The original complaint charges defendants with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants failed to disclose or indicate the following: (1) that the Company over relied, in their financial projections, on the customers' future demand for premium-priced and reduced-lead-time products, which had previously accounted for 50% of the Company sales; (2) that the Company failed to adequately insulate itself from the softening demand, specifically with regard to supply needs of a major networking customer; (3) that the Company failed to appreciate the market conditions, which did not support the Company's aggressive growth; and (4) that, as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and their earnings projections. The complaint further alleges that on May 13, 2004, after the close of the market, Merix revised guidance for the fourth quarter of fiscal 2004, ending May 29, 2004. News of this shocked the market. Shares of Merix fell $4.64 per share or 30.29 percent on May 14, 2004, to close at $10.68 per share.
In a press release dated September 20, 2005, Merix Corporation announced that the complaint in the securities class action lawsuit (In re Merix Corporation Securities Litigation, U.S. District Court Case No. CV 04-826-MO) filed against Merix and four of its officers has been dismissed without prejudice to plaintiffs' right to refile.
In a press release dated November 19, 2005, Merix Corporation today announced that the plaintiff in the previously filed securities class action lawsuit (In re Merix Corporation Securities Litigation, U.S. District Court Case No. CV 04-826-MO) has filed an amended complaint against Merix, its directors, four of its officers and the underwriters of its January 2004 public offering of common stock, alleging violations of federal securities laws.
According to a press release dated September 29, 2006, Merix Corporation announced that the second amended complaint in the securities class action lawsuit (In re Merix Corporation Securities Litigation, U.S. District Court Case No. CV 04-826-MO) filed against Merix, its directors and four of its officers has been dismissed with prejudice. The litigation was originally filed on June 17, 2004, alleging violations of federal securities laws. Merix filed a motion to dismiss in March 2005, which was granted in September 2005 without prejudice to the plaintiffs' right to re-file. The plaintiffs filed their second amended complaint in November 2005, and Merix again moved to dismiss. The motion to dismiss was granted with prejudice on September 28, 2006.
On October 13, 2006, the plaintiffs filed a Notice of Appeal from the dismissal in the U.S. Court of Appeals for the Ninth Circuit.
As summarized by the Company’s FORM 10-Q for the quarterly period ended August 29, 2009, in April 2008, the Ninth Circuit reversed the dismissal of the second amended complaint seeking an unspecified amount of damages. The Company sought rehearing which was denied and rehearing en banc was also denied. The Company obtained a stay of the mandate from the Ninth Circuit and filed a certiorari petition with the United States Supreme Court on September 22, 2008. On December 15, 2008, the Supreme Court denied the certiorari petition and the case was remanded back to the U.S. District Court for the District of Oregon. On May 15, 2009, the plaintiffs moved to certify a class of all investors who purchased in the public offering and who were damaged thereby. The Court has not yet ruled on that motion. The case is currently in the discovery phase.
On November 5, 2009, Judge Michael W. Mosman granted in part and denied in part the Lead Plaintiff's Motion to Certify the Class. According to the Opinion and Order, Judge Mosman certifies a class composed of all persons and entities who purchased or otherwise acquired the common stock of Merix Corporation from an Underwriter defendant directly pursuant to Merix's January 29, 2004 offering, who held the stock through the first alleged corrective disclosure on May 13, 2004, and who were damaged thereby. Judge Mosman appoints Central Laborers as class representative and appoint Barroway Topaz as class counsel. Finally, Judge Mosman allows class treatment only with respect to § 11 claims and § 15 claims predicated on § 11 violations.
On April 1, 2010, Judge Michael W. Mosman signed the Order staying the case pending final approval of a settlement agreement between the parties.
On August 25, 2010, the lead plaintiffs filed a motion for preliminary approval of the proposed settlement. According to the Stipulated Settlement Agreement, the proposed settlement is in the amount of $2,500,000 in cash. The motion was approved on September 17, 2010. The Settlement Fairness Hearing was set for January 3, 2011.
On January 5, 2011, the Court entered the Order signed by Judge Michael W. Mosman approving the settlement, approving the plan of allocation, and awarding attorneys' fees and expenses. According to the Order, lead counsel for plaintiffs is awarded attorney fees in the amount of one third (33 1/3 %) of the settlement fund, and $160,368.31 for reimbursement of expenses.