According to the docket, on December 7, 2000, the Court entered the Order and Reasons by U.S. District Judge Mary Ann Vial Lemmon granting the defendants’ motion to dismiss the plaintiffs’ consolidated amended class action complaint for failure to state a claim upon which relieve may be granted. The Court further entered the Judgment in favor of the defendants and the complaint was dismissed. The plaintiff soon after filed a Notice of appeal and on March 13, 2001, the Court entered the Order from the Fifth Circuit Court of Appeals dismissing the appeal.
The original Complaint charges that Stewart issued materially false and misleading statements during the Class Period in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint alleges that Stewart made these false and misleading statements concerning the Company's financial condition, operations, and ability to manage future growth in order to artificially increase the price of its stock to support the company's secondary public offering of common stock in February 1999. The secondary offering was needed to fund an aggressive expansion program. As a result of defendants false and misleading statements, the price of Stewart common stock was artificially inflated during the Class Period. The market first learned of a concealed shortfall in Stewart earnings in a disclosure on August 12, 1999. Prior to that disclosure, Stewart's Chairman of the Board sold over 745,000 shares of his Stewart stock, pocketing over $12.5 million. The market reaction to the August 12, 1999 news was disastrous. The price of Stewart common stock plummeted to as low as $6 per share on August 13, 1999 in extraordinarily heavy trading volume.