According to the docket, on August 29, 2005, the Court entered the Order awarding Plaintiffs' Counsel attorneys’ fees in the amount of 35% of the Settlement Fund plus litigation expenses of $190,946.69, together with interest earned. The Court further entered the Final Judgment and Order of Dismissal with Prejudice. The settlement was approved, and the action was dismissed with prejudice.
Previously, on June 14, 2002, the defendants filed motions to dismiss the amended class action complaint, and on October 31, 2003, the Court entered a 30-Day Order of Dismissal signed by U.S. District Judge Jorge A. Solis as a result of the parties reaching a settlement. On March 3, 2005, a Stipulation or Settlement was filed, and the settlement, in the amount of $2,750,000.00, was preliminarily approved in an Order entered on May 18, 2005.
According to a press release dated July 25, 2001, three related securities class actions (the ``Actions'') have been filed and consolidated into the action styled Todd Holley v. Kitty Hawk Inc., et al., No. 3-00 CV 0828-P (N.D. Tex.). The consolidated action is currently pending in front of United States District Court Judge Jorge A. Solis, who presides over this action in Dallas, Texas. The related actions allege violations of Section 10(b), and 20(a) of the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995 (15 U.S.C. ss.ss. 78j(b) and 78t), and Rule 10b-5 promulgated thereunder (17 C.F.R. ss. 240.10b-5) against Kitty Hawk and certain individual defendants. The actions were stayed against Kitty Hawk after it filed a voluntary petition for Chapter 11 Bankruptcy. The actions are continuing against the other defendants.
The actions allege that Kitty Hawk, a provider of national and international air cargo transportation services, and the other defendants provided materially false and misleading information about the Company's financial results. The Company reported reassuring earnings for all of its 1999 fiscal quarters. Specifically, the Company reported that its first quarter per-share earnings exceeded analysts estimates by $.03; that its second quarter was a ``success;'' that its third quarter was highlighted by the signing of a lucrative long-term contract with the U.S. Postal Service; and that its fourth quarter, and entire fiscal 1999, saw significant gains over the comparable 1998 fiscal year. In truth, as the Actions allege, Kitty Hawk's 1999 financial results were achieved by its improper non-recognition of significant losses.
The Actions charge that plaintiffs and the Class were injured when Kitty Hawk revealed its true financial condition and allowed the market to realistically gauge the Company's value. On April 11, 2000 - the end of the Class Period - the Company issued a statement that it will recognize the value of aircraft regulated out of its United States operation as a loss, that the value of many inoperable engines would also be recognized as a loss, and that it breached engine-maintenance covenants contained in several senior secured notes. Moreover, the Company revealed that these losses would have to be reflected in its previously reported 1999 operating results, and that its independent auditors, Ernst & Young LLP, will express doubts about the Company's viability as a going concern in its end of the year audit letter. The Actions charge that the Company having to restate seemingly favorable 1999 financials to reflect losses unsettled the market which relied on them in evaluating the Company's stock. The market absorbed the news on the day of the release, April 11, 2000, and the stock dropped from $4.50 per share to $0.90.