The original complaint charges Retek and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Retek is a leading provider of software solutions and services to the retail industry. In April 2000, the Company announced that it had formed an alliance with IBM to develop a partnership to develop a merchandising solution for the food and drug segment of the retail market. The complaint alleges that the defendants continuously led the market to believe not only that the alliance was fully intact but also that the alliance was on track to generate revenues of more than $1 billion for the two companies for the year 2003. Defendants, however, concealed that not only was the $1 billion prospect a fallacy, but that throughout the Class Period the so-called alliance was in shambles. Retek wanted access to IBM's consulting deals and IBM wanted Retek to change its software applications so that they ran on IBM's platform, not Oracle's. By October 2001, defendants realized that the conversion would be too costly in the short run and delayed the full conversion to IBM platforms, including the most critical, a merchandising product for large-scale retail operations. The complaint further alleges that by the beginning of the Class Period, many of the Company's projects (IBM) were faltering and its new products (Retek 10), which were scheduled to boast earnings, were riddled with bugs. Moreover, one of the Company's joint ventures, PerformanceRetail Inc. ("PRI"), was hemorrhaging nearly $200,000 of the Company's monies per month. Finally, the defendants' projections were not only stale but actually false when made as the defendants knew or made a conscious decision to ignore the fact that circumstances underlying those projections (i.e., problems with Retek 10, the IBM alliance, PRI, an eroding customer base) actually compelled the conclusion that the Company could not possibly achieve the projections.
As disclosed by the Company’s FORM 10-K for the fiscal year ended December 31, 2004, between October 30, 2002 and December 12, 2002, Retek was named in six substantially similar federal securities class action complaints filed in the United States District Court for the District of Minnesota. Thereafter, the plaintiffs voluntarily dismissed one of the complaints without prejudice, and the Court consolidated the other five actions into a single proceeding before Judge John R. Tunheim. The consolidated action is styled In re Retek Inc. Securities Litigation, Case No. CV 02-4209 JRT/ SRN. On February 20, 2003, the Court appointed as co-lead plaintiff in the consolidated proceedings: (1) the Louisiana Municipal Police Employees’ Retirement System (“LMPERS”); and (2) Mr. Steven B. Paradis. The appointed lead plaintiffs served a consolidated complaint on or about April 15, 2003. On May 30, 2003, Retek and the individual defendants served a motion to dismiss the consolidated complaint. The Court heard oral argument on this motion on January 27, 2004. On March 30, 2004, the Court granted defendants’ motion to dismiss the consolidated complaint, with leave to file an amended consolidated complaint. Thereafter, plaintiffs filed an amended consolidated complaint and defendants filed a motion to dismiss the amended consolidated complaint. On September 28, 2004, the Court heard oral arguments on the motion to dismiss. On March 7, 2005, the Court issued an order granting in part and denying in part defendants’ motion to dismiss the amended consolidated complaint. As a result of the Court’s Order, co-lead plaintiffs may pursue some of their allegations, while others have been dismissed.
On July 5, 2001, the lead plaintiffs filed a motion to certify the class. While engaged in extensive discovery proceedings, the defendants filed a Motion for Judgment on the Pleadings on August 12, 2005, which was later denied by the Order entered on October 21, 2005. On February 6, 2006, previously appointed lead plaintiff Steven B. Paradis’ motion to withdraw as lead plaintiff was granted. On March 22, 2006, the Court entered the Order granting the plaintiffs' motion to certify the class. On May 1, 2006, the plaintiffs filed a Second Amended Consolidated Class Action Complaint for Violations of the Securities Laws. The defendants responded by filing a motion to dismiss the complaint.
On January 3, 2007, Judge John R. Tunheim signed the Memorandum Opinion and Order granting in part and denying in part defendants' motion to dismiss the Second Amended Consolidated Complaint. According to the Order, the motion is granted with prejudice with respect to the claims regarding AOL and the negative trend allegations, and with respect to the Rule 10b-5 claim against defendant Steven D. Ladwig. In addition, the statements in paragraphs 111, 120, 124, 131, and 136 of the Second Amended Consolidated Complaint provide no basis for a Rule 10b-5 claim against defendants. The motion to dismiss is denied in all other respects.
On May 19, 2008, the defendants filed three separate motions for summary judgment. On March 31, 2009, Judge John R. Tunheim signed the Memorandum Opinion and Order granting the motions for summary judgment. On April 29, 2009, the lead plaintiff filed a notice of appeal to the Eighth Circuit Court of Appeals, which was dismissed by the Mandate entered in the Court on February 9, 2010.