According to a press release dated March 22, 2006, the Goodyear Tire & Rubber Company announced that United States District Court Judge John Adams has ordered the dismissal of the class action lawsuit alleging securities fraud filed against the company and certain of its current and former officers. The suit relates to Goodyear's previous restatement of its financial results. In its ruling today, the Court found that the plaintiffs had failed to sufficiently set forth particularized facts to support their claim. Goodyear has also asked the Court to dismiss two companion cases pending before Judge Adams: a shareholder derivative action and an action based on alleged ERISA violations.
As summarized by the docket posted, on December 31, 2003, the Court entered the Order signed by U.S. District Judge John R. Adams granting in part defendants' motion to adopt case management proposal as follows: Cases are assigned to the complex track; Counsel will use electronic filing and service; Actions shall be consolidated into three separate cases consisting of 1) Securities Actions, 2) Derivative Actions, 3) ERISA Actions. The lead case in the Securities Actions is 5:03cv2166. The lead case in the Derivative Actions is 5:03cv2180. The lead case in the ERISA Actions is 5:03cv2182. All filings shall be made in the lead case only and not in the individual actions. On May 12, 2004, the Court entered the Order granting Capital Invest's motion for appointment as lead plaintiff and appointing the law firm of Bernstein Litowitz as lead counsel and the law firm of Climaco Lefkowitz as liason counsel. On June 28, 2004, lead plaintiff filed a Consolidated Amended Class Action Complaint, and the defendants responded by filing a motion to dismiss the Consolidated Amended Class Action Complaint on November 15, 2004. On June 23, 2005, the lead plaintiff filed a Corrected Consolidated Amended Class Action Complaint.
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 class period.
Specifically, the Complaint alleges the statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the Company's implantation of an enterprise resource planning accounting system in 1999 caused Goodyear to materially overstate its net income and earnings by up to $100 million; (2) that the Company's financial statements were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (3) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (4) that as a result, the value of the Company's net income and financial results were materially overstated at all relevant times.
Further, the complaint alleges that on October 22, 2003, after the market had closed, Goodyear announced that it would restate its financial results for the years 1998-2002 and for the first and second quarters of 2003, and that the restatement would result in a decrease in net income over the restatement period by up to $100 million. Market reaction to this news was swift and fast. Shares of Goodyear fell more than 10 percent during inter-day trading and traded as low as $5.55 per share on extremely heavy volume.