According to a press release dated August 11, 2006, Northwest Airlines Corp. said a class action lawsuit brought on behalf of investors who acquired the company's securities between April 21, 2005 and Sept. 14, 2005 has been voluntarily dismissed without prejudice. The airline said the action, which was filed at the end of 2005, was pending in the U.S. District Court for the Southern District of New York, and was brought under the Securities Exchange Act.
In an article dated May 17, 2006, only the class members collectively known as the 'Tu Group' have moved to be appointed as lead plaintiff, and to designate their counsel as Lead Counsel pursuant to the procedures set forth by the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4(a)(3)(B) ('PSLRA'). The Court hereby appoints the Tu Group as Lead Plaintiff, and designates the firm of Milberg Weiss Bershad & Schulman LLP ('Milberg Weiss ') as Lead Counsel.
The complaint alleges, among other things, that certain Northwest insiders sold their Northwest securities for proceeds in excess of $30 million while in possession of nonpublic information regarding Northwest's plans to file for chapter 11 bankruptcy. The complaint further alleges that defendants made materially false and misleading statements, throughout the class period, with respect to Northwest's prospects. Specifically, the complaint alleges, defendants maintained that Chapter 11 bankruptcy was "a possibility" and that the Northwest might have "to consider" filing for bankruptcy if certain conditions were not met. The complaint further alleges that defendants' statements were materially false and misleading not only because defendants failed to disclose that the Company's Chapter 11 bankruptcy filing was already imminently anticipated and being planned for, but also because they failed to disclose that filing for Chapter 11 protection was, in fact, a strategy that defendants had adopted at least as early as April 2005 because they viewed bankruptcy reorganization as the only way to dump the crushing burden of Northwest's pension obligations on the Pension Benefit Guaranty Corp., impose their will upon Northwest's union to obtain givebacks of at least $1.1 billion, and thereby compete with lower-cost discount carriers such as JetBlue Airways, and so-called "legacy" rivals such as UAL Corp. and US Airways Group Inc., that had already offloaded their pension obligations and otherwise achieved significant savings through bankruptcy reorganization.
The Company, on September 14, 2005, announced that it had filed a voluntary petition for relief under Chapter 11, title 11, United States Code, 11 U.S.C. sections 101, et seq. (the "Bankruptcy Code"). On this news the Company's shares, which had been trending downward, fell from a closing price of $1.87 on September 14, 2005 to an opening price of $0.86 on September 15, 2005. The stock was delisted on September 26, 2005 but continued to trade over-the-counter as a penny stock. As a result of defendants' wrongful acts and omissions, and this material erosion and decline in the market value of Northwest securities, plaintiffs and other class members who purchased such Northwest securities during the Class Period have suffered significant losses and damages.
The complaint further alleges that, during the months preceding the bankruptcy, insiders sold their Northwest shares to unwitting investors for proceeds in excess of $30 million under highly suspicious circumstances that raise the inference that, at the time of the sales, defendants had material nonpublic information that the Company had already planned to file for bankruptcy and that the filing was imminently expected.