On August 12, 2004, the Court entered the certified copy of the Mandate from the U.S. Court of Appeals for the Fourth Circuit. The decision of the District Court to grant the motion to dismiss the Amended Class Action Complaint was affirmed.
On February 20, 2003, the defendants filed a motion to dismiss the Amended Class Action Complaint, and on August 7, 2003, the Court entered the Memorandum Opinion and Order granting the motion to dismiss. Judgment was entered in favor of the defendants against the plaintiff. On September 4, 2003, the plaintiff filed a notice of appeal.
On September 20, 2001, RailWorks filed its petition in bankruptcy. On October 29, 2001, Judge Andre M. Davis issued an Order staying and administratively closing this action. At counsel’s request, the judge lifted the stay on November 22, 2002, permitting the case to proceed against the defendants. RailWorks had by then obtained a discharge and had emerged from bankruptcy as a privately-held enterprise. Thereafter, on January 6, 2003, with leave of court, the plaintiff filed his Amended Complaint, in which he has asserted claims against an additional individual defendant for the first time.
The Complaint charges RailWorks and certain of its officers and directors with violations of the Securities Exchange Act of 1934. RailWorks’ initial public offering occurred in August 1998. Its business plan consisted of acquiring more than 35 disparate railway companies (as a so-called “roll-up” concern) in order to become a nationwide provider of integrated rail system services and products. The company’s services and products included the following: new construction, rehabilitation, repair and maintenance of track, signaling, communications, electrical and other track-related systems, and rails products manufacturing and supply. The complaint’s allegations generally comprise two clusters of issues. First, the complaint contends that Defendants violated § 10(b) by issuing and causing to be issued numerous press releases and other public statements which falsely represented that RailWorks had successfully integrated the operations of its many acquired companies, with resultant positive financial outcomes, the effect of which was to prop up the price of RailWorks securities. Second, the complaint alleges that Defendants purposefully misrepresented material facts in respect to, and failed to make full and timely disclosures of, discrete aspects of RailWorks’ financial condition and financial management, including but not limited to its access to credit, the value of certain assets, its potential for bankruptcy, and the maintenance of irregular accounting practices by, and the financial condition of, certain acquired companies.