L-3 Investors Soar in $34.5 Million Securities Class Action Recovery
On March 10, 2017, the Honorable Valerie Caproni of the United States District Court for the Southern District of New York preliminarily approved a $34.5 million recovery in Patel v. L-3 Communications Holdings, Inc.
L-3 is a prime contractor in aerospace systems and national security solutions and a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. Initially filed August 1, 2014, lead plaintiffs alleged that L-3 and certain of its officers and directors made false and misleading statements regarding the company’s Aerospace Systems segment during the January 30, 2014 through July 30, 2014 class period. The settlement resolves allegations that L-3 knowingly made materially false and misleading statements and failed to disclose that: (i) L-3's financial statements contained errors related to the improper deferral of cost overruns on a fixed-price maintenance and logistics support contract resulting in overstatement of operating income; (ii) net sales with respect to the fixed-price maintenance and logistics support contract were overstated; (iii) the company lacked adequate internal controls over financial reporting; and (iv) as a result of the foregoing, the company's financial statements were materially false and misleading at all relevant times.
Before markets opened on July 31, 2014, L-3 announced preliminary results due to the disclosure of a concurrent internal accounting review into matters at the company's Aerospace Systems segment, announcing that it expected to incur an aggregate pre-tax charge of $84 million against operating income and a related reduction in net sales of approximately $43 million. As a result, L-3 shares fell $14.68 per share, or more than 12%, on extremely heavy volume, to close at $104.96 per share.
The City of Pontiac General Employees' Retirement System, Local 1205 Pension Plan and City of Taylor Police and Fire Retirement System are serving as lead plaintiffs in this action. Robbins Geller attorneys Samuel H. Rudman, David A. Rosenfeld, Alan I. Ellman, Jordan Mamorsky and Samuel Adams obtained this result for lead plaintiffs.
Patel v. L-3 Communications Holdings, Inc., et al., No. 1:14-cv-06038-VEC, Order Preliminarily Approving Settlement and Providing for Notice (S.D.N.Y. Mar. 10, 2017).