According to an article dated April 1, 2008, on Feb. 6, 2008, the settlement to resolve this putative securities class action received final approval from the court, according to the company's Feb. 28, 2008 Form 10-K filing with the U.S. Securities and Exchange Commission for the fiscal year ended Dec. 31, 2007.
In a press release dated November 30, 2007, the above-captioned action has been certified as a class action and that a settlement for $3.6 million has been proposed. A hearing will be held before the Honorable David Folsom in the United States Courthouse, 3rd Floor, 500 N. State Line Ave., Texarkana, Texas 75504, at 10:00 a.m., on Wednesday, February 6, 2008 to determine whether the proposed settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the application of Plaintiffs' Counsel for attorneys' fees and reimbursement of expenses.
As summarized by the Company’s Form 10-Q for the quarterly period ended September 30, 2007, similar complaints were consolidated by the court with the Walker matter in October 2002. On November 25, 2002, the lead plaintiffs in the Walker matter filed an amended consolidated complaint which added certain of our outside directors as defendants to the Exchange Act claims. The amended complaint also added additional claims that we, and certain of our current and former officers and directors, violated various provisions of the Securities Act as a result of alleged misrepresentations and omissions in connection with an offering in May 2001 and also added the managing underwriters in that offering as defendants. On July 25, 2005, the court dismissed with prejudice the claims against our outside directors as well as the underwriter defendants, but denied our motion to dismiss. A hearing on class certification was held on June 22, 2006. On October 29, 2007, before the court ruled on class certification, we announced that we had reached a prospective settlement with the plaintiffs to resolve this matter. Under the terms of the settlement, which has now been documented and was preliminarily approved by the court on October 31, 2007, we anticipate our insurance carrier will pay an aggregate of $3.6 million in cash, which will be distributed to an agreed upon class of claimants who purchased our common stock from April 25, 2001 through October 8, 2001, as well as used to pay costs of notice and settlement administration, and plaintiffs’ attorneys’ fees and expenses. In connection with the settlement, neither we nor any officer and director defendants are admitting liability for any securities laws violations. The terms of the settlement are subject to obtaining final approval from the court.
The original complaint charges Rent-A-Center and certain of its officers and directors with issuing a series of material misrepresentations to the market during the Class Period, thereby artificially inflating the price of Rent-A-Center publicly traded securities. For example, on April 25, 2001, Rent-A-Center issued a press release announcing record results for the first quarter of 2001 and highlighting the Company's resilience in a weakening economy. The representations in the
press release were, according to the allegations of the complaint, materially
false and misleading because the Company did not disclose that its expenses were rising dramatically as Rent-A-Center attempted to combat weakening demand with deep discounts and promotions. While in possession of this adverse non-public information, Rent-A-Center completed a secondary offering of 3,200,000 shares of its common stock at $42.50 per share on May 25, 2001. Defendants sold 1,700,000 Rent-A-Center shares in the secondary offering, grossing over $72 million, and sold 500,000 shares, grossing over $72 million. Then, on May 31, 2001, defendants sold an additional 1,955,000 shares of Rent-A-Center common stock at $40.38 per share, grossing over $78 million. Subsequently, on October 8, 2001, only five months after the secondary offering, Rent-A-Center issued a press release announcing that earnings for the third and fourth quarter of 2001 would be significantly less than the Company's previous guidance to the market, due to rising expenses. In response to this announcement, Rent-A-Center's stock price dropped by 19% in one day on heavy trading volume.