On February 23, 2007, the Settlement Conference was held before U.S. District Judge Walter S. Smith. That day, the Court entered the Order and Final Judgment approving the settlement and dismissing the action with prejudice. Lead counsel was awarded 25% of the settlement fund in fees and $45,116.46 in reimbursement of expenses.
According to a press release dated December 20, 2006, the action has been certified as a class action for certain purposes and that a Settlement for $2,600,000 has been proposed. A hearing will be held before the Honorable Walter S. Smith, Jr., Chief United States District Judge, in the United States District Court for the Western District of Texas, Waco Division, U.S. Courthouse, 800 Franklin Ave., Room 1, Waco, Texas 76701 at 9:30 a.m., on February 23, 2007 to determine whether the proposed Settlement should be approved by the Court as fair, reasonable and adequate, and to consider the motion of Lead Counsel for attorneys' fees and reimbursement of expenses.
In a press release dated August 15, 2006, Central announced that it has reached oral agreements in principle with the plaintiffs to settle all outstanding securities class action litigation, two purported derivative actions related to the period between the date of Central's initial public offering and August 2004, and a third derivative action related to the Merger transaction. The agreements do not contain any admission of fault or wrongdoing on the part of Central or any of the individual defendants in such litigation. The agreements are subject to the completion of the usual and customary documentation for such settlements, and are subject to, and conditioned upon, final court approval. The settlements will be funded from the proceeds of Central's directors' and officers' liability insurance policy.
As summarized by the Company’s Form 10-Q for the quarterly period ended July 1, 2006, three stockholder class actions s were subsequently consolidated in the United States District Court for the Western District of Texas under the caption In re Central Freight Lines Securities Litigation (the "Consolidated Class Action"). The Oklahoma Firefighters Pension and Retirement System was named lead plaintiff in the Consolidated Class Action, and a Consolidated Amended Class Action Complaint was filed on May 9, 2005, purportedly on behalf of purchasers of the Company’s common stock from December 12, 2003 through March 17, 2005. The Complaint seeks unspecified monetary damages. On July 8, 2005, the Company moved to dismiss the Consolidated Amended Class Action Complaint. On August 23, 2005, the lead plaintiff filed its opposition to this motion to dismiss, and on September 12, 2005, the Company filed a response in which it again requested dismissal of the Consolidated Amended Class Action Complaint. At present, this motion is still pending and no hearing date has been set. In July 2006, the Company reached an oral agreement in principle with the plaintiffs to settle the Consolidated Class Action. The agreement does not contain any admission of fault or wrongdoing on the part of the Company or any of the individual defendants in the litigation. The agreement, which is subject to, and conditioned upon, final court approval, generally provides for the establishment of a settlement fund in the aggregate amount of $2,600, inclusive of fees and expenses, in exchange for a release of the Company and the individual defendants from all claims asserted in the litigation. The settlement will be funded from the proceeds of the Company’s directors’ and officers’ liability insurance policy.
The original complaint charges Central Freight and certain of its officers and directors with violations of the Securities Act of 1933. On December 12, 2003, Central Freight announced that had completed an IPO of 8.5 million shares of stock pursuant to a Prospectus/Registration Statement. The IPO was priced at $15.00 per share for total net proceeds of $77.9 million after underwriting discounts and commissions. In fact, the Prospectus/Registration Statement was materially false and misleading and failed to disclose, among other things, the following: (1) that the Company's dynamic resource planning process implementation was going disastrously; (2) that the Company's aggressive expansion projects were negatively affecting the Company's margins; (3) that the Company's insurance and claims accrual rate was off because the Company failed to have sufficient reverses for accident frequency; and (4) that the Company was experiencing severe operational issues. As this adverse information was disclosed, the Company's shares eventually plummeted to $8.55 per share.