The class action was commenced on behalf of purchasers of Constellation Energy Group, Inc. publicly traded securities during the period between January 30, 2008 and September 16, 2008 (the "Class Period"), including the Series A Junior Subordinated Debentures (the "Preferred Securities "), pursuant and/or traceable to the Company's Registration Statement and Prospectus (collectively, the "Registration Statement") issued in connection with the Company's June 27, 2008 Preferred Securities offering.
The complaint charges Constellation and certain of its officers and directors and its underwriters with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933. Constellation is an energy company that conducts its business through various subsidiaries.
The complaint alleges that due to defendants' positive, but false, statements, Constellation's stock closed as high as $88.25 per share on June 9, 2008. On June 27, 2008, defendants consummated the sale of Constellation's Preferred Securities pursuant to the false and misleading Registration Statement, selling 18 million shares at $25.00 per share for proceeds of approximately $435.8 million.
In July 2008, the Company reported favorable financial results and reaffirmed EPS guidance of $5.25-$5.75 per share for 2008. In August 2008, analysts questioned Constellation's accounting and the implications of a credit downgrade. Then, on September 15, 2008, investors and the market became aware of Constellation's exposure to Lehman Brothers Holdings Inc.'s ("Lehman") bankruptcy, which affected the Company's ability to engage in energy-related trades. With this news, Constellation's shares plunged to $47.99, a 50% drop from the Company's Class Period high of $97.34 per share.
According to the complaint, defendants were aware of the following material undisclosed information which contradicted their public statements, including in the Registration Statement/Prospectus: (a) defendants were inflating Constellation's results through manipulations relating to the characterization of depreciation expense which inflated the Company's reported cash flows; (b) the Company's financial results were inflated by overly optimistic assumptions which were reflected in mark-to-market accounting; (c) the Company's exposure to credit problems of trading partners was much greater than represented - in fact, one of Constellation's key trading partners, Lehman, was having severe financial problems; and (d) the Company was not on track to report 2008 EPS of $5.25+ per share.
On February 13, 2009, Judge William H. Pauley, III granted the defendants’ motion to transfer the actions from the U.S. District Court for the Southern District of New York to the District of Maryland.
On June 18, 2009, by Judge Catherine C. Blake signed the Order consolidating several actions under lead case, CCB-08-2854, appointed the Ironworkers St. Louis District Council Pension Fund as lead plaintiff and appointed the law firm of Coughlin Stoia Geller Rudman & Robbins LLP as Lead Counsel and appointed the law firm of Brown Goldstein Levy, LLP as Liaison Counsel. On September 17, 2009, the lead plaintiff filed an Amended And Consolidated Class Action Complaint. The defendants responded by filing motions to dismiss the Amended and Consolidated Class Action Complaint on November 14, 2009.
According to the Memorandum and Order signed by Judge Catherine C. Blake, the pending motions to dismiss are all granted in part and denied in part. The plaintiffs are granted leave to amend Count II within 30 days against the individual and underwriter defendants as it pertains to the misstated downgrade collateral requirements only; and all other claims are dismissed.
On September 17, 2010, the lead plaintiff filed a Second Amended and Consolidated Class Action Complaint.
On July 5, 2012, the Court issued an Order denying plaintiffs' motion for class certification without prejudice to refiling if mediation is not successful.
On March 21, 2013, the parties entered into a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on May 8. On November 4th, the Court issued an Order awarding attorneys' fees and expenses. This was followed by a Final Judgment and Order of Dismissal with Prejudice.