On October 29, 2003, the Court entered the Order and Final Judgment granting the motion for support of final approval of settlement, plan of allocation of settlement proceeds, and the case was dismissed. On December 16, 2003, the Court also entered the certified copy of the Order from the U.S. Court of Appeals for the Tenth Circuit dismissing the appeal. On September 1, 2004, the Court entered the Order by Chief Judge Sven Erik Holmes granting motion for order approving distribution of settlement funds.
According to the Notice of Pendency Of Class Action dated August 18, 2003, a hearing will be held on October 28, 2003, for the purposes of determining:(1) whether the proposed Settlement of the claims in the litigation for$1,050,000 in cash is fair, reasonable, and adequate, and whether it should be approved by the Court; (2) whether the Plan of Allocation for the distribution of the Net Settlement Fund should be approved as fair and reasonable; (3) whether Lead Counsel’s application for an award of attorneys’ Fees and reimbursement of Expenses should be approved; (4) whether judgment should be entered dismissing the Action with prejudice; and (5) whether the releases of the Defendants by the Settlement Class should be approved.
As summarized by the same Notice, by Order dated March 4, 2002, the United States District Court for the Northern District of Oklahoma consolidated the pending federal securities actions into this Action, and appointed Ronald Nicol, Colin Nicol and William & Marjorie Groszkruger as lead plaintiffs, and approved Lead Plaintiffs’ selection of Berger & Montague, P.C. as Lead Counsel for Lead Plaintiffs. On April 22, 2002, Lead Plaintiffs filed a Consolidated Amended Class Action Complaint. The Individual Defendants each answered the Complaint, and filed cross-claims against Defendant Tullius Taylor. Defendant Tullius Taylor also filed cross-claims against them. On June 14, 2002, Defendant Tullius Taylor filed a motion to dismiss the Complaint, asserting that the allegations in the Complaint failed to adequately allege Tullius Taylor’s scienter. The Court denied Tullius Taylor’s motion by Order dated February 18, 2003. On December 4, 2002, Royal Indemnity filed a complaint against Nesco, Eddy L. Patterson, James Howell, and Larry Johnson seeking declaratory judgment that its Directors’ and Officers’ Liability Policy, providing insurance for these individuals, should be rescinded based upon the individuals allegedly providing Royal false information during the insurance application process. Royal’s action, if successful, would directly impact a source of recovery for Plaintiffs in this Action. By Order dated December 17, 2002, the Court certified a class against the Individual Defendants consisting of all persons or entities who purchased and/or acquired Nesco common stock during the period of November 3, 2000 through August 16, 2001, inclusive, and who were damaged thereby. The Court also certified a subclass as against Defendant Tullius Taylor consisting of all persons or entities who purchased and/or acquired Nesco common stock during the period April 2, 2001 through August 16, 2001, inclusive, and who were damaged thereby. At the hearing on class certification, the Court suggested that it was shortening Plaintiffs’ proposed class period because the Court did not believe that Plaintiffs’ allegations set forth in the Complaint established a basis for fraud claims during the earlier period of time, prior to November 3, 2000. On January 2, 2003, pursuant to Fed.R.Civ.P. 23(f), Plaintiffs filed a petition to appeal the Court’s Order on class certification with the United States Court of Appeals for the Tenth Circuit, arguing that the District Court erroneously made findings on the merits when limiting Plaintiffs’ proposed class period. On January 28, 2003, the United States Court of Appeals for the Tenth Circuit granted Plaintiffs’ petition, thus permitting Plaintiffs to file an appeal.
In or about January 2003, Plaintiffs and Defendants commenced negotiations concerning a potential settlement of the Action. A settlement conference was held with Magistrate Judge Frank H. McCarthy of the District Court on February 25, 2003, but the Action was not resolved at that time. As prompted by Plaintiff’s petition to the Tenth Circuit to appeal the District Court’s Order on class certification, the parties mediated their dispute before David W. Aemmer, Chief Circuit Mediator of the United States Court of Appeals for the Tenth Circuit, during the period from March 2003 through July 2003. Through this ongoing mediation, the parties agreed to settle this Action.
The original complaint alleges that defendants violated Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 by issuing a series of materially false and misleading statements about the Companys quarterly and annual financial results for 2000 and its quarterly financial results for the first quarter of 2001. At the close of the Class Period, the Company restated its revenues for 2000 and the first quarter of 2001 to adjust for $3.65 million in overbooked sales. The overbooked sales, which were the result of accounting irregularities, forced the company to reduce its earnings for 2000 to $588,000, or 6 cents a share, from the previously reported $2.85 million, or 31 cents per share. The Complaint alleges that as a result of these false and misleading statements the price of Nesco common stock was artificially inflated throughout the Class Period causing plaintiff and the other members of the Class to suffer damages.
NOTE: On November 26, 2001, Nesco filed a voluntary bankruptcy petition under Chapter 11 of the federal Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Oklahoma.