According to the Company’s FORM 10-K for the fiscal year ended February 28, 2003, a consolidated amended class action complaint, which alleged federal securities law violations by the Company and its chief executive officer, chief financial officer and principal accounting officer, was filed in the United States District Court for the Eastern District of Virginia. The Company and the individual Defendants filed a motion to dismiss the suit that was heard by the Court in January of 2003. In February 2003 the Court granted the motion and dismissed the consolidated amended complaint with prejudice. No appeal was taken by the Plaintiffs.
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 December
6, 2001 and February 22, 2002, thereby artificially inflating the price of
Circuit City securities. The complaint alleges that defendants issued
materially false and misleading statements during the Class Period which failed
to disclose, among other things, that Circuit City was facing significant
inventory shortages and was experiencing problems with its internal controls
which would result in the Company having to incur additional expenses
associated with the termination of leases and with the remodeling of almost
half of its retail stores. When defendants belatedly disclosed these problems
on February 22, 2002, the last day of the Class Period, the price of Circuit
City stock plummeted over 33% to close at $16.08 per share.