Pursuant to Rules 12(b)(6), 12(c), 54, and 58 and to the 4/26/2004 Order of the Court, the Plaintiff’s claims are dismissed with prejudice. The Court entered the Final Judgment on June 3, 2004.
According to a press release dated June 8, 2004, Judge Barbara Lynn dismissed all claims in the lawsuit. Blockbuster general counsel Edward Stead said the ruling should bring an end to the suit.
The 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 April 24, 2002 to December 17, 2002, thereby artificially inflating the price of Blockbuster securities. Throughout the Class Period, as alleged in the Complaint, defendants issued numerous positive statements regarding the Company's financial performance and its future prospects. The Complaint alleges that these statements were each materially false and misleading when made as they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including: (a) that Blockbuster's business was being negatively impacted by declining DVD sale prices. As the prices of DVDs declined, consumers began to purchase DVDs from a variety of retail outlets, instead of renting them, thereby causing Blockbuster to experience declining rental sales; (b) that Blockbuster was unable to effectively compete with other retailers of DVDs as many of those retailers offered DVDs as loss leaders - selling the DVDs below or at cost - in order to entice shoppers into the store. As a result, Blockbuster was experiencing declining DVD sales as it lost sales to mass merchandisers; (c) as a result of (a) and (b), growth at stores that were open for more than one year was slowing to such an extent that the same-store growth rates that defendants had promised investors would not be realized; (d) that Blockbuster was experiencing problems with certain of the movie studios with whom it had profit-sharing arrangements. In particular, Blockbuster was being accused by Buena Vista of breaching the terms of its revenue sharing agreement with it. After the Class Period, Buena Vista brought suit against Blockbuster for $120 million and alleged breach of contract; and (e) as a result of the foregoing, defendants' lacked a reasonable basis for their earnings projections and positive statements about the Company at all times. On December 18, 2002, Blockbuster shocked investors when it slashed its earnings estimates and cut its growth rate for same-store sales and attributed the revisions to the negative impact of lower DVD prices which was increasing sales of DVDs and decreasing rentals. In response, the price of Blockbuster common stock declined precipitously, falling from $19.40 per share to $13.64 per share on extremely heavy trading volume. Prior to the disclosure of this adverse information to the market, the Individual Defendants and certain other high-level executives of Blockbuster sold their personally-held Blockbuster common stock to the unsuspecting public, reaping proceeds of more than $25 million.