CSK Auto Corporation is a specialty retailer of automotive parts and accessories, primarily doing business in the western part of the United States.
The original Complaint alleges that during the Class Period, Defendants issued false statements about CSK Auto’s earnings, assets and business prospects causing the Company’s stock to trade at artificially inflated levels. While the Company’s stock was artificially inflated due to Defendants’ false statements, certain officers and directors sold 75,106 shares of their CSK Auto stock for proceeds of $1.1 million.
The Complaint further alleges that on or around March 27, 2006, before the market opened, the Company issued a press release announcing that it would postpone the release of its fourth quarter and fiscal 2005 financial results. The postponement was necessary to provide adequate time for the Company to conduct a thorough review of certain accounting errors and irregularities discovered in the course of its ongoing assessment of internal control over financial reporting and an internal audit. On this news, CSK Auto stock dropped $1.26 to $14.64 per share, after hitting a low of $14.40 per share.
As summarized by the Company's quarterly report filed on August 15, 2007, on June 9 and 20, 2006, two shareholder class actions alleging violations of the federal securities laws were filed in the United States District Court for the District of Arizona against the Company and four of its current and former officers: Maynard Jenkins (who is also a director), James Riley, Martin Fraser and Don Watson (collectively referred to as the “Defendants”). The cases are entitled Communications Workers of America Plan for Employees Pensions and Death Benefits v. CSK Auto Corporation, et al., No. Civ. 06-1503 PHX DGC (“Communications Workers”) and Wilfred Fortier v. CSK Auto Corporation, et al., No. Civ. 06-1580 PHX DGC. The cases were consolidated on September 18, 2006, with the Communications Workers case as the lead case. The consolidated actions have been brought on behalf of a putative class of purchasers of CSK Auto stock between March 20, 2003 and April 13, 2006, inclusive.
The consolidated amended Complaint, filed on November 30, 2006, alleged that the Defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5, promulgated thereunder, as well as Section 20(a) of the Exchange Act. The consolidated amended Complaint alleged that Defendants issued false statements before and during the class period about the Company’s income, earnings and internal controls, allegedly causing the Company’s stock to trade at artificially inflated prices during the class period. It sought recovery of damages in an unspecified amount. The Defendants filed motions to dismiss the consolidated amended Complaint, arguing that the Plaintiffs failed to adequately plead violations of the federal securities laws. The court issued an order on March 28, 2007 granting the motions to dismiss, but allowing Plaintiffs leave to amend the Complaint. Plaintiffs filed their Second Amended Complaint on May 25, 2007, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5, promulgated thereunder, and Section 20(a) of the Exchange Act, against the same Defendants, except for James Riley, whom the Plaintiffs voluntarily dismissed. The Company filed a motion to dismiss the Second Amended Complaint on July 13, 2007.
According to an article dated October 31, 2007, on September 27, 2007, the district court granted the chief operating officer's motion to dismiss but denied the remaining Defendants' motion to dismiss, finding that the Plaintiffs sufficiently alleged scienter.
On April 16, 2008 parties submitted a Stipulation of Settlement outlining a $10 million agreement on behalf of class members. The judge entered a his Final Order on July 1, 2008. Attorneys were awarded $2.45 million in fees and an additional $213,677.61 in expense reimbursement.
