According to the docket, the court entered a Final Judgment and Order of Dismissal on July 14, 2008. The court awarded attorneys' fees and expenses in the amount of 23.5% and $229,847.79, respectively.
According to a press release dated March 11, 2008, Nash Finch Company a leading national food distributor, announced that it has signed a Stipulation of Settlement which, if approved by the Court, will fully resolve all of the claims in the putative securities fraud class action pending in the United States District Court for the District of Minnesota. That class action was filed after the Company issued revised earnings guidance on October 20, 2005. The lawsuit challenged, among other things, the public statements the Company made about its acquisition of certain assets from Roundy’s Supermarkets, Inc. The Company denies it engaged in any wrongdoing. Pursuant to this settlement, which is subject to certain conditions, $6.75 million will be paid into a settlement fund that will be distributed to members of a class of all persons who purchased the Company’s common stock from February 24, 2005, the date the Company announced an agreement to acquire certain assets from Roundy’s Supermarkets, Inc., through and including October 20, 2005, the date the Company announced a downward revision to its earnings guidance for fiscal 2005. The settlement payment will be funded in full by the Company’s insurance coverage. Notice of the settlement must be provided to the class and then it is subject to final approval by the Court.
As summarized by the Company’s Form 10-K for the fiscal year ended: December 29, 2007, on December 19, 2005 and January 4, 2006, two purported class action lawsuits were filed against us and certain of our executive officers in the United States District Court for the District of Minnesota on behalf of purchasers of Nash Finch common stock during the period from February 24, 2005, the date we announced an agreement to acquire two distribution divisions from Roundy’s, through October 20, 2005, the date we announced a downward revision to our earnings outlook for fiscal 2005. One of the complaints was voluntarily dismissed on March 3, 2006 and a consolidated complaint was filed on June 30, 2006. The consolidated complaint alleges that the defendants violated the Securities Exchange Act of 1934 by issuing false statements regarding, among other things, the integration of the distribution divisions acquired from Roundy’s, the performance of our core businesses, our internal controls and our financial projections, so as to artificially inflate the price of our common stock. The defendants filed a joint motion to dismiss the consolidated complaint, which the Court denied on May 1, 2007. Following the denial of the Motion to Dismiss, Nash Finch and the purported class engaged in settlement discussions which are still ongoing.
The original Complaint alleges that defendants violated federal securities laws by issuing a series of materially false statements in the summer of 2004, which included eliminating non-performing assets, restructuring the Company's credit lines, and issuing hundreds of millions of dollars in then-unregistered convertible debt. Also, the complaint alleges that on February 24, 2005, the inception of the Class Period, defendants announced a $220 million acquisition of Roundy's Distribution Center (Roundy's), a Midwest food distributor, which, according to defendants, was expected to add nearly $1 billion in yearly sales to the Company, be immediately accretive to earnings, and create approximately $10 million per year in cost savings. Unbeknownst to investors, however, defendants' statements were materially false and misleading because defendants knew, or recklessly disregarded. Throughout the Class Period, defendants failed to disclose that (i) the Company was operating far below expectations; (ii) that the Company had significantly under-reserved for the Roundy's acquisition; (iii) the integration of Roundy's was not proceeding according to plan; and (iv) Nash Finch's core business was underperforming guidance. While investors were unaware of the conditions that were adversely affecting Nash Finch, defendants sold more than $300 million in notes in a private placement and Company insiders sold more than $17 million of their Nash Finch shares.
On October 20, 2005, the last day of the Class Period, the Company issued a press release announcing significantly lower fiscal 2005 earnings guidance of $3.00 to $3.25 per share, from its previous guidance of $3.70 and $3.89. The Company attributed the lowered guidance to "a decline in retail gross profit margins, primarily reflecting inadequate execution in pricing across the Company's retail operations; depressed wholesale gross profit margins principally relating to manufacturer promotional spending; and higher than expected acquisition integration costs." Defendant Marshall stated that the Company "experienced serious erosion in retail and wholesale gross profit margins" and that "the impact has been deeper than we anticipated and margins will take longer to rebound than we had thought or fiscal 2005." In reaction to this news, the price of Nash Finch stock fell $12.76 per share, or 28.6%, from its closing price of $42.08 on October 20, 2005, to close at $30.04 on the following trading day. Defendants were motivated to engage in the fraudulent and wrongful conduct to sell more than $300 million in notes in a private placement and in order for Company insiders, including defendant Marshall, to sell more than $17 million of their privately-held Nash Finch shares while in possession of material adverse non-public information about the Company.
Note: Nash Finch operates in three segments: Food Distribution, Military Food Distribution, and Food Retailing. During the Class Period, the Company operated 85 corporate-owned stores and, through its distribution operations, served independent retailers and military commissaries.