Flowserve Corporation manufactures industrial pumps, valves, seals and actuators.

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 between October 23, 2001 and September 27, 2002, thereby artificially inflating the price of Flowserve securities. During the Class Period, as alleged in the Complaint, the Company issued statements that failed to disclose and/or misrepresented the following adverse facts, among others: (a) that the Company's declining revenues and earnings during 2001 and 2002 would have caused the Company to violate its loan covenants but for its public stock offerings, which enabled the Company to reduce its debt, obtain favorable interest rates and debt refinancings from lenders, and enable Flowserve to fund the acquisition of the Flow Control Division ("IFC") of Invensys plc, among other things; (b) that demand for the Company's products had materially declined, especially its aftermarket sales or "quick-turnaround business" resulting in revenue and earnings shortfalls; (c) that the Company's recent acquisitions, including Ingersoll-Dresser Pump Co. ("IDP") and IFC, had not materially altered the Company's dependence on revenue streams from the chemical industry, or further stabilized its aftermarket revenue streams for its pump and valve business through significant cross-selling opportunities, among other things; (d) that the Company's reorganizations, downsizing and facility closures, following its acquisition of Innovative Valve Technologies, Inc. ("Invatec"), IDP and IFC had failed to eliminate excess manufacturing capacity resulting in the material erosion of the Company's gross margins and earnings; (e) that the Company had severe and continuing integration problems following the acquisition of Invatec, resulting in a disruption of the Company's service and maintenance operations and contributing to the decline in Flowserve's high margin service revenues, eventually necessitating the reorganization of the Company's service business segment; and (f) based on the foregoing, Defendants' opinions, projections and forecasts concerning the Company and its operations were
lacking in a reasonable basis at all times. On September 27, 2002, the Company warned of a 21% earnings shortfall for the quarter ending September 30, 2002, and cut its full year 2002 earnings guidance by over 60%, to $1.45 per share, from the $2.30 per share earnings guidance shared with investors during roadshow presentations promoting Flowserve's public offerings less than six months prior. Market reaction to the Company's announcement was swift and severe. Flowserve shares fell over 38% to close at $8.70 on September 27, 2002, a decline of more than 75% from the Class Period high of $34.90 reached on May 2, 2002. Prior to the disclosure of the true facts, Flowserve completed two public offerings of its common stock, thereby raising more than $433.9 million, and Flowserve insiders sold their personally held Flowserve common stock, generating millions in proceeds.

According to the company’s FORM 10-Q for the quarterly period ended September 30, 2009, in 2003, related lawsuits were filed in federal court in the Northern District of Texas, alleging that Flowserve violated federal securities laws. After these cases were consolidated, the lead Plaintiff amended its Complaint several times. The lead Plaintiff’s last pleading was the fifth consolidated amended Complaint (the “Complaint”). The Complaint alleged that federal securities violations occurred between February 6, 2001 and September 27, 2002 and named as Defendants the Company, C. Scott Greer, the former Chairman, President and Chief Executive Officer, Renee J. Hornbaker, the former Vice President and Chief Financial Officer, PricewaterhouseCoopers LLP, the independent registered public accounting firm, and Banc of America Securities LLC and Credit Suisse First Boston LLC, which served as underwriters for the Company's two public stock offerings during the relevant period. The Complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 11 and 15 of the Securities Act of 1933. The lead Plaintiff sought unspecified compensatory damages, forfeiture by Mr. Greer and Ms. Hornbaker of unspecified incentive-based or equity-based compensation and profits from any stock sales and recovery of costs. By orders dated November 13, 2007 and January 4, 2008, the District Court denied the Plaintiffs’ motion for class certification and granted summary judgment in favor of the Defendants on all claims. The Plaintiffs appealed both rulings to the federal Fifth Circuit Court of Appeals, and on June 19, 2009, the Court of Appeals issued an opinion vacating the District Court’s denial of class certification, reversing in part and vacating in part the District Court’s entry of summary judgment, and remanding the case to the District Court for further proceedings consistent with the Court of Appeals’ opinion. As a result of the Court of Appeals’ opinion, the case will be returned to the District Court for further consideration of certain issues, including whether the Plaintiffs can demonstrate that the case should be certified as a class action. The parties have engaged in discussions following the issuance of the Court of Appeals’ opinion in furtherance of an amicable resolution of the case. These discussions yielded tentative settlement terms, which were contingent upon resolution of certain closure issues.

On December 18, 2009, a Stipulation of Settlement was filed. The proposed settlement is in the amount of $55 million in cash, $1.5 million of that to be paid by PwC. On March 1, 2010, Judge Jane J. Boyle preliminarily approved the settlement. On April 22, 2010, an objection was filed to the motions for final approval of the class action settlement and plan of allocation and attorney fees and expenses.

On May 11, 2010, the Final Settlement Hearing was held before Judge Boyle. Judge Boyle approved the Plan of Allocation, the motion for attorney fees and expenses, and approved the final settlement. The action is now dismissed with prejudice.