The original complaint alleges that, during the Class Period, defendants made materially false and misleading statements concerning Textron’s stability and profitability by repeatedly publicizing record “backlogs” of unfilled customer orders for aircraft generated primarily by Cessna and by making positive statements about the Company's finance segment. As alleged in the complaint, these statements were materially false and misleading because defendants misrepresented and/or failed to disclose the following adverse facts, among others: (i) that Textron was accepting orders for business jets from a growing number of customers that were mere startup and/or financially distressed fleet operators who neither intended nor possessed the financial resources to pay for or take delivery of aircraft during 2008-09 and beyond, which materially inflated Textron’s “backlog” of unfilled orders for the Company’s Cessna segment, which in turn materially overstated the Company’s current financial condition and future prospects; (ii) that hundreds of orders reported as “backlog” at Cessna for future business-jet production were subject to deferral and cancellation causing the Company to overstate its projected fiscal 2008-09 business-jet production and to initiate costly production cutbacks and worker reduction programs, which eroded Textron’s revenues and earnings; (iii) that the Company’s Finance segment had incurred material losses in the fair market value of its finance receivables and other financial assets, and these unrealized market losses were omitted from or misrepresented in the Company’s periodic reports of earnings and income; and (iv) that Textron’s credit ratings were deteriorating in light of its Finance segment’s losses and the additional debt the Company would incur in connection with its Finance segment’s distressed asset base.
On January 29, 2009, the last day of the Class Period, Textron announced that an estimated $30 million of the $65 million in “restructuring” costs would be incurred by the Company’s Cessna segment due to production cutbacks and worker layoffs planned for the first quarter of 2009. After this announcement, Textron common stock traded to a new low of $8.83 per share before closing at $9.05 per share on volume of more than 26 million shares, a one day decline of $4.19, or 31%.
On December 4, 2009, Chief Judge Mary M. Lisi signed the Memorandum and Order appointing the Automotive Industries Pension Trust Fund as lead plaintiff and approved the selection of Coughlin Stoia Geller Rudman & Robbins LLP as lead counsel. On February 8, 2010, the lead plaintiff filed a Consolidated Class Action Complaint. On April 9, 2010, the defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint.
On August 24, 2011, Judge Paul J. Barbadoro granted the defendants' motion to dismiss the Consolidated Class Action Complaint. According to the Memorandum and Order, plaintiffs’ complaint does not state a viable claim for relief under § 10(b). Because plaintiffs’ § 20(a) claim is premised on the existence of an actionable claim under § 10(b), it too fails to state a claim for relief.
The plaintiffs filed a Notice of Appeal on September 23, 2011. The appeal is currently pending in the First Circuit Court of Appeals.