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Case 1:15-Cv-07199-JMF Document 124 Filed 08/15/17 Page 1 of 170 Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 1 of 170 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK GARY KOOPMANN, TIMOTHY KIDD and : Civ. Action No: 15-cv-07199-JMF VICTOR PIRNIK, Individually and on Behalf of : All Others Similarly Situated, : : CLASS ACTION : Plaintiffs, : FOURTH AMENDED : COMPLAINT FOR VIOLATIONS v. : OF THE FEDERAL SECURITIES : LAWS : : FIAT CHRYSLER AUTOMOBILES N.V., : FCA US, LLC, SERGIO MARCHIONNE, : RICHARD K. PALMER, SCOTT JURY TRIAL DEMANDED KUNSELMAN, MICHAEL DAHL, STEVE : MAZURE and ROBERT E. LEE : : Defendants. : : Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 2 of 170 TABLE OF CONTENTS I. NATURE OF THE ACTION ............................................................................................. 1 II. JURISDICTION AND VENUE ....................................................................................... 14 III. PARTIES .......................................................................................................................... 14 IV. SUBSTANTIVE ALLEGATIONS .................................................................................. 18 A. Chrysler’s Background ......................................................................................... 18 B. Chrysler’s Obligation To Identify Safety-Related Defects And Conduct Recalls ...................................................................................................................19 C. NHTSA Increas es Focus on Compliance and Tim eliness of Reporting and Notification ........................................................................................................... 24 D. Chrysler’s Vehicle Safety Regulatory Violations ................................................. 25 1. Chrysler’s Untimely Notices ..................................................................... 25 2. Chrysler’s Failur es To Tim ely and Properly Recall and Repair Vehicles That Caught Fire From Low-Speed Rear Impacts .................................... 29 3. Chrysler’s Failure to Timely Recall Vehicles Containing Defective Takata Air Bags .................................................................................................... 35 4. Chrysler’s Failur e to Rem edy “A xel Lock Up” Causing Loss of Control ...................................................................................................... 40 5. Chrysler’s Failur e to Rem edy Def ective Tie Rods That Cause Loss of Control ...................................................................................................... 42 6. Chrysler’s Untimely Recalls ..................................................................... 45 7. Chrysler’s Failure to Notify NHTS A About Changes to Notification Schedule .................................................................................................... 46 8. Chrysler’s Failure to Submit Recall Communications ............................. 48 9. Chrysler’s Failure To Provide Other Critical Information ....................... 52 10. Chrysler’s Failure To Submit Information On Remedy ........................... 56 i Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 3 of 170 11. Chrysler’s Failure To Report Deaths and Serious Injuries ....................... 58 E. Chrysler’s Failure to Properly Account For Recalls ............................................. 58 1. Chrysler’s Underreporting of Its C osts and Liabilities Related to Vehic le Warranties and Recalls ............................................................................. 58 2. Relevant Accounting Principles ................................................................ 59 F. Chrysler’s Vehicle Emissions Regulatory Violations ........................................... 64 G. Materially False and Misleading Statements Issued During the Class Period ...... 78 H. The Truth About Chrysler’s NHTSA Viol ations Begins to Emerge As Defendants Continue To Make Materially False and Misleading Statements ....................... 103 I. The Truth About Chrysler’s Emissions Violations Begins to Emerge ............... 115 J. Additional Allegations Demonstrating Falsity and Scienter .............................. 122 Defendants’ Had A Strong Motive to Conceal Chrysler’s Mounting and Expected Recall Costs ............................................................................. 128 Additional Allegations of Defendants ’ Scienter Concerning Chrysler’s Emissions Violations .............................................................................. 130 Chrysler’s Creation of The Eight Illegal AECD’s Along with Dahl, Lee’s and Marchionne’s Involvem ent W ith T hat Process Supports a Strong Inference of Scienter ............................................................. 130 The Obvious Illegality of The Eight AECDs Supports a Strong Inference Of Scienter ........................................................................ 131 Defendants’ Failure to Disclose th e Very Software That Violated Emissions Regulations Supports and Inference of Scienter ............. 132 The VRC Ordering a Secret “Volun tary Recall” through a “Field Fix” of One of The Illegal AECD In 2015 Demonstrates Defendants’ Knew of the Undisclosed AECDs and Their Illegality ............................... 133 The EPA Alerted Defendants in Mid-2015 That It Had Identified “Defeat Devices” on the Grand Cherokee and Ram 1500 ................ 138 Marchionne’s Adm ission That Chrysler’s Vehicle s “W eren’t Compliant” When They W ere Launched Supports a Strong Inference of Scienter ......................................................................................... 141 ii Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 4 of 170 Defendants Knew That The Gra nd Cherokee and Ra m 1500 3.0 Liter Diesel Vehicles Were Exceeding NOx Emissions Standards In August 2014................................................................................................... 143 Marchionne’s Regular Receipt And Approval of Reports Detailing The Status of Em issions Software Supports A Strong Inference of Scienter ............................................................................................. 145 The Involvement of Bos ch In Chrysler’s Em issions Scheme Supports A Strong Inference of Scienter ......................................................... 149 Marchionne’s Repeated Detailed Discussio ns and Assurances Concerning Em issions Software Create A Strong Inference of Scienter ............................................................................................. 152 V. PLAINTIFF’S CLASS ACTION ALLEGATIONS ....................................................... 156 A. Fraud On The Market Presumption of Reliance ................................................. 158 B. Applicability of Presumption of Reliance: Affiliated Ute .................................. 160 COUNT I .................................................................................... 160 COUNT II ................................................................................... 163 PRAYER FOR RELIEF ............................................................. 165 DEMAND FOR TRIAL BY JURY ............................................ 165 iii Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 5 of 170 Lead Plaintiffs Gary Koopm ann, Tim othy Kidd (“Lead Plaint iffs”) and Victor Pirnik (together with Lead Plaintif fs, “Pla intiffs”), individually and on behalf of all other persons similarly situated, by their undersig ned attorneys, for their com plaint against defendants, allege the following based upon personal knowledge as to them selves and their own acts, and information and belief as to all other m atters, based upon, inter alia, the investigation conducted by and through their attorneys, which included, am ong other things, a review of the defendants’ public docum ents, conference ca lls and announcem ents made by defendants, United States Securities and Exchange Comm ission (“SEC”) filings, wire and press re leases published by and regarding Fiat Chrysler Automobiles N.V. (“Chrysler” or the “Company”), analysts’ reports and advisories about the Company, and inform ation readily obtainable on the Internet, including the website of the Natio nal Highwa y Traf fic Saf ety Adm inistration. Plaintif fs believ e th at substantial evidentiary s upport will exist for the allegations set forth herein after a reasonable opportunity for discovery. I. NATURE OF THE ACTION 1. This is a f ederal secu rities c lass a ction on behalf of purchasers of Chrysler common stock between October 13, 2014 and Ma y 22, 2017, inclusive (the “C lass Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. Chrysler is an automotive group that designs, engineers, manufactures, distributes and sells vehicles and components under brand names including Chrysler, Dodge, Fiat, Jeep, and Ram. The Com pany sells its products in approximately 150 countries. The Company was founded in October 2014 as the resu lt of a m erger that completed the integration of Fiat Group Automobiles (“Fiat”) and Chrysler Group LLC. 1 Case 1:15-cv-07199-JMF Document 124 Filed 08/15/17 Page 6 of 170 3. This action involves a series of false and m isleading statem ents and m aterial omissions concerning Chrysler’s com pliance w ith federally m andated vehicle safety and emissions regulations, as well as Chrysler’s internal controls and reported cost of sales, earnings, and earn ings before in terest and taxes (“EB IT”), provis ion for warranty and recalls,
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