The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing a series of materially false and misleading statements to the public which described the Company's increasing financial performance. As alleged in the complaint, these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company had violated Generally Accepted Accounting Principles ('GAAP') and its own internal policies by prematurely recognizing revenue on certain non-obligatory prepaid membership dues; (ii) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (iii) that, as a result, the value of the Company's reported revenues during the Class Period was materially overstated.
Further, the complaint alleges that on April 28, 2004, the Company issued a press release announcing that its Chief Financial Officer and Director, John W. Dwyer, had resigned and that the Division of Enforcement of the Securities & Exchange Commission had commenced an investigation in connection with the Company's announced restatement regarding the timing of recognition of certain prepaid dues. The Company also stated that it had modified its existing internal controls structure, which it believes is now effective. In response to these disclosures, shares of the Company's stock fell approximately 17%, to close at $4.50 per share, on extremely heavy trading volume.
On March 15, 2005, the Court appointed a lead plaintiff and on May 23, 2005 the Court appointed lead plaintiff’s counsel. By stipulation of the parties, the consolidated lawsuit was stayed pending restatement of the Company’s financial statements in November 2005. On December 30, 2005, plaintiffs filed an amended consolidated complaint, asserting claims on behalf of a putative class of persons who purchased Bally stock between August 3, 1999 and April 28, 2004, and adding the Company’s former outside audit firm, Ernst & Young LLP as an additional defendant.
According to a press release dated July 17, 2006, Bally Total Fitness Holding Corp. (BFT) said the U.S. District Court of the Northern District of Illinois dismissed the consolidated class action complaint alleging securities fraud by the Chicago-based company and certain of its current and former officers. The court had previously consolidated ten separate actions into the class action complaint, Bally said. The court dismissed the complaint without prejudice, allowing the plaintiffs until Aug. 14 to file an amended complaint.
On August 14, 2006, an Amended Consolidated Class Action Complaint was filed. On September 28, 2006, the defendants responded by filing motions to dismiss the Amended Consolidated Class Action Complaint.
On February 20, 2007, Judge John F. Grady issued an order dismissing the case against Bally's, its individual defendants and Ernst & Young. Appeals were then filed by lead plaintiffs in March.
On July 31, 2007, appellee Bally Total Fitness Holding Corporation filed a petition for relief under Chapter 11 of the United States Bankruptcy Code, and on August 9, 2007, the Seventh Circuit stayed the proceedings against Bally Total Fitness Holding Corporation pursuant to the automatic stay provision of 11 U.S.C. Section 362.
On July 23, 2010, the case was remanded from the U. Court of Appeals back to the District Court for the purposes of conducting class action settlement approval proceedings.
On August 11, 2010, the plaintiff filed a motion for preliminary approval of the class action settlement. The motion was approved on August 23, 2010, by the Honorable John F. Grady.
According to a press release dated September 21, 2010, you are hereby notified that a hearing will be held before the Honorable John F. Grady on November 18, 2010 at 2:00 p.m. in Courtroom 2201 of the U.S. District Court for the Northern District of Illinois, 219 South Dearborn Street, Chicago, IL 60604, for the purpose of determining whether: (a) the proposed settlement of the claims in the above-captioned litigation for the sum of $2 million should be approved by the court as fair, reasonable, and adequate; (b) thereafter, this litigation should be dismissed with prejudice as set forth in the Stipulation of Settlement dated June 29, 2010; (c) the Plan of Allocation of the Net Settlement Fund is fair, reasonable, and adequate and should be approved; and (d) the application by Plaintiffs' Counsel for an award of attorneys' fees for their time devoted to this litigation and for reimbursement of expenses should be approved.
On November 24, 2010, the settlement hearing was held. The Lead Plaintiff's Unopposed Motion for Final Approval of Class Action Settlement 217 is granted. Lead Counsel's Unopposed Motion for Award of Attorneys' Fees and Reimbursement of Expenses 220 is granted. The Civil Case is terminated.