On October 20, 2006, the Court entered the Memorandum and Order granting final approval of the settlement and the plan of allocation. Further, according to the Order, the plaintiffs’ counsel is awarded attorneys’ fees in the amount of $1,505,000 and $10,000.00 shall be deducted from this amount and designated for lead plaintiff Local 710 Funds. Lastly, the request of plaintiffs' counsel for reimbursement of expenses is granted in the amount of $236,959.80. On December 13, 2006, the Court entered the Order of Dismissal with Prejudice.
According to a press release dated March 6, 2006, a hearing will be held on May 9, 2006 at 9:00 a.m., before the Honorable William E. Smith at the United States District Court for the District of Rhode Island, Federal Building and United States Courthouse; One Exchange Terrace, Providence, Rhode Island 02903-1270 for the purpose of determining, among other things, whether: (1) the proposed settlement of the claims in the litigation for cash consideration totaling $7,000,000 (plus accrued interest) should be approved by the Court as fair, reasonable and adequate; (2) this consolidated action should be dismissed with prejudice; (3) the Plan of Allocation is fair and reasonable and should be approved; and (4) the application of Plaintiffs' Counsel for the payment of attorneys' fees and reimbursement of costs and expenses incurred in connection with this Action should be granted.
As summarized by the Notice of Pendency and Proposed Settlement of Class Action dated February 21, 2006, on and after April 26, 2002, the two similar actions were filed in the United States District Court for the District of Rhode Island. By Order dated September 27, 2002, the Court consolidated these actions for all purposes (collectively the “Action”) and granted the motion of Local 710 Funds to be appointed lead plaintiff under §21D(a)(3)(B) of the Securities Exchange Act of 1934
(the “Exchange Act”) and approved lead plaintiff’s selection of Futterman & Howard, Chtd. and Kirby McInerney & Squire, LLP as Lead Counsel. The Court also appointed Kaplan & Kolb, Inc. as Liaison Counsel for plaintiffs pursuant to §21D(a)(3)(B)(v) of the Exchange Act. On December 13, 2002, plaintiffs filed an amended and consolidated class action complaint (the “Complaint”). The Complaint is brought on behalf of a Class consisting of all persons who purchased or otherwise acquired the securities of Textron between October 19, 2000 and September 26, 2001, inclusive and alleges violations of §§10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder relating, among other things, to Defendants’ accounting in connection with certain government contracts, including a Bell Helicopter Textron Inc. contract relating to the V-22 Osprey, tiltrotor aircraft. Defendants filed a motion to dismiss on March 26, 2003. On June 15, 2004, the Court denied, in part, Defendants’ motion to dismiss and on May 11, 2005, the Court certified Plaintiffs’ claims for class treatment pursuant to Rule 23 of the Federal Rules of Civil Procedure. The Court appointed Plaintiffs Local 710 and William Swartchild III as class representatives and Kirby McInerney & Squire, LLP and Futterman & Howard Chtd., as Plaintiffs’ Co-Lead Counsel. The Court also appointed Kaplan & Kolb, Inc. (now replaced by the Law Offices of William M. Kolb, LLC) as liaison counsel for the Class. By order of December 21, 2005, the Court appointed Behn & Wyetzner, Chartered as an additional Co-Lead Counsel and the Law Offices of William M. Kolb, LLC as new liaison counsel.
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 thereby artificially inflating the price of Textron securities. The complaint alleges that, throughout the Class Period, Textron failed to disclose that the V-22 Osprey, a military aircraft that it was manufacturing, suffered from structural defects that required that it be substantially redesigned which would delay full-scale production of the Osprey for years and cost hundreds of millions of dollars in excess of the costs allocated to the project for the purpose of calculating profit and loss.
On September 26, 2001, as alleged in the complaint, Textron issued a press release over the Business Wire in which it reduced its guidance for the third and fourth quarters of 2001, and announced that it expected a third-quarter loss of $0.25 per share, compared to the consensus forecast of earnings of $0.71 cents per share. The complaint alleges that the Company attempted to blame its poor performance on "the slowdown in the U.S. economy" and "the impact of events on September 11." However, as alleged in the complaint, Textron was also forced to admit that its reduced earnings were resulting from "a number of significant adjustments at Bell Helicopter and other Textron businesses," including a special charge of approximately $0.52 per share resulting from "stretched out production schedules and additional costs to make design changes in the V-22 and H-1 government programs." In the same press release, the Company announced the abrupt departures of defendant Janitz as Textron Chief Operating Officer, and defendant Stinson as Chief Executive Officer of Bell Helicopter. On this news, Textron shares dropped to a year-low price of $33.04 per share, down 23% from the previous day's closing price of $43, on relatively heavy trading volume of 4,393,200 shares traded.