According to Smart Choice’s Form 10-Q for the fiscal quarter ended October 31, 2000, the Company recorded $2.5 million to settle the action. The entire $2.5 million settlement amount was funded by Smart Choice's insurance carrier.
On March 14, 2003, the Court entered the Order by U.S. District Judge John Antoon II granting the motion for the distribution of the class settlement fund. Earlier, on January 17, 2003, the Court entered the Order granting in part and denying in part the motion for attorney fees and reimbursement of expenses. Plaintiffs' Counsel was awarded attorneys' fees in the amount of $750,000, plus interest earned, and reimbursement of expenses in the amount of $36,657.74. The motion for $3,422.68 in additional expenses was denied. On September 13, 2001, the Court entered the Order and Final Judgment by Judge John Antoon II approving the proposed Settlement as fair, reasonable and adequate, and the compliant was dismissed with prejudice.
The complaint alleges defendants Smart Choice, its CFO, and Smart Choice's founder and CEO issued a series of false and misleading statements in the company's quarterly reports that artificially inflated the price of Smart Choice shares.
Specifically, the complaint alleges that Smart Choice had been struggling with a low stock price since the middle of 1998. Its stock problems intensified after a one-for-two reverse stock split in August and the cancellation of a second stock offering in September. By the time the year-end report was released Feb. 10, Smart Choice's stock had plunged to nearly $4 a share. The complaint further alleges that in the report, Smart Choice announced it would sell its new-car dealerships and its aftermarket auto-parts subsidiary, Eckler Industries Inc., to concentrate on its more profitable used-car business. Before Smart Choice withdrew the earnings report, at least two analysts praised the decision to divest the two businesses. They said Smart Choice needed the capital to open more used-car lots, especially after it had canceled the second stock offering. Also in the year-end report, Smart Choice said its used-car chain in 1998 sold 8,329 used vehicles for $84.6 million, up from $35.3 million in 1997. In the same report, Smart Choice reported overall net income of $4.61 million for 1998, compared with a net loss of $18.6 million in 1997. However, just 16 days later, Smart Choice withdrew the report and announced the resignation of its CFO. Smart Choice released a statement that said its net income "was likely overstated in a material, presently undetermined, amount."