This case was settled and subsequently closed on September 28, 2010.
On September 28, 2006, the Court entered the Memorandum Opinion and Order signed by U.S. District Judge Mary L. Cooper granting the defeddants’ motion to dismiss the Consolidated Complaint, and the civil case was terminated. On October 27, 2006, the plaintiff filed a Notice of Appeal. The appeal is currently pending in the U.S. Court of Appeals for the Third Circuit.
As disclosed by the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, in April and May of 2005, purported class action lawsuits were filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, alleging violations of the federal securities laws. The actions purport to be filed on behalf of purchasers of the Company’s common stock during the period from October 5, 2004 (the date of the Company’s signing of the agreement to acquire Tenovis) through April 19, 2005. The Company has been served with a number of these complaints. No class has been certified in the actions. The complaints seek compensatory damages plus interest and attorneys’ fees. In August 2005, the court entered an order identifying a lead plaintiff and lead plaintiffs’ counsel. A consolidated amended complaint was filed in October 2005. Pursuant to a scheduling order issue by the District Court, defendants filed their motion to dismiss the consolidated complaint in December 2005. A hearing on defendants’ motion to dismiss is scheduled for August 2006. Discovery of the matter has been stayed in accordance with applicable law, pending the outcome of the motion to dismiss.
The Complaint alleges that Avaya violated federal securities laws. Specifically, defendants failed to disclose the following: (i) the cost of the integration of Tenovis, a company Avaya had acquired, was much greater than represented and rather than being "accretive" to fiscal 2005 earnings or having a positive financial impact within a short period of time, the acquisition would, in fact, reduce Avaya's earnings by at least $.06 per share during fiscal 2005; (ii) Avaya's changes in its delivery methods of products to market was creating severe disruptions in sales; (iii) Avaya was experiencing a dramatic reduction of demand in its U.S. market; and (iv) and as a result, Avaya had no reasonable basis to project an increase in profits or an increase in revenues of 25-27% for fiscal 2005.
The complaint further alleges that on or around April 19, 2005, Avaya released its financial and operational results for the second quarter of fiscal 2005 and reported revenues and earnings far short of previous guidance and analyst expectations of earnings of $0.17 a share on revenue of $1.29 billion. One analyst at J.P. Morgan called the results "horrid" and cut its rating on the stock to "neutral" from "overweight." On this news, the stock fell more than 25% on April 20, 2005.
The class action lawsuit has been filed behalf of all persons who purchased the publicly traded securities of Avaya, Inc., and all those who acquired Avaya through its acquisitions of Tenovis and RouteScience.