On February 7, 2007, the judge granted defendants' motion to dismiss but provided leave for an amended complaint to be filed. Plaintiffs did so, entering the Second Consolidated Complaint on March 12, 2007. Again defendants moved for dismissal, and again their motion was granted with prejudice on October 3, 2007.
On May 22, 2006, the Court entered the Order consolidating all actions under master file number 1:06-cv-275-TWT. The Court further granted the motion to appoint lead plaintiff and approve Lead Plaintiff's Selection of Lead Counsel. The Court granted the motion to dismiss the Argento Complaint without prejudice. On June 30, 2006, the plaintiffs filed a Consolidated Class Action Complaint, and the defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint.
The original Complaint alleges that the Defendants violated Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder, by failing to disclose to the investing public that CCE had a longstanding and systemic practice of channel stuffing -- forcing extra product onto its customers to boost revenue. CCE's reported financial results and future earnings prospects were materially misleading without disclosure about CCE's channel stuffing practices and how those practices affected CCE's financial condition. The complaint also alleges that CCE's channel stuffing resulted in the improper recognition of revenue in violation of GAAP.
While defendants were misrepresenting CCE's financial condition, and CCE's stock price climbed through the Class Period, the individual defendants engaged in substantial insider trading. For example, Defendant Johnston sold over $172 million worth of his CCE stock, representing 19.52% of his holdings or 6,481,082 shares. Defendant Mannelly sold approximately 372,396 shares of his CCE common stock, with proceeds totaling approximately $9,353,964, and Defendant Van Houten sold approximately 225,953 shares of CCE common stock, for proceeds totaling approximately $6,123,757. Other individual defendants sold substantial amounts of CCE stock as well.
The complaint further alleges that on or around July 29, 2004, CCE made a partial corrective disclosure regarding CCE's true financial condition and diminished future earnings prospects. Reacting to CCE's disclosures, and the individual defendants' insider trading activities, investors hammered CCE's stock price on record trading volumes. Thus, by the close of business on July 29, CCE's stock price fell by approximately 25% or $5 per share, erasing nearly $3.1 billion of CCE's then $12.5 billion market capitalization.