According to a press release dated April 7, 2008, Martek Biosciences Corporation announced that the United States District Court for the District of Maryland has entered a Final Judgment and Order of Dismissal approving the settlement of the consolidated class action brought on behalf of certain purchasers of Martek common stock.
In a press release dated February 7, 2008, the action has been certified as a class action and that a settlement for Six Million Dollars ($6,000,000) has been proposed. A hearing will be held before the Honorable Marvin J. Garbis in the United States District Court for the District of Maryland, United States Courthouse, 101 W. Lombard Street, Baltimore, MD 21201, at 10:00 a.m., on April 4, 2008, to determine whether (1) the proposed Settlement should be approved by the Court as fair, reasonable, and adequate; (2) Plaintiffs' Co-Lead Counsel's application for an award of attorneys' fees and reimbursement of expenses should be approved; (3) Lead Plaintiffs should be reimbursed for their reasonable costs and expenses (including lost wages) directly related to their representation of the Class in the litigation; and (4) the claims against the Defendants should be dismissed with prejudice.
In a press release dated December 10, 2007, Martek Biosciences Corporation announced that it has entered into a tentative settlement of all claims in the securities class action litigation filed in the United States District Court for the District of Maryland alleging, among other things, violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. The settlement will result in the dismissal of the claims against Martek and all other defendants, subject to final court approval. The proposed settlement of the class action will include a cash payment to the settlement fund of $6 million, all of which will be paid by the Company's insurer. The parties anticipate filing in the near future a motion in the federal court asking for approval of the proposed settlement, which is required before the settlement becomes effective and final. No assurances can be given that the settlement ultimately will be approved by the court.
On July 11, 2007, the defendants filed a motion for summary judgment on the remaining counts.
On September 18, 2006, a Stipulation of Dismissal With Prejudice of Counts III and IV of the Consolidated Amended Class Action Complaint. On September 20, 2006, the Court entered the Marginal Order approving the Stipulation of Dismissal. On September 22, 2006, the Court entered the Stipulation and Order approving the motion to certify a class.
As disclosed by the Company’s FORM 10-Q For the Quarterly Period Ended July 31, 2006, the Court entered orders consolidating these cases, appointing lead plaintiffs and approving lead plaintiffs’ counsel and liaison counsel. On November 18, 2005, a consolidated amended class action complaint was filed in the United States District Court for the District of Maryland in In re Martek Biosciences Corp. Securities Litigation, Civil Action No. MJG 05-1224. While the Court has not made a determination of whether a putative class can be certified, the consolidated complaint claims to be filed on behalf of the purchasers of the Company’s common stock during a purported class period beginning December 9, 2004 and ending April 28, 2005. At this time, plaintiffs have not specified the amount of damages they are seeking in the actions. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, promulgated thereunder, and violations of Section 11 and 15 of the Securities Act of 1933, as amended. The consolidated complaint alleges generally that we and the individual defendants made false or misleading public statements and failed to disclose material facts regarding our business and prospects in public statements the Company made or failed to make during the period and, in the case of the Securities Act of 1933 claims, in the Company’s January 2005 prospectus. The Company filed a motion to dismiss the consolidated complaint on February 3, 2006, and a hearing before the Court on this motion was held on May 22, 2006. On June 14, 2006, the Court denied the Company’s motion to dismiss and on July 25, 2006, the Court entered a scheduling order for further proceedings in the case. Discovery has commenced and is anticipated to continue into 2008.
Several purported shareholder class action lawsuits have been filed against Martek and certain of its present and former executive officers charging the defendants with violations of the Securities Exchange Act of 1934. 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 due to the Company's productions issues in the past, the defendants put in place a system by which they allowed their customers to build a moderate level of safety stock inventory; (2) that throughout the fourth quarter of fiscal year 2004 and the first quarter of fiscal year 2005, defendants manipulated its channels of distribution by flooding its major customers with inventory in excess of their allotted levels, so that Martek could meet its financial numbers and complete an$81.4 million stock offering; (3) as a result of defendants' channel manipulation, Martek's financial results were materially inflated; and (4)that as a result of the above, the Company's statements about its fiscal year2005 financial performance were lacking in any reasonable basis when made.
The complaint further alleges that on or around April 27, 2005, after the market closed, Martek provided an update o fits earnings estimates and production plan for fiscal year 2005. Martek revealed it anticipated a decrease in third quarter sales. News of this shocked the market. Shares of Martek, on April 28, 2005, fell $32.49 per share, or 45.9 percent, on unusually heavy trading volume.