On October 13, 2006, the defendants filed a motion to dismiss the Consolidated Amended Class Action Complaint which was originally filed on July 24, 2006. As a result of the Stipulation and Agreement of Settlement and the motion for preliminary approval of settlement both filed on September 6, 2007, the Court issued an Order on September 11, 2007, denying the defendants’ motion to dismiss without prejudice. On September 25, 2007, the Court issued the Order preliminarily approving the settlement and set the Settlement Hearing for January 11, 2008. According to the Notice of Pendency filed on October 3, 2007, the gross settlement fund is in the amount of Nine Million Canadian Dollars (CAD $9,000,000).
According to a Decision of Interest in an article dated August 10, 2006, the Court grants the Snow Group's motion to consolidate related actions, for appointment as lead plaintiff, and designates Lerach Coughlin and Labaton Sucharow as co-lead counsel. The Clerk of the Court shall file a copy of this Order in the separate file for each of the above-captioned actions and any other related individual action hereafter filed in, or hereafter transferred to, this Court.
As summarized by the same article, a prior related consolidated action against the same defendants named here but brought by Canadian plaintiffs, and arising out of the same course of alleged conduct, was dismissed without prejudice on forum non conveniens grounds in favor of a Canadian forum in an opinion issued by the Hon. Harold Baer, Jr. See In re Royal Group Techs. Sec. Litig., 04 Civ. 9809 (HB), 2005 WL 3105341 (S.D.N.Y. Nov. 21, 2005). At a status conference held in this matter on June 22, 2006, defendants indicated that one of the lead plaintiffs in the former action, Canadian Commercial Workers Industry Pension Plan, has since filed a similar complaint in Canada alleging violations of Canadian securities laws. Defendants further represented that they intend to file consolidated motions to dismiss the consolidated complaint in this action based on, inter alia, forum non conveniens, subject matter jurisdiction, preclusion, statute of limitations, and personal jurisdiction (as to individual defendants) grounds. At this stage, it is inappropriate to consider any of these potential bases for dismissal, and only the pending motion to consolidate and appoint lead plaintiff and counsel will be addressed below. Because the above-captioned actions arise out of or are related to the same allegations, the Court hereby consolidates the aforementioned cases for all purposes, as stated on the record at a conference held June 22, 2006. The caption of this consolidated action shall be hereinafter referred to as 'In re Royal Group Technologies Securities Litigation.' All relevant documents and submissions shall be maintained as one file under Master File No. 06 Civ. 0822 (RJH). Any other actions now pending or later filed in this district that arise out of or are related to the same facts as alleged in the above cases shall be consolidated for all purposes, if and when they are brought to this Court's attention, whether by application to the Court or otherwise.
Several purported class action complaints have been filed in January and February 2006 with similar allegations to the case against Royal Group Technologies, Inc., first filed in 2004. The 2004 case was dismissed in November 2005. According to the complaints filed in 2006, the lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of (i) all persons who purchased or otherwise acquired the common stock of Royal Group Technologies Limited ("Royal Group" or "the Company") (NYSE:RYG) (TSX:RYG); and (ii) all foreign persons and entities that purchased or otherwise acquired the common stock of Royal Group on the NYSE during the period between February 24, 2000 and October 18, 2004, inclusive (the "Class Period"). The case is pending in the United States District Court for the Southern District of New York against defendant Royal Group and one or more of its officers and/or directors. The action charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period, which statements had the effect of artificially inflating the market price of the Company's securities.
According to a press release dated November 22, 2005, Royal Group Technologies Ltd. said after the closing bell on Tuesday that the U.S. District Court for the Southern District of New York dismissed a consolidated shareholder lawsuit against the company that sought class action status. The lawsuit had alleged, among other things, that the defendants failed to disclose certain related-party transactions in violation of U.S. securities laws. The lawsuit was dismissed without prejudice on the grounds that Canadian courts would provide a more convenient and appropriate forum, the Toronto-based manufacturer of polymer-based construction products said.
The original complaint alleges that Royal Group violated United States securities laws by issuing false or misleading public statements. The complaint charges Royal Group and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Specifically, the complaint alleges that during the Class Period, defendants caused Royal Group's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. The statements were materially false and misleading because defendants knew, but failed to disclose the following: (1) that defendants engaged in a fraudulent scheme and/or conspiracy whereby defendants used false invoices to steal money from the Company and defraud shareholders; (2) that the defendant's use of false invoices caused the Company to overstate inventory and allowed defendants to delay writedowns on these assets in order to maintain purportedly strong earnings results; (3) that defendants falsely portrayed that the Company's U.S. window business was strong; (4) that the Company materially overstated its financial results during the Class Period; and (5) that as consequence of the above, the defendants' projection for fiscal year 2003-2004 were materially overstated and were lacking an any reasonable basis when made.
More specifically, the Complaint alleges that Royal Group and certain of its top executive officers were engaged in a conspiracy to defraud shareholders as disclosed on October 15, 2004 when Royal Group announced that it had received a Royal Canadian Mounted Police production order relating to alleged violations of the Criminal Code for fraud and conspiracy between January 1996 and January 2004. When this was revealed, shares of Royal Group fell $1.12 per share, or 12.49 percent, on October 18, 2004, to close at $7.85 per share.