The original complaint alleges that during the Class Period, Belo intentionally overstated the circulation of its flagship newspaper, The Dallas Morning News, in order to exact higher payments from the newspapers' advertisers. These numbers were then reported to investors and used to inflate the company's financial results.
The complaint further alleges that on or around August 5, 2004, Belo admitted its Dallas Morning News circulation was overstated by 1.5% for the daily paper and 5% for the Sunday paper. It disclosed the resignation of Barry Peckham, the Executive Vice President in charge of circulation, and announced it was conducting an internal investigation and would refund advertisers all amounts that they had been overcharged. In response to this announcement, Belo's stock price fell from a close of $23.21 per share on August 5, 2004 to close at $21.55 per share on August 6, 2004, on unusually high trading volume of over 4.6 million shares.
As previously reported by the Company’s FORM 10-K for the fiscal year ended December 31, 2005, on August 23, 2004, August 26, 2004 and October 5, 2004, respectively, three related lawsuits were filed by purported shareholders of the Company in the United States District Court for the Northern District of Texas against the Company and certain individuals. The complaints arise out of the circulation overstatement at The Dallas Morning News, alleging that the overstatement artificially inflated Belo’s financial results and thereby injured investors. The plaintiffs seek to represent a purported class of shareholders who purchased Belo common stock between May 12, 2003 and August 6, 2004. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On October 18, 2004, the court ordered the consolidation of all cases arising out of the same facts and presenting the same claims, and on February 7, 2005, plaintiffs filed an amended, consolidated complaint adding individual defendants. On April 8, 2005, plaintiffs filed their unopposed motion for leave to file a first amended consolidated complaint, which motion was granted on April 11. On August 1, 2005, defendants filed a motion to dismiss. On September 30, 2005, plaintiffs filed their response to defendants’ motion and on October 31, 2005, defendants filed their reply.
According to a press release dated March 30, 2006, Belo Corp. was notified that the United States District Court for the Northern District of Texas granted the motions of Belo Corp. and other defendants to dismiss the purported federal securities class action lawsuits filed against them in 2004 arising out of the previously-reported circulation overstatement at The Dallas Morning News. The Court granted plaintiffs leave to file an amended complaint.
On May 12, 2006 plaintiffs filed their Second Amended Consolidated Complaint against Belo Corporation and certain individuals. On July 27, 2006, all defendants moved to dismiss the complaint, which the judge granted in part and with prejudice for three individuals on May 18, 2007. On September 17, 2007, the plaintiffs filed a motion to certify the class.
According to an article dated April 7, 2008, Judge Sidney Fitzwater has denied class-action certification in a 2004 shareholder lawsuit against Belo Corp. over a circulation overstatement at The Dallas Morning News, Brendan Case writes for the newspaper. …in his recent ruling, Judge Fitzwater determined that the lead plaintiff had failed to show that its losses were due solely to Belo's announcement of the circulation overstatement, as opposed to other causes of The News' circulation declines that Belo also detailed on Aug. 5, 2004.
On June 16, 2008, the Fifth Circuit has granted plaintiff’s petition to appeal the court’s denial of class certification. On December 2, 2008, Chief Judge Sidney A. Fitzwater granted the motion to stay discovery pending a ruling by the Fifth Circuit on plaintiff’s appeal from the court’s Memorandum Opinion and Order denying class certification.
According to a press release dated August 12, 2009, Belo Corp. and A. H. Belo Corporation announced that the U. S. Court of Appeals for the Fifth Circuit affirmed a U. S. District Court's denial of class certification sought by the plaintiffs in litigation filed in 2004 related to circulation matters at The Dallas Morning News. The Fifth Circuit's decision in Fener v. Belo, No. 08-10576, held that the plaintiffs had not presented sufficient evidence for the case to proceed as a class action. The Company and the other defendants will now seek to dismiss the litigation.
On November 10, 2009, Chief Judge Sidney A. Fitzwater signed the Judgment and Order of Dismissal with Prejudice. The case is now closed.