According to a Press Release dated March 11,2003, The Major Automotive Companies, Inc. (Nasdaq SC: MAJR - news) today announced that the settlement of a class action against the Company and several of its current and/or prior directors and/or officers, captioned In re Fidelityn Holdings, Inc. Securities Litigation, has been approved by the United States District Court Eastern District of New York. Accordingly, the settlement fund will be fully funded with payment of $4,450,000 from the Company's insurance carrier and such funds will be distributed, after payment of legal and administrative expenses, to claimants who have not validly excluded themselves and who submit valid claims. There will be no further costs to the Company in connection with this action and all prior costs have been reflected in the Company's previously issued financial statements.
As reported by the Company’s Form 10-K For The Fiscal Year Ended December 31, 2002, in August 2001, the lead plaintiffs in this class action served a Consolidated and Amended Class Action Complaint. This Complaint alleged, among other things, that plaintiffs and other members of the putative class were damaged when they acquired shares of the Company’s common stock because defendants allegedly issued materially false and misleading statements and failed to disclose material information which purportedly cause such stock to trade at artificially inflated prices during the class period. The complaint alleged violations of Sections 10(b) and 20(a) of the 1934 Exchange Act, as amended (the "Exchange Act") and Rule 10b-5 promulgated thereunder. The allegedly misstated and omitted information concerned primarily the prospects for the Company’s technology business. The complaint sought, among other things, damages in an unspecified amount. In September 2001, the Company moved to dismiss the complaint for failure to state a claim upon which relief can be granted and for failure to plead with the legally-required factual particularity. In October 2001, the Company reached an agreement with lead plaintiffs to settle this action for $4.45 million, subject to the consent thereto of the Company’s insurance company and court approval.
The original complaint charged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between November 15, 1999 and April 12, 2000. For example, as alleged in the complaint, on November 15, 1999, Fidelity holdings issued a press release announcing its financial results for the third quarter of 1999 which highlighted "record" gross quarterly profits. This statement, the complaint alleged, was materially false and misleading because the Company failed to disclose that millions of dollars in third quarter expenses were improperly deferred into the fourth quarter. On April 12, 2000, the Company issued a press release announcing a net loss of $3.5 million for its 1999 fiscal year, which the Company attributed to disproportionately high fourth quarter expenses, and poor sales at the Company's Technology Division. Following the announcement, Fidelity Holdings' stock price plummeted to $3.38 per share, an 83% decline from its class period high of $20 per share.