|
Stanford
University Law School
- Securities Class Action Clearinghouse
|
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
-----------------------------x
IN RE VALUJET, INC., Civil Action No.
SECURITIES LITIGATION 1-96-CV-1355-JTC
-----------------------------x
THIS DOCUMENT RELATES TO:
ALL ACTIONS
-----------------------------x
CONSOLIDATED AMENDED COMPLAINT
Plaintiffs and all others similarly situated, by and through
Plaintiffs' attorneys, allege the following upon information and
belief, except as to those allegations concerning Plaintiffs, which
are alleged upon personal knowledge. Plaintiffs' information and
belief is based, inter alia, on the investigation made by and
through Plaintiffs' attorneys, which investigation included,
without limitation, a review and analysis of various articles about
and public filings of and relating to ValuJet, Inc. and ValuJet
Airlines, Inc.
NATURE OF THE CASE
1. This is a shareholders' class action on behalf of all
persons, other than Defendants and their affiliates, who purchased
common stock of ValuJet, Inc. and/or ValuJet Airlines, Inc.
(collectively referred to herein as "ValuJet" or the "Company")
during the period June 9, 1995 through June 17, 1996 inclusive (the
"Class Period") and who sustained damage as a result of those
transactions (the "Class"). As hereinafter alleged, during the
Class Period, ValuJet, a self-described low cost, no frills
airline, and the Individual Defendants, each of whom is an
executive officer, and/or director and controlling person of
ValuJet, knowingly and/or recklessly failed to disclose the
Company's severe and pervasive safety, maintenance and regulatory
problems. Defendants' fraudulent scheme and deceptive course of
business artificially inflated and maintained the trading price of
ValuJet securities during the Class Period and thereby injured
members of the Class.
2. ValuJet's misrepresentations about its safety and
maintenance practices began as early as June 8, 1995 when, after an
engine blew up in one of its planes, the Company stated that they
"exceed all standards." Thereafter, ValuJet continued to
experience incident after incident while the Company maintained the
appearance of being a safe airline.
3. The truth finally began to emerge when, on May 11, 1996,
a ValuJet DC-9 crashed into the Florida Everglades killing all 110
passengers on board. Subsequent to the crash, some adverse
information about ValuJet's safety and maintenance practices and
its regulatory problems was made public. This adverse information,
as specified herein, was known to Defendants prior to the May 11,
1996 crash but undisclosed to the investing public. As the adverse
information began to emerge, Defendants continued to insist that
ValuJet's operations were completely safe, that it was the
Company's policy to correct all United States Federal Aviation
Association ("FAA") findings immediately and to promptly implement
any indicated preventive measures, and that they believed many of
the FAA's concerns had already been addressed.
2
4. To the contrary, the FAA had warned the Company in a
letter dated February 29, 1996 "that ValuJet is not meeting its
duty to provide service with the highest possible degree of safety
in the public interest ... [and] does not have a structure in place
to handle your rapid growth, and that [the Company] may have an
organizational culture that is in conflict with operating to the
highest possible degree of safety." The February 29, 1996 letter,
which came on the heels of an intense FAA investigation started in
late February 1996, also required ValuJet to get FAA approval
before buying more planes or beginning service to new cities.
ValuJet's corporate culture, which strived to cut costs without
apparent regard for the maintenance or safety of its airplane
fleet, led to a substantial number of FAA violations and reports
that eventually resulted in the Company's agreement to cease
operations. At all relevant times, investors were unaware of the
severity and pervasiveness of the Company's regulatory, maintenance
and safety problems.
5. On June 17, 1996, it was announced after the market
closed that ValuJet was temporarily ceasing operations pursuant to
an agreement with the FAA. The FAA determined that the airline's
pervasive and severe safety and maintenance problems, which had
plagued the Company prior to, and throughout, the entire Class
Period, had rendered the airline unfit to continue service.
Specifically, FAA Administrator, David Hinson, noted that ValuJet
had serious deficiencies including the "failure to establish the
airworthiness of certain planes in its fleet, systemwide
3
maintenance deficiencies, multiple shortcomings in the quality
assurance of ValuJet contractors, and a lack of engineering
capability in ValuJet maintenance."
6. Investor reaction to the news on June 17, 1996, that the
Company was temporarily ceasing operations was swift, and the price
of ValuJet stock fell from $10.00 per share to as low as $4.50 per
share on June 18, 1996, closing at an all-time low of $6.50 per
share on volume of more than 23 million shares, a loss of 35% of
its value in one day. Similarly, one month earlier -- on the news
of the plane crash -- the stock had declined precipitously, falling
from $17.875 per share on May 10, 1996 to close at $13.687 per
share on May 13, 1996, the next trading day, a loss of
approximately 23% on trading volume of more than 20 million shares.
7. Since June 17, 1996, ValuJet has attempted to address the
FAA's concerns and resume operations. However, in the weeks
following the June 17, 1996 shutdown, FAA inspectors uncovered
additional severe maintenance and pilot training problems. In
response, on July 18, 1996, FAA officials in Atlanta, who have been
overseeing ValuJet's efforts to return to the skies, prohibited the
airline from even conducting training or ferry flights. The
inspection team also found gaps in pilot training records at
ValuJet headquarters, which effectively disqualified the airline's
entire training staff. As a result, all of ValuJet's pilots were
deemed not legal to fly the Company's aircraft and must be
retrained as they are recalled from furlough. Finally, ValuJet
received Department of Transportation clearance to resume flying on
4
September 26, 1996. The stock of ValuJet has continued to languish
in the $10 to $12 range (from a Class Period high of $34.75).
JURISDICTION AND VENUE
8. Plaintiffs bring this action pursuant to Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), 15 U.S.C. §§78j(b), and 78t(a), Rule 10b-5 promulgated
thereunder, 17 C.F.R. §240.10b-5 and the common law.
9. This Court has jurisdiction over the subject matter of
this action pursuant to Section 27 of the Exchange Act, 15 U.S.C.
§78aa and 28 U.S.C. §1331, as amended, as well as the doctrine of
supplemental jurisdiction, codified in 28 U.S.C. §1367.
10. Venue is proper in this District pursuant to Section 27
of the Exchange Act, 15 U.S.C. §78aa. Defendant ValuJet maintains
its principal executive offices in this District at 1800 Phoenix
Boulevard, Atlanta, Georgia and many of the acts and transactions
giving rise to the violations of law complained of herein,
including the preparation and dissemination to the investing public
of false and misleading information, occurred in this District.
11. In connection with the acts, conduct and other wrongs
complained of herein, the Defendants, directly or indirectly, used
the means and instrumentalities of interstate commerce, including
the United States mails and interstate telephone communications,
and the facilities of the national securities exchanges.
5
THE PARTIES
Lead Plaintiffs
12. The following representative Plaintiffs have been
appointed by the Court as Lead Plaintiffs in the consolidated
action:
(a) Plaintiffs Olivier and Ludmilla Courteau, as set
forth in the accompanying certification, purchased ValuJet common
stock at artificially inflated prices during the Class Period and
have been damaged thereby;
(b) Plaintiff Ali Solimon, as set forth in the
accompanying certification, purchased ValuJet common stock at
artificially inflated prices during the Class Period and has been
damaged thereby;
(c) Plaintiffs Hossein Malekabadi and Ziba Malekabadi,
as set forth in the accompanying certification, purchased ValuJet
common stock at artificially inflated prices during the Class
Period and have been damaged thereby;
(d) Plaintiff Dennis Lynch, as set forth in the
accompanying certification, purchased ValuJet common stock at
artificially inflated prices during the Class Period and has been
damaged thereby;
(e) Plaintiff Carlton Davis, as set forth in the
accompanying certification, purchased ValuJet common stock at
artificially inflated prices during the Class Period and has been
damaged thereby;
6
(f) Plaintiff Jack Marks, as set forth in the
accompanying certification, purchased ValuJet common stock at
artificially inflated prices during the Class Period and has been
damaged thereby; and
(g) Plaintiff Howard F. Chapuis, as set forth in the
accompanying certification, purchased ValuJet common stock at
artificially inflated prices during the Class Period and has been
damaged thereby.
(h) Other Plaintiffs who have filed complaints in the
consolidated action but were not named lead Plaintiffs, are as
follows: Plaintiffs Todd Wiener, Joseph Shubert, The Elesabeth
Ingalls Gillet Foundation, Mulugeta Ejigu, Mengistu Ejigu, Debebe
Ejigu, Debbie Miller, Joseph Singer, Dore Kreisler, I.R.A., Michael
M. Feder, C. Wesley Noon, Jr., Arlene Goldstein Boryk, Staci Weber,
Mary and Gary Glore, Martin G. Agius, Eastov Holdings and John
Kenney.
13. Defendant ValuJet Airlines, Inc. was organized as a
Nevada corporation in July 1992. In October 1995, Defendant
ValuJet Airlines, Inc. became a wholly-owned subsidiary of
Defendant ValuJet, Inc. and each share of common stock in ValuJet
Airlines, Inc. was converted into one share of common stock of
ValuJet, Inc. During 1995, the Company announced and consummated
a two-for-one stock split effected in the form of stock dividends.
The stock split was payable on November 21, 1995 to stockholders of
record as of the close of business on November 6, 1995. As of
December 31, 1995, the Company had over 54 million shares of common
7
stock outstanding. During the Class Period the Company's common
stock was actively traded on the NASDAQ exchange.
14. The following Defendants are referred to herein as the
"Individual Defendants":
(a) Defendant Robert L. Priddy ("Priddy") is and was
Chairman of the Board of the Company and its Chief Executive
Officer at all relevant times hereto. Defendant Priddy is the
beneficial owner of 6,448,000 shares of common stock of the
Company. Pursuant to an employment agreement, Priddy receives a
base salary of $150,000 and a cash bonus based on the Company's
income. In 1995, Defendant Priddy received $400,000 in cash
compensation and 290,000 stock options from the Company.
(b) Defendant Lewis A. Jordan ("Jordan") is and was a
director, President and Chief Operating Officer of the Company at
all relevant times hereto. Defendant Jordan is the beneficial
owner of 4,677,480 shares of common stock of the Company. Pursuant
to an employment agreement, Jordan receives a base salary of
$150,000 and a cash bonus based on the Company's income. In 1995,
Defendant Jordan received $400,000 in cash compensation and 290,000
stock options from the Company.
(c) Defendant Maurice J. Gallagher, Jr. ("Gallagher") is
and was Vice-Chairman of the Board of Directors, Treasurer and
Secretary of the Company at all relevant times hereto. As of the
close of the Class Period, Defendant Gallagher was the beneficial
owner of 5,986,000 shares of common stock of the Company. Pursuant
to an employment agreement, Gallagher receives a $50,000 base
8
salary and a bonus based on the Company's net income. In 1995,
Defendant Gallagher received $50,000 in cash compensation and
50,000 stock options from the Company.
(d) Defendant Stephen C. Nevin ("Nevin") is and was a
Senior Vice-President of Finance, Chief Financial Officer and
director of the Company at all relevant times hereto. In 1995,
Defendant Nevin received a base salary of $100,000, a bonus of
$38,000 based on a combination of the stock price and profitability
of the Company, and 26,000 stock options from the Company. On
October 31, 1995, while in possession of material non-public
adverse information about the Company's safety and maintenance
practices and adherence to FAA regulations, Nevin sold 3,000 shares
of ValuJet common stock at artificially inflated prices and
received proceeds of approximately $156,000.
(e) Defendant Michael D. Acks ("Acks") at all relevant
times hereto was ValuJet's Controller and Chief Accounting Officer.
On October 27, 1995, while in possession of material non-public
adverse information about the Company's safety and maintenance
practices and adherence to FAA regulations, Acks sold 50,000 shares
of ValuJet common stock at artificially inflated prices and
received proceeds of approximately $2,263,500.
(f) Defendant Timothy P. Flynn ("Flynn") is one of the
founders of the Company and a director. On May 20, 1996, while in
possession of material adverse non-public information about the
Company's safety and maintenance practices and adherence to FAA
regulations, Flynn sold 1.5 million shares of ValuJet common stock
9
at artificially inflated prices and received proceeds of
approximately $17 million. Flynn still owns over 5.9 million
shares of ValuJet.
15. By reason of their stock ownership, their management
positions and/or their membership on the Company's Board of
Directors, and their ability to make public statements in the name
of the Company, the Individual Defendants were controlling persons
of the Company and had the power and influence to cause the Company
to engage in the unlawful conduct complained of herein. Because of
their Board membership and/or executive and managerial positions
with the Company, each Individual Defendant had access to the non-
public information regarding the extent of the Company's
infractions of safety standards, poor safety and maintenance
practices, the substantial number of safety incidents involving
their aging fleet of planes, including the DC-9 which crashed in
the Florida Everglades on May 11, 1996, and the findings and
investigations of federal agencies with respect thereto, via their
access to internal corporate documents, conversations or
connections with corporate officers or employees, attendance at
Company management and/or Board of Directors meetings and
committees thereof and/or via reports and other information
provided to them in connection therewith.
16. Defendants had a duty to promptly disseminate accurate
and truthful information with respect to the Company's airline
safety record or to cause and direct that such information be
disseminated and to promptly correct any previously disseminated
10
information that was misleading to the market. As a result of
their failure to do so, the value of the Company's stock was
artificially inflated during the Class Period, causing injury to
Plaintiffs and the Class.
17. The Defendants participated in and consciously or
recklessly pursued the unlawful conduct alleged herein in order to
enrich itself/themselves at the public's expense, to protect
emoluments and privileges of corporate office, to maintain the
value of their securities holdings in the Company, and/or to avoid
embarrassment and loss of prestige. Moreover, the Defendants were
also motivated to downplay the Company's infractions of safety
standards, and the investigations and assessments thereof by
federal agencies, in order to successfully consummate a private
placement of $150 million of debt securities in April 1996.
CLASS ACTION ALLEGATIONS
18. Plaintiffs bring this action as a class action pursuant
to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure
on behalf of a class consisting of all persons who purchased the
common stock of ValuJet during the period June 9, 1995 through June
17, 1996 inclusive. Excluded from the Class are the Defendants
herein, members of the immediate family of the Individual
Defendants, any entity in which any Defendant has a controlling
interest, and the legal affiliates, representatives, heirs,
controlling persons, successors, and predecessors in interest or
assigns of any such excluded party.
11
19. Because over 54 million shares of the Company's common
stock were outstanding and because the Company's common stock was
actively traded on the NASDAQ exchange during the Class Period, the
members of the Class are so numerous that joinder of all members is
impracticable. While the exact number of Class members can only be
determined by appropriate discovery, Plaintiffs believe that Class
members number at least in the thousands and that they are
geographically dispersed.
20. Plaintiffs' claims are typical of the claims of the
members of the Class because Plaintiffs and all of the Class
members sustained damages arising out of the Defendants' wrongful
conduct complained of herein.
21. Plaintiffs will fairly and adequately protect the
interests of the Class members and have retained counsel who are
experienced and competent in class and securities litigation.
Plaintiffs have no interest which is contrary to or in conflict
with those of the members of the Class Plaintiffs seek to
represent.
22. A class action is superior to all other available methods
for the fair and efficient adjudication of this controversy since
joinder of all members is impracticable. Furthermore, as the
damages suffered by individual members of the Class may be
relatively small, the expense and burden of individual litigation
make it impossible for the members of the Class individually to
redress the wrongs done to them. There will be no difficulty in
the management of this action as a class action.
12
23. Questions of law and fact common to the members of the
Class predominate over any questions which may affect only
individual members in that Defendants have acted on grounds
generally applicable to the entire Class. Among the questions of
law and fact common to the Class are:
(a) Whether the federal securities laws and the common
law were violated by Defendants' acts as alleged herein;
(b) Whether the Company's publicly disseminated releases
and statements during the Class Period omitted and/or
misrepresented material facts and whether Defendants breached any
duty to convey material facts or to correct material facts
previously disseminated;
(c) Whether Defendants participated in and pursued the
common course of conduct complained of;
(d) Whether the Defendants acted willfully, recklessly
or negligently in omitting and/or misrepresenting material facts;
(e) Whether the market prices of ValuJet common stock
during the Class Period were artificially inflated due to the
material nondisclosures and/or misrepresentations complained of
herein; and
(f) Whether the members of the Class have sustained
damages and, if so, what is the appropriate measure of damages.
13
SUBSTANTIVE ALLEGATIONS
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE
24. At all relevant times, the market for ValuJet common
stock was an efficient market for the following reasons, among
others:
(a) ValuJet common stock met the requirements for
listing, and was listed and actively traded, on the NASDAQ National
Market a highly efficient and automated market;
(b) As a regulated issuer, ValuJet filed periodic public
reports with the SEC and the NASD; and
(c) ValuJet stock was followed by securities analysts
employed by major brokerage firms who wrote reports which were
distributed to the sales force and certain customers of their
respective brokerage firms. Each of these reports was publicly
available and entered the public marketplace. Among the securities
firms that followed the Company during the Class Period were: Alex
Brown & Sons, Inc., BT Securities, CS First Boston, Dillon Read,
Gruntal & Co., Lehman Bros., Merrill Lynch, Morgan Stanley & Co.,
Natwest Securities Corp., PaineWebber, Piper Jaffray and Smith
Barney.
25. As a result, the market for ValuJet securities promptly
digested current information with respect to ValuJet from all
publicly-available sources and reflected such information in
ValuJet's securities prices. Under these circumstances, all
purchasers of ValuJet securities during the Class Period suffered
14
similar injury through their purchase of securities at artificially
inflated prices and a presumption of reliance applies.
INAPPLICABILITY OF STATUTORY SAFE HARBOR
26. The statutory safe harbor provided for forward-looking
statements under certain circumstances does not apply to any of the
statements alleged to be false or misleading in this complaint to
the extent they were intended to be or could be construed as
forward-looking in nature (the "forward-looking statements"). None
of the forward looking statements pleaded herein were identified as
forward-looking statements when made (either expressly or by
implication). Nor was it stated that actual results could differ
from those projected. Nor did meaningful cautionary statements
identifying important factors that cause actual results to differ
materially from those in the forward-looking statements accompany
those forward looking statements. Alternatively, to the extent
that the statutory safe harbor does not apply to any forward
looking statements pleaded herein, Defendants are liable for those
false forward-looking statements because, at the time each of those
false forward-looking statements was made, the speaker knew the
forward-looking was false and the forward looking statement was
authorized and/or approved by an executive officer at ValuJet who
knew that those statements were false when made.
FACTUAL ALLEGATIONS
Background Of The Company
27. ValuJet is a low fare, no frills airline providing point-
to-point service in relatively high density markets from four focus
15
cities. The Company began operations in October 1993 and quickly
became popular for its aggressive discounts. The original focus
city was Atlanta, where the Company started in 1993. A focus city
at Washington-Dulles was added in January 1995, and Orlando and
Boston became focus cities in December 1995 - January 1996.
ValuJet does not operate in the hub-and-spokes configuration which
is typical in the airline industry, but rather seeks to turn-around
its aircraft as quickly as possible (average 30 minutes) and, in
turn, maximize aircraft utilization (10 hours per day for ValuJet
versus seven to eight for most hub-and-spokes airline operations).
28. In its short history, ValuJet has enjoyed a remarkable
earnings performance along with consistently substantial increases
in revenues. In fiscal year 1993, ValuJet had revenues of
$5,810,791 and a net loss of $894,091, resulting in a net loss per
share of $.03. In fiscal 1994, the Company's revenues grew to
$133,901,310, its net income grew to $20,731,980 and the Company
reported $.44 in earnings per share. In fiscal 1995, ValuJet's
revenues grew to $367,757,378, its net income grew to $67,762,598
and the Company reported $1.13 in earnings per share. In the first
quarter of 1996 which ended on March 31, 1996, ValuJet had revenues
of $109,995,007, net income of $10,666,774 and earnings per share
of $.18 as compared to revenues of $60,746,743, net income of
$9,070,612 and earnings per share of $.15 in the first quarter of
1995.
29. ValuJet's remarkable earnings performance is based, in
large part, on the fact that it had the lowest costs in the
16
industry. This enabled the Company to yield 13.4 cents per
passenger mile, which is 14% higher than Southwest Airline's yield
per passenger mile of 11.8 cents on similar average passenger trip
lengths. ValuJet also has the lowest break-even load factor in the
airline industry, excluding commuter flights, at 46% or 52
passengers in its 113 seat DC-9 aircraft.
30. ValuJet also contains costs by employing a work force
whose base salaries and benefit levels are substantially below
those of the major airlines. ValuJet's labor costs, including
fringe benefits and employee bonuses, comprise 24% of total
operating expenses as compared with 38% for the major airlines.
For example, ValuJet pays its captains a base salary of $45,000 per
year, and 100% of their paid hours are hard hours, i.e., spent
behind the controls of the airplane. Moreover, unlike every other
airline flying big jets, ValuJet requires all of its prospective
pilots to pay nearly $10,000 for their own training and mandatory
federal certifications before putting them on the payroll, and
relies exclusively on outside vendors to provide those services.
As a result, ValuJet often ends up hiring the least-experienced
pilots who were passed over by other carriers. Conversely, it is
estimated that Delta's least senior captain is paid a salary of
approximately $140,000 per year, with only about 55% of paid hours
being hard hours.
31. In order to increase profits by motivating its employees
to keep ValuJet planes flying, the Company provides for a company-
wide bonus compensation incentive program. In addition to their
17
base salaries, ValuJet pilots receive stock options and bonuses
based on Company profits. In 1995, ValuJet captains received
bonuses of approximately $20,000. All other team member employees,
i.e., those hired on a permanent basis after a 90 day probationary
period, are paid a quarterly bonus also based on Company profits.
32. ValuJet also cuts costs by using independent contractors
to perform heavy aircraft maintenance and a substantial portion of
gate and ground handling activities. While the practice of hiring
contractors for heavy aircraft maintenance and engine overhauls is
widespread in the industry, ValuJet contracts out virtually all of
its repairs. According to industry officials, carriers such as
ValuJet that outsource maintenance face a difficult task of
coordinating work and making sure all the correct maintenance is
done. This is especially true at ValuJet, whose maintenance is
performed by as many as 56 outside contractors.
33. That ValuJet had the lowest costs in the industry is
surprising in light of the fact that most travel-industry
executives agree that older planes are more expensive to maintain
than newer planes, and the Company's fleet averaged 26.4 years in
age as of February 1996, well above the average age of the fleets
of the major airlines including America West, American,
Continental, Delta, Northwest, Southwest, Trans World Airlines
("TWA"), United and US Air, and higher than other discount airlines
such as Alaska, American Trans Air, Kiwi and Tower. The aircraft,
which come from several different sources in different countries
are each equipped with different avionics in the cockpit and
18
different interiors in the cabins, and have been serviced over the
years on different maintenance schedules.
34. Since ValuJet's inception, and throughout the Class
Period, the Company continuously trumpeted its profitability, its
expansion into new markets and its purchase of additional planes.
Against this backdrop of positive business developments, ValuJet
common stock rose precipitously in price. On June 8, 1995, ValuJet
traded at $16.40 per share, subsequently rising to a class period
high of $34.75 (adjusted for a two for one stock split). ValuJet's
expansion and its ability to continue that expansion were clearly
significant to the market and were reflected in the Company's
escalating stock price.
35. ValuJet, however, faced two major obstacles to its
continued expansion efforts. First, the Company needed to maintain
its low cost structure which meant continuing its practice of
buying heavily used planes and outsourcing all maintenance as well
as other functions. Second, the Company needed to assure that it
was in compliance with all applicable FAA regulations, as any
significant regulatory problems could stall or block the Company's
expansion efforts. Moreover, increased regulatory scrutiny would
likely increase the Company's costs and thereby negatively impact
the Company's cost structure. Rather than sufficiently addressing
both concerns, ValuJet aggressively sought to limit costs at the
expense of maintenance and regulatory compliance. As a result,
ValuJet's aircraft maintenance record was abysmal, thereby
increasing the likelihood that the Company would face heightened
19
regulatory scrutiny which would result in limitations on its
operations.
36. During the Class Period, ValuJet and the Individual
Defendants learned that as a result of the Company's severely
inadequate maintenance and the attendant safety problems, the
Company would likely be subject to strict FAA scrutiny which would
eventually force a slowdown in the Company's expansion and drive up
costs. Despite this knowledge, Defendants made numerous statements
about ValuJet and its business that failed to disclose the true
scope of the Company's severe and pervasive safety, maintenance and
regulatory problems and resultant business risks. Eventually,
Defendants were forced to reveal the true extent of the Company's
maintenance, safety regulatory and safety problems when it agreed
to cease operations in the wake of the Florida disaster.
Defendants' Misleading Statements and Omissions and the
Falsity of Those Statements
37. (a) Throughout the Class Period, Defendants represented
to the investing public that ValuJet was committed to running a
safe airline, was, in fact, one of the safest airlines, had
extensive plans for expansion and were addressing and had already
addressed many safety issues raised by various FAA inspections.
These statements along with statements about the Company's
extensive expansion plans, set forth in paragraphs 38, 44, 53-54,
59(a), 60-61, 65(a), 66, 68-69, 72, 76, 81, 84-86, 88-94 and 96,
below, were materially false and misleading because, in fact,
ValuJet had one of the worst safety records of all airlines,
possessed a corporate culture inconsistent with the highest level
20
of safety, and had failed to address numerous safety problems
identified by FAA inspections which would hinder the Company's
ability to grow as set forth in paragraphs 39-43, 45-46, 48, 50-51,
55-58, 59(b), 60, 62-63, 65(b), 66, 70, 73-74, 77-80, 82-83, 98,
100-102, 104 and 106. These materially false and misleading
statements artificially inflated the price of ValuJet stock.
(b) Indeed, these pervasive safety and maintenance
problems and violations of FAA regulations that were undisclosed to
the investing public substantially increased the risk that ValuJet
aircraft would be involved in a fatal accident exposing the Company
to tens of millions of dollars in lawsuits from the victims'
families, which in fact happened as a result of the May 11, 1996
crash. The failure to disclose the Company's safety and
maintenance problems and the attendant risk for such liability
should the Company have a fatal accident also artificially inflated
the price of ValuJet stock.
(c) In addition, the financial statements showing the
continuing upward trend in the Company's profitability during the
Class Period as set forth in ValuJet's Form 10Q's, 10K and Annual
Report and as described in paragraphs 47, 49, 52, 64 and 75 were
false and misleading because these documents failed to disclose
that the only reason the Company was able to report increasing
profits was because the operating expenses associated with
maintenance were artificially low due to ValuJet's failure to
comply with FAA regulations and other industry safety guidelines.
The Company's failure to disclose that its low expenses, which
21
allowed the Company to report high earnings and increase the price
of its stock, would necessarily have a material adverse effect on
ValuJet by exposing it to costly future accidents, FAA inspections
(which the Company has to reimburse) and restrictions on its
operations.
38. On June 8, 1995, the engine of a ValuJet plane burst into
flames shortly before takeoff from the Atlanta airport, destroying
the plane and injuring four passengers and three flight attendants.
Following that incident, ValuJet vigorously denied that the
incident reflected any shortcomings in the Company's safety
procedures and practices. As reported by The Atlanta Journal on
June 9, 1995, Richard Hillman, ValuJet's operating chief, defended
the Company's safety procedures, stating: "In no way do we skimp on
maintenance. We exceed all standards."
39. In stark contrast to this affirmative statement about
ValuJet's maintenance, the Company was, at this time and all times
relevant to this matter, outsourcing essentially all maintenance
functions to numerous outside contractors in an effort to pare its
costs and fuel its expansion. As a direct result of this lack of
oversight, the Company was experiencing an inordinately high amount
of reported incidents to the FAA and was operating the airline in
a hazardous and unsafe manner as later confirmed by various FAA
reports released near the end of the Class Period.
40. Specifically, the engine which caught on fire was
purchased from a Turkish airline and failed to meet FAA
requirements. In response to that incident, the FAA issued an
22
airworthiness directive requiring ValuJet to disassemble and
inspect all 24 engines purchased from the Turkish airline and wrote
to ValuJet, telling it to develop safeguards to ensure that it does
not again acquire "questionable assets." This plane had been
involved in three prior incidents involving two unscheduled
landings and the failure of a fuel transfer pump. One incident
occurred on April 25, 1995, when ValuJet mechanics at Washington's
Dulles airport noted two problems with the plane's center fuel
tank. Work on the fuel system was performed the following day,
but, as an FAA analysis revealed, the fuel tank problems were not
repaired. Nevertheless, ValuJet then flew the airplane on seven
commercial flights before grounding it, after a ValuJet mechanic
called a federal air safety hotline to report the leaky fuel tank.
ValuJet officials later admitted "questionable judgment" in keeping
the plane in service. Inquiries after the engine fire found that
ValuJet had not provided hands-on tail exit evacuation training for
more than 400 flight attendants. FAA documents show that ValuJet
admitted the lack of training under a FAA self-disclosure provision
that allows airlines to correct infractions without fear of public
disclosure. The National Transportation Safety Board attributed
the accident to improper and incomplete inspections.
41. Moreover, contrary to the statements in paragraph 38 that
the Company does not skimp on maintenance and exceeds all
standards, FAA inspectors had found problems at ValuJet since its
inception in late 1993. Prior to the Class Period, FAA inspectors
23
had already identified numerous safety incidents involving ValuJet,
including the following:
i) On December 30, 1993, FAA inspector notes
indicated that on a ValuJet flight from Tampa to Atlanta both
pilots "could not find or reference any material concerning the
carrier's de-icing program." It was the FAA inspector's opinion
"that the training concerning the company's de-ice program falls
short of meeting the regulatory requirement."
ii) On January 19, 1994, an FAA inspector noted
that one engine on a ValuJet plane had used 26 quarts of oil in 13
days.
iii) In Atlanta on February 12, 1994, an FAA
inspector noted that a ValuJet captain had allowed the aircraft to
descend through 12,000 feet during a flight. The inspector had to
point out to the captain that the plane had been descending. This
happened again at 7,000 feet. Neither pilot was watching the
controls during this time and again had to be reminded to stop the
descent.
iv) On January 18, 1995, an FAA inspector noted on
one flight that the "[e]mergency floor lighting was coming up from
the floor with exposed wires in the aisle. Flight attendant said
there were no cabin discrepancy log[s] and her method to get it
repaired was to write it down on a napkin and leave it in the
galley."
24
v) On February 15, 1995, FAA inspectors reported
a hazardous material violation, for which ValuJet received a
warning letter.
vi) On February 24, 1995, FAA inspectors reported
inspection record-keeping violations, and issued a letter
correction.
vii) On March 14, 1995, on a Chicago flight, the FAA
inspector documented that the plane had a hydraulic leak in the
landing gear area, a split in the left flap with water inside the
flap, a split in the right flap 5 feet from the fuselage and a
brake hose rubbing on the wheel.
viii) On an April 20, 1995 Hartford flight, the FAA
inspector noted that the plane had a fuel leak from the top of the
right wing, four upper wing panels were leaking and one panel had
the appearance that someone had tried to externally seal the panel
with a brown sealer.
ix) On April 27, 1995, FAA inspectors reported
maintenance violations and assessed the Company a civil penalty.
x) On May 4, 1995, FAA inspectors reported flight
crew training violations, for which ValuJet received a letter
correction.
xi) On May 30, 1995, on a ValuJet flight en route
to Philadelphia, fumes were present throughout the cabin allegedly
caused by a new auxiliary power unit, which was then shut down.
42. Indeed, in the first six (6) months of 1995 alone,
service difficulty report data indicated ValuJet was involved in
25
numerous incidents. However, since lax reporting requirements
under FAA rules allows some incidents to go unreported, these
records can only be viewed as reporting the minimum number of
incidents. Some of these incidents included:
i) On January 11, 1995, an aircraft depressurized
at 10,000 feet on climb. Oxygen masks were deployed. The flight
continued to destination despite this.
ii) On January 12, 1995, the same aircraft again
deployed oxygen masks as a result of continuing inoperability of
the automatic pressurization system. Three rows of oxygen masks
failed to deploy.
iii) On January 13, 1995, another aircraft failed to
pressurize properly and made an unscheduled landing.
iv) On January 15, 1995, a vertical gyro failed,
resulting in an unscheduled landing. The gyro indicates altitude
of the aircraft.
v) On January 16, 1995, the captain declared an
emergency and returned to Atlanta due to an electrical power loss
(numerous circuit breakers popped in the cockpit).
vi) On January 16, 1995, the vertical gyro again
failed on the same aircraft on climb, resulting in an unscheduled
landing.
vii) On January 20, 1995, an aircraft would not
pressurize and returned to Atlanta.
26
viii) On January 20, 1995, the hydraulic pressure
was too low in the aircraft, and the aircraft made an unscheduled
landing.
ix) On January 20, 1995, an engine fire warning due
to a broken clamp resulted in an unscheduled landing.
x) On January 27, 1995, a fuel heater malfunction
caused oil temperature to exceed maximum limits, resulting in an
unscheduled landing.
xi) On February 3, 1995, an aircraft unable to
pressurize, returned to Atlanta.
xii) On February 4, 1995, a proximity switch defect
caused an unsafe nose gear warning, and returned to Atlanta.
xiii) On February 15, 1995, during takeoff, an
engine experienced a loud bang and the takeoff was aborted. The
same aircraft failed to pressurize on February 3, 1995.
xiv) On February 16, 1995, a flight attendant
reported smoke in the cabin in the same aircraft that experienced
the proximity switch defect on February 4, 1995.
xv) On February 24, 1995, an aircraft experienced
an electrical power loss upon takeoff, resulting in an aborted
takeoff. The same aircraft also experienced two gyro malfunctions.
xvi) On March 9, 1995, an aircraft lost hydraulic
pump pressure.
xvii) On March 13, 1995, an aircraft suffered an
emergency engine shutdown.
27
xviii) On March 14, 1995, an aircraft made an
unscheduled landing due to a wheelwell vibration. It turned out
that the gear doors were left open. The same aircraft experienced
an unexplained bang and power loss one month earlier.
xix) On March 20, 1995, there was an in-flight
emergency due to smoke in the cockpit from a coffeemaker.
xx) On April 5, 1995, a stabilizer trim motor
failed upon the aircraft's descent.
xxi) On April 7, 1995, on the same aircraft that
experienced the bang during takeoff, a stabilizer motor experienced
a thrust reverser warning indication and heavy vibration upon final
approach. A mid-flight thrust reverser malfunction is potentially
catastrophic, as the aircraft turns on its side.
xxii) On April 9, 1995, an aircraft experienced a
gear unsafe warning. The next day, the same aircraft made an
unscheduled landing due to sudden depressurization. Oxygen masks
were deployed, except in row 5.
xxiii) On April 10, 1995, an aircraft made an
unscheduled landing due to failure to pressurize.
xxiv) On April 28, 1995, another carrier reported
fuel coming from a ValuJet wing tip. The aircraft made an
immediate landing and simply transferred fuel from one tank to the
other.
xxv) On May 4, 1995, an aircraft returned to Atlanta
due to an engine malfunction.
28
xxvi) On May 7, 1995, a pilot noted a fuel
discrepancy between tanks indicated a fuel loss and declared an
emergency.
xxvii) On May 8, 1995, another aircraft experienced
a fuel imbalance. On May 12, 1995, the same aircraft lost fuel out
of its right wing tip.
xxviii) On May 19, 1995, an aircraft door separated
from the aircraft during flight.
xxix) On May 23, 1995, an engine vibration and a
compressor stalling in the aircraft resulted in an unscheduled
landing.
xxx) On May 24, 1995, an aircraft returned to
airport when the pilots realized the emergency exit door was not
properly latched. They closed the door and took off again.
xxxi) On May 30, 1995, a flight from Atlanta to
Philadelphia experienced a malfunctioning NR2 generator, and the
crew disconnected the CSD. Nonetheless, the aircraft continued to
fly. On the same day, the flight to Atlanta again experienced a
NR2 generator malfunction. This means that maintenance simply
reconnected the CSD between flights rather than fixing the CSD.
xxxii) On June 6, 1995, aircraft made unscheduled
landing because compartment door left open.
43. Thus, by June 9, 1995, ValuJet was well on its way to
accumulating safety incidents at a pace nearly four times greater
than the total reported by TWA in 1995, even though TWA had more
planes deployed on average. Consequently, the statements by
29
ValuJet that it does not skimp on maintenance and that it exceeds
all standards is belied by at least 44 incidents evidencing the
Company's inadequate maintenance and concomitant safety problems.
44. At the time of the June 8, 1995 engine explosion, ValuJet
operated flights to 22 cities out of Atlanta, with three additional
cities to be added in July, using a fleet of 29 planes with an
average age of 22 to 23 years. On June 20, 1995, the Company
issued a press release in which Defendant Jordan noted that
"management will continue to focus on operating a safe, reliable,
low-cost, low-fare fun and friendly scheduled airline . . ."
45. Indeed, in contrast to Defendant Jordan's June 20, 1995
statement that "management will continue to focus on operating a
safe . . . . airline," in July 1995 alone, ValuJet had incurred
additional violations:
i) On July 10, 1995, FAA inspectors reported
maintenance violations that resulted in civil penalties assessed
against ValuJet. These violations included not operating aircraft
in an airworthy condition and failing to maintain aircraft
properly.
ii) On July 13 and 17, 1995, FAA inspectors
reported maintenance violations and issued letters of correction;
and
iii) On July 31, 1995, FAA inspectors reported
additional maintenance violations, resulting in the assessment of
a civil penalty against ValuJet.
30
46. During August 1995, the inadequacy of ValuJet's
maintenance procedures was further confirmed by an inspection of
ValuJet by the United States Department of Defense. In its report,
which evaluated all phases of the airline's operation, the
Department of Defense gave unsatisfactory evaluations to the
Company's critically important maintenance manuals, records and
quality assurance. The report noted that the Company had no
internal audit program, and had incomplete and disorganized
training records of maintenance workers. As a result, the
Department of Defense prohibited its employees from flying ValuJet.
47. On or around August 11, 1995, ValuJet filed its Form 10-Q
for the fiscal quarter ended June 30, 1995. The Form 10-Q was
signed by Defendants Priddy and Acks. The Company reported
operating revenues of $83,579,796, operating expenses of
$60,921,318, net income of $16,860,044 and net income per share of
$0.57 for the quarter ended June 30, 1995, as compared to operating
revenues of $29,778,303, operating expenses of $21,167,813, net
income of $5,117,135 and net income per share of $0.26 for the
quarter ended June 30, 1994. The Form 10-Q for the quarter ended
June 30, 1995, was materially false and misleading for the reasons
detailed in paragraph 37(c).
48. During September 18 to 29, 1995, the FAA conducted an
inspection of ValuJet. The FAA found 58 violations, 17 of which
were in the most serious category A. The FAA report noted lapses
in flight crew and dispatcher training. The FAA report cited 43
instances where the airline either had no maintenance procedures,
31
or the established procedures were not followed. In addition, the
FAA also found that ValuJet did not have an internal auditing
program for safety measures such as maintenance. These facts were
not disclosed to investors.
49. On or around November 15, 1995, ValuJet filed its Form
10-Q for the fiscal quarter ended September 30, 1995. The Company
reported operating revenues of $104,576,338, operating expenses of
$72,624,306, net income of $22,661,139 and net income per share of
$0.76 for the quarter ended September 30, 1995, as compared to
operating revenues of $40,343,080, operating expenses of
$29,354,073, net income of $6,573,753 and net income per share of
$0.25 for the quarter ended September 30, 1994. The Form 10-Q for
the quarter ended September 30, 1995, was false and misleading for
the reasons detailed in paragraph 37(c).
50. In the second half of 1995 ValuJet continued to incur
service difficulty incidents at a record pace. These included:
i) On July 6, 1995, an aircraft made an
unscheduled landing because the aircraft would not pressurize. The
crew closed the emergency door improperly.
ii) On July 14, 1995, a flight made an unscheduled
landing due to a sudden oil drop. It was discovered that
maintenance had left the oil cap loose.
iii) On July 15, 1995, the left engine of an
aircraft failed on takeoff. The aircraft was flown on one engine
the remainder of the flight. On the same day, the same aircraft
experienced a failure of its emergency lighting system.
32
iv) On July 18, 1995, upon takeoff, the primary and
secondary trim failed, and the aircraft made an unscheduled
landing.
v) On July 20, 1995, after takeoff a hydraulic
pump on the engine failed. The aircraft made an unscheduled
landing.
vi) On July 25, 1995, the pilot declared an
emergency upon the final approach when an electrical meter began
smoking.
vii) On September 4, 1995, the autopilot switch
shorted out and caused smoke in the cockpit.
viii) On September 7, 1995, an aircraft made an
unscheduled landing because a compartment door was left unlatched.
ix) On September 20, 1995, an aircraft made an
unscheduled landing when the engine failed.
x) On September 23, 1995, smoke was reported in
the cabin and the aircraft returned to the airport.
xi) On September 28, 1995, an aircraft returned to
Atlanta when after takeoff the crew noticed fuel leaking from the
wing.
xii) On September 28, 1995, while at the gate in
Philadelphia, smoke filled the aircraft cabin due to leaking oil.
xiii) On October 7, 1995, an aircraft returned to
airport when 3,000 lbs. of fuel leaked from the center fuel tank.
xiv) On October 7, 1995, another aircraft
experienced a fuel loss, with fuel streaming out of its right wing
33
tip. It was discovered that the manifold valve was at fault;
however, the valve was not replaced, but simply cleaned and
repositioned. The next day, this same aircraft experienced a
second fuel leak from the right wing and made another return to
Atlanta.
xv) On October 9, 1995, an aircraft returned to
Atlanta due to a hydraulic fluid leak in the brake assembly.
xvi) On October 15, 1995, an aircraft returned to
Atlanta when the engine malfunctioned.
xvii) On October 18, 1995, an aircraft made an
unscheduled landing because a compartment door was left unlatched.
xviii) On October 21, 1995, another aircraft made an
unscheduled landing because another compartment was left unlatched.
xix) On October 25, 1995, at 17,000 feet, the
cockpit windshield began disintegrating.
xx) On October 28, 1995, on descent, an aircraft
lost pressurization.
xxi) On November 2, 1995, another aircraft lost
pressurization.
xxii) On November 24, 1995, an aircraft was unable
to pressurize; in addition, the door lights failed. Upon the
aircraft's return to Atlanta, it was discovered that an emergency
door was left open. Maintenance closed the door but did not fix
the door lights, and dispatched the aircraft. The warning
indicator for the open door that had also failed to light remained
unrepaired. On December 11, 1995, this aircraft experienced a
34
complete navigation system failure upon takeoff from Atlanta. The
aircraft was kept in service. On December 12, 1995, on takeoff,
another engine failed due to turbine blade damage.
xxiii) On December 10, 1995, an aircraft lost
pressurization at 17,000 feet. No oxygen masks were deployed.
xxiv) On December 14, 1995, an aircraft returned to
Atlanta because of fuel leaking from its right wing.
xxv) On December 23, 1995, an aircraft made an
unscheduled landing due to an altimeter failure.
xxvi) On December 24, 1995, an aircraft made an
unscheduled landing when the hydraulic pump failed.
xxvii) On December 24, 1995, aircraft blew two tires
on landing and had to be ferried from runway.
51. On or around February 5, 1996, the FAA began surveillance
of ValuJet and unbeknownst to investors, advised the Company in
writing that scrutiny of the Company's pilots and their training
"have brought to light what appears to be an area of possible
concern." The letter noted that in several cases, the captain was
either new or had little experience flying jets or both. In
addition, the FAA inspectors sitting in the cockpit during flight
checks at times had to keep ValuJet pilots from breaking rules.
The letter ended: "There is no doubt that our concerns parallel
your own and that you are conducting your own evaluation of the
reasons for these events." This letter and its contents were
concealed from public scrutiny by Defendants and did not become
publicly disclosed until after the May 11, 1996 crash.
35
52. On or around February 8, 1996, ValuJet mailed its 1995
Annual Report to shareholders. The Company reported operating
revenues of $367,757,358, operating expenses of $260,001,513, net
income of $67,762,598 and net income per share of $1.13 for the
year ended December 31, 1995, as compared to operating revenues of
$133,901,310, operating expenses of $99,355,489, net income of
$20,731,980 and net income per share of $0.44 for the year ended
December 31, 1994. The Annual Report was materially false and
misleading for the reasons detailed in paragraph 37(c).
53. The Annual Report also contained a letter from Defendant
Priddy and Jordan which sought to portray the Company as continuing
its expansive growth and continued profitability. The letter
stated:
ValuJet also continued to strengthen its
balance sheet during the year. The Company
added $42.9 million in cash to finish the year
with $12.7 million. Stockholders' equity
increased 74 percent from 1994 to $162.1
million. These figures reaffirm ValuJet's
increased presence and success within the
industry.
Perhaps the most exciting news of the
year was the agreement we reached with the
McDonnell Douglas Corporation to be the launch
customer of the MD-95 aircraft, which will
lead ValuJet into the next century. In
addition, ValuJet declared two, two-for-one
stock splits during the year.
On the operational side, we announced and
established our third and fourth focus cities
in Boston and Orlando. With the introduction
of our new service beginning May 1, 1996 to
New York (LaGuardia), Mobile, Alabama, and
Fort Walton Beach, Florida, ValuJet will fly
to 31 cities in 19 states, offering convenient
service with 320 daily departures on peak
36
travel days with our fleet of 44 DC-9 and four
MD-80 jet aircraft.
By almost any measure, 1995 was a great
year for ValuJet. As we moved forward into
1996 and beyond, ValuJet will continue to
utilize the resources and skills of our
workforce who are ultimately responsible for
the Company's success. Our paramount goal in
1996: sustain our consistent pattern of
profitability, while continuing our progress
toward excellence in operational integrity.
We look forward to continued growth for
the remainder of 1996 and beyond. Thank you
for your confidence and support.
54. On February 13, 1996, ValuJet issued a press release
announcing that it had executed agreements for the purchase of
eleven used McDonnell Douglas aircraft, nine DC-9-30's and two
DDMD-83's, increasing ValuJet's fleet commitments from 47 to 58
aircraft. The February 13 press release further stated that the
Company expected delivery of five used aircraft by the end of the
first quarter of 1996, five used aircraft during the second quarter
of 1996 (four DC-9's and one MD-83), and expected delivery of four
additional used DC-9's during the third quarter of 1996, thereby
increasing ValuJet's fleet by more than 20% in slightly more than
six months. According to the press release, delivery of the final
MD-83 aircraft was expected during the first quarter 1997. The
press release did not mention the on-going FAA surveillance,
underlying operational or maintenance problems or any affect they
might have on the Company's plans to acquire the planes or expand.
55. In contrast to ValuJet's February 13, 1996 press release
touting the Company's extensive expansion plans, the Company's
growth strategy was in real jeopardy. In a February 14, 1996 memo
37
which was not disclosed until after the May 11, 1996 crash, the FAA
cited inadequacies with ValuJet's safety and maintenance
operations, indicating that ValuJet did not have sufficient
procedures for maintenance personnel, data-monitoring trends with
engine issues or an adequate air-worthiness-maintenance program.
The memo also cited problems with the FAA inspection of ValuJet's
operations, including its manuals and maintenance procedures. The
memo noted that the agency had "severely overlooked" inspecting
ValuJet's fleet of aging jets. Indeed, there had been no
structural inspections of the Company's aircraft for more than two
years. The memo also indicated that FAA staff members recommended
that the agency immediately consider a "recertification" of
ValuJet, which usually indicates that an airline has not been
complying with all the operating requirements necessary to run an
airline, and entails going over all aspects of an airline's
operations to make sure it meets regulations. The memo noted that
ValuJet had 46 violations in its 2 1/2 years of operations and that
20 violations remained uncorrected.
56. As a result of several accidents and concerns regarding
the rate at which the Company was adding additional aircraft and
flights, on February 22, 1996, the FAA began an extra surveillance
of ValuJet. These accidents included:
i) On January 7, 1996, a ValuJet plane stalled as
it approached the Nashville airport and hit the runway hard,
severely damaging the tail and front landing gear;
38
ii) On January 12, 1996, a ValuJet flight in
Washington-Dulles skidded off a taxiway into a snow bank;
iii) On January 26, 1996, a plane landing at
Hartsfield International skidded off a runway; and
iv) On February 1, 1996, a right landing gear that
had touched down in Nashville collapsed on the runway, damaging the
wing. Indeed, only hours away from the completion of the
inspection, one of ValuJet's planes in Savannah ran off the runway.
57. Also, in the weeks prior to that surveillance, several
ValuJet flights were delayed after FAA inspectors pointed out
discrepancies, including the failure to perform timely inspection
of parts. The extra surveillance by the FAA was followed by a 120-
day special emphasis inspection. The inspection was conducted
because of repeated safety problems and focused on concerns
regarding pilot training and the quality of maintenance provided by
outside contractors.
58. As a result of the February 1996 inspection and the
numerous safety incidents involving ValuJet, the FAA wrote to
ValuJet on February 29, 1996, informing the Company that it was
taking the extraordinary step of requiring ValuJet to get FAA
approval before buying more planes or beginning service to new
cities. That kind of restriction against a carrier is extremely
rare. Since the airline industry was deregulated in 1978, airlines
have been generally free to add planes and cities when and where
they want. The February 29, 1996, letter from the FAA questioned
the airline's commitment to safety, suggesting that the Company's
39
quick airport turnarounds and pay-by-the-trip policy for pilots
might encourage risky decisions. The letter to Defendant Jordan
also raised concerns about maintenance and mechanical problems that
were not fixed correctly the first time. The letter stated, in
part:
ValuJet Airlines has recently experienced four
occurrences. These occurrences, coupled with
the preliminary findings of the Federal
Aviation Administration's Special Emphasis
Review completed on February 28, 1996, give us
concern that ValuJet is not meeting its duty
to provide service with the highest possible
degree of safety in the public interest ....
It appears that ValuJet does not have a
structure in place to handle your rapid
growth, and that you may have an
organizational culture that is in conflict
with operating to the highest possible degree
of safety.
* * *
Specifically, it seems that your corporate
policies have created a culture that is
affecting and influencing the ability of
aircraft captains to make safety-oriented
decisions....
* * *
In addition, we have some concerns regarding
ValuJet's maintenance. The first concern is
the quality of maintenance inspections
performed, and second, the management of
repetitive discrepancies.
59. (a) Notwithstanding the unprecedented number of safety
incidents ValuJet was experiencing, resulting in the FAA's
requirement that the Company obtain approval prior to expanding
further, throughout the fall of 1995 and winter of 1996, the
Defendants made numerous announcements of ValuJet's expansions of
service and planned and actual additions to the Company's fleet of
40
aircraft. The Company announced the initiation of service to
numerous additional cities, aircraft purchases, and package
services, including new service to New Orleans, Charlotte,
Pittsburgh, Philadelphia, Boston, Orlando, Fort Walton Beach,
Mobile, Raleigh-Durham, Fort Lauderdale, Tampa and West Palm Beach
as well as increased service to other cities already served by
ValuJet. These announcements continued into April 1996, when at a
Robinson-Humphrey investors' conference, Defendant Priddy stated
that ValuJet planned to add at least 18 planes per year from 1997
through 2000 and that "[g]rowth will continue to be significant."
(b) This statement by Defendant Priddy was materially
false and misleading because as of February 29, 1996, ValuJet had
received notice from the FAA that any further growth would require
FAA approval.
60. However, as a result of the FAA mandate, ValuJet was
forced to put a hold on its expansion program, but not before
Defendant Jordan attempted to convince the FAA to reverse its
decision on March 5, 1996. The FAA refused to reverse its decision
curtailing ValuJet's expansion programs. The safety concerns and
the limitations on ValuJet's ability to expand raised in the
February 29, 1996 FAA letter were not publicly disclosed until June
4, 1996. Moreover, on or about March 7, 1996, Defendant Jordan
misleadingly told the investing public that the curtailment of
expansion was "voluntary." In fact, the curtailment was not
voluntary, but rather was a result of FAA pressure on ValuJet to
curtail the Company's expansion plans in light of the ongoing FAA
41
surveillance, which uncovered numerous safety and maintenance
violations.
61. In an effort to allay any market concerns over the depth
and substance of the FAA inspection and the likelihood that it
would impact the Company's expansion and growth, on March 7, 1996,
as reported by Aviation Daily, Defendant Jordan falsely called the
inspection "routine," stating that in some safety areas the FAA
concluded that ValuJet was operating beyond FAA requirements.
62. Unbeknownst to investors at the time, however, an FAA
internal memo dated March 15, 1996, indicated that the FAA found "a
significant decrease in the experience level of new pilots being
hired by ValuJet, as well as other positions such as mechanics,
dispatchers, etc."
63. The March 15, 1996 FAA memo detailed numerous problems
with ValuJet's operations uncovered by FAA inspectors, including:
i) planes being flown with inoperative mandatory equipment; ii)
decision-making by cockpit crews that resulted in incidents such as
going off runways; iii) continuous changes in key management
personnel; and iv) an increase in maintenance discrepancies found
by FAA inspectors.
64. On or around March 29, 1996, ValuJet filed its Form 10-K
for the period fiscal year ended December 31, 1995 with the SEC.
The Form 10-K was signed by Defendants Priddy, Jordan, Nevin, Acks,
Gallagher and Flynn. The Company reported operating revenues of
$367,757,358, operating expenses of $260,001,513, net income of
$67,762,598 and net income per share of $1.13 for the year ended
42
December 31, 1995, as compared to operating revenues of
$133,901,310, operating expenses of $99,355,489, net income of
$20,731,980 and net income per share of $0.44 for the year ended
December 31, 1994. The Form 10-K was materially false and
misleading for the reasons detailed in paragraph 37(c).
65. (a) In the Form 10-K the Defendants discussed the
Company's purportedly low-cost structure as follows:
Low Cost Structure. The Company believes it
enjoys a cost advantage over its competitors
through its: (i) well defined, low cost
aircraft acquisition strategy; (ii) aggressive
approach to minimizing operating costs
including selectively outsourcing services
such as training, airport operations, routine
maintenance and major engine and repair
overhauls; (iii) highly motivated and
generally non-union workforce with a flexible
wage structure based upon Company
profitability and performance; and (iv)
utilization of proprietary technology, such as
its customer-direct ticketless reservation
system, to minimize operating and
administrative costs.
(b) However, the Company failed to disclose that its
outsourcing was not "selective," but rather was done by 56
different independent contractors who were not appropriately
supervised by ValuJet. Also undisclosed was the fact that the
Company's "aggressive approach" to minimizing operating costs
included violations of FAA regulations and would have a materially
adverse impact on the Company's financial health because the lack
of adherence to safety standards would inevitably result in an air
disaster, increased FAA regulation and eventual curtailment of the
Company's operations.
43
66. With respect to the Company's plans to acquire new
planes, the Form 10-K released on or about March 29, 1996,
reported:
Fleet Acquisition. The Company has targeted
acquisition of low cost aircraft as the basis
for its fleet. As of January 31, 1996, the
Company operates 43 DC-9 aircraft most of
which are equipped with 113 single class
seats. All of these aircraft are owned, and
fixed aircraft ownership costs (depreciation
plus interest expense) represented less than
5% of revenues during the year ended December
31, 1995. This relatively low percentage of
fixed costs allows the Company to tailor
capacity to demand, permitting the Company to
schedule fewer flights during off-peak demand
periods. Future plans for aircraft
acquisition cost and commonality of parts and
training.
ValuJet intends to acquire additional DC-9-30
series aircraft in the future because they are
inexpensive to acquire and can be modified to
meet Stage 3 noise requirements. ValuJet also
intends to acquire a limited number of used
MD-80 aircraft beginning in early 1996. These
aircraft offer operating commonality to the
DC-9 and similar long-life durability and are
also attractively priced in the used aircraft
market. Equipped with 164 single-class seats,
the MD-80 aircraft will be utilized on longer-
haul, busier routes where the Company is
experiencing high load factors.
The Company has entered into a contract with
McDonnell Douglas to purchase 50 new MD-95
aircraft, to be delivered in 1992 to 2002,
with options to purchase another 50 aircraft.
To accommodate the Company's growth from 1997
through 1999, the agreement also requires
McDonnell Douglas to provide up to 15 used DC-
9 and MD-80 aircraft each year. The MD-95
aircraft will have 129 seats in a single class
configuration.
The Company stated with respect to FAA surveillance:
As a result of certain recent incidents
involving the Company's aircraft, as well as
44
the Company's rapid growth, the FAA recently
conducted a special review of the Company's
operations and has indicated that it intends
to maintain an increased level of scrutiny of
the Company for a period of time. This
increased regulatory scrutiny could continue
to affect the Company's acquisition program
and expansion plans beyond 1996.
This statement was materially false and misleading because the
Company already, in fact, needed FAA approval to expand and was
undergoing a serious, non-routine, on-going FAA review proceeding
akin to a recertification proceeding that could affect the
Company's ability to stay in business. Lastly the Company, in the
section entitled "Government Regulations" discussed generally the
oversight exercised by the FAA:
The Company has also obtained an operating
certificate issued by the FAA pursuant to Part
121 of the Federal Aviation Regulations. The
FAA has jurisdiction over the regulations of
flight operations generally, including the
licensing of pilots and maintenance personnel,
the establishment of minimum standards for
training and maintenance and technical
standards for flight, communications and
ground equipment. As required, the Company
has effective FAA certificates of
airworthiness for all of its aircraft. The
Company's flight personnel, flight and
emergency procedures, aircraft and maintenance
facilities are subject to periodic inspections
and tests by the FAA. The Company's director
of safety and regulatory compliance acts as a
liaison between the Company and the FAA,
implementing any changes requested by the FAA
with respect to operating procedures or
training programs and generally ensuring
proper compliance with aviation regulations
applicable to the Company.
67. The market reacted negatively to the Company's revelation
that the FAA surveillance might inhibit its growth and adversely
affect the Company's access to new additional gates at Laguardia
45
Airport and other major airports that it was seeking to expand
into. The week of April 8-12, 1996, the price of ValuJet common
stock dropped sharply from $26.625 to $20.4375 per share, a 23%
decrease. However, this partial disclosure did not inform the
market of the full adverse facts regarding ValuJet, as set forth
above.
68. ValuJet and the Individual Defendants moved quickly to
calm the markets and assure investors that the FAA surveillance was
nothing more than a bump in the road and that the Company would
shortly resume its expansion. On April 11, 1996, the Company
issued a press release entitled "ValuJet's President Lewis Jordan
Confirms Commitment To Safety And Is Confident About Future
Growth". The press release quoted Defendant Jordan stating in
pertinent part:
The FAA has publicly stated its policy of
close scrutiny for all new airlines and
ValuJet Airlines has attracted significant
attention as the most successful and fastest
growing of the group. ValuJet welcomes the
highest level of scrutiny from the FAA because
additional professional observations enhance
our quality improvement process.
* * *
ValuJet's reputation of controlling costs
should not be misunderstood. The company
willingly and enthusiastically spends whatever
is appropriate to achieve the highest level of
safety.
* * *
The record shows that ValuJet's programs,
policies, procedures and operations have
provided millions of customers safe, pleasant
and affordable air transportation. ValuJet's
46
safety record is certifiably among the very
best in the airline industry.
69. Defendants also addressed the Company's safety practices
in the April 11, 1996 press release. Specifically, Defendants
stated:
VALUJET STANDARD PRACTICE STATEMENT OF
VALUJET SAFETY AND REGULATORY COMPLIANCE
PHIL0SOPHY Each ValuJet person is expected to
adhere to the following policy at all times.
ValuJet Airlines was founded and operates
daily upon the principal that SAFETY is by far
our most important responsibility.
Accordingly, it is the commitment of ValuJet's
Board of Directors, its management personnel,
and all permanent, temporary, contact and non-
contract employees to place safety above all
other company objectives. ValuJet requires
all of its people to comply strictly with the
Federal Aviation Regulations and other laws,
policies, and procedures which address
directly or indirectly the safety of our
operations. Further, it is the policy of
ValuJet Airlines to conduct frequent internal
audits of its safety and regulatory compliance
practices. It is ValuJet's policy to
cooperate fully with the FAA. However, we
must never forget that safety is primarily our
responsibility. For that reason, we should
always strive to go beyond mere regulatory
compliance. In keeping with these
commitments, ValuJet employs a Director of
Safety and Regulatory Compliance with direct
line authority to the Chairman and President
of the company. ValuJet maintains and
aggressively monitors a 24-hour, toll free,
confidential SAFETY HOT LINE. Finally, at
ValuJet the President and C.E.O. maintain an
open door policy which allows any individual
to discuss any matter affecting safety at the
highest level of the company.
70. Contrary to Defendants' statement regarding the Company's
open-door policy relating to safety matters, ValuJet employees were
discouraged from reporting infractions of federal safety rules. In
fact, a ValuJet flight attendant was fired for reporting a
47
violation of a federal child restraint safety rule (FAR 121.311) to
the FAA. The rule was violated by requiring parents of a five-
year-old child to place the child on their lap during the flight in
order to make room for an off-duty ValuJet pilot who was traveling
for pleasure. In another incident, a ValuJet flight attendant
working in the Company's Atlanta operations center on December 31,
1995 saw a pilot come in and tell the Company's operations
supervisor that his plane needed several days worth of maintenance
and that he would not fly it. The pilot was assigned another
aircraft, but 15 minutes later ValuJet boarded up the first plane
with another crew and the plane left. As a result of reporting
this incident to her supervisor the flight attendant was forced to
resign.
71. This press release coincided with a private placement to
institutional investors of $150 million in aggregate principal
amount of the Company's 10 1/4 percent senior unsecured notes due
2001 (the "Notes"). The Notes were placed in a private offering
pursuant to section 4(2) and Rule 144A under the Securities Act of
1933 and in offshore transactions under Regulation S of that Act.
This private placement was open from April 1 - 17, 1996. This
press release, in part, was intended to allay the fears of
potential institutional investors and others who intended to
purchase Notes through the private placement.
72. Furthermore, in a Wall Street Journal article dated April
11, 1996, Defendant Jordan was quoted as stating: "We attempt to
48
achieve the highest level of safety and we'll spend any money
necessary to do it."
73. Yet as of April 11, 1996, the FAA had 21 separate
investigations of ValuJet underway.
74. On May 2, 1996, the FAA received an internal report that
singled out ValuJet as more accident-prone than nearly all its low-
cost competitors, including AmeriJet, Air South, American Trans
Air, Frontier, Kiwi, Morris, Reno, Tower Air, Spirit, Vanguard,
Western Pacific and Southwest Airlines.
75. On or around May 3, 1996, ValuJet filed its Form 10-Q
from the fiscal quarter ended March 31, 1996. The Form 10-Q was
signed by Defendants Priddy and Acks. The Form 10-Q reported
operating revenues of $109,995,007, operating expenses of
$92,469,690, net income of $10,666,774 and net income per share of
$0.18 for the year ended March 31, 1996, as compared to operating
revenues of $60,746,743, operating expenses of $46,165,655, net
income of $9,070,612 and net income per share of $0.15 for the
quarter ended March 31, 1995. The Form 10-Q for the quarter ended
March 31, 1996, was materially false and misleading for the reasons
detailed in paragraph 37(c).
76. In addition, in the section of the Form 10-Q entitled
Management's Discussion and Analysis of Financial Condition and
Results Of Operations Defendants discussed the Company's growth
plans:
After 1996, the Company expects to acquire
approximately 18 aircraft per year. As of
April 26, 1996, the Company had taken delivery
of seven aircraft and has 9 aircraft currently
49
under contract for delivery during the
remainder of 1996.
* * *
The Company has contracted with McDonnell
Douglas for the purchase of 50 MD-95 aircraft,
at a cost of approximately $1.0 billion, for
delivery in 1999 to 2002. Approximately
$60,000,000 of this amount will be paid in
progress payments during 1996 to 1998. The
balance of the purchase price after all
progress payments will need to be paid upon
delivery of each aircraft. If the Company
exercises its option to acquire up to an
additional 50 MD-95 aircraft, additional
payments could be required beginning in this
period.
77. As a result of the FAA's on-going special emphasis
inspection of ValuJet, the FAA prepared a draft report of its
findings dated May 6, 1996, which was not publicly disclosed until
June 11, 1996. The draft report documents approximately 100 safety
infractions by the Company called ValuJet's procedures for quality
control of its contract maintenance facilities "inadequate." The
draft report documents numerous instances in which FAA inspectors
found out-of-date manuals, employees who were unfamiliar with
various rules and work that was certified as completed when, in
fact, it had not been started. For example:
a) The draft report indicted that on February 23,
1996, an FAA inspector saw ValuJet's maintenance personnel
attempting to remove a DC-9 jet engine part by beating on the
engine part "with a hammer and chisel and inquired what procedures
and tooling were required to perform the task." The ValuJet
workers "did not have access to the appropriate maintenance
manual," a Pratt & Whitney maintenance manual, and had no idea that
50
the manual indicates that a special tool was required for the
removal of the engine part. The plane then departed and the engine
shut down due to a loss in oil pressure, that the FAA discovered
was caused by the chisel, which had damaged a seal, allowing engine
oil to leak out.
b) Another incident documented in the draft report
provided an extreme example of the Company's failure to document
repairs. On April 1, 1996, an FAA inspector found evidence that a
tail on an aircraft had struck the runway during a previous
takeoff, damaging the tail skid, which protects a plane from
scrapes during takeoff. ValuJet dispatched its vice president of
technical operations and the director of maintenance to the scene
and immediately grounded the plane. However, on the following day,
as passengers were boarding the plane, a follow-up FAA inspection
indicated that no repairs had been made. A ValuJet supervisor
assured the FAA inspector that the tail skid had been replaced.
ValuJet officials, called to the scene, admitted that in fact the
work had not been done.
c) On that same day, an FAA inspection found a
damaged tail skid on another plane. A ValuJet maintenance lead
technician certified that the problem was fixed, but a follow-up
FAA inspection found no evidence that the damaged tail skid had
been repaired.
d) Inspectors also discovered in a spot check of
ValuJet's Atlanta operations maintenance records that shift record
changes were not kept properly and that "many forms are
51
incomplete." This is considered a serious violation because
necessary maintenance procedures may be skipped over in the
confusion of a shift change if meticulous records are not kept.
e) FAA inspectors also found maintenance personnel
"deficient" in the performance of many airline checks, and noted
that "ValuJet's familiarization training is considerably less than
other operators of DC-9s." Inspections of 30 of ValuJet's aircraft
found numerous instances of missing rivets, leaking fuel, loose
screws and hinges and loose seats.
f) The draft report noted the fact that ValuJet's
maintenance is performed by 56 outside contractors, who are not
properly supervised.
g) The draft report also indicated instances of
ValuJet employees' unfamiliarity with aircraft systems due to the
fact that ValuJet did not standardize its aircraft cockpits when
refurbishing planes it had acquired from different sellers.
h) In ValuJet's Atlanta operations flight
dispatching area, the FAA found that the "dispatch facility is very
confining and congested" and that the operations manual was out of
date, as was the manual of airport landing charts in the chief
dispatcher's office.
78. On May 11, 1996, a ValuJet DC-9 passenger aircraft
crashed in the Florida Everglades, killing all 110 people on board.
The plane was carrying more than 50 oxygen generators as cargo,
which used sodium chlorate, a hazardous material that ValuJet is
not authorized nor equipped to carry. The Company admits that the
52
canisters containing the oxygen generators were mislabelled as
"empty". In fact, ten months before the May 11, 1996 crash, the
FAA cited ValuJet after a new employee, who had no hazardous
materials training, allowed a passenger to check a pressurized
oxygen tank as cargo. Although airport security guards prevented
the tank from being loaded on the flight, an FAA special agent
stated that "ValuJet ... exhibited a substantial disregard for
safety and security by allowing an untrained hazmat [hazardous
materials] employee to check baggage for their operation." This
prompted intensified public and regulatory scrutiny of ValuJet's
operations, causing some of the adverse information set forth above
to be revealed about the Company's safety and maintenance practices
and FAA regulatory problems.
79. On Monday, May 13, 1996, the first trading day after the
crash, ValuJet common stock plummeted after concerns about
ValuJet's fleet safety were raised. On May 10, 1996, the closing
price of the Company's stock was $17.875 per share, on volume of
638,900 shares. On May 13, 1996, the stock closed at $13.687 per
share on a volume of over 20 million shares, a drop of
approximately 23%. As a result of the crash and the adverse
information regarding ValuJet's safety record, the United States
Department of Defense has banned its employees from using ValuJet
airlines.
80. Contrary to Defendant Jordan's materially false and
misleading statements, made on March 7, 1996 and April 11, 1996
respectively, that the February 1996 FAA investigation was
53
"routine" and involved "close scrutiny of all new airlines," as set
forth in paragraphs 61 and 68, on May 13, 1996, prior to the
market's opening, Transportation Secretary Federico Pena stated
that the inspection was "very unusual."
81. Notwithstanding the laundry list of safety problems
experienced in its short history, following the Florida disaster,
ValuJet continued to represent that the Company's safety and
maintenance procedures were exemplary. As reported by The
Associated Press on May 13, 1996, Defendant Jordan said that "[a]
properly maintained airplane that is 25, 26, 27 years old is as
safe as a brand new airline coming off the line" and that there was
nothing "abnormal or shocking" about the history of the plane that
crashed. Jordan added that "ValuJet looked at ways we could be
creative and build a company that had the highest level of
safety..." A ValuJet spokesman, Robert Copeland, further stated:
"We welcome the FAA's scrutiny. We will continue to work with the
FAA to assure the highest level of safety."
82. Contrary to Defendant Jordan's statement that there was
nothing "abnormal or shocking" about the plane that crashed, the
crashed aircraft had a history of problems. Delta, which had
previously owned the plane, filed 26 service difficulty reports on
the plane, while ValuJet filed 12 in just two years, including two
on the same day. FAA reports also showed that mechanical problems
forced the plane to make an emergency landing, abort a take-off and
turn back to the airport another eight times in the past two years.
This very same plane, earlier in the day of the crash, when flying
54
from Atlanta to Miami, left the gate and turned back two times
because of electrical problems.
83. Moreover, from January 1, 1996 until the May 11, 1996
crash, ValuJet was involved in numerous safety and maintenance
incidents including:
i) On January 4, 1996, the pilot declared an
emergency when the left engine generator failed. Purportedly, the
right engine generator is to automatically cross-tie during such an
event; it did not. In addition, the aircraft lost radio
communications.
ii) On January 13, 1996, a pilot performed an
emergency descent as the aircraft pressurization suddenly failed.
The aircraft made an unscheduled landing.
iii) On January 13, 1996, a landing gear would not
retract after takeoff, and the aircraft made an unscheduled
landing.
iv) On January 13, 1996, a pressure switch defect
caused an unscheduled landing.
v) On January 19, 1996, an aircraft failed to
pressurize and an air flow failed, resulting in an unscheduled
landing.
vi) On January 22, 1996, a right engine hydraulic
pump failed, causing an unscheduled landing.
55
vii) On January 30, 1996, the cabin failed to
pressurize and oxygen masks were deployed. The aircraft returned
to Atlanta.
viii) On January 31, 1996, an aircraft made an
unscheduled landing due to a gear door malfunction on takeoff.
ix) On February 4, 1996, an aircraft suddenly lost
pressurization and the oxygen masks were deployed. On the same day
another aircraft lost pressurization, although there was no
indication that oxygen masks were deployed.
x) On February 5, 1996, an aircraft returned to
Boston after takeoff when it could not retract its landing gear.
xi) On February 17, 1996, an aircraft returned to
Atlanta when its landing gear failed. The next day, the pilot of
the same aircraft aborted takeoff when the airspeed indicator
failed.
xii) On February 19, 1996, an aircraft returned to
Atlanta when a flight attendant advised the crew that oxygen masks
had been deployed. The crew had received no cockpit warning and no
pressure light went on. Despite this, although maintenance
replaced a valve, they did not inspect the warning system. The
same aircraft failed to pressurize on January 30, 1996.
xiii) On February 20, 1996, an aircraft returned to
Atlanta when engine oil pressure dropped.
xiv) On February 22, 1996, an engine failed and the
aircraft made an unscheduled landing. Despite this, mechanics
found everything "normal" and returned the aircraft to service.
56
xv) On February 23, 1996, a right generator failed.
Despite this, the Company did not take the aircraft out of service.
On the same day, the aircraft experienced a landing gear
malfunction upon the return flight.
xvi) On February 23, 1996, a cockpit windshield
shattered in-flight.
xvii) On February 24, 1996, an aircraft made an
unscheduled landing when the engine lost all its oil due to a leak.
xviii) On February 25, 1996, an aircraft would not
pressurize and returned to Boston.
xix) On February 28, 1996, an aircraft returned to
Atlanta when its landing gear malfunctioned.
xx) On March 6, 1996, a left engine flamed out.
xxi) On March 7, 1996, an aircraft returned to
Atlanta when its radar malfunctioned.
xxii) On March 9, 1996, a left engine hydraulic
pump failed after takeoff.
xxiii) On March 11, 1996, an aircraft returned to
Tampa because its overwing emergency door would not latch.
xxiv) On March 11, 1996, an aircraft returned to
Atlanta when its right engine fuel valve malfunctioned.
xxv) On March 12, 1996, the pilot aborted takeoff
because the engine failed to achieve takeoff speed. It was
indicated that mechanics trimmed the no. 1 engine. However, one
week later, on February 19, 1996, the pilot again aborted takeoff
when the no. 2 engine failed to reach takeoff power. Three days
57
later, on March 22, 1996, oxygen masks dropped due to an oxygen
regulator leak.
xxvi) On March 15, 1996, an aircraft returned to
Atlanta when its radar malfunctioned.
xxvii) On March 18, 1996, an aircraft made
unscheduled landing when its navigation receiver failed.
xxviii) On March 22, 1996, an aircraft made an
unscheduled landing when both ATC transponders failed.
xxix) On March 22, 1996, the pilot aborted takeoff
because the aircraft's no. 2 engine was erratic.
xxx) On March 28, 1996, an aircraft lost its right
hydraulic fluid upon landing.
xxxi) On March 30, 1996, an aircraft returned to
Atlanta when its vertical gyro failed during takeoff.
xxxii) On April 2, 1996, an aircraft returned to
Atlanta when its radio failed.
xxxiii) On April 10, 1996, an aircraft made an
unscheduled landing because its landing gear would not retract.
xxxiv) On April 10, 1996, an aircraft returned to
Atlanta when its landing gear door malfunctioned.
xxxv) On April 11, 1996, an aircraft returned to
Boston after it lost electrical power.
xxxvi) On April 21, 1996, an aircraft returned to
Atlanta when its EGT indicator failed.
xxxvii) On April 22, 1996, an aircraft made an
emergency descent when the cabin over-pressurized.
58
xxxviii) On April 26, 1996, an aircraft returned to
Atlanta when its engine failed.
xxxix) On May 2, 1996, an aircraft returned to
Atlanta when the right fuel valve failed.
xl) On May 5, 1996, an aircraft made an unscheduled
landing when the radar failed.
xli) On May 8, 1996, the hydraulic pressure dropped
to zero due to a hydraulic fluid leak.
xlii) On May 9, 1996, an aircraft made an
unscheduled landing when the landing gear system malfunctioned.
xliii) On May 10, 1996, a gear door malfunctioned.
xliv) On May 11, 1996, on the same day as the crash,
another aircraft made an unscheduled landing due to radar failure.
84. On May 16, 1996, at a ValuJet press conference, Defendant
Jordan once again misrepresented ValuJet's safety history when he
stated:
We will continue putting our focus . . . on
running the safest airline we possibly can at
ValuJet every day.
* * *
And we will continue to let safety be number
one absolutely.
* * *
But beyond that, with the level of scrutiny
that we are currently experiencing with our
partners in safety in the FAA and all of the
oversight we are providing, I've heard more
than one person express the belief that we are
probably the safest airline in the sky.
59
I will tell you that I have a lot of facts
that indicate that ValuJet has a safe
operation and has done a lot of things right.
85. On May 17, 1996, ValuJet issued a press release quoting
Defendant Jordan:
It is our belief that our operations are
completely safe.
* * *
The measures we are announcing today go well
beyond the current FAA inspection to reassure
our customers that we share their insistence
on the utmost safety.
* * *
This program will enable planes to be
inspected in an orderly, proper and thorough
manner while the system runs safely, reliably
and according to schedule.
* * *
Our fundamental commitment to our customers
and ourselves is to operate an airline that is
both safe and reliable.
86. On May 17, 1996, at a ValuJet press conference, Defendant
Jordan stated: "Frankly, at ValuJet Airlines, it is our view that
anything less than a perfect safety record is unacceptable." Also,
on May 17, 1996 the Company announced that it had reduced the
number of its flights by 50% due to the ongoing FAA inspection,
causing rating agencies to downgrade the Company's debt and
prompting the Company to appease customers with meal vouchers and
free flights.
87. On May 22, 1996, in a conference call with securities
analysts, Defendant Priddy stated (a) that ValuJet probably would
never return to the rapid expansion pace that built the Company
60
into a 51 jet airline in 2 1/2 years (b) that ValuJet may have to
cut more flights from its schedule to allow for increased
maintenance and federal inspections (c) that ValuJet paid more than
$4.1 million for customer refunds in the week after the crash, (d)
that the Company expected a significant increase in its costs in
the current quarter and the near future, due to extraordinary
expenses related to the crash, including intensive scrutiny of its
maintenance, (e) that the Company's load factor had fallen
substantially for the reduced number of flights it was operating,
(f) that the Company does not expect to return to its pre-crash
schedule until the fourth quarter, and (g) that delivery of six
additional aircraft would be or were likely to be delayed. Priddy
also stated: "We believe that our franchise with the public can be
rebuilt."
88. On May 23, 1996, ValuJet issued a press release in which
it was reported that ValuJet's senior management informed Wall
Street analysts on that same date that it believes the carrier's
operational situation has "stabilized, and now has a platform from
which it can rebuild over time."
89. On May 23, 1996, ValuJet also held its annual shareholder
meeting. At the meeting, Defendant Priddy stated:
The fundamentals of our business are what will
matter most in the long run, and we still have
those fundamentals in place today. They
include a dedicated, professional workforce, a
safe fleet, and a customer group that, while
shaken by the accident coverage, still seems
to understand that it would be unreasonable to
accept the erroneous notion that low fares
equal low safety.
61
90. On May 23, 1996, Reuters quoted Defendant Priddy as
saying "We feel that we operate a fleet which is of superb
caliber."
91. On May 31, 1996, the Company issued a press release
stating:
However, given the level of internal and
external safety scrutiny of ValuJet today many
of our customers and employees have expressed
an opinion that ValuJet may be the safest
airline in the world.
92. In response to the public disclosure of a May 6, 1996 FAA
draft report documenting approximately 100 safety infractions
committed by ValuJet as described in paragraph 75 above, the
Company issued a press release on June 11, 1996, in which Defendant
Jordan stated:
Anything less than perfection where safety is
concerned is unacceptable to ValuJet. While
the report includes findings that are, at
first reading troubling, it is filled with
many items typical of those that would be
reported at any established major airline if
it were subjected to this extreme level of in-
depth inspection.
It is our policy to voluntarily and
enthusiastically correct all legitimate
findings immediately and to promptly implement
any preventive measures that are indicated.
While we have not had an opportunity to review
completely the interim findings cited by the
FAA, we believe that many of them have already
been addressed.
93. In the June 11, 1996 press release, Jordan further said
that ValuJet had been unfairly singled out by the press and that
much of the criticism has been based on misinformation. He pointed
to numerous changes that the airline had made in reaction to FAA
62
complaints, including stepped-up pilot training, new cockpit
operations rules and numerous maintenance changes, including hiring
new quality assurance inspectors for maintenance work.
94. On June 12, 1996, the Atlanta Constitution reprinted
Defendant Jordan's statement in response to the May 6, 1996 FAA
draft report that: "It is our policy to voluntarily and
enthusiastically correct all legitimate findings immediately and to
promptly implement any preventive measures that are indicated."
95. On June 13, 1996, it was reported in the Financial Post
(Toronto) that Defendant Jordan stated that the airline would know
within a few days how much of its operations could be brought back
on line.
96. A June 14, 1996, article in the Washington Post reported
that Defendant Jordan said that reports such as the May 6, 1996 FAA
draft report are often open to challenge and are sometimes based on
misinformation.
97. Also on June 14, 1996, ValuJet filed a Form S-4
registration statement with the SEC for an offer to exchange $150
million 10 1/4 % Senior Notes for similar notes. The registration
statement noted several consequences of the crash and the FAA
inspections, including but not limited to: (i) the Company has
refunded fares paid by customers affected by the Company's changing
schedules; (ii) the Company's load factors have decreased
significantly and the accident will likely affect future load
factors; (iii) the Company's costs will likely increase to reflect
the cost of additional maintenance inspections and lower aircraft
63
utilization levels; (iv) the Company has sought to defer acceptance
of certain aircraft presently under contract; and (v) the Company's
expansion will likely be subject to FAA approval for an indefinite
period of time.
98. Finally, on June 17, 1996, after the close of trading,
ValuJet shocked the public markets by announcing that the Company
was temporarily ceasing operations under an agreement with the FAA.
"We asked them to cease operations and they agreed to do so," said
David Hinson, the head of the FAA. Specifically, FAA Administrator
David Hinson identified several major problems at ValuJet including
the Company's "failure to establish the airworthiness of certain
planes in its fleet, systemwide maintenance deficiencies, multiple
shortcomings in the quality assurance of ValuJet maintenance."
Under the agreement, ValuJet was not permitted to resume operations
until it gave the government a comprehensive plan for correcting
what FAA Administrator David Hinson called "serious deficiencies"
in its maintenance and training programs. The suspension of
ValuJet's operations was an extreme measure that several aviation
veterans have said may be unprecedented for a major carrier.
99. On June 18, 1996, the next trading day, ValuJet common
stock immediately fell to an all-time low of $4.50 per share, and
closed at $6.50 per share on trading volume of 23 million.
100. On June 18, 1996, ValuJet signed a consent order with the
FAA. The consent order indicated that between February 18, 1996
and June 15, 1996, ValuJet committed 33 separate violations of
maintenance and reporting requirements, resulting in civil penalty
64
actions. For example, both before and after the May 11, 1996
crash, ValuJet's fleet of planes flew with damaged engines, leaking
hydraulic systems and weather radar that did not work. The FAA
said that the broken, leaking and inoperative equipment were safety
hazards that could have endangered flights. The report also
documented that mechanics working on ValuJet planes sometimes were
making their first-ever repairs to parts without supervision and in
some cases were unfamiliar with the systems they were working on.
The report also details 34 serious safety violations discovered by
the FAA in special inspections that date back almost a year and 14
violations of FAA regulations.
101. The violations listed by the FAA in the June 18, 1996
consent order paint a picture of a troubled and disorganized
maintenance operation that allowed potentially serious problems to
go unnoticed. Included among the violations are the following:
a) One ValuJet DC-9 with a hole in its engine
cowling flew eight times before being repaired. Such a hole, which
should have been discovered and fixed immediately, could have made
extinguishing an engine fire more difficult.
b) A different DC-9 flew seven flights with a leak
in the hydraulic system that controls critical aircraft components
that keep a plane in the air. The leak should have been easy to
spot because fluid was floating in the face of the hydraulic
pressure gauge.
c) Another DC-9 apparently had no weather radar
system, or it operated infrequently, for more than nine months.
65
ValuJet's flight crew recorded the system as inoperative 31 times
between June 5, 1995 and March 14, 1996.
d) When an FAA inspector pointed out to a mechanic
checking a ValuJet plane that a tail cone evacuation slide wasn't
rigged properly, "the mechanic stated that he did not know how it
was rigged and that this was his first aviation job."
e) A mechanic worked on a cockpit lighting system
of a DC-9 without ever having done it previously and without
supervision.
f) Another mechanic working on a secondary latch
system for the pilot and copilot instrument panel "did not know
what the secondary latches were."
102. In addition, the consent order documented that FAA
inspectors found numerous instances of parts and systems without
proper paperwork showing how or when they were previously repaired,
or improper records on when parts were supposed to wear out. For
example, ValuJet records contained "incorrect life limits" on
engine disks in two separate aircraft. Without proper
documentation, the disks could exceed their proper time in service
and cause engine failure. FAA inspectors also discovered that
mechanics used the wrong tools to secure access panels on fuel
tanks, mis-routed and crossed electrical panels, and worked on
parts that were not broken.
103. As part of the consent order, the FAA reached agreement
with ValuJet to permit the Company to resume flying in about 30
days. Under the agreement, if the Company complied with the terms
66
of the agreement, ValuJet would be permitted to restart its
operations with only 15 planes in its fleet, down from its full
fleet of 51 aircraft. ValuJet would also only be permitted to fly
to about 10 cities from Atlanta, instead of the 31 cities it used
to serve. In addition, pursuant to the agreement, ValuJet would
pay the FAA $2 million to defray the cost for the FAA's overseeing
the Company's bid to resume flying. The consent order provides for
numerous improvements that ValuJet needed to make before it could
return to business, including but not limited to, standardizing
maintenance manuals and revising training curriculums.
104. On June 25, 1996, FAA Administrator, David R. Hinson,
made the following statement before the House Committee on
Transportation and Infrastructure, Subcommittee on Aviation, in
connection with the events leading up to the shutdown of ValuJet on
June 17, 1996:
In July 1995, ValuJet bid on a government
contract with DOD [Department of Defense] and
underwent a DOD inspection. DOD found that
they did not have all the procedures in place
that the DOD required, including a fully
developed Internal Audit Program. The carrier
made the necessary adjustments, and, in a
January 1996 inspection, was found to be
satisfactory and certified as an approved
carrier by DOD in February.
In September 1995, after the August DOD
inspection, ValuJet underwent an FAA National
Aviation System Inspection Program (NASIP)
inspection by a team of FAA inspectors from
outside the region. This inspection noted a
number of operations and maintenance issues,
but resulted in only one violation relating to
manual errors and a Letter of Warning to the
airline for not having a current copy of an
employee's pilot certificate.
67
* * *
On February 16, just after DOD certified
ValuJet as a DOD-approved carrier, the FAA's
Southern Region initiated a 120-day special
emphasis review of the airline to begin on
February 22. This review was initiated to
provide an in-depth look at its operations and
maintenance activities. FAA's principal
inspectors for ValuJet and their management
had developed concern over several recent
accidents and incidents, a decrease in the
experience level of new hire pilots,
unfavorable surveillance reports, and the
further addition of aircraft to ValuJet's
fleet.
This review process began with an initial,
intensified 7-day inspection period to
establish a baseline for the overall
inspection. At the end of the 7-day period,
on February 29, the Atlanta Flight Standards
District Office (FSDO) wrote ValuJet
expressing concerns about maintenance manuals
and procedures, training programs, Minimum
Equipment List/deferred maintenance, and the
quality of inspections performed. On March 5,
ValuJet responded, detailing a series of
specific steps it would initiate to correct
these deficiencies. The FSDO continued on
with the special emphasis review to assess the
airline's operations and maintenance
activities and, ultimately, to determine the
effectiveness of the new measures implemented
by the carrier. On May 11, the tragic
accident occurred.
Two days after the accident, we initiated an
intense 30-day review of the airline to
determine whether the earlier corrective steps
taken by the airline had proven effective at
stemming the deficiencies we had informed them
about.
* * *
On May 24, the Atlanta FSDO wrote ValuJet,
outlining initial findings of the follow-up
review. Areas highlighted included
maintenance program inspection quality,
Continuing Analysis and Surveillance and
Contractor performance, and maintenance
68
training and experience levels, particularly
on the midnight shift in Atlanta. ValuJet
responded on May 27, with another action plan
to correct these deficiencies. They were to
increase supervision, add a coordinator, add
training instructors, and add quality
inspectors. They amended the plan further the
next day, at the Atlanta FSDO's request for
additional detail.
Following the compilation of the raw data from
the more than 2000 inspections that were
conducted during the four-week period after
the accident, a team of safety inspectors was
convened to examine and analyze this data.
Their analysis led our Atlanta FSDO personnel
to conclude that the airline's plans for
improvement had not achieved that effect. The
maintenance management systems were not
working as they should. In addition to
unrelated and discrete issues being
identified, a pattern of violations and
problems indicated to our personnel that there
were systematic problems in the maintenance
area. Our principal inspectors and FSDO
management concluded they could no longer have
confidence that the airline's maintenance
system could assure the safety and
airworthiness of the aircraft they operated.
In circumstances such as this, the FAA can
suspend an operator's certificate in one of
two ways. The airline was contacted and
offered a choice. Either the FAA would act
unilaterally to suspend ValuJet operating
certificate or the airline could enter into a
voluntary consent agreement with the FAA to
suspend its operations. The carrier entered
into a consent agreement, and flights were
suspended at the end of that day, June 17.
* * *
I am not going to suggest in any way that
there are things we should not have done
differently during this process. There are.
And I do not intend to be defensive on that
point. A safety organization, such as the
FAA, cannot and will not improve if it does
not build on what it learns from its mistakes.
In this case, I think we should have better
understood the effects of rapid growth on this
69
airline. It is apparent now that the
extraordinarily rapid growth of this airline
created problems that should have been more
clearly recognized and dealt with sooner and
more aggressively. We also should have better
anticipated and addressed proactivity the many
difficulties that virtually complete
outsourcing of its maintenance can present to
an airline in meeting its ultimately
responsibility to assure the safety of its
aircraft.
105. Predictably, the Company's artificially low maintenance
expenses caught up with ValuJet and had a materially adverse effect
on its June 30, 1996 financial statements. As a result of the
safety incidents and accidents resulting in the Company's shutdown,
as detailed above, the Company, on August 7, 1996, reported that
for the second quarter ended June 30, 1996, ValuJet lost $9.6
million or $0.18 per share on operating revenues of $81.2 million.
ValuJet took a $31.6 million charge against earnings after the
shutdown.
106. ValuJet did not resume flying within 30 days of signing
the consent order. In the weeks following the shutdown, FAA
inspectors uncovered additional severe maintenance and pilot
training problems. Among the most serious problems uncovered since
the beginning of July 1996, were continued confusion over the
airworthiness of some ValuJet aircraft and the Company's ability to
maintain accurate records on the maintenance and service life of
critical components. These included landing gear and the constant
speed drive for engine accessories on ValuJet's DC-9. It was also
discovered that there were gaps in pilot training records which
70
disqualified ValuJet's entire training staff and required all the
Company's pilots to be retrained. In addition, it was also
reported that ValuJet told the FAA on July 17 that all aircraft had
been re-inspected. However, the next day the FAA "received
documentary information indicating total re-inspection of all
affected aircraft was not factual."
107. Finally, on September 26, 1996, after being grounded over
three months, ValuJet received Department of Transportation
clearance to resume flying.
SCIENTER ALLEGATIONS
108. As alleged herein, Defendants acted with scienter in that
Defendants knew or recklessly disregarded that the public documents
and statements issued or disseminated by and in the name of the
Company were materially false and misleading; knew or recklessly
disregarded that such statements or documents would be issued or
disseminated to the investing public; and knowingly and
substantially participated or acquiesced in the issuance or
dissemination of such statements or documents as primary violators
of the federal securities laws. As set forth elsewhere herein in
detail, Defendants, by virtue of their receipt of information
reflecting the true facts regarding ValuJet, including receipt of
reports from the Department of Defense and the FAA during the Class
Period and its severe and persistent maintenance problems,
regulatory noncompliance, their control over and/or receipt of
ValuJet's allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to
71
confidential proprietary information concerning ValuJet,
participated in the fraudulent scheme alleged herein. Defendants
knew and/or recklessly disregarded the falsity and misleading
nature of the information which they caused to be disseminated to
the investing public.
109. As alleged herein Defendants acted with scienter in that
Defendants knew:
i) that ValuJet's maintenance was wholly
inadequate;
ii) that the Company was subject to strict FAA
scrutiny and, in fact, had received numerous direct communications
from the FAA and Department of Defense criticizing the Company's
safety record;
iii) that the Company had experienced an inordinate
amount of safety violations;
iv) that the Company's financial statements filed
with the SEC were materially false and misleading due to the fact
that ValuJet's maintenance costs were artificially low because of
the Company's failure to comply with FAA regulations and industry
guidelines; and that
v) the foregoing was not adequately disclosed in
the Company's public documents and statements -- in fact, not
disclosed at all.
110. The Individual Defendants engaged in such a scheme to
inflate the price of ValuJet securities in order to:
72
i) enhance the effectiveness of the April $150
million private placement of ValuJet Notes; and
ii) enhance the value of Defendants' personal
holdings of ValuJet securities and options;
iii) protect and enhance their executive positions
and the substantial compensation and prestige they obtained
thereby; and
iv) in the case of Defendants Acks, Nevin and Flynn
to engage in insider trading as alleged herein.
111. Defendants further covered up ValuJet's safety problems
in an effort to keep the flying public sufficiently in the dark so
that they would continue to choose to fly ValuJet and keep the
Company profitable -- resulting in enhanced incentive compensation
for the Individual Defendants.
COUNT I
FOR VIOLATIONS OF SECTIONS 10(b) AND 20(a) OF THE EXCHANGE ACT
AND RULE 10b-5 PROMULGATED THEREUNDER AGAINST ALL DEFENDANTS
112. Plaintiffs incorporate by reference and reallege all
paragraphs previously alleged herein, and assert these claims
against all defendants.
113. During the Class Period, defendants, individually and in
concert, engaged in a plan, scheme and course of conduct, pursuant
to which they knowingly and/or recklessly engaged in acts,
transactions, practices, and courses of business which operated as
a fraud upon Plaintiffs and other members of the Class, and made
various untrue statements of material fact and omitted to state
material facts necessary in order to make the statements made, in
73
light of the circumstances under which they were made, not
misleading, to Plaintiffs and other Class members as set forth
above. The purpose and effect of said scheme was to induce
Plaintiffs and the members of the Class to purchase the Company's
common stock during the Class Period at artificially inflated
prices.
114. By reason of the foregoing, the defendants knowingly or
recklessly violated Section 10(b) of the Exchange Act and Rule 10b-
5 promulgated thereunder in that they themselves or a person whom
they controlled: (a) employed devices, schemes and artifices to
defraud; (b) made untrue statements of material facts or omitted to
state material facts necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading; or (c) engaged in acts, practices and a course of
business that operated as a fraud or deceit upon Plaintiffs and
other members of the Class in connection with their purchases of
the Company's common stock during the Class Period.
115. Each of the defendants participated in and joined the
alleged scheme and course of conduct specified above and each is
liable primarily for the aforesaid wrongful acts and statements
specified above.
116. The Individual Defendants are liable under Section 20(a)
as control persons since, by virtue of their executive position,
their knowledge of and involvement in the Company's business,
and/or stock ownership, and/or power and ability to make public
statements on behalf of the Company to shareholders, potential
74
investors and the media, they had the power and ability to control
the actions of the Company.
117. As a result of the foregoing, the market price of the
Company's common stock was artificially inflated during the Class
Period. In ignorance of the false and misleading nature of the
representations described above, Plaintiffs and other members of
the Class relied, to their damage, directly on the misstatements or
on the integrity of the market both as to price and as to whether
to purchase these securities. Plaintiffs and the other members of
the Class would not have purchased ValuJet stock at the market
prices they paid, or at all, if they had been aware that the market
prices had been artificially and falsely inflated by the
defendants' false and misleading statements and concealments. At
the time of the purchase of ValuJet common stock by Plaintiffs and
the other members of the Class, the fair market value of said
common stock was substantially less than the prices paid by
Plaintiffs.
118. The price of the Company's common stock declined
materially upon the public disclosure of the facts that had been
misrepresented or omitted as alleged in this Complaint. Plaintiffs
and other members of the Class have suffered substantial damages as
a result.
75
COUNT II
NEGLIGENT MISREPRESENTATION
119. Plaintiffs incorporate by reference and reallege all
paragraphs previously alleged herein and assert these claims
against all defendants.
120. Defendants made and participated in the making of
representations of fact to Plaintiffs and other members of the
Class by means of various documents, reports, releases and
statements as set forth above.
121. As alleged herein, said representatives were materially
false and misleading and omitted to state material facts necessary
in order to make the statements made, in light of the circumstances
under which they were made, not misleading. Said
misrepresentations and omissions were a result of the negligence
and carelessness of the defendants, and each of them.
122. It was reasonably foreseeable to defendants that the
Class would rely upon the material misrepresentations or omissions
in purchasing ValuJet common stock at the prices paid.
123. In addition, it was reasonably foreseeable that
defendants' negligence would result in damages to the Class.
124. At the time of said misrepresentations and omissions,
Plaintiffs and other members of the Class were ignorant as to their
falsity, and believed the statements that were made to be true. In
direct and/or indirect reliance on said misrepresentations and in
reliance upon the superior knowledge and expertise of defendants,
and in ignorance of the true facts, Plaintiffs and other members of
76
the Class were induced to, and did, purchase ValuJet common stock.
Had Plaintiffs and other members of the Class known the true facts,
they would not have taken such actions. By reason thereof, they
have been damaged.
WHEREFORE, Plaintiffs, on behalf of themselves and on
behalf of the Class, pray for judgment as follows:
(a) Declaring this action to be a class action pursuant
to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure
on behalf of the Class defined herein;
(b) Awarding Plaintiffs and the members of the Class
rescissory and/or compensatory damages in an amount which may be
proven at trial, together with interest thereon;
(c) Awarding Plaintiffs and the members of the Class,
prejudgment and post-judgment interest, as well as their reasonable
attorneys' and experts' witness fees and other costs; and
(d) Awarding such other and further relief as this Court
may deem just and proper including any extraordinary equitable
and/or injunctive relief as permitted by law or equity to attach,
impound or otherwise restrict the defendants' assets to assure
Plaintiffs have an effective remedy.
77
DEMAND FOR JURY TRIAL
Plaintiffs hereby demand a trial by jury.
Dated: October 18, 1996
BERGER & MONTAGUE, P.C.
/s/
By____________________________
Sherrie R. Savett
Carole A. Broderick
Stuart J. Guber
1622 Locust Street
Philadelphia, PA 19103
(215) 875-3000
APPEL, CHITWOOD & HARLEY
/s/
By____________________________
Martin D. Chitwood
(Georgia Bar No. 124950)
945 E. Paces Ferry Road
Suite 1400
Atlanta, GA 30326
(404) 266-1650
Co-Lead Counsel for Plaintiffs
MILBERG WEISS BERSHAD HYNES
& LERACH
David J. Bershad
Steven G. Schulman
Keith M. Fleischman
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
BERNSTEIN, LITOWITZ, BERGER
& GROSSMAN
Max W. Berger
Lisa K. Buckser
1285 Avenue Of The Americas
33rd Floor
New York, NY 10019
(212) 554-1400
Executive Committee for Plaintiffs
78
CARR, TABB & POPE
W. Pitts Carr
Georgia Bar No. 112100
1355 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30309
(404) 876-7790
Liaison Counsel for Plaintiffs
POMERANTZ LEVY HAUDEK
BLOCK & GROSSMAN
Marc I. Gross
Robert J. Axelrod
100 Park Avenue
New York, NY 10017-5510
(212) 661-1100
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ
David Brower
Jeffrey G. Smith
Ira P. Lustbader
270 Madison Avenue
New York, NY 10016
(212) 545-4600
BERMAN, DEVALERIO & PEASE
Glen DeValerio
Jeffrey C. Block
One Liberty Square
Boston, Massachusetts 02109
(617) 542-8300
STARR & HOLMAN, L.L.P.
Zachary Alan Starr
10 E. 40th Street, 29th Floor
New York, NY 10016
(212) 684-6442
MORRIS & MORRIS
Irving Morris
Karen Morris
P.O. Box 2166
1105 N. Market Street
Wilmington, DE 19899
(302) 426-0400
79
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
Robert I. Harwood
Jeffrey M. Haber
Samuel K. Rosen
805 Third Avenue
New York, NY 10022
(212) 935-7400
HOLT, NEY, ZATCOFF WASSERMAN
J. Scott Jacobson
Jay Frank Castle
100 Galleria Parkway
Suite 600
Atlanta, GA 30339
(770) 956-9600
MAGER, LIEBENBERG & WHITE
Roberta Liebenberg
Two Penn Center, 10th Floor
Philadelphia, PA 19102
(215) 569-6921
JAROSLAWICZ & JAROS
David Jaroslawicz
150 Williams Street
19th Floor
New York, NY 10038
(212) 227-2780
BERNARD MALINA, ESQUIRE
60 East 42nd Street, Suite 501
New York, NY 10165
(212) 986-7410
LAW OFFICE OF KLARI NEUWELT
Klari Neuwelt
950 Third Avenue
New York, NY 10022
(212) 593-8800
80
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Olivier and Ludmilla Courteau, ("Plaintiffs") duly swear
and say, as to the claims asserted under the federal securities
laws, that:
1. Plaintiffs have reviewed the complaint and
authorized its filing.
2. Plaintiff a did not purchase the security that is the
subject of this action at the direction of plaintiffs' counsel or
in order to participate in this private action.
3. Plaintiffs are willing to serve as representative
parties on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiffs' transactions in the security that is the
subject of this action during the Class Period are attached hereto
as Exhibit A.
5. Plaintiffs have not sought to serve as class
representatives in any case in the last 3 years.
6. Plaintiffs will not accept any payment for serving
as representative parties on behalf of the class beyond Plaintiffs'
pro rata share of any recovery, or as ordered or approved by the
court, including any award for reasonable costs and expenses
(including lost wages) directly relating to the representation of
the class.
We declare under penalty of perjury that the foregoing is
true and correct. Executed this 25th day of June,
1996, at Miami, Florida.
/s/
_____________________________
OLIVIER COURTEAU
/s/
_____________________________
LUDMILLA COURTEAU
EXHIBIT A
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
3,500 4/16/96 20 3/4
6,500 4/16/96 20 7/8
10,000 5/09/96 18
15,000 5/10/96 18
1,000 4/29/96 19 3/4
Shares Sold:
-----------
36,000 6/18/96 5 3/8
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Ali Soliman, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
1,965 05/14/96 14 7/8
3,000 05/15/96 14 7/8
Shares Sold:
-----------
4,965 06/18/96 $4 5/8
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this Monday day of June 24,
1996, at Brooklyn, New York.
/s/
_____________________________
ALI SOLIMAN
CERTIFICATION OF NAMED PLAINTIFFS
PURSUANT TO FEDERAL SECURITIES LAWS
Hossein Malekabadi and Ziba Malekabadi ("Plaintiffs")
declare, as to the claims asserted under the federal securities
laws, that:
1. Plaintiffs have reviewed the complaint and
authorized its filing.
2. Plaintiffs did not purchase the security that is the
subject of this action at the direction of plaintiffs' counsel or
in order to participate in this private action.
3. Plaintiffs are willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiffs' transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transaction Date Price
-------- ----------- ---- -----
[illegible] shares purchase 10/31/95 52 5/8
[illegible] shares purchase 11/02/95 57
[illegible] shares purchase 11/08/95 54 5/8
[illegible] shares purchase 11/27/95 32 7/8
[illegible] shares purchase 12/01/95 29 3/8
[illegible] shares purchase 12/05/95 27
[illegible] shares sale 12/14/95 24 1/8
5. I have not sought to serve as a class representative
in any case in the last 3 years.
6. Plaintiffs will not accept any payment for serving
as a representative party on behalf of the class beyond the
Plaintiffs' pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 30 day of May, 1996, in Atlanta,
GA.
/s/
_____________________________
Hossein Malekabadi
/s/
_____________________________
Ziba Malekabadi
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
----------------------------------------x
|
DENNIS LYNCH, on behalf of | Civ. Action No.
himself and all those similarly |
situated, |
Plaintiff, |
|
- v. - |
|
VALUJET AIRLINES INC., VALUJET |
INC., ROBERT L. PRIDDY, LEWIS A. |
JORDAN, MAURICE J. GALLAGHER, JR., |
STEPHEN C. NEVIN, |
|
Defendants. |
|
----------------------------------------x
REPRESENTATIVE PLAINTIFF'S CERTIFICATION
I, Dennis Lynch, hereby certify that:
1. I have reviewed the Complaint in this class action
and have authorized the filing thereof by my attorneys, Starr &
Holman, LLP.
2. I did not purchase any shares of the common stock
of Valujet Inc., the subject of the Complaint, at the request or
direction of my counsel or in order to participate in this
private action.
3. I am willing to serve as a representative plaintiff
on behalf of the class defined in the Complaint, including
providing testimony at deposition and trial, if necessary.
4. During the Class Period defined in the complaint, I
have engaged in the following transactions involving the common
stock of Valujet Inc. as follows:
Type of Transaction Trade Date No. of Shares
------------------- ---------- -------------
Purchase 6/9/95 1000
Sale 6/14/95 100
Sale 6/19/95 400
Purchase 7/14/95 500
Purchase 7/17/95 500
Sell 10/4/95 2000
Purchase 12/4/95 1500
Purchase 2/23/96 2000
Purchase 3/15/96 1000
Purchase 4/11/96 1000
Purchase 4/18/96 300
5. During the last three years preceding the date of
this certification, I have sought to serve as a representative
plaintiff on behalf of a class under the federal securities laws
in In re Microage Securities Litig., Civ-94-1434-PHX-ROS (D.
Ariz. 1995).
6. I will not accept payment for serving as a
representative plaintiff on behalf of the class beyond my pro-
rata share of any recovery, except as ordered or approved by the
Court.
7. Nothing herein shall be construed to be or
constitute a waiver of my attorney-client privilege.
/s/
_____________________
Dennis Lynch
Sworn to and subscribed
before me this 4th day
of June, 1996
/s/
_______________________
Notary Public
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Carlton Davis ("Plaintiff") declares, as to his claims
asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of Plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transaction Date Price
-------- ----------- ---- -----
ValueJet common stock Bot. 14,700 5-16 $13.50
ValueJet common stock Bot. 14,800 5-21 13.50
ValueJet common stock Bot. 5,000 5-23 12.62 1/2
ValueJet common stock Bot. 5,000 5-23 12.50
ValueJet common stock Sold 25,000 6-18 5.00
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party an behalf of the class beyond Plaintiff's
pro rata share of any recovery, except such reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 27 day of June, 1996, in Atlanta,
Georgia.
/s/
______________________
Carlton Davis
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
___________________________________
)
OLIVIER COURTEAU, LUDMILLA )
COURTEAU, DORE KREISLER I.R.A., )
MICHAEL M. FEDER, ALI SOLIMAN )
and C. WESLEY MOON, JR. )
individually, and on behalf of )
all others similarly situated, )
) CIVIL ACTION NO.
) 1:96-CV-1705-JTC
Plaintiffs, )
v. )
)
VALUJET AIRLINES, INC., VALUJET, )
INC., ROBERT L. PRIDDY, )
LEWIS A. JORDAN, MAURICE J. )
GALLAGHER, JR., AND STEPHEN C. )
NEVIN, )
)
Defendants. )
___________________________________)
CERTIFICATION OF HOWARD F. CHAPUIS
IN SUPPORT OF CLASS ACTION COMPLAINT
Howard F. Chapuis ("Plaintiff") declares, as to the
claims asserted under the federal securities laws, that:
1. I have conferred with my counsel Milberg Weiss
Bershad Hynes & Lerach LLP, regarding the merits of the complaint
in the above-referenced action, as well as other causes of action
that may be brought by ValuJet, Inc. ("ValuJet") investors. I
have further authorized my legal counsel to file a motion, or
join in a motion on my behalf, for appointment as one of the lead
plaintiffs in this and related actions.
2. I believe that as a purchaser of 35,000 shares of
ValuJet common stock during the relevant time period, I have
suffered damages as a result of defendants' fraudulent conduct
[illegible line of text]
against the defendants are typical of those of the other members
of the class.
3. I did not purchase the security that is the
subject of the complaint at the direction of my counsel or in
order to participate in any private action arising under the
federal securities laws.
4. I am willing to serve as a representative party on
behalf of a class, including providing testimony at deposition
and trial, if necessary.
5. During the proposed Class Period, I executed the
following transactions relating to the common stock of ValuJet,
Inc.:
Date Action Amount Price
---- ------ ------ -----
May 29, 1996 Bought 35,000 $13 7/8
June 18, 1996 Sold 35,000 $4 5/8
6. In the past three years, I have not sought to
serve nor have served as a representative party on behalf of a
class in an action filed under the federal securities laws.
7. I will not accept any payment for serving as a
representative party on behalf of a class beyond plaintiff's pro
rata share of any recovery except such reasonable costs and
2
expenses (including lost wages) directly relating to the
representation of the Class as ordered or approved by the Court.
I declare under penalty of perjury that the foregoing
is true and correct. Executed this 24th day of July, 1996.
/s/
____________________
Howard F. Chapuis
3
SWORN CERTIFICATION
I, JACK MARKS, hereby certify and swear as follows:
1. I have reviewed the Complaint and authorize its filing;
2. I did not purchase shares of ValuJet at the direction of
my counsel or in order to participate in any private action under
the federal securities laws;
3. I am willing to serve as a representative party on behalf
of a class, including providing testimony at deposition and trial,
if necessary;
4. The following is a description of all my transactions
during the class period specified in the Complaint in the shares of
ValuJet:
Date No. of Shares P/S Price/Share
---- ------------- --- -----------
05/17/96 20,000 13-5/8
06/19/96 20,000 7-1/2
5. I have filed no other actions within the 3 year period
preceding the date hereof in which I sought to serve, or served, as
a representative party on behalf of a class in an action brought
under the federal securities laws.
6. I will not accept any payment for serving as a
representative party on behalf of a class beyond my pro rata share
of any recovery, except as ordered or approved by the Court.
I declare under penalty of perjury that the foregoing is true
and correct.
Dated: June 28, 1996.
/s/
__________________________
JACK MARKS
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
ARLENE GOLDSTEIN BORYK ("Plaintiff") declares, as to the
claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of Plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony, at
deposition and trial, if necessary.
4. Plaintiff's transactions in the securities that are
the subject of this action during the Class Period are as follows:
Security Transaction Date
-------- ----------- ----
Common Stock 1,000 shares purchased May 15, 1996
at $15.375 per share
Common Stock 1,000 shares purchased May 22, 1996
at $13.875 per share
5. During the three years prior to the date of this
Certificate, Plaintiff has sought to serve or served as a
representative party for a class in the following actions filed
under the federal securities law: None
6. Plaintiff has sought to serve or served as a
representative party for a class in the following actions
subsequent to December 22, 1995: None
7. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the Court.
8. I declare under penalty of perjury that the
foregoing is true and correct. Executed this 19th day of June,
1996, at Forest Hills, New York.
/s/
_____________________________
ARLENE GOLDSTEIN BORYK
2
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Todd Wiener ("Plaintiff") declares, as to the claims
asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transaction in the security that is the
subject of this action during the Class Period is as follows:
Security Transaction Date Price
-------- ----------- ---- -----
ValuJet 300 shares 2/5/96 $21-1/4
ValuJet 700 shares 5/13/96 $12-1/4
5. I have not sought to serve as a class representative
in any case in the last 3 years.
6. The Plaintiff will not accept any payment for serving
as a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 28th day of May, 1996, at
Wynnewood, Pennsylvania.
/s/
_______________________
TODD WIENER
2
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Joseph Shubert, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
220 04/23/96 $20.50
Shares Sold:
-----------
220 05/20/96 $12.50
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 5th day of June,
1996, at Orlando, Florida.
/s/
___________________________
JOSEPH SHUBERT
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
_________________________________
|
JOSEPH SINGER, |
| Civil Action No.
Plaintiff, |
|
v. |
| PLAINTIFF'S SWORN
VALUJET AIRLINES, INC., VALUJET, | CERTIFICATION
INC., ROBERT L. PRIDDY, LEWIS A. |
JORDAN, MAURICE J. GALLAGHER, JR.|
and STEPHEN C. NEVIN, |
|
Defendants. |
|
_________________________________|
I, Joseph Singer, hereby certify that the following is
true and correct to the best of my knowledge, information and
belief:
1. I have reviewed the complaint being filed herewith
in the captioned action (the "Complaint"), and have authorized the
filing thereof.
2. I am willing to serve as a representative party on
behalf of the class (the "Class") as defined in the Complaint,
including providing testimony at deposition and trial, if
necessary.
3. I purchased 500 shares of common stock of the
ValuJet Airlines, Inc. on May 16, 1996 at $13.50 per share.
4. I did rot purchase these securities at the direction
of my counsel, or in order to participate in any private action
arising under the Securities Exchange Act of 1934.
1
5. During the three year period preceding the date of
my signing this Certification, I have not sought to serve as a
class representative in any class action.
6. I will not accept any payment for serving as a
representative party on behalf of the Class beyond my pro rata
share of any possible recovery, except for an award, as ordered or
approved by the Court, for reasonable costs and expenses (including
lost wages) directly relating to my representation of the Class.
Signed under penalties of perjury this 28th day of June,
1996.
/s/
_________________________
JOSEPH SINGER
Sworn to before me this
28th day of June 1996
/s/
_____________________
Notary Public
2
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
STACI WEBER ("Plaintiff") declares, as to the claims
asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of Plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the securities that are
the subject of this action during the Class Period are as follows:
Security Transaction Date
-------- ----------- ----
Common Stock 500 shares purchased May 16, 1996
at $13.125 per share
5. During the three years prior to the date of this
Certificate, Plaintiff has sought to serve or served as a
representative party for a class in the following actions filed
under the federal securities law: None
6. Plaintiff has sought to serve or served as a
representative party for a class in the following actions
subsequent to December 22, 1995: None
7. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the Court.
8. I declare under penalty of perjury that the
foregoing is true and correct. Executed this 2nd day of July,
1996, at Brooklyn, New York.
/s/
___________________________
STACI WEBER
2
CERTIFICATION OF NAMED PLAINTIFFS
PURSUANT TO FEDERAL SECURITIES LAWS
Mary Glore and Gary L. Glore ("Plaintiff") declares,
to her claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of Plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transaction Date Price
-------- ----------- ---- -----
ValuJet Inc. 3600 shares 12/18/95 21 7/8 bought $79,699.90
ValuJet Inc. 3600 shares 1/10/96 1600 20 1/4 sold 72,356.59
1000 20 1/2
1000 20 3/8
ValuJet Inc. 3490 shares 1/18/96 20 5/8 bought 72,055.05
ValuJet Inc. 3490 6/13/96 11 5/8 sold 40,536.30
5. Plaintiff has not sought to serve an a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond Plaintiff's
pro rata share of any recovery, except such reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
Sworn under penalty of perjury that foregoing is true and
correct. Executed this 26 day of June, 1996, in ______________,
___________________.
/s/ /s/
_______________________________
Mary Glore Gary L. Glore
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
______________________________________
JOHN KENNEY, )
)
Plaintiff, )
)
v. ) Civil Action No.
)
VALUJET AIRLINES, INC., VALUJET, INC.,)
ROBERT L. PRIDDY, LEWIS A. JORDAN, ) PLAINTIFF'S SWORN
MAURICE J. GALLAGHER, JR., and ) CERTIFICATION
STEPHEN C. NEVIN, )
)
Defendants. )
______________________________________)
I, John Kenney hereby certify that the following is true and
correct to the best of my knowledge, information and belief:
1. I have reviewed the complaint filed herewith (the
"Complaint") and have authorized its filing.
2. I am willing to serve as a representative party on behalf
the class as defined in the Complaint (the "Class"), including
providing testimony at deposition and trial, if necessary.
3. My transactions concerning Class securities are as
follows:
Date No. Shares Price Transaction
---- ---------- ----- -----------
4-15-96 230 $21.25 buy
5-6-96 270 18.13 buy
5-13-96 400 13.63 buy
4. I did not purchase these securities at the direction of
my counsel, or in order to participate in any private action
arising under the Securities Exchange Act of 1934.
5. During the three-year period preceding the date of my
signing of this Certification, I have not sought to serve as a
class representative in any class action.
6. I will not accept any payment for serving as a
representative party on behalf of the class beyond my pro rata
share of the recovery, if any, excepting for an award, as ordered
or approved by the Court, of reasonable costs and expenses
(including lost wages) directly relating to the representation of
the Class.
Plaintiff declares under penalty of perjury that the
foregoing is true and correct.
/s/
_______________________
John Kenney
2
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Martin G. Agius, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
125 3/13/96 24 1/4
250 4/24/96 20 5/8
100 5/14/96 15 1/8
Shares Sold:
-----------
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 12 day of July,
1996, at Getzville, New York.
/s/
_______________________
MARTIN G. AGIUS
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
C. Wesley Noon, Jr., ("Plaintiff") duly swears and says,
as to the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
500 3/13/96 24
Shares Sold:
-----------
500 6/20/96 7 25/64
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 24th day of June,
1996, at Wynnewood, PA.
/s/
____________________________
C. WESLEY NOON, JR.
CERTIFICATION OF NAMED PLAINTIFFS
PURSUANT TO FEDERAL SECURITIES LAWS
MICHAEL M. FEDER ("Plaintiff") declares, as to the claims
asserted under the federal securities laws, that:
1. I have reviewed the complaint and authorized its
filing.
2. I did not purchase the security that is the subject
of this action at the direction of plaintiffs' counsel or in order
to participate in this private action.
3. I am willing to serve as a representative party on
behalf of the class, including providing testimony at deposition
and trial, if necessary.
4. My transactions in the security that is the subject
of this action during the Class Period are as follows:
Security Transaction Date Price
-------- ----------- ---- -----
1,000 shares purchase 5/13/96 11 7/8
10 calls (6/15) sale 5/13/96 1 1/4
5. I have sought to serve as a class representative in
the last three years under this Title of the federal securities
laws in the following identified action:
In re California Micro Devices Securities
Litigation, Case No. C-94-2817-VRW, United States
District Court, Northern District of California,
San Francisco Division, Filed August 5, 1994
6. I will not accept any payment for serving as a
representative party on behalf of the class beyond my pro rata
share of any recover, except such reasonable costs and expenses
(including lost wages) directly relating to the representation of
the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 19 day of June, 1996, in Hewlett, N.Y.
/s/
____________________________
Michael M. Feder
-2-
CERTIFICATION OF NAMED PLAINTIFFS
PURSUANT TO FEDERAL SECURITIES LAWS
DORE KREISLER I.R.A. ("Plaintiff") declares, as to the claims
asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiffs' counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transaction Date Price
-------- ----------- ---- -----
300 shares purchase 5/8/96 17 1/2
3 calls (6/17) sale 5/8/96 1 9/16
3 calls (6/17) purchase 5/29/96 3/16
3 calls (7/15) sale 5/29/96 1 1/4
5. Plaintiff has not sought to serve as a class
representative in any case under this Title of the federal
securities laws in the last three years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the
representation of the class as ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true
and correct. Executed this 20th day of June, 1996 in New York,
N.Y.
/s/
_______________________
Dore Kreisler I.R.A.
-2-
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Debbie Miller, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
1000 April 26, 1996 21 3/8 or
$21,487
Shares Sold:
-----------
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or an ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 12th day of June,
1996, at Rockville, Maryland.
/s/
_____________________________
DEBBIE MILLER
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Mulugeta Ejigu, ("Plaintiff") duly swears and says, as to
the claims. asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
200 05/06/96 $18
Shares Sold:
-----------
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
[missing page 2 of Mulugeta Ejigu certification]
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Mengistu Ejigu, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
500 05/06/96 $18 5/8
500 12/07/95 21 3/4
Shares Sold:
-----------
500 12/11/95 25 1/4
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 06 day of June,
1996, at Avondale Est., Georgia.
/s/
__________________________
MENGISTU EJIGU
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Debebe Ejigu, ("Plaintiff") duly swears and says, as to
the claims asserted under the federal securities laws, that:
1. Plaintiff has reviewed the complaint and authorized
its filing.
2. Plaintiff did not purchase the security that is the
subject of this action at the direction of plaintiff's counsel or
in order to participate in this private action.
3. Plaintiff is willing to serve as a representative
party on behalf of the class, including providing testimony at
deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the
subject of this action during the Class Period are as follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
500 05/06/96 $18 1/2
Shares Sold:
-----------
5. Plaintiff has not sought to serve as a class
representative in any case in the last 3 years.
6. Plaintiff will not accept any payment for serving as
a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 06 day of June,
1996, at Clarkston, Georgia.
/s/
___________________________
DEBEBE EJIGU
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
Elesabeth Ingalls Gillet, as President of The Elesabeth
Ingalls Gillet Foundation duly swears and says as follows:
1. I am the President of The Elesabeth Ingalls Gillet
Foundation (the "Foundation") and have authority to bring the
claims asserted under the federal securities laws on behalf of the
Foundation ("Plaintiff").
2. I have reviewed the complaint and authorized its
filing on behalf of the plaintiff.
3. The Foundation did not purchase the security that is
the subject of this action at the direction of plaintiff's counsel
or in order to participate in this private action.
4. The Foundation is willing to serve as a
representative party on behalf of the class, including providing
testimony at deposition and trial, if necessary.
5. The Foundation's transactions in the security that
is the subject of this action during the Class Period are as
follows:
Security Transactions Date Price
-------- ------------ ---- -----
ValuJet Common Stock Shares Purchased:
----------------
1,200 01/03/96 $25.125
Shares Sold:
-----------
1,200 05/23/96 $12.875
6. The Foundation has not sought to serve as a class
representative in any case in the last 3 years.
7. The Foundation will not accept any payment for
serving as a representative party on behalf of the class beyond the
Plaintiff's pro rata share of any recovery, or as ordered or
approved by the court, including any award for reasonable costs and
expenses (including lost wages) directly relating to the
representation of the class.
I declare under penalty of perjury that the foregoing is
true and correct. Executed this 14th day of June,
1996, at Palm Beach, Florida.
/s/
________________________________
ELESABETH INGALLS GILLET
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
------------------------------------x
IN RE VALUEJET, INC.,
SECURITIES LITIGATION
------------------------------------x
THIS DOCUMENT RELATES TO:
ALL ACTIONS
------------------------------------x
CERTIFICATE OF SERVICE
This is to certify that I have this day served true and
correct copies of the within and foregoing "CONSOLIDATED AMENDED
COMPLAINT" upon counsel for Defendant by hand delivery at the
following address:
LONG ALDRIDGE & NORMAN
J. Allen Maines, Esq.
One Peachtree Center
Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
This 18th day of October, 1996.
/s/
____________________________
Martin D. Chitwood
APPEL CHITWOOD & HARLEY
945 East Paces Ferry Road
Suite 1400
Atlanta, GA 30326
(404) 266-1650