The original Complaint charges United Rentals and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.The Complaint specifically alleges that, during the Class Period, the Company failed to disclose and misrepresented the following material adverse facts which were known to Defendants or recklessly disregarded by them: (1) that the Company, in an effort to generate a more favorable stock price and raise capital, manipulated its financial results through the use of restructuring charges, asset write-downs, and debt refinancing; (2) that the Company improperly delayed recognition of bad accounts receivable; (3) that as a result of these manipulations, the Company's announced financial results were in violation of Generally Accepted Accounting Principles ('GAAP'); and (4) that the Company's financial results were materially inflated at all relevant times. As the Complaint details, on August 30, 2004, United Rentals announced that it had received notice that the SEC was conducting a non-public, fact- finding inquiry of the company. The notice was accompanied by a subpoena requesting the production of documents relating to certain of the Company's accounting records. News of this inquiry shocked the market. Shares of United Rentals fell $4.39 per share, or 21.53 percent, to close at $16.00 per share on August 30, 2004 on unusually heavy trading volume.
As summarized by the Company’s FORM 10-K For The Fiscal Year Ended December 31, 2008, as previously announced, following our public announcement of the SEC inquiry, three purported class action lawsuits were filed against the Company and certain of its current and former officers and/or directors in the United States District Court for the District of Connecticut. By orders dated February 1, 2005 and November 8, 2005, the Court consolidated the three actions and appointed City of Pontiac Policeman’s and Fireman’s Retirement System as lead plaintiff for the purported class. The consolidated action is now entitled In re United Rentals, Inc. Securities Litigation.
The consolidated amended complaint in this action alleges, among other things, that certain of our SEC filings and other public statements contained false and misleading statements that resulted in damages to the plaintiffs and the members of the purported class when they purchased our securities. The consolidated amended complaint includes, inter alia, allegations relating to the conclusions of the Special Committee and other matters disclosed in the 2004 Form 10-K. On the basis of those allegations, lead plaintiff, on behalf of itself and a purported class of purchasers of our securities from February 28, 2001 to August 30, 2004, asserts: (i) a claim against all defendants under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 thereunder; and (ii) a claim against certain of the individual defendants under Section 20(a) of the Exchange Act. The consolidated amended complaint seeks unspecified compensatory damages, costs and expenses.
The defendants in this action filed and briefed motions to dismiss the consolidated amended class action complaint. On March 10, 2008, we announced that we had entered into a memorandum of understanding with lead plaintiff’s counsel to settle this action. The memorandum of understanding provided that the claims of the purported plaintiff class will be settled for a cash payment of $27.5. On January 22, 2009, we and the individual defendants entered into a stipulation of settlement with lead plaintiff on the terms contemplated by the memorandum of understanding. The Court issued an order dated February 2, 2009 that, among other things, (i) preliminarily approved the parties’ proposed settlement; (ii) certified, for purposes of the proposed settlement only, a class of persons who purchased or otherwise acquired our publicly-traded securities during the period from February 28, 2001 to August 30, 2004, inclusive; (iii) directed that lead plaintiff’s counsel provide notice to the class of the proposed settlement; and (iv) scheduled a fairness hearing with respect to the settlement to take place on May 22, 2009. The proposed settlement of this action remains subject to, among other things, final approval by the Court. Separately, the Company has entered into agreements with its insurance carriers to fund a portion of the proposed settlement and reimburse the Company for certain defense costs concerning the stockholder actions and related inquiries and matters that have previously been expensed by the Company.
On May 26, 2009, Judge Christopher F. Droney signed the Orders approving the motion for settlement and approving the motion for attorney fees and expenses. Lastly, Judge Droney signed the Final Judgment and Order of Dismissal with Prejudice, dismissing the action.