According to a Press Release dated May 19, 2004, the United States Court of Appeals for the Second Circuit issued a Summary Order affirming the judgment of Senior Judge Milton Pollack of the United States District Court for the Southern District of New York dismissing the suit with prejudice. This litigation concerns activities prior to the May 1, 2003 acquisition of American Skandia Life Assurance Corp. by Prudential Financial, Inc. from Skandia Insurance Company Ltd. The Court of Appeals agreed with Judge Pollack's conclusion that the plaintiff's claims were without legal merit. In dismissing the plaintiffs' claims, Judge Pollack had written that, "the disclosures in the Prospectuses, taken in context, conclusively disprove the materiality of the alleged omissions and are thus fatal to the Plaintiffs' claims."
The lawsuit alleges that the defendants committed violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder; Sections 11, 12 and 15 of the Securities Act of 1933, and the Investment Company Act of 1940. The complaint alleges that defendants violated the securities laws and the Investment Company Act, and common law, by making materially misleading statements and material omissions in the prospectuses and other written documents under which these variable annuities were sold. The material misstatements included that tax-deferred variable annuities were appropriate and suitable investments for tax-deferred retirement accounts. Similarly, the material omissions failed todisclose that the tax-deferred variable annuities sold by defendants are never suitable investments for already tax-deferred retirement accounts because earnings on any investment placed in such an annuity already are tax-deferred by virtue of the retirement account itself, and purchase of a deferred annuity in a tax-deferred retirement account represents a useless approach which simply increases carrying costs. These material misstatements/omissions caused plaintiff and other members of the class to purchase the variable annuity contracts.