

refused to allow plaintiffs to proceed with allegations of ‘fraud by hindsight.’ Corporate

21

This cited case is often referred to as “Omnicare” or “Omnicare I,” but to avoid

confusion with the first-cited In re Omnicare, Inc. Sec. Litig., 769 F.3d 455 (6 Cir. 2014), this

case is referred to as “Jndiana State Dist. Council of Laborers.”

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officials need not be clairvoyant; they are only responsible for revealing those material facts

reasonably available to them. Thus, allegations that defendants should have anticipated future

events and made certain disclosures earlier than they actually did do not suffice to make out a

claim of securities fraud.”) (quoting Novak v. Kasaks, 216 F.3d 300, 309 (2™ Cir. 2000)); see

also City of Pontiac Policemen’s and Firemen’s Retirement Sys. v. UBS AG, 752 F.3d 173, 188

(2 Cir. 2014) (“We do not recognize allegations of ‘fraud by hindsight’”) (company’s failure to

recognize the vulnerability of all of its mortgage-related assets may have been “poor judgment,”

but not actionable misstatement); In re Century Bus. Servs. Sec. Litig., No. 1:99-CV-2200, 2002

WL 32254513 (N.D. Ohio June 27, 2002) (“Plaintiffs cannot simply set forth the relevant

statements and ‘summarily characterize the statements as “false and misleading.’” In other

words, plaintiffs must demonstrate a basis for the claim that the defendants’ statements were

false at the time they were made, rather than merely erroneous in hindsight.”). Here, the

Plaintiffs assertions regarding the Monterrey Plant amount to claiming that because the facility

was the subject of an Administrative Proceeding in 2019, and operations were temporarily

suspended in 2022, all of its earlier statements about having a competitive advantage and beliefs

about being in full compliance with applicable environmental laws must have been false. These

are not actionable claims.

(i) Cost and Competitive Advantage

Plaintiffs first challenge GrafTech’s statements about its competitive advantages and cost

advantages, such as statements about how it had an “advantaged low cost structure” (ECF #56,

qf 115-116, 124, 126), a “long-term competitive advantage” (ECF #56, § 119), and a “portfolio

of low-cost graphite electrode manufacturing facilities” (ECF #56, § 120). Plaintiffs state that

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these statements were misleading because the Defendants “concealed that GrafTech’s cost

advantages had been achieved in substantial part by the Company’s failure to implement

necessary environmental safeguards and comply with environmental regulations at its Monterrey

facility.” (ECF #56, J 123; see also 89, 94, 110, 131, 137, 143, 154, 163 & 169). Yet, there

are no identified facts or specific factual allegations about what GrafTech’s costs actually were,

or that they were different from what was reported as of the date of any alleged misstatement.

Nor are there any factual allegations comparing GrafTech’s costs and competitive advantages to

those of its competitors. Most significantly, the First Amended Complaint cites no documents,

communications, or data showing that the Monterrey Plant was in material violation of any

specific environmental regulation or requirement as of the date of any alleged misstatement — or

those showing that this purported “noncompliance” rendered any challenged statement about

costs materially misleading.

(ii) Environmental Compliance

The main focus of Plaintiffs’ claims about the Monterrey Plant concerns statements about

GrafTech’s efforts to comply with applicable environmental requirements, made months or even

years before the temporary shutdown in 2002, such as that GrafTech had “an on-going

commitment to rigorous internal environmental protection standards,” (ECF #56, 4 223),

“proactively [took] steps to reduce [environmental] impacts throughout [its] operations,” (ECF

#56, J 111), focused on “being good environmental stewards” and continued to “monitor

progress on [its] environmental initiatives,” (ECF #56, J 118), and was “in compliance in all

material respects with federal, state, local, and foreign environmental laws and regulations,”

(ECF #56, {jf 90, 106, 127, 159). Plaintiffs now assert that these statements were false because

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the Monterrey Plant was, at least at some points in time, not in compliance with all such

environmental requirements, as later revealed by the brief shutdown in 2022.

Plaintiffs do not identify any particularized facts showing that any of such statements (see

Appendix A of this Memorandum of Opinion) supporting their claim that they were false when

made. The First Amended Complaint does not identify any specific environmental requirement

that applied to the Monterrey Plant at the time of any challenged statement, or any particularized

facts showing known violation at the time of any such statement — such as any limits imposed by

law or regulation on plant emissions, the actual quantity of emissions that were occurring at the

time of any statement, or any data, documents, or reports identifying violations of a law or

regulation at the time of any alleged misstatement.

Nor does the First Amended Complaint identify any document, communication, data, or

other source showing that GrafTech was not committed to environmental compliance, that it was

not monitoring its progress on environmental efforts, or that it was knowingly aware that it was

not in compliance with any standard at the time of any statement. The fact that operations at the

Plant were briefly shut down in 2022, in some cases years after a statement, is not demonstrative

of contemporaneous falsity, and rather is best described as asserting “fraud by hindsight.” An

example of this is found in the facts asserted in the case of Bondali v. Yum! Brands, 620 F.

App’x 483 (6" Cir. 2015), where the Sixth Circuit affirmed the district court’s dismissal of the

claims. In Bondali, the plaintiff alleged that “Yum’s general statements touting its standards and

protocols” including that it “adhere[d] to a strict food safety testing program” and “[c]ontinually

monitor[ed] and improve[d] its procedures and practices to ensure food safety,” were false and

misleading because some of Yum’s products later tested positive for drug and antibiotic residue.

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Bondali, 620 F. App’x at 487-90. The district court dismissed the complaint. The Sixth Circuit

affirmed, finding that the complaint failed to state a claim because it “alleged no facts to suggest

that Yum did not require its suppliers to adhere to corporate food standards and safety

protocols.” Jd at 489. The Sixth Circuit further held that it was “not reasonable to interpret

Yum’s statements as a guarantee.” Jd. Such is also the case here.

Nor can contemporaneous falsity be established by the existence of the complaint filed by

the mayor of Apodaca, César Garza Villareal, along with Apodaca’s Secretary of Urban

Development, Ecology[,] and Transportation, Andres M. Canto Ramirez, filed in May 2020

against GrafTech with the Secretary of Sustainable Development for the Nuevo Leén State

Government, asserting violations of “environmental regulations, biosafety and wildlife, among

others, affecting matters of public order and social interest by expending risks or threats of

environmental contingency in neighborhoods, municipality[,] and surrounding municipalities,”

or the September 2021 citizen’s complaint filed with the Federal Prosecutor’s Office for

Environmental Protection regarding the Monterrey Plant’s dust emissions. (ECF #56, JJ 49-51).

First, as Plaintiffs’ admit, “‘[i]t is unclear what action, if any, the State Attorney General’s Office

of Sustainable Development took in response to the complaint filed by Mayor Garza and Mr.

Ramirez, (ECF #56, § 49), and “[a]s with the 2020 complaint filed by Mayor Garza and Mr.

Ramirez, it is unclear what action, if any, was taken in response to [the later] citizen’s complaint,

(ECF #56, § 51). Plaintiffs do not show that any enforcement action resulted from either

complaint, or that GrafTech or the Individual Defendants were aware of them. Nor is a claim of

contemporaneous falsity supported by Mayor Garza’s “address” to the Apodaca City Council

asking the Council to take action against the Company related to the emissions issues. (ECF

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#56, □□ 67-69). Again, Plaintiffs do not show, or even assert, that GrafTech or any of the

Individual Defendants were aware of the mayor’s remarks. These allegations also fall within the

description of “fraud by hindsight,” and are thus not actionable under the PSLRA.

(iii) 2019 Administrative Proceeding

The remaining allegations of “material misstatement or omission” in connection with the

Monterrey Plant relate to statements made by GrafTech regarding the Administrative Hearing

initiated in March 2019 by the Nuevo Leén Department of Sustainable Development, which

culminated in GrafTech paying fines amounting to approximately $150,000,” and being directed

to implement corrective measures to address violations of the environmental laws relating to

emissions. (ECF #56, 7] 95, 98, 102).

The First Amended Complaint does not identify any document, communication, or

statement that any of the disclosures or other statements made by Defendants on this matter were

either false or incorrect. The gist of Plaintiffs’ claims are that GrafTech should have included

more information in its public statements, such as the detailed findings of the Nuevo Leén

Department of Sustainable Development in its Resolution, as stated in the First Amended

Complaint:

Defendants concealed that, on July 30, 2019, the Department of Sustainable

Development issued a formal resolution of the administrative proceeding with

respect to the Company’s Monterrey facility, which: (i) determined that

GrafTech’s Monterrey facility operated “without the means of control to

ensure that dust emissions are avoided, which is mandatory as established in

Article 131 section II of the Environmental Law of the State of Nuevo Leon,

to ensure satisfactory air quality for population well-being and ecological

22

Specifically, $150,054.25, comprised of $140,253.40 and $9,800.84. (See ECF #64-10,

Resolution of the Department of Sustainable Development of Nuevo Leon, p.11 [PageID #1207]

(July 30, 2019)).

-4]-

balance”; (ii) found that GrafTech “benefitted economically by evading the

expense generated by implementation of equipment or systems that guarantee

avoiding the generation of dust emissions to the atmosphere during its

operation”; and (iii) ordered GrafTech to immediately and permanently . . .

carry out the necessary actions, adaptations and/or maneuvers that guarantee

avoiding the generation of emissions of dust or any other contaminant to the

atmosphere.”

(ECF #56, § 100; see also { 104, similar allegations).

An omission is actionable under Section 10(b) only if it renders another affirmative

statement materially misleading. Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601

U.S. 257, 265 (2024). Corporate executives “have no general duty to disclose every problem

that arises.” Jn re Allscripts, Inc. Sec. Litig., No. 00-C-6796, 2001 WL 743411, at *9 (N.D. IIL.

June 29, 2001); see also Singh v. Cigna Corp., 277 F. Supp.3d 291, 310 (D. Conn. 2017) “A

reasonable investor’s interest is not sufficient, standing alone, to require disclosure”), aff'd 918

F.3d 57 (2™ Cir. 2019); In re United Am. Healthcare Corp. Sec. Litig., No. 2:05-CV-72112,

2007 WL 313491, at *6 (E.D. Mich. Jan. 30, 2007) (“A corporation not required to disclose a

fact merely because an investor would very much like to know that fact”) (quoting Jn re Time

Warner, Inc. Sec. Litig., 9 F.3d 259, 267 (2° Cir. 1993)). Nor are companies required to provide

an overly cautious or negative picture of current performance or future prospects. Albert Fadem

Tr. v. American Elec. Power Co., Inc., 334 F. Supp. 2d 985, 1026 (S.D. Ohio 2004); see also

Rombach v. Chang, 355 F.3d 164, 174 (2"! Cir. 2004) (“People in charge of an enterprise are not

required to take a gloomy, fearful or defeatist view of the future”).

A company or its officers is required to disclose information only if its absence would

“create an impression of a state of affairs that differs in a material way from the one that actually

exists.” Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9" Cir. 2002); see also

-4)-

Macquarie, 601 U.S. at 265; United Am. Healthcare, 2007 WL 313491, at *10 (finding the

omission of information was immaterial when it did not render the defendant’s factual

statements inaccurate); Lim, 2024 WL 4349409, at *11 (“Because they did not result in an

affirmative misleading statement, Defendants had no duty to disclose the omitted details”).

Section 10(b) “do[es] not create . . . an affirmative duty to disclose any and all material

information.” Plymouth Cty. Ret. Assn. v. ViewRay, Inc., 556 F. Supp. 3d 772, 784 (N.D. Ohio

2021), aff'd, 2022 WL 3972478 (6" Cir. Sept. 1, 2022). It also merits mention here that

GrafTech’s full statements on such issues were often more than as identified in the First

Amended Complaint:

We believe that we are currently in compliance in all material respects with

the federal, state, local and foreign environmental laws and regulations to

which we are subject. We have experienced some level of regulatory

scrutiny at most of our current and former facilities and, in some cases,

have been required to take or are continuing to take corrective or remedial

actions and incur related costs, and may experience further regulatory

scrutiny, and may be required to take further corrective or remedial actions

and incur additional costs, in the future.

(See ECF #56, 7§ 90, 106, 127) (text omitted from statements as quoted in First Amended

Complaint shown in bold italic type).”

A review of the actual statements made by GrafTech (including the example quoted

above and others identified in Appendix A of this Memorandum of Opinion) shows that it

disclosed the existence of the 2019 Administrative Proceeding, that GrafTfech was required to

23

See ECF #64-19, PageID #1374 (partially quoted at ECF #56, § 90), GrafTech

International Ltd., 2018 Annual Report (Form 10-K), p.16 (Feb. 22, 2019); ECF #64-6, PageID

#1160 (partially quoted at ECF #56, § 106), GrafTech International Ltd., 2019 Annual Report

(Form 10-K), p.17 (Feb. 21, 2020); ECF #64-18, PageID #1300 (partially quoted at ECF #56,

{ 127), GrafTech International Ltd., 2020 Annual Report (Form 10-K), p.16 (Feb. 23, 2021).

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take corrective measures, that GrafTech paid a fine (and the specific amounts are stated in the

Resolution cited in the First Amended Complaint), and that the matter was closed — as admitted

by Plaintiffs in their First Amended Complaint:

The [Third Quarter 2019] Form 10-Q reiterated that “[o]n March 1, 2019, the

[Department of Sustainable Development] provided notice of an

administrative proceeding with respect to the Company’s Monterrey facility,”

which required the “Company to design and implement certain corrective

measures involving certain potential violations of state environmental law

relating to emissions.” The [Third Quarter 2019] Form 10-Q further

represented that GrafTech had “cooperated with the Department” with respect

to the proceeding, “including payment of certain fines that were not material

to the Company.” The [Third Quarter 2019] Form 10-Q also reported that, in

September 2019, “the Department of Sustainable Development formally

closed the proceeding.”

(ECF #56, § 102) (bracketed text in original, with exception of “[Third Quarter 2019]” added by

Court to replace “3Q19” of original). None of this information is alleged by Plaintiffs to be

false, nor do the statements create “an impression of a state of affairs that differs in a material

way from the one that actually exists.” Brody, 280 F.3d at 1006; see also Zaluski v. United Am.

Healthcare Corp., 527 F.3d 564, 574 (6" Cir. 2008) (“These statements are not the type . . . that

give rise to a duty to disclose; they are accurate portrayals of the status of the company and its

operations”); In re Yum! Brands, Inc. Sec. Litig., 73 F. Supp. 3d 846, 865 (W.D. Ky. 2014) □□□□

corporation is not required to disclose a fact merely because a reasonable investor would very

much like to know that fact.”), aff'd 620 F. App’x 483 (6" Cir. 2015).

In addition, many of the statements about the Monterrey Plant that Plaintiff now alleges

are false or misleading amount to non-actionable opinions. Opinions are actionable under

Section 10(b) only if the speaker did not hold the belief professed, or if the speaker possessed a

specific item of contradictory information that a reasonable person would have thought undercut

-44.

the opinion so strongly that the speaker knew it was misleading not to disclose that information.

Omnicare, Inc. v. Laborers Dist. Council Indus. Pension Fund, 575 U.S. 175, 183-96 (2015)

(describing that pleading an actionable opinion is “no small task’). The allegations of the First

Amended Complaint do not identify such “actional opinion” statements.

GrafTech’s or its officers’ statements on cost advantages, to the effect of “we believe our

facilities have significant cost advantages,” or “[w]e believe that we have the most competitive

portfolio” of production facilities, or “[w]e believe our facilities are among the most strategically

located and lowest cost graphite electrode manufacturing plants,” were plainly subjective

opinions about GrafTech and its business operations. See, e.g., Yum! Brands, 73 F. Supp. 3d at

863-64 (“opinions of management” with “no obvious, objective meaning” are not actionable); Jn

re TransDigm Grp., Inc. Sec. Litig., 440 F. Supp. 3d 740, 764 (N.D. Ohio 2020) (statements

about “value-based operating strategy,” “value drivers,” “value creation,” and “highly engineered

value-added products,” as well as statements regarding “strength” and “quality” of products,

were inactionable opinions). Plaintiffs do not identify particularized facts showing that any

Defendant was in possession of information contradicting these opinions, or that the speakers did

not genuinely hold such opinions. See, e.g., ViewRay, Inc., 556 F. Supp. 3d at 789-90

(statements about the value of certain backlogs were “estimate[s] and opinions,” and plaintiffs

offered no information to show “math” was wrong); Gregory v. ProNAi Therapeutics Inc., 297

F. Supp. 3d 372, 406 (S.D.N.Y.) (statements were opinions, as indicated by use of “phrases

classically indicative of opinion such as ‘I believe’ and ‘I think.’”), aff'd ,757 F. App’x 35 □□□

Cir. 2018).

GrafTech’s statements about its environmental efforts and compliance were also opinions

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that do not rise to the level of “actionable opinions” under Section 10(b). Statements such as

‘““we believe we are currently in compliance in all material respects with the federal, state, local

and foreign environmental laws and regulations to which we are subject,” (see ECF #56, □ 90,

106, 127), and “we believe we operate in compliance in all material respects with applicable

laws and regulations,” (ECF #56, J 159), are also the kind of statements consistently held to be

- inactionable opinions. See, e.g., Omnicare, 575 U.S. at 185-86 (“we believe we are obeying the

law” not an actionable misstatement). Again, Plaintiffs do not identify particularized facts

showing that any Defendant was in possession of information contradicting these opinions, or

that the speakers did not genuinely hold such opinions.

Finally, many of the statements Plaintiffs identify as “false or misleading” lack the

factual specificity required to be actionable statements. The Sixth Circuit has consistently held

that “soft” information, such as “puffery,” general predictions, aspirational statements, and

“corporate optimism” is not actionable because the information does not meaningfully alter the

total mix of information available to investors. See, e.g., Zaluski, 527 F.3d at 573 (“loosely

optimistic statements” that were “insufficiently specific” were not actionable); Jn re Ford Motor

Co. Sec. Litig., 381 F.3d 563, 570 (6" Cir. 2004) (“Immaterial statements include vague, soft,

puffing statements or obvious hyperbole” upon which a reasonable investor would not rely;

identifying numerous such inactionable statements).”

24

As stated by the Sixth Circuit:

[P]laintiffs allege that Ford made many misleading statements regarding its

commitment to quality, safety, and corporate citizenship, such as: (1) “[A]t Ford,

quality comes first.” (2) “We aim to be the quality leader”; (3) “Ford has its best

quality ever”; (4) Ford is “taking across-the-board actions to improve . . . [its]

quality.”; (5) Ford has made “quality a top priority”; (6) “Ford is a worldwide

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Several of the alleged misstatements expressed generic hopes or characterizations about

GrafTech’s growth and cost structure. (See, e.g., ECF #56, § 87 (“economies of scale and a

competitive cost structure”); {J 115-116, 124 (‘advantaged low cost structure”); ff 119, 126,

132, 135, 138, 141, 150 (“low-cost structure . . . sustainable and long term competitive

advantage”); Jf 96, 99, 132, 150 (“’manage capital expenditures by taking into account...

environmental and regulatory requirements”)). Courts in the Sixth Circuit and elsewhere.

routinely dismiss claims based on such generic characterizations or expressions, or “puffery.”

See, e.g., Kolominsky v. Root, Inc., 667 F. Supp. 3d 685, 706-07 (S.D. Ohio 2023) (statements

that company kept “acquisition costs much lower that [its] competitors” were “vague puffery by

leader in automotive safety”; (7) Ford has made “quality a top priority” [sic,

repeating the same statement identified as “(5)”]; (8) Ford is “designing safety

into... . [its] cars and trucks” because it wants its “customers to feel safe and

secure in their vehicles at all times”; (9) Ford “want[s] to make customers’ lives . .

. safer”; (10) Ford has “dedicated . . . [itself] to finding even better ways of

delivering .. . safer vehicles to [the] consumer”; (11) Ford “want[s] to be clear

leaders in corporate citizenship”; (12) Ford’s “greatest asset is the trust and

confidence ... [it] has earned from . . . [its] customers”; (13) Ford “is going to

lead in corporate social responsibility.” Such statements are either mere

corporate puffery or hyperbole that a reasonable investor would not view as

significantly changing the general gist of available information, and thus, are

not material, even if they were misleading. All public companies praise their

products and their objectives. Courts everywhere “have demonstrated a

willingness to find immaterial as a matter of law a certain kind of rosy

affirmation commonly heard from corporate managers and numbingly familiar

to the marketplace — loosely optimistic statements that are so vague, so lacking

in specificity, or so clearly constituting the opinions of the speaker, that no

reasonable investor could find them important to the total mix of information

available.”

Ford Motor Co., 381 F.3d at 570-71 (inserts and omissions in original; emphasis supplied).

-47-

an executive that is immaterial as a matter of law”); ProNAi Therapeutics, Inc., 297 F. Supp. 3d

at 399 (statement about “competitive advantages” was puffery).

The statements on environmental efforts and commitment to sustainability, (see, e.g.,

ECF #56, { 103, 105 (“continue to invest in health, safety and environmental performance’’);

118 (‘being good environmental stewards”), are of the same character of immaterial “soft”

information or “puffery.” See Norfolk Cty. Ret. Sys. v. Tempur-Pedic Int’l, Inc., 22 F. Supp. 3d

669, 677 (E.D. Ky. 2014), aff'd, 614 F. App’x 237 (6" Cir. 2015); City of Pontiac Gen. Emps.

Ret. Sys. v. Stryker Corp., 865 F. Supp. 2d 811, 829 (W.D. Mich. 2012) (statements that

company was “committed to... manufacturing . .. medical products that are safe and effective

and that comply with applicable laws and regulations” were “[v]ague statements of opinion

[that] are not actionable under the federal securities laws”).

The statements regarding GrafTech believing itself to be “in compliance in all material

respects with federal, state, local and foreign environmental laws and regulations to which [it

was] subject,” (see ECF #56, {9 90, 10-6, 127, 159), also fit within this category. Generic

statements assuring “legal compliance” constitute “soft” information, as companies generally

“have no duty to opine about the legality of their own actions.” Indiana State Dist. Council of

Laborers, 583 F.3d at 945. This is especially so where the statement can be described as one

routinely included in a company’s public statements, as is the case here. Doshi v. General Cable

Corp., 386 F. Supp. 3d 815, 829 (E.D. Ky. 2019) (the “vague nature” of such statements and

their “borderline boilerplate quality” weigh against a finding of materiality, and generally lead to

dismissal).

Put simply, Plaintiffs have not stated an actionable claim under Section 10(b) of the

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Exchange Act and the PSLRA in connection with GrafTech’s statements regarding its Monterrey

Plant.

b. Statements About the St. Marys Plant

The First Amended Complaint’s allegations about GrafTech’s statements regarding the

St. Marys Plant fall into two categories. The first category involves statements about an

automated pin production line at the St. Marys Plant that became operational in 2021. The

second category is comprised of a single forward-looking statement from early 2019 that

GrafTech could operate the St. Marys Plant as a peaking plant if needed in the future.

(i) Statements About Production at St. Marys

As to the first category, the First Amended Complaint alleges that certain statements

made by GrafTech or its officers between August 2021 and May 2022 regarding GrafTech’s

investment in an automated pin production line at the St. Marys Plant were false or misleading,

as stated in the First Amended Complaint:”

“TGrafTech was] investing in a pin production line at our St. Marys,

Pennsylvania facility that will be online in the third quarter. ... This

diversifies our pin capacity and provides production flexibility.” (See ECF

#56, 99 54, 142);”°

“Tn the third quarter of 2021, we introduced additional connecting pin

production capabilities at our St. Marys, Pennsylvania facility.” (See ECF

25

The full statements as made by GrafTech and/or its officers are collected in Appendix B

to this Memorandum of Opinion.

26

Referencing GrafTech International Ltd., Second Quarter 2021 Earnings Call, p.3 (Aug.

6, 2021) (“Second Quarter 2021 Earnings Call”) (ECF #64-55, PageID #1629).

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#56, § 151);7”

“The pin production line at our St. Marys, Pennsylvania facility is now

operational, and we are ramping up production. Importantly, this provides us

with 2 connecting pin production facilities.” (See ECF #56, J 153);

“Our investment in the new automated pin line at St. Marys continues to

progress well and helps to de[-]risk our pin production capacity.” (See ECF

#56, 7 158);”

‘“°"'Ojur recent investment in the automated pin line at St. Marys continues to

progress and helps to de[-]risk our pin production capacity.” (See ECF #56,

1 56, 168).°

As asserted in the First Amended Complaint, the Third Quarter 2022 10-Q filing, (ECF

#64-12, PageID #1241, GrafTech International Ltd. Quarterly Report (Form 10-Q), p.24 (Nov.

4, 2022), issued during the Monterrey Plant shutdown, allegedly revealed that these earlier

statements about operations at the St. Marys Plant were false. Specifically, Plaintiffs contend that

GrafTech, for the first time in that filing, disclosed that the St. Marys Plant was not running the

full manufacturing process and that it was not producing the “pin stock” from which connecting

pins were machined:

[Monterrey is] currently [GrafTech’s] only site that produces the pin stock

27

Referencing GrafTech International Ltd., Quarterly Report (Form 10-Q), p.25 (Nov. 5,

2021) (“Third Quarter 2021 10-Q”) (ECF #64-25, PageID #1467).

28

Referencing GrafTech International Ltd., Third Quarter 2021 Earnings Call, p.3 (Nov. 5,

2021) (“Third Quarter 2021 Earnings Call”) (ECF #64-7, PageID #1179).

29

Referencing GrafTech International Ltd., Fourth Quarter 2021 Earnings Call, p.3 (Feb. 4,

2022) (“Fourth Quarter 2021 Earnings Call”) (ECF #64-28, PageID #1516).

30

Referencing GrafTech International Ltd., First Quarter 2022 Earnings Call, p.3 (May 6,

2022) (“First Quarter 2022 Earnings Call”) (ECF #64-30, PageID #1532).

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utilized for all [of GrafTech’s graphite] electrodes .... [W]e are pursuing

several alternatives with respect to production and sourcing of pin stock as

well as other mitigation activities to minimize the impact on our business and

our customers if the Monterrey suspension continues for the foreseeable

future. These include a potential restart of our St. Marys, Pennsylvania

facility, where the scope of production is currently limited to graphitizing and

machining of electrodes and pins. We are actively pursuing approvals for

operating permits for a restart of the facility for pin production.

(ECF #56, § 172) (quoting the Third Quarter 2022 10-Q filing, ECF #64-12, PageID #1241).

An examination of GrafTech’s prior statements about the operations of the St. Marys

Plant as contained in documents referenced in the First Amended Complaint, (which the Coutt is

entitled to do, see note 6, supra), shows that this statement does not contradict any of GrafTech’s

prior statements about the operations of the St. Marys plant or otherwise show falsity regarding

any such prior statement. Plaintiffs have not identified any prior statement that claimed that the

St. Marys made the “pin stock” from which connecting pins were made.

From well before the putative Class Period (which is asserted to begin in February 2019),

GrafTech repeatedly disclosed that it had idled the St. Marys Plant in 2016, except for the

operational functions of performing the final two steps of the pin manufacturing process,

machining, and then later, starting in 2018, graphitizing. Numerous statements identified that the

St. Marys Plant was machining semi-finished product received from other plants - indicating that

the St. Marys Plant was not engaged in the processes of making the semi-finished materials from

raw materials itself. See, e.g., GrafTech International Ltd., 2018 Annual Report (Form 10-K),

p.49 (Feb. 22, 2019) (“2018 10-K”) (ECF #64-19, PageID #1380) (“The St. Marys, Pennsylvania

facility was temporarily idled effective the second quarter of 2016 except for the machining of

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semi-finished products sourced from other plants.”).*’ And, in 2018, GrafTech began also

graphitizing a limited number of electrodes at the St. Marys Plant. See (ECF #64-19, 2018 10-K,

PageID #1384) (“In the first quarter of 2018, our St. Marys facility began graphitizing a limited

amount of electrodes sourced from our Monterrey, Mexico facility.”). GrafTech’s public

statements appear to have always disclosed that the St. Marys Plant was sourcing semi-finished

31

This same disclosure was made repeatedly by GrafTech throughout the purported Class

Period prior to the statement identified by Plaintiffs in the Third Quarter 2022 10-Q filing

(boldface type used in ECF citations to distinguish individual documents): (1) GrafTech

International Ltd., 2018 Annual Report (Form 10-K), pp.8, 10, 11, 41, 49, 53 (Feb. 22, 2019)

(“2018 10-K”) (ECF #64-19, PageID #1368, #1370, #1371, #1377, #1380, #1384); (2) GrafTech

International Ltd., Quarterly Report (Form 10-Q), p.25 [misidentified as p.26, at ECF #64-1,

p.24, n.15| (May 1, 2019) (“First Quarter 2019 10-Q”) (ECF #64-20, PageID #1398);

(3) GrafTech International Ltd., Quarterly Report (Form 10-Q), p.28 [misidentified as pp.29-30,

at ECF #64-1, p.24, n.15] (Nov. 7, 2019) (“Third Quarter 2019 10-Q”) (ECF #64-11, PageID

#1225); (4) GrafTech International Ltd., 2019 Annual Report (Form 10-K), p.6, 16, 24, 42, 48-49

(Feb. 21, 2020) (“2019 10-K”) (ECF #64-6, PageID #1149, #1159, #1162, #1166, #1169);

(5) GrafTech International Ltd., Quarterly Report (Form 10-Q), p.26 (Nov. 3, 2020) (“Third

Quarter 2020 10-Q”) (ECF #64-22, PageID #1433); (6) GrafTech International Ltd., 2020

Annual Report (Form 10-K), pp. 7, 14, 24, 43 (Feb. 23, 2021) (“2020 10-K”) (ECF #64-18,

PageID #1295, #1298, #1303, #1306); (7) GrafTech International Ltd., Quarterly Report (Form

10-Q), p.25 (May 5, 2021) (“First Quarter 2021 10-Q”) (ECF #64-23, PageID #1446);

(8) GrafTech International Ltd., Quarterly Report (Form 10-Q), p.26 (Aug. 6, 2021) (“Second

Quarter 2021 10-Q”) (ECF #64-24, PageID #1455); (9) GrafTech International Ltd., Quarterly

Report (Form 10-Q), p.26 (Nov. 5, 2021) (Third Quarter 2021 10-Q”) (ECF #64-25, PageID

#1468); (10) GrafTech International Ltd., 2021 Annual Report (Form 10-K), pp.6, 14, 20, 36

(Feb. 22, 2022) (“2021 10-K”) (ECF #64-26, PageID #1480, #1483, #1486, #1489);

(11) GrafTech International Ltd., Quarterly Report (Form 10-Q), p.25 (May 6, 2022) (“First

Quarter 2022 10-Q”) (ECF #64-27, PageID #1507).

Defendants also reference similar disclosures as appearing on page 29 of GrafTech

International Ltd., Quarterly Report (Form 10-Q) (July 31, 2019) (‘Second Quarter 2019 10-Q”)

(ECF #64-21) and page 38 of the Third Quarter 2019 10-Q (ECF #64-11), see Memorandum of

Law in Support of the Motion of Defendants GrafTech, Kessler, Coburn, Flanagan, and Halford

(ECF #64-1, p.24, n.15), but the Court finds no such reference at the cited page or any nearby

page of such documents. Given the accuracy of each of the many other references to such

disclosures, the Court suspects this is due to citation error or inadvertent omission of the correct

page of these documents rather than the statement not appearing elsewhere in them.

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product from other plants to then conduct its machining and graphitization processes. (See ECF

#64-19, PageID #1370, #1380). Plaintiffs identify no public statement that the St. Marys facility

was performing all six steps of the pin manufacturing and production process.

In fact, the record of GrafTech’s public disclosures and statements prior to the Third

Quarter 2022 10-Q show that it never made representations that all the steps of the pin

manufacturing process were being conducted at the St. Marys facility, or that any more activities

than pin machining and graphitizing were being conducted. Numerous statements issued by

GrafTech show that the activities of the St. Marys Plant were limited to machining and later

eraphitization. As an example, the transcript of GrafTech’s Third Quarter Earnings Call shows

the following exchange, where, in response to a question from an analyst about whether GrafTech

had “given any thought to be starting [restarting] St. Marys outside of the pin machining,”

GrafTech’s then-CEO David Rintoul noted that “In terms of St. Marys, we need to finish ramping

up this pin machining operation. That’s a critical addition and provides us more flexibility.”

(ECF #64-7, p.7, PageID #1181). The documents cited in the First Amended Complaint show

that in the following Earnings Call, in February 2022, Rintoul again noted that GrafTech was not

running the full production process at St. Marys, by stating “Please bear in mind that is all-in and

we’re not currently running the front end of St. Marys.” (See GrafTech International Ltd., Fourth

Quarter 2021 Earnings Call, p.7 (Feb. 4, 2022) (“Fourth Quarter 2021 Earnings Call”) (ECF #64-

28, PageID #1520). In GrafTech’s 2021 10-K Annual Statement, released shortly afterward, it

noted “In 2021, we shifted graphitization and machining of a portion of semi-finished products

from Monterrey to St. Marys, Pennsylvania, in order to improve environmental performance,

production flexibility and overall cost efficiencies across the two facilities.” (GrafTech

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International Ltd., 2021 Annual Report (Form 10-K), pp. 6, 14 (Feb. 22, 2022) (2021 10-K’”)

(ECF #64-26, PageID #1480, #1483). Finally, just prior to the Monterrey Plant shutdown in

September 2022, and shortly before the referenced Third Quarter 2022 10-Q filing, GrafTech

Chief Operating Officer Jeremy Halford, at the Second Quarter 2022 Earnings Call, again stated

that operations at St. Marys were limited to a pin machining line and graphitization activities:

[I]n response to your question on St. Mary’s [sic], we’ve increased the amount

of activity in the St. Mary’s [sic] facility with the installation of the new pin

machining line that complements the graphitization activities that were already

taking place there. And, I would point out that, I’m actually quite pleased

with the St. Marys team and their performance on commissioning and ramping

up that equipment.

GrafTech International Ltd., Second Quarter 2022 Earnings Call, p.10 (Aug. 5, 2022) (“Second

Quarter 2022 Earnings Call”) (ECF #64-29, PageID #1525).

Thus, it is evident that, rather than the referenced Third Quarter 2022 10-Q statement

having the effect of contradicting GrafTech’s prior statements about the St. Marys Plant

operations, the referenced statement confirms what had been previously reported. None of the

alleged misstatements about GrafTech’s St. Marys facility — that it “diversifies our pin capacity

and provides production flexibility,” (ECF #64-55, Second Quarter 2021 Earnings Call, p.3,

PageID #1629), that it “introduced additional connecting pin production,” (ECF #64-25, Third

32

The First Amended Complaint does not reference the transcript of the Second Quarter

2022 Earnings Call. Because this statement, provided in GrafTech’s Memorandum in Support

of Motion to Dismiss, places the overall statements about the St. Marys facility in context, the

Court may consider it. See Plymouth Cnty. Ret. Ass’n v. ViewRay, Inc., 556 F. Supp. 3d

772,784 (N.D. Ohio 2021) (courts may “analyze the statements and omissions at issue in their

full context”), aff'd 2022 WL 3972478 (6" Cir. Sept. 1, 2022); see also FED. R. Evip. 201 (“The

court may judicially notice a fact that is not subject to reasonable dispute because it . . . can

accurately and readily be determined from sources whose accuracy cannot reasonably be

questioned.”).

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Quarter 2021 10-Q, p.25, PageID #1467), that the “pin production line at our St. Marys,

Pennsylvania facility is now operational” or that it “provides us with two connecting pin

production facilities,” (ECF #64-7, Third Quarter 2021 Earnings Call, p.3, PageID #1179), that it

“helps to de[-|risk our pin production capacity,” (ECF #64-28, Fourth Quarter 2021 Earnings

Call, p.3, PageID #1516; ECF #64-30, First Quarter 2022 Earnings Call, p.3, PageID #1532) —

claimed that the operations at St. Marys fully de-risked pin production, only that it “helped” to de-

risk it. No facts are alleged that diversifying production with machining and graphitization at St.

Marys did not help to de-risk production, or did not make GrafTech’s overall operations more

flexible. A statement is not materially misleading simply because a company might have said it

better. See In re Yum! Brands, Inc. Sec. Litig., 620 F. App’x 483, 490 (6" Cir. 2015) (description

of its protocols as “strict” was “reasonably grounded in objective fact and thus, is not ‘disproven’

just because Yum could have strengthened its standards and protocols.”).

The record this Court is entitled to review in determining the Motions to Dismiss does not

support Plaintiffs’ allegations that GrafTech concealed the true state of affairs at its St. Marys

facility. Thus, the First Amended Complaint fails to allege with particularity that any of the

statements about operations at St. Marys were false when made, or that GrafTech’s statements

were incorrect.

(ii) Statement About Being a “Peaking Plant”

As to the second “category” of alleged misstatement about St. Mary’s (effectively, a

single statement from a 2018 Earnings Call), the First Amended Complaint alleges that an initial

statement and follow up statement made by GrafTech from early 2019 that GrafTech could

operate the St. Marys Plant as a “peaking plant” if needed in the future was a material

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misstatement:

We will ramp up production at St. Marys if required by the market at any point

in the future. St Marys can be thought of as essentially the equivalent of a

peaking plant, and we will operate in that fashion. ... We will use St. Marys

to allow us flexibility and variability. We expect the degree to which we run

that will move up and down based upon the market dynamics, not unlike that

of, again, in the analogy of a peaking plant.

(ECF #56, 88) (quoting GrafTech International Ltd., Fourth Quarter 2018 Earnings Call, pp.2, 5

(Feb. 8, 2019) (“Fourth Quarter 2018 Earnings Call,” ECF #64-31, PageID #1535, #1538).

However, the First Amended Complaint does not include any particularized fact

demonstrating that GrafTech did not consider St. Marys as a potential peaking plant in February

2019 when the statement made, and thus, the statements are not actionable. See In re Century

Bus. Servs. Sec. Litig., No. 1:99-CV-2200, 2002 WL 32254513 (N.D. Ohio June 27, 2002)

(plaintiffs must demonstrate a basis for the claim that the defendants’ statements were false at the

time they were made, rather than merely erroneous in hindsight.”’).

Moreover, the statements amount to “forward looking statements” protected by the “safe

harbor” provisions of the PSLRA, which encourages companies to provide forward-looking

information without “[flear that inaccurate projections will trigger the filing of a securities fraud

lawsuit.” (See S. Rep. 104-98, at 16 (1995)). The safe harbor provision protects “statements

concerning a company’s future economic performance; and statements about the assumptions

underlying forward-looking statements.” Norfolk Cty. Ret. Sys. v. Tempur-Pedic Int'l, Inc., 614

F. App’x 237, 242 (6" Cir. 2015). Forward looking statements are actionable only if “(1) a

reasonable investor would find the statement material (2) the defendant failed to identify its

statement as forward looking or provide meaningful cautionary statements identifying important

factors that could cause actual results to differ materially from those in the forward looking

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statement, and (3) the defendant made the statement with actual knowledge that it was false or

misleading.” Jd. at 242, 246-48.

GrafTech’s statements regarding its possible use of the St. Marys Plant as a “peaking

plant” are comprised entirely of future-looking language, such as “[ w]e will ramp up,” “at any

point in the future,” “we will operate,” “we will use,” “we expect,” and “will move up and

down.” The transcript of the Fourth Quarter 2018 Earnings Call, during which the statements

were made, began with an announcement of the following:

[A]s a reminder, some of the matters discussed on this call may include

forward-looking statements regarding, among other things, results,

performance and strategies. These statements are based on current

expectations and are subject to risks and uncertainties. Factors that could

cause actual results to differ materially from those indicated by forward-

looking statements are shown here.

(Fourth Quarter 2018 Earnings Call, p.1, ECF #64-31, PageID #1534). One of the factors that

could “cause actual results to differ” identified in the call was “the possibility that plant capacity

expansions may be delayed or may not achieve the expected benefits. (GrafTech International

Ltd., Fourth Quarter 2018 Earnings Presentation, slide 1 (Feb. 8, 2019) (“Fourth Quarter 2018

Earnings Presentation”) (N/A) (ECF #64-32, PageID #1541).

Again, as there are no particularized factual allegations demonstrating that these

statements were false when made, they are not actionable.

c. Statements About the Anticipated Effects of Monterrey Shutdown

The final category of Plaintiffs’ allegations of “material misstatements or omissions”

concerns GrafTech’s and its officers’ statements about the anticipated effects of the Monterrey

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Plant shutdown in November 2022.*? These allegations are based on the premise that because the

Monterrey Plant shutdown’s ultimate impact turned out to be more severe than GrafTech and its

officers initially predicted, the statements must have been false.

Similar to Plaintiffs’ claims regarding the statements issued by GrafTech related to the

Monterrey Plant on having a “competitive advantage,” and its beliefs about being in full

compliance with applicable environmental laws prior to the Administrative Proceeding in 2019

or the brief shutdown of that facility in 2022, the claims related to the later “inaccuracy” of

GrafTech’s predictions about the future ongoing effects of the Monterrey Plant shutdown fall

within the definition of alleging “fraud by hindsight,” which is not the basis of an actionable

claim. See In re Huntington Bancshares Inc., Sec. Litig., 674 F. Supp. 2d 951, 959 (S.D. Ohio

2009) (“Corporate officials need not be clairvoyant; they are only responsible for revealing those

material facts reasonably available to them. Thus, allegations that defendants should have

anticipated future events and made certain disclosures earlier than they actually did do not suffice

to make out a claim of securities fraud.’’) (citation omitted); see also View Ray, 556 F. Supp. 3d

at 791 (finding plaintiff to have failed to state a claim under Section 10(b) because “Plaintiff

33

At this point in time, neither Individual Defendant David Rintoul (who left his role as

President and Chief Executive Officer, and as a member of GrafTech’s Board of Directors, in

June 2022) nor Individual Defendant Quinn Coburn (who left his role as GrafTech’s Chief

Financial Officer in November 2021), were employed by GrafTech at the time of any such

statements. Accordingly, no liability would attach to them for any alleged misstatement or

omission made after their respective departures. See In re Jiangbo Pharms., Inc., Sec. Litig., 884

F. Supp. 2d 1243, 1260 (S.D. Fla. 2012), aff'd sub nom. Brophy v. Jiangbo Pharms., Inc., 781

F.3d 1296 Cir. 2015) (CEO cannot be liable for statements made by others after her

departure); Das v. Rio Tinto PLC, 332 F. Supp. 3d 786, 807 (S.D.N.Y. 2018) (holding defendant

“could not be held liable for any public statements issued after he stepped down as CEO”); In re

Braskem S.A. Sec. Litig., 246 F. Supp. 3d 731, 762 (S.D.N.Y. 2017) (former CEO “cannot be held

to have violated § 10(b) based on the Form 20-Fs” filed after he left his position).

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really complains that ‘the fact that something turned out badly must mean that defendant knew

earlier that it would turn out badly’” amounted to inactionable “fraud by hindsight’); UBS AG,

752 F.3d at 188 (“We do not recognize allegations of ‘fraud by hindsight.’”).

The gist of Plaintiffs’ claims are statements issued by GrafTech, in the immediate wake

of the shutdown, that the Monterrey Plant was the “only site that produce[d] the pin stock

utilized for all. . . electrodes,” (and thus apparently “contradicting” GrafTech’s earlier statements

about taking efforts to “help[] to de-risk our pin production capacity), (ECF #56, 172), that the

immediate effects were expected to be “modest” due to “existing pin inventory, (ECF #56,

{{ 175-176), that the anticipated financial impact of the shutdown would be “significant” if

Monterrey remained closed, (ECF #56, { 173-174), and that the shutdown was not expected to

change GrafTech’s long-term commercial strategy, (ECF #56, § 177), and particularly that

GrafTech intended to pursue renewals of its long-term-agreements with parties (in response to

questions about whether the shutdown would reduce GrafTech’s ability to fulfill anything other

than short time frame agreements) based on its belief that its customers appreciated its vertical

integration and the certainty it provided to customers, (ECF #56, § 177), were misleading.

As it became evident over the following months, and as referenced in the First Amended

Complaint, some of GrafTech’s stated expectations did not turn out as well as initially predicted.

(See ECF #56, {J 83, 173-174, 181-184). However, the First Amended Complaint does not

identify any particularized facts demonstrating that any of GrafTech’s statements about its early

expectations were false when made. Plaintiffs do not assert that GrafTech actually did not have

the inventory of pin stock referenced in its statements, that it did not pursue renewals of its long

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term agreements, or that it did not have the commercial strategy it described.** The First

Amended Complaint does not allege or identify facts demonstrating that, as of the date of any

_ statement, that GrafTech’s customer contract negotiations had failed or were expected to fail, or

that any of the persons making statements about GrafTech’s commercial strategy thought that it

was not viable. Nor is there any contemporaneous document, report, or other communication

identified by Plaintiffs that demonstrates the falsity of GrafTech’s statements about the expected

impact of the shutdown. The basis of Plaintiffs’ claims is that because the shutdown ended up

affecting GrafTech’s financial health for a longer period than initially expected, the previous

statements must have been false. This is not the basis for a viable claim. See, e.g., Lim, 2024

WL 4349409, at *14 (“Claims of securities fraud or misrepresentation based on allegations that

defendants should have anticipated future events and made certain disclosures earlier than they

actually did fail on their merits.”).

Plaintiffs also allege that GrafTech and the Individual Defendants omitted information

about the “cause for temporary suspension” and the “potential financial impacts” on GrafTech,

specifically:

After the markets closed on September 16, 2022, GrafTech filed a Form 8-K

signed by defendant Flanagan, which disclosed that GrafTech’s critical

Monterrey facility had received a “temporary suspension notice” ordering the

facility to “wind down operations within seven days,” following the

conclusion of a September 15, 2022 inspection of the “facility and certain of

the facility’s environmental and operating permits” by the State Attorney’s

office for the Secretary of Environment and the Ministry of the Environment

of the State of Nuevo Leén, Mexico. The Form 8-K further disclosed that

“ijn parallel, the Director of Integral Air Management of the Undersecretary

of Climate Change and Air Quality of the Ministry of the Environment

34

A complete list of the statements at issue in set forth in Appendix C to this Memorandum

of Opinion.

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determined that, among other things, GrafTech Mexico’s operating license

was no longer in effect.” The Form 8-K provided no further details regarding

the cause for the temporary suspension notice or the potential financial

impacts of the critical Monterrey facility’s closure.

(ECF #56, § 170).

The First Amended Complaint contends that GrafTech should have also disclosed that the

Monterrey Plant was the only facility capable of producing pin stock, that the closure coincided

with a “critical” negotiating window for GrafTech to negotiate its customer contracts for 2023,

and that GrafTech did not have sufficient pin stock inventory to “withstand even a temporary

shutdown of the Monterrey facility.” (ECF #56, { 171). An examination of the document cited

by Plaintiffs, however, shows that GrafTech did disclose the information Plaintiffs claim was

omitted — or in other instances, GrafTech did not have a “duty to disclose” each item of

information noted by Plaintiffs.

The referenced document cited by Plaintiffs, which was GrafTech’s initial disclosure of

the shutdown, specifically identified the “cause for the temporary suspension” — that authorities

found that Graffech México’s operating license was “no longer in effect.” It also included the

further details that it planned to dispute that finding and intended to defend against it, and that it

was “not able to assess how long operations . . . will be temporarily suspended.” GrafTech’s full

statement, as given in the September 16, 2022 Form 8-K referenced by Plaintiffs, states (portions

not quoted in the First Amended Complaint are shown in boldface italic text):

On September 15, 2022, inspectors from the State Attorney’s Office for the

Secretary of Environment of the State of Nuevo Leon, Mexico visited

GrafTech México, S.A. de C.V.’s (‘GrafTech Mexico,’ a subsidiary of

GrafTech International Ltd. (the ‘Company’)) graphite electrode

manufacturing facility located in Monterrey, Mexico to inspect GrafTech

Mexico’s facility and certain of the facility’s environmental and operating

permits. At the conclusion of the inspection, the inspectors issued GrafTech

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Mexico a temporary suspension notice. The inspector’s notice instructed

GrafTech Mexico’s graphite electrode manufacturing facility to wind down

operations within seven days of the notice. In parallel, the Director of Integral

Air Management of the Undersecretary of Climate Change and Air Quality of

the Ministry of the Environment determined that, among other things,

GrafTech Mexico’s operating license was no longer in effect. At this time,

the Company is not able to assess how long operations at the manufacturing

facility will be temporarily suspended. While the Company strongly

disagrees with this course of action, the Company intends to work with the

authorities to address these allegations and will vigorously defend against

these allegations.

(GrafTech International Ltd., Current Report (Form 8-K), unpaginated “2/3” (Sept. 16, 2022))

(“9/16/2022 8-K”) (ECF #64-8, PageID #1185).

Other pertinent disclosure documents, issued shortly thereafter, including GrafTech’s

Third Quarter 2022 10-Q and the transcript of its Third Quarter 2022 Earnings Call, provided the

same information.

As stated in the Third Quarter 2022 10-Q:

Our facility in Monterrey has been operating since 1959, has over 550

employees and represents approximately 60 thousand MT of annual

production capacity, or 30% of our total annual production capacity excluding

St. Marys. Monterrey operations can produce a broad portfolio of products,

including various sizes of graphite electrodes and pins, and is currently our

only site that produces the pin stock utilized for all of our graphite electrodes.”

* * * As such, we are pursuing several alternatives with respect to production

and sourcing of pin stock as well as other mitigation activities to minimize the

impact on our business and our customers if the Monterrey suspension

continues for the foreseeable future. These include a potential restart of our

St. Marys, Pennsylvania facility, where the scope of production is currently

limited to graphitizing and machining of electrodes and pins. We are actively

pursuing approvals for operating permits for a restart of the facility for pin

production.

(GrafTech International Ltd., Quarterly Report (Form 10-Q), p.24 (Nov. 4, 2022) (“Third Quarter

2022 10-Q”)) (ECF #64-12, PageID #1241) (referenced at ECF #56, 172).

Beyond the fourth quarter of 2022, if Monterrey remains suspended, the impact

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on the Company’s results in the first half of 2023 will be significant, with sales

volume reduced by 50% or more, compared to sales volume in the first half of

2022, before recovering in the back half of the year.

(Third Quarter 2022 10-Q, p.25 (ECF #64-12, PageID #1242)) (referenced at ECF #56, J 173):

And, as stated in the comments made in the Third Quarter 2022 Earnings Call:

[U]nless Monterrey reopens, our business performance will be significantly

impacted for the first 2 quarters of 2023 with a reduction in sales volume of 50

percent or more before recovering in the back half of the year.

(GrafTech International Ltd., Third Quarter 2022 Earnings Call, p.2 (Nov. 4, 2022) (“Third

Quarter 2022 Earnings Call”) (Marcel Kessler, then-GrafTech CEO) (ECF #64-13, PageID

#1250) (referenced at ECF #56, □ 174).

The substantial majority of the pins that are required to achieve what we’re

talking about are already in inventory in one form or another. So this is not

something that we are going to be dependent on third parties or some other

source for achieving the level of achievement that Marcel [Kessler, then-

GrafTech CEO] talked about. We have a substantial amount of inventory.

We have capped a substantial amount of inventory all the way along of pins

and pin stock, and we will be processing that through the other facilities in

order to achieve what Marcel was talking about.

(Third Quarter 2022 Earnings Call, p.7) (Kessler) (ECF #64-13, PageID #1255) Oreferenced at

ECF #56, § 175)

So, as I indicated in my prepared remarks, the impact for Q4 will be modest

because we do have quite a bit of existing pin inventory.

(Third Quarter 2022 Earnings Call, pp.7-8) Weremy Halford, then-Graffech COO) (ECF #64-13,

PagelD #1255-#1256) (referenced at ECF #56, § 176).

Yeah, thanks. It’s an important question, Arun. And one of the things that I

want to make clear is that while we need to consider the near-term supply

constraints related to the Monterrey situation, none of this changes our

commercial strategy. We continue to believe that we are unique in the market

in our ability to offer a variety of different contracting terms to our customers,

that’s supported by our vertical integration, and that’s a key differentiator, our

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ability to provide that certainty to our customers. And while in the very near

term, we’re dealing with the Monterrey situation, we have absolute confidence

in our ability to resolve this current environment we’re in, and it’s not

changing our commercial strategy at all.

(Third Quarter 2022 Earnings Call, p.9) (Halford) (ECF #64-13, PageID #1257) (referenced at

ECF #56, { 177).

Thus, these statements together, made during the shutdown, disclosed that the Monterrey

Plant was the only facility that produced pin stock, that GrafTech had substantial pin inventory

going into the fourth quarter of 2022 (and Plaintiffs offer no document or other information that

such was not the case), that GrafTech would lose volume in the fourth quarter because of the

shutdown, that GrafTech expected a financial impact in the first half of 2023 if the Monterrey

Plant did not reopen, and that the shutdown did not effect GrafTech’s commercial strategy.

Then, when the Monterrey Plant did reopen later in November, GrafTech issued further

statements regarding its outlook for the fourth quarter of 2022, and stated that it would “provide

an update on the estimated impact of the suspension on its 2023 outlook when it report[ed] its

fourth quarter 2022 results: in February 2023:

On November 17, 2022, the State Attorney’s Office for the Secretary of

Environment of the State of Nuevo Leén, Mexico (the ‘State Attorney’) lifted

the suspension notice, subject to the completion of certain agreed-upon

activities, including the submission of an environmental impact study with

respect to the facility’s operations.

* oo

For the fourth quarter of 2022, the Company continues to anticipate the

temporary suspension will impact its ability to fulfill approximately 10

thousand metric tons (“MT”) to 12 thousand MT of customer orders,

consistent with its previous outlook provided on November 4, 2022. The

Company will provide an update on the estimated impact of the suspension on

its 2023 outlook when it reports its fourth quarter 2022 results.

(GrafTech International Ltd., Current Report (Form 8-K), unpaginated “1/4” (Nov. 18, 2022))

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(“11/18/2022 8-K”) (ECF #64-14, PageID #1260). Then, in February 2023, GrafTech issued an

update on its outlook for 2023, which disclosed that the shutdown’s effects would impact the

first-half 2023 results. (GrafTech International Ltd., Fourth Quarter 2022 Earnings Call, p.3

(Feb. 3, 2023) (ECF #64-15, PageID #1267) (“The impact of the suspension in our sales volume

in the first half of 2023 will be significant though. However, we will be well-positioned to fully

meet our customer needs as well as — as we enter the second half of the year and we expect to

meet all our remaining LTA commitments throughout 2023”). In following statements,

GrafTech repeated its outlook, and expressed its hopes that sales volume would further recover

in the second half of 2023, but cautioned that soft demand had dampened its predictions.

(GrafTech International Ltd., First Quarter 2023 Earnings Call, p.4 (Apr. 28, 2023)) (ECF #64-

33, PageID #1546) (“In the second half of the year, we anticipate our sales volume will further

recover as we move past Monterrey suspension driven impact. However, as we’ve noted, given

economic uncertainty and elevated graphite electrode inventory levels at our customers, we are

now more cautious regarding our commercial outlook for the second half of 2023.”).

Plaintiffs have not identified any facts or documents indicating that any of these

statements were false when made, or that they did not express GrafTech’s then hopes or beliefs

about the longer-term impact of the Monterrey Plant shutdown.

As to Plaintiffs’ claims that GrafTech had a duty to opine more about its thoughts on the

projected impact of the Monterrey Plant shutdown, the Court notes that omissions are actionable

only if the undisclosed information renders the challenged statements materially misleading.

See, e.g., Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S. 257, 265 (2024) (An

omission is actionable under Section 10(b) only if it renders another affirmative statement

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materially misleading); Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9" Cir. 2002)

(A company or its officers is required to disclose information only if its absence would “create an

impression of a state of affairs that differs in a material way from the one that actually exists.”).

Here, the allegations of the First Amended Complaint do not plausibly demonstrate that the

alleged “omissions” rendered any affirmative statement materially misleading, or that any of the

factual statements issued by GrafTech were inaccurate.

GrafTech’s statements identified by Plaintiffs about the expected impact of the Monterrey

Plant shutdown are also inactionable opinions. The Supreme Court has held that opinions are

actionable only if the speaker did not actually hold the belief expressed, or had in his possession

some specific item of contradictory information that a reasonable person would have thought

undercut the opinion so strongly that the speaker knew it was misleading not to disclose the

contradictory information. Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension

Fund, 575 U.S. 175, 183-96 (2015). Plaintiffs have alleged neither.

The statements identified by Plaintiffs about GrafTech’s beliefs that it could continue to

pursue renewals of long term agreements despite the shutdown, and that the effects of the

shutdown were likely to last only through the first half of 2023, (see ECF #56, □□ 172-177) were

clearly opinions. See, e.g., View Ray, 556 F. Supp. 3d at 789-90 (backlog estimates, although

mathematically specific, were “subjective” opinions and not actionable); Woolgar v. Kingstone

Cos., Inc., 477 F. Supp. 3d 193, 224-35 (S.D.N.Y. 2020) (loss reserves are predictions about

future likelihood and magnitude of losses are therefore constitute opinions). Plaintiffs’ claims

about the statements are not actionable as they neither allege particularized facts about

contradictory information that GrafTech or its officers possessed or that they did not believe what

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they said. Companies are not required to provide an “overly cautious or negative picture of

current performance or future prospects” to comport with the PSLRA. Albert Fadem Tr. v.

American Elec. Power Co., Inc., 334 F. Supp. 2d 985, 1026 (S.D. Ohio 2004).

Moreover. GrafTech’s statements about the expected impacts of the Monterrey Plant

shutdown were forward-looking statements protected by the PSLRA’s safe harbor provisions,

which were explained in connection with GrafTech’s statements about its hopes and expectations

related to the operations planned for the St. Marys Plant. Courts construe the “safe harbor”

protection liberally, and routinely dismiss securities claims based on statements that fit within it.

For example, statements that a company’s “state of affairs” will “continue,” or that it is “looking”

to take a future action, are considered definitive “forward-looking statements. See Tempur-Pedic

Int'l, 614 F. App’x at 246. The statements identified in the First Amended Complaint are of the

same character: See, e.g., ECF #56, § 173 (“/I/f Monterrey remains suspended, the impact on

the Company’s results in the first half of 2023 will be significant”); ECF #56, § 174 (“/U/nless

Monterrey reopens, our business performance will be significantly impacted for the first 2

quarters of 2023”); ECF #56, § 175 (“[T]he impact for Q4 will be modest”); ECF #56, □□ 183

(“/W]e expect sales volume levels will further recover, as we move past Monterrey suspension-

driven uncertainty”).

These forward-looking statements were also accompanied by cautionary statements

conveying “substantive information about factors that realistically could cause results to differ

materially from those projected in the forward-looking statements, such as, for example,

information about the issuer’s business.” Helwig v. Vencor, Inc., 251 F.3d 540, 558-59 □□□ Cir.

2001) (en banc). A review of the pertinent disclosures shows that GrafTech issued such

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cautionary statements from the outset, such as when it warned that it was “not able to assess how

long operations at the manufacturing facility will be temporarily suspended.” (9/16/2022 8-K”’)

(ECF #64-8, PageID #1185). In its Third Quarter 2022 10-Q, GrafTech cautioned that it could

not assure that its mitigation “measures will be effective in limiting the impact of the suspension”

of its Monterrey operations. (Third Quarter 2022 10-Q, p.25) (ECF #64-12, PageID #1242).

Because this cautionary language related directly to the forward-looking statements at issue, the

safe harbor provision became applicable, and the statements are thus inactionable. These

statements are rendered inactionable for the additional reason that the First Amended Complaint

does not contain any particularized allegations of actual knowledge of falsity. Claims of

“recklessness” are not enough to render forward-looking statements actionable. See, e.g., Lim,

2024 WL 4349409, at *14 n.8 (“Without actual knowledge, Plaintiffs [sic] forward-looking

statements are protected under the Safe Harbor Doctrine, even if they had not been accompanied

by cautionary language”).

2. Scienter

As noted earlier, in order to state a claim under Section 10(b) and Rule 10b-5, a plaintiff

must establish both “(1) a material misrepresentation or omission by the defendant” and

(2) scienter,” as well as the four other elements identified in Bondali v. Yum! Brands, 620 F.

App’x 483, 489 (6 Cir. 2015) (quoting Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc.,

552 U.S. 148, 157 (2008)). Scienter requires “knowing and deliberate” conduct or

“recklessness.” Doshi v. General Cable Corp., 823 F.3d 1032, 1039 (6™ Cir. 2016) (often

referred to as “Doshi IP’). Recklessness is defined as “highly unreasonable conduct” and “an

extreme departure from the standards of ordinary care, where the danger must at least be so

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obvious that any reasonable man would have known of it.” Teamsters Loc. 237 Welfare Fund v.

ServiceMaster Glob. Holdings, Inc., 83 F Ath 514, 526 (6" Cir. 2023).

The PSLRA requires that a complaint “state with particularity facts giving rise to a strong

inference that the defendant acted with the required state of mind.” See 15 U.S.C. § 78u-

4(b)(2)(A). A scienter inference is “strong” only if it is “cogent” and “at least as compelling as

any opposing inference” of non-fraudulent intent. Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308, 324 (2007). The analysis is “inherently comparative,” and “a court must consider

plausible, nonculpable explanations for the defendant’s conduct, as well as inferences favorable

to the plaintiff.” Jd. at 323-24. The inference that the defendant acted with scienter need not be

irrefutable, i.e., of the ‘smoking gun’ genre, or even the “most plausible of competing

inferences[.|” Jd. at 324. “Before drawing an inference of recklessness, courts typically require

multiple, obvious red flags demonstrating an egregious refusal to see the obvious, or to

investigate the doubtful.” Doshi I, 823 F.3d at 1039.

Here, the “scienter” allegations of the First Amended Complaint do not arise above the

level of conclusory allegations based on an Individual Defendant’s position as a Senior Officer at

GrafTech or their higher compensation, rather than asserting plausible claims of “scienter” in

committing securities fraud. The First Amended Complaint alleges — only generally — that the

Individual Defendants:

Were “provided” “or had access to the information alleged herein to be false

or misleading prior to or shortly after its issuance[.]” (ECF #56, § 187)

“Because of their positions and access to material, non-public information, . .

. knew or recklessly disregarded that the adverse facts specified herein were

being concealed from the public and that the positive representations being

made were then materially false and misleading.” (ECF #56, § 187)

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Were “directly involved in the management and day-to-day operations of the

Company at the highest levels and [were] privy to confidential proprietary

information.” (ECF #56, § 188)

“ [Were involved in drafting, producing, reviewing, and disseminating the

false and misleading statements and information alleged herein, were aware

of, or recklessly disregarded, the false and misleading statements being issued

regarding the Company, and approved or ratified these statements[.]” (ECF

#56, J 188)

“[H]ad a duty to promptly disseminate accurate, truthful, and complete

information.” (ECF #56, § 189)

Had “motive and opportunity to commit fraud, including the self-interested

motivation of Defendants in the form of saving their salaries and high-ranking

jobs[.]” (ECF #56, □□ 225-230).

(ECF #56, First Amended Complaint, “Additional Scienter Allegations,” {§ 187, 188, 189, 225-

230).

Generic allegations such as these are not sufficient to sustain the necessary element of

“scienter” needed to assert an actionable claim under Section 10(b) or Rule 10b-5. See, e.g.,

ServiceMaster Glob. Holdings, 83 F.4th at 530 (as to senior position) (“Scienter is not to be

inferred simply by virtue of [a defendant’s] senior position[]’’); Pittman v. Unum Grp., 861 F.

App’s 51, 57 (6" Cir. 2021) (as to compensation) (even “alleging that an executive’s

compensation is directly tied to the company’s performance is not enough to bolster an inference

of scienter”);°° Bondali, 620 F. App’x at 493 (as to involvement in SEC filings) (affirming

dismissal where “the amended complaint alleges no facts to suggest” that “employees who

prepared or were otherwise involved in making the allegedly false or misleading statements at

35

See also Inre Omnicare Sec. Litig., 769 F.3d 455, (6 Cir. 2014) (“If a well-pleaded

complaint can allege only that a corporation intended to defraud based on a desire to continue

earning money, without showing a particular link between an actual statement and a specific

payment, then the heightened pleading standard for scienter has no bite.”).

□ -70-

issue” were “aware of the issues” at the heart of the claims); Jn re Huntington Bancshares Sec.

Litig, 674 F. Supp. 2d 951, 972 (S.D. Ohio 2009) (as to supposed access to unspecified

documents) (finding that “generalized allegations of Individual Defendants’ access to documents

and internal information lack specific facts to establish a strong inference of scienter”).

a. “Scienter” Allegations With Respect to

Statements Related to the Environmental

Compliance or Conditions at the Monterrey Plant

The gist of Plaintiffs’ claims alleging “scienter” with respect to the environmental

conditions at the Monterrey Plant, and its compliance with applicable environmental laws, is that

because GrafTech tracked air emissions data in connection with the Plant and because Individual

Defendants Rintoul, Coburn, and Halford were at various times on GrafTech’s ESG

[Environmental, Social, and Governance] Steering Committee, they were aware of the 2019

Administrative Proceeding, and they often talked with the leadership personnel at the Monterrey

Plant, they “knew” that GrafTech’s statements about the Monterrey Plant’s environmental

compliance were misleading. (See ECF #56, {J 194-205, 208-210).

The PSLRA does not permit supporting claims of security fraud scienter based on

unparticularized “must have known” allegations. An example of this is found in the Sixth

Circuit case of Teamsters Loc. 237 Welfare Fund v. ServiceMaster Glob. Holdings, Inc., 83 F □□□

514 (6" Cir. 2023), where the plaintiff alleged that executives made misrepresentations about the

extent of a termite crisis that exposed ServiceMaster to liability. ServiceMaster, 83 F 4th at 531.

The complaint alleged that the executives discussed the termite crisis during meetings. Jd. The

Sixth Circuit affirmed the district court’s dismissal because “any detail about exactly what was

discussed, whether or not the extent of the problem or liability for possible claims was discussed,

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whether the possible impact on ServiceMaster’s financial results was raised, or specifically when

the alleged discussions occurred” was “[c]ompletely absent from the complaint.” Jd. “Without

this information, the ‘mere attendance at meetings’ where the [] termite crisis was discussed does

little to establish the kind of ‘red flags’ necessary to support a strong inference of scienter.” Jd.

The same situation arises here in the First Amended Complaint. There are no

particularized facts alleged about any document, communication, or data known to any

Defendant at the time of any “challenged” statement that contradicts any statement identified.

Allegations that the Defendants should have stated that they “blatantly” ignored unspecified

environmental requirements relating to the Monterrey Plant, while also identifying no

particularized example of “blatant” non-compliance with any specific requirement on the date of

any statement does not suffice. Even if an Individual Defendant may have been aware of

challenges faced by the Plant with respect to environm

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