According to a press release dated October 31, 2007, SIRVA, Inc., a global relocation services provider, announced that the Company's previously-announced agreement to settle the securities class action litigation against SIRVA and certain of its former officers and directors has received final court approval. In approving the settlement, the court concluded that the settlement was fair and that all procedural requirements were met.
In a press releae dated July 12, 2007, a settlement for $53,300,000 has been proposed. A hearing will be held before the Honorable Ronald A. Guzmán in the U.S. District Court for the Northern District of Illinois, Eastern Division, Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604, at 2:00 p.m., on October 2, 2007 to determine whether the proposed settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the application of Lead Counsel for attorneys’ fees and reimbursement of expenses.
In a press release dated June 22, 2007, SIRVA (SIR) says it will settle a securities class action litigation pending against SIR and certain of its current and former officers and directors for approximately $53.3 million. SIR says its contribution to the settlement will be its agreement to waive its right to reimbursement from its insurers of approximately $5.6 million of legal fees and costs incurred by SIR in connection with the litigation, almost all of which has been previously paid by SIR.
In a press release dated May 4, 2007, in connection with completing its 2006 Forms 10-Q and as a result of SIRVA entering into settlement discussions regarding its securities class action litigation, SIRVA recorded a charge of approximately $5.6 million in the first quarter of 2006, reflecting SIRVA's estimate of its expected settlement costs. The majority of these costs have been previously funded by SIRVA.
As summarized by the Company’s FORM 10-Q For the quarterly period ended September 30, 2006, the court has appointed Central Laborers’ Pension Fund as the lead plaintiff and Saxena White P.A. as lead plaintiff’s counsel. On May 13, 2005, plaintiff filed a “corrected” complaint which alleged, among other things, that defendants had made false and misleading statements in certain press releases and SEC filings, including the prospectuses for SIRVA’s initial and secondary public offerings. On October 11, 2005, plaintiff filed its Consolidated Amended Class Action Complaint (the “Amended Complaint”), followed by a corrected version on October 19, 2005. The Amended Complaint added ten new defendants, including an additional SIRVA director, the seven underwriters which participated in the Company’s initial and secondary public offerings, the Company’s independent registered public accounting firm, and the private investment fund that manages the Company’s controlling shareholder. The Amended Complaint purported to be brought on behalf of all those who acquired SIRVA’s common stock between November 25, 2003 and January 31, 2005. The Amended Complaint also contained allegations relating to the following areas: the Company’s restatement of financial statements and accounting errors for years 2000 through 2003 and the first nine months of 2004, problems in the Company’s European operations, insurance reserves, financial forecasting and internal controls. The statements subject to the Amended Complaint are alleged to violate Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended (the “Securities Act”), as well as Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934, as amended. The plaintiff seeks unspecified damages. On January 3, 2006, the Company and all other defendants moved to dismiss the Amended Complaint for failure to state a claim upon which relief can be granted. On September 22, 2006, the court granted in part and denied in part that motion. It dismissed in full, without prejudice, the claim under Section 12(a)(2) of the Securities Act, as well as various allegations underlying the other claims and granted plaintiff 30 days to amend its complaint. On October 23, 2006, plaintiff filed its Consolidated Second Amended Class Action Complaint (the “Second Amended Complaint”) in order to replead claims that the court dismissed without prejudice. On November 14, 2006, the Company and all other defendants filed their answer to the Second Amended Complaint. On November 15, 2006, the Company and certain of the other defendants moved in part to dismiss the Second Amended Complaint.
On January 25, 2005, the plaintiff in the first filed complaint, Hiatt, et al. v. Sirva, Inc., et al. filed a Notice of Voluntary Dismissal. This case has been voluntarily dismissed to join a related purported class action complaint filed on November 24, 2004, Central Laborers' Pension Fund, et al. v. Sirva, Inc., case number 04-CV-07644.
The Complaint alleges that during the Class Period, SIRVA violated federal securities laws by issuing materially false or misleading public statements. More specifically, the Complaint alleges that SIRVA misrepresented or failed to disclose (1) that it maintained inadequate reserves in its Network Services division; (2) that the growth and profitability of its Network Services division was being adversely affected; (3) that SIRVA failed to rationalize capacity, reduce fixed costs, and generate a more meaningful relocation volume growth in its European division; and (4) that the profitability of the European operations was suffering.
The complaint further alleges that on November 9, 2004, Sirva announced, in a press release discussing its third quarter 2004 results, that it would take a $15.2 million charge to bolster its insurance reserves, which severely and negatively impacted its earnings. Its insurance business had deteriorated to the point that the Company would discontinue entire lines of its insurance business. In addition, the Company also reported poor results from its European operations. In a follow-up conference call, Sirva's CEO, stated that the reason behind the disappointing European results was high fixed costs, a situation that was being remedied through a substantial restructuring. These disclosures caused Sirva's stock price to drop from $23.78 per share on November 9, 2004 to $17.95 per share on November 10, 1004, a one day drop of 24.5%, on unusually heavy trading volume. During the Class Period, entities in which defendants Rogers and Schnall had financial and controlling interests sold 6,403,476 shares in the IPO and 15,022,831 shares in the secondary offering (21,426,307, total), thereby giving defendants a strong incentive to create the illusion that the Company's financial performance was better than it actually was.