The original Complaint alleges 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 April 19, 2001 and July 19, 2001, thereby artificially inflating the price of Scientific-Atlanta securities. Specifically, throughout the Class Period, defendants issued materially false and misleading information with regard to the financial results of its third fiscal quarter. For example, on May 11, 2001, in a Form 10-Q that was filed with the Securities & Exchange Commission, defendants reported their financial results and highlighted an increase in production capacity of set-tops. On July 19, 2001, defendants reported Scientific-Atlanta's financial results for the fiscal fourth quarter of 2001 and shocked the market by reporting a 21% decline in bookings from the previous year's fourth quarter. This decline in bookings was attributable to, among other things, a surplus in customer inventory levels, which defendants knew, or should have known, at the time they filed the Company's Form 10-Q on May 11, 2001, making the representations in the Form 10-Q regarding production capacity materially false and misleading. Additionally, the Company announced that it was revising its earnings estimates for the first quarter of fiscal 2002. The market reaction to this announcement was immediate and punitive, as shares of Scientific-Atlanta plummeted by more than 34%, or $12.08, to close at $23 per share, on heavy trading volume.
According to the Company’s FORM 10-K for the fiscal year ended July 1, 2005, on July 24, 2001, a purported class action alleging violations of the federal securities laws by the Company and certain of the its officers was filed in the U.S. District Court for the Northern District of Georgia. After July 24, 2001, several actions with similar allegations were filed. A lead plaintiff and lead counsel were selected by the court in December 2001, and a consolidated complaint was filed by the lead counsel in January 2002. The U.S. District Court for the Northern District of Georgia denied on December 23, 2002 the Company’s motion to dismiss the consolidated complaint. The District Court then certified for appeal to the Eleventh Circuit Court of Appeals an issue related to its decision on the motion to dismiss. On June 22, 2004, the Eleventh Circuit affirmed the District Court’s order denying the Company’s motion to dismiss.
The action is currently in discovery. On April 15, 2005, a movant filed a motion to certify the class. On September 7, 2007, Judge Richard W. Story granted the motion to certify the class.
On January 26, 2010, the defendants filed a motion for summary judgment, filed under seal. This motion was granted by the Order signed by Judge Richard W. Story. Judgment was entered in favor of the defendants and the civil action is now terminated. On December 17, 2010, a Notice of Appeal was filed.