Having deemed the settlement agreement fair and reasonable, the judge entered his final order approving the settlement and dismissing the case with prejudice on March 31, 2008. In the same order he granted attorneys’ request for 30% of settlement in fees and reimbursed $248,348.88 in out-of-pocket expenses. As reported in Key Energy’s Form-10Q for period ended March 31, 2008, the settlement for both the securities class action and derivative action total $16.6 million, of which Key will be required to pay approximately $1.1 million.
According to the docket, plaintiffs filed a motion for preliminary settlement approval on November 16, 2007. A week later the Stipulation of Settlement was submitted stating the agreed settlement amount of $15,425,000. Attorneys intend to request fees of 30% and reimbursement of expenses of $275,000.
On October 25, 2006, the Court entered the Order dismissing two individual defendants without prejudice in accordance with Court's Order issued on August 11, 2006. That day, the Court also ordered that the parties file motion for class certification on or before November 24, 2006.
On February 7, 2005, a Report and Recommendation to consolidate the actions, appoint lead plaintiff and approve lead counsel was filed. On February 25, 2005, the Court entered the Order adopting the U.S. Magistrate’s Judge Report and Recommendation. On November 2, 2005, a Consolidated Amended Class Action Complaint was filed. In January 2006, the defendants responded by filing various motions to dismiss the Consolidated Amended Class Action Complaint. On August 11, 2006, the Court entered the Order granting in part and denying in part the defendants’ motions to dismiss.
The original complaint alleges violations of the Securities Exchange Act of 1934. More specifically, the complaint alleges that during the Class Period, defendants' publicly disseminated results of Key's operations and financial condition contained artificially inflated revenues, assets and income. Such results were not prepared or reported in accordance with Generally Accepted Accounting Principles and deceived investors as to the Company's true performance, thereby artificially inflating the price of Key securities during the Class Period. The truth began to emerge on March 15, 2004. On that date, the Company announced that that it would not meet the Securities and Exchange Commission deadline for filing its annual report because it had yet to complete its review of 'certain idle equipment' with a book value of $55 million, and that the review might result in 'a revision to the 2003 earnings.' The Company maintained, however, that, 'the underlying fundamentals of the Company are strong and the outlook remains positive.' The next two months were punctuated by a series of additional disclosures, each of which further depressed Key's stock price. The Class period ends on June 4, 2004. The morning of the next trading day, June 7, 2004, before the market opened, defendants announced that they were 'withdrawing all previous earnings forecasts of operating results for 2004,' that they were doing so 'in light of current uncertainties affecting the Company,' and that they had received notice from the indenture trustee of its 6.375% and 8.375% senior Notes that the Company was in default and had 90 days to cure the default. On this news, the price of Key shares plummeted on extremely high trading volume of 13,963,900 shares. Key shares had closed at $9.62 on June 4, 2004. On June 7, 2004 they reached an intra-day low of $7.00, down 27%, before rebounding to close the day at $8.67.