The original complaint charges Dot Hill and certain of its officers and directors with violations of the Securities Exchange Act of 1934 by issuing a series of materially false statements. Specifically, defendants concealed the following: (i) the Company's accounting department suffered from material weaknesses and deficiencies and lacked the necessary staff and resources to perform its required functions; (ii) the Company's inadequate internal accounting process and controls enabled Dot Hill management to manipulate the Costs of Goods Sold and routinely and inappropriately misclassify "expenses"; (iii) the Company lacked effective internal controls in its financial reporting process; and (iv) the Company falsely reported its Q1-Q3 04 financial results by improperly recognizing revenue and by improperly recording expenses.
The complaint further alleges that on or around February 3, 2005, the Company announced its preliminary Q4 04 financial results and that it would be restating its 2004 unaudited financial results due to a data entry error that the Company attributed to material weaknesses in its internal controls. The Company also stated that it had "identified other errors pertaining to the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004 that it deems immaterial, including: the incorrect classification of certain product costs as operating expenses, the failure to eliminate corresponding revenue and cost of goods sold entries and the presence of duplicate entries."
The lawsuit was filed on behalf of all persons who purchased the common stock of Dot Hill Systems Corp between April 23, 2003 and February 3, 2005, inclusive. Also included are those who purchased in a secondary offering on or around September 17, 2003.
On June 8, 2006, several complaints were consolidated into a single action. On June 23, 2006, and the Court appointed as lead plaintiff a group comprised of the Detroit Police and Fire Retirement System and the General Retirement System of the City of Detroit. The consolidated complaint was filed on August 25, 2006, and the Company filed a motion to dismiss on October 5, 2006. The Court granted the Company’s motion to dismiss on March 15, 2007. Plaintiffs filed their Second Amended Consolidated Complaint on April 20, 2007. The Company filed a motion to dismiss the Second Amended Consolidated Complaint on May 1, 2008. On September 2, 2008, U.S. District Judge Janis L. Sammartino granted the defendants’ motion to dismiss without prejudice with leave to file a third amended consolidated class action complaint within thirty days of the date the Order. Judge Sammartino also granted the motion to stay discovery in the state court actions.
On October 10, 2008, the lead plaintiffs filed a Third Amended Consolidated Class Action Complaint against all defendants. The defendants responded by filing a motion to dismiss the Third Amended Consolidated Class Action Complaint on November 24, 2008. On March 18, 2009, Judge Sammartino granted the defendants’ motion to dismiss without prejudice with leave to file a Fourth Amended Consolidated Class Action Complaint.
On April 17, 2009, the lead plaintiffs filed a Notice of Appeal as to the order dismissing the action. According to an Order from the Ninth Circuit Court of Appeals issued on May 1, 2009, the U.S. Court of Appeals a review of the challenged order reflects that it may not be final and appealable because the USDC dismissed the third amended class action complaint with leave to amend. Within 21 days after the date of this order, appellant shall move for voluntary dismissal of this appeal or show cause why it should not be dismissed for lack of jurisdiction.
On May 15, 2009, the lead plaintiffs filed a notice of intent of not to file a Fourth Amended Consolidated Complaint, and on May 18, 2009, Judge Janis L. Sammartino issued the Final Judgment and Order of Dismissal dismissing the action with prejudice. On June 8, 2009, the plaintiffs filed an Amended Notice of Appeal as to the judgment and order granting the defendants’ motion to dismiss. On October 30, 2009, the Court entered the Order from the U.S. Court of Appeals. The parties stipulated to the dismissal of the appeal.