The original complaint charges 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 materially false and misleading statements to the market between August 7, 2001 and August 2, 2002. The complaint alleges that Heartland was at all relevant times a private equity firm that presented itself as being expert in leveraged buyouts of industrial manufacturers and that, in February 2001, Heartland
acquired a controlling interest in CKC. CKC was at all relevant times a
manufacturer of automotive interior components. The complaint further
alleges that Heartland and CKC acquired Textron Automotive Company's
TAC-Trim division and that, throughout the class period, Heartland and
CKC repeatedly stated that the TAC-Trim acquisition would be accretive
to earnings and that, in addition to doubling CKC's annual revenue, the
TAC-Trim acquisition would increase operating income by reducing costs
through synergies and economies of scale. The truth was revealed on
August 5, 2002, when the Company reported a net loss of $20.3 million,
or $0.29 per diluted share, compared with net income of $9.2 million, or
$0.11 per diluted share a year earlier, and announced that it expected
2002 earnings to be $0.20 to $0.26 per share, well below the consensus
estimate of $0.74 per share. On this news, the investing public dumped
its CKC stock, pushing the price down 49% to close at $2.81 on
relatively high trading volume.
On August 6, 2003, the Court entered the Order granting the motion to consolidate cases and appointment of lead plaintiff approval of selection of lead and liaison counsel. On September 29, 2003, the Court entered the Supplemental Order consolidating actions and appointing lead plaintiff. On November 14, 2003, the plaintiffs filed a Consolidated and Amended Class Action Complaint. On January 30, 2004, the defendants filed a motion to dismiss the Consolidated and Amended Class Action Complaint. On May 20, 2005, Collins and Aikman Corporation filed a suggestion of bankruptcy.
On August 31, 2006, the Company filed a plan of reorganization with the Bankruptcy Court in Detroit to emerge from Chapter 11 of the United States Bankruptcy Code.
On January 31, 2008, the Court entered the Order signed by the Honorable Gerald E. Rosen granting the plaintiffs' motion for leave to file second consolidated and amended complaint while denying the defendants’ motion to dismiss. On February 14, 2008, the plaintiffs filed a Second Consolidated and Amended Class Action Complaint. Due to the Company’s bankruptcy, Collins & Aikman Corporation is a non-defendant. On April 30, 2008, the defendants filed several motions to dismiss the Second Consolidated and Amended Class Action Complaint. Also on April 30 and August 8, 2008,, certain individual defendants were voluntarily dismissed from the action. The parties soon after engaged in settlement negotiations. On March 20, 2009, the lead plaintiffs filed a motion for preliminary approval of settlement. On April 3, 2009, Judge Gerald E Rosen preliminarily approved the $10,800,000 in cash.
On July 30, 2009, the Court entered the Order Approving the Plan of Allocation and Awarding Attorneys' Fees and Expenses. The Court also entered the Order and Final Judgment approving the settlement and dismissing the action with prejudice. The case is now closed.