On October 30, 2006, the hearing on whether to approve the settlement was held before U.S. District Judge Christina A. Snyder. On November 6, 2006, the Court entered the Order from the hearing awarding Lead Counsel reimbursement of expenses in the aggregatge amount of $99,822.65, and attorneys’ fees in the total amount of $1,687,500. The Court also entered the Final Order and Judgment approving the settlement as set forth in the Stipulation. The case is terminated.
According to the Notice of Pendency and Proposed Settlement of Class Action, $6,750,000 settlement fund has been established. The Court will hold a hearing on October 30, 2006, to decide whether to approve the Settlement.
As summarized by the same notice, by an order dated January 28, 2005, the Court consolidated all five cases. On March 14, 2005, the Court appointed the Lead Plaintiff, and approved Lead Plaintiff’s selection of Schiffrin & Barroway, LLP as lead counsel (“Lead Counsel”). The Consolidated Amended Class Action Complaint (the “Complaint”) was filed on June 30, 2005. On August 1, 2005, Defendants moved to dismiss the Complaint. Plaintiffs filed their opposition to Defendants’ Motion to Dismiss on November 2, 2005, and Defendants filed a reply brief in support of the Motion to Dismiss on February 17, 2006. In the midst of these filings, the Parties agreed to submit this matter to mediation and met before the Honorable Daniel Weinstein (Ret.) on September 9, 2005. The Parties did not come to a resolution at the mediation, but settlement negotiations continued. In or around March 2006 the basic terms of the Settlement were reached. The Defendants’ motion to dismiss was pending at the time the Parties reached the proposed Settlement.
The original complaint charges Autobytel 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. More specifically, the Complaint alleges that 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 inappropriately recognized some unapplied credits; (2) that as a result of this, the Company's financial results were materially inflated by $900,000; (3) that the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal controls; and (5) that as a result of the above, the Company's financial results were materially inflated at all relevant times.
The complaint further alleges that on October 21, 2004, Autobytel announced partial third quarter 2004 financial results and that it would reschedule its earnings conference call and webcast, which had been scheduled for that afternoon. Furthermore, the Company announced that the Audit Committee of the Board of Directors of the Company was directing an internal review of the accounting treatment of certain unapplied credits that were recognized as revenue during the four quarters ended March 31, 2004. This news shocked the market. Shares of Autobytel fell $1.93 per share, or 21.91 percent, on October 21, 2004, to close at $6.80 per share.