According to the Company’s Form 10-K For The Fiscal Year Ended December 31, 2001, on January 8, 2002, plaintiffs filed a protective notice of appeal with the Ninth Circuit Court of Appeals, wherein they appealed the District Court’s Order Granting Defendants’ Motion to Dismiss on June 14, 2001, and its December 20, 2001 Order Denying Plaintiffs’ Motion to Lift Stay of Discovery. On February 2, 2002, the parties filed a stipulation with the Ninth Circuit Court of Appeals, whereby all parties agreed to dismiss the appeal with prejudice. On February 4, 2002, the parties also filed a stipulation of dismissal of the case with prejudice in the District Court. On February 7, 2002, the District Court issued its order dismissing the case with prejudice, and on February 14, 2002, the Court of Appeals issued its order dismissing the appeal with prejudice.
As summarized by the same SEC filing, on November 9, 2000, the Court entered an order consolidating the several cases, appointing the lead stockholder-plaintiff, and appointing lead stockholders-plaintiffs’ counsel to prosecute the litigation. On February 13, 2001, plaintiffs filed their First Amended and Consolidated Class Action Complaint asserting claims on behalf of a purported class of persons who purchased Company common stock during the period April 14, 2000, through June 21, 2000. In their consolidated complaint, plaintiffs asserted violations of Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, arising out of various alleged misstatements and omissions in the Company’s Annual Report on Form 10-K for the year 1999, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, and in other information made publicly available by the Company, and, further, claimed that plaintiffs and the purported class suffered damages as a result thereof. Such alleged misstatements and omissions were claimed to relate to the Company’s trading activities in wholesale energy markets, the Company’s risk management policies and procedures with respect thereto, and the Company’s trading losses in the second quarter of 2000. The plaintiffs requested, among other things, compensatory damages in unspecified amounts and other relief as the Court may deem proper. On March 29, 2001, the Company filed a Motion to Dismiss the Consolidated Complaint, which was granted by the Court on June 14, 2001 without prejudice to allow the plaintiffs the opportunity to amend the complaint to seek to cure the deficiencies identified by the Court.
The original class action lawsuit charged Avista and certain of its officers with violations of the federal securities laws. Specifically, plaintiffs have brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The Complaint alleges that during the Class Period, despite assurances from Avista that it would only enter into derivative contracts as a means to “limit the exposure to market risk,” the Company covertly entered into huge amounts of forward contracts in an undisclosed gamble that electricity prices would decrease in the future. Unfortunately, the price of electricity skyrocketed, resulting in staggering losses on these forward contracts. When the Company disclosed these massive losses, and the impact they would have on the financial position of the Company, the Company’s stock price plummeted. On the day prior to the start of the Class Period, Avista shares closed trading at $37 11/16 per share. After Avista was finally forced to publicly acknowledge the extent of the losses resulting from this improper speculation on June 21, 2000, Avista’s shares closed trading at $19 per share.