According to the latest docket posted, on October 22, 1997, the plaintiffs filed an appeal to the U.S. Court of Appeals from the September 30, 1997 Opinion and Judgment which granted the defendants’ motion to dismiss the class action complaint. On March 5, 1998, the Court entered the certified copy of the order from the Sixth Circuit Court of Appeals. The plaintiffs voluntarily dismissed the appeal.
The case was dismissed with prejudice by the court on 9/30/97. Judge Gerald E. Rosen wrote that, "Nowhere in the Complaint do Plaintiffs specify each statement that is allegedly false nor do they give a particular reason why a particular statement is false. Rather, they have simply complied a long list of block quotes, many of which contain statements that cannot seriously be regarded as false or misleading, and they line these statements up against a conclusory list of omissions and pronounce that fraud exists," as one of the reasons for the dimissal.
The complaint charges defendants with violations of the federal securities laws. Network Express went public in mid-1994, and in early 1994 its stock was trading at approximately $7-$8 per share due to the apparent success Network Express had achieved in selling its ISDN products in Japan. During 1995, defendants made false and misleading representations that Network Express' business in Japan would continue to succeed and that Network Express was on the verge of explosive growth in revenues from its business in the United States and Europe, in large part due to the success of its new NELink 1000 product, while forecasting strong revenue and earnings per share growth for Network Express throughout 1995 and 1996. These representations pushed Network Express' stock price to much higher levels -- $19-5/8 per share by August 1995 -- enabling Network Express and its insiders to sell over 3 million shares of Network Express stock to the public at artificially inflated prices. This enabled the Company to raise $27 million it desperately needed in an attempt to continue to survive in an increasingly competitive business environment and Network Express' insiders to pocket over $3.8 million in insider trading proceeds. However, shortly after defendants had completed their large stock sales, Network Express reported lower than expected third quarter results and revealed that instead of the strong growth it had previously forecast, its sales in Japan would decline sharply, its United States business would not achieve strong revenue growth and that its NELink 1000 product did not have the remote access capabilities, which were indispensable for its commercial success.