Collins & Aikman Corporation is an automotive manufacturer of products such as cockpit modules, automotive floor and acoustic systems, instrument panels, automotive fabric, and convertible top systems.
The original Complaint charges Collins & Aikman and certain of its current and former officers with violations of the Securities Exchange Act of 1934. 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 improperly accounted for certain supplier rebates; (2) that the Company's financial statements required net adjustments of approximately $10 - $12 million; (3) that the Company's financial statements were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (5) that as a consequence of the foregoing, the Company's net income and financial results were materially overstated at all relevant times.
The Complaint further alleges that on or around March 17, 2005, Collins & Aikman announced that after the review of vendor rebates covered an aggregate of approximately $88 million of vendor transactions in fiscal years 2002 through 2004, the Company's management believes that net adjustments of approximately $10 - $12 million was required primarily occurring during fiscal 2004. News of this shocked the market. Shares of Collins & Aikman fell $0.39 per share or 23.93 percent, on March 17, 2005, to close at $1.24 per share.
On May 17, 2005, Collins & Aikman filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code and was no longer named as a Defendant. On June 8, 2005, Plaintiff Joseph Bruno, the Plaintiff in the first filed Complaint, filed a Notice of Voluntary Dismissal. Similar cases that were also filed in the U.S. District Court for the Eastern District of Michigan were also voluntarily dismissed. Additional Complaints were filed against certain officers and/or directors of Collins & Aikman in the U.S. District Court for the Southern District of New York.
As summarized by the lead Counsel’s website, on June 6, 2005, motions were made to consolidate the various cases and appoint lead Plaintiff and lead Counsel. On December 1, 2005, the court consolidated the cases. A consolidated Complaint was filed on January 13, 2006. On March 2, 2006, Defendants filed a motion to transfer the case to the Eastern District of Michigan. Plaintiff filed an opposition on March 17, 2006. Defendants' filed their motions to dismiss on March 18, 2006. Plaintiff filed an opposition on April 21, 2006, and Defendants replied on May 5, 2006. On July 10, 2006, Judge Mukasey of the Southern District of New York officially appointed Wolf Haldenstein lead Counsel. On July 12, 2006, he granted Defendants' motion for transfer and ordered the clerk to the transfer the case to the Eastern District of Michigan. Because of the transfer, Judge Mukasey declined to rule on Defendants' pending motions to dismiss.
On October 19, 2006, on of the individual Defendants was voluntarily dismissed with prejudice. On January 11, 2007, Defendants’ pending motion to dismiss were denied as moot. On May 4, 2007, a Second Amended Consolidated Class Action Complaint was filed and the Defendants responded by filing several motions to dismiss the Second Amended Consolidated Class Action Complaint on July 31, 2007. On August 6, 2007, the Court entered the Order granting the motion to dismiss the Second Consolidated Class Action Complaint as to one of the individual Defendants. On March 19, 2008, U.S. District Arthur J. Tarnow denied two of Defendants’ motions to dismiss and granted in part and denied in part one of the Defendant’s motion to dismiss. The parties then engaged in settlement conferences and discovery.
On February 17, 2010, a motion for preliminary approval of settlement was filed. According to the Stipulation and Agreement of Settlement, the proposed settlement is in the amount of $12,262,500. On February 24, 2010, the settlement was preliminarily approved. The Settlement Fairness Hearing was scheduled to be held before the Court on June 7, 2010.
On June 7, 2010, the settlement fairness hearing was held and the settlement was approved by District Judge Gerald E. Rosen. The case is now dismissed with prejudice.
On April 14, 2011, the Court issued a Settlement Distribution Order awarding the payment of fees and expenses to the claims administrator and awarding additional attorney's expenses.
