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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA
THOMAS HAUGH, on behalf of himself 06-61250and all others similarly situated, )
)Plaintiff, )
V .
PARLUX FRAGRANCES INC., ILIA LEKACH )and FRANK A. BUTTACAVOLI, )
Defendants. )
lily
t', V , HU C1UDGX
Plaintiff makes the following allegations, except as to allegations specifically pertaining
to plaintiff and plaintiffs counsel, based upon the investigation undertaken by plaintiffs counsel,
which investigation included analysis of publicly-available news articles and reports, public
filings, press releases and other matters of public record .
NATURE OF THE ACTION
1) This is a class action on behalf of all purchasers of the common stock of Parlux
Incorporated ("Parlux " or the "Company") between February 8, 2006 and August 10, 2006
inclusive, (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of
1934 (the "Exchange Act") .
2) Throughout the Class Period, defendants issued highly positive statements
regarding in an effort to create the impression that Parlux 'revenues were growing and the
Company was well positioned to generate strong profitability. In response, Parlux stock traded
at over $37 per share (prior to a stock split) during the Class Period . Starting in June 2006, the
truth about the Company's declining sales and accounting issues were revealed in a series of
disclosures indicating that : (1) contrary to prior public statements, Parlux's sales were declining
materially, including sales to related parties ; and (2) the Company suffered from internal control
issues with respect to its financial reporting, causing Parlux to delay the filing of its Annual
Report on Form 10-K for the year ended March 31, 2006, and its quarterly report on Form 10-Q
for the quarter ending June 30, 2006 . Prior to revealing this information, defendants and
Company insiders sold over $13 million worth of their Parlux holdings.
3) On August 10, 2006, the Company issued yet another shocking announcement,
revealing that Parlux profit for the quarter ended June 30, 2006 would be far less than the
investing public had been led to believe, due mainly to lower sales to U.S. department stores
and related parties . On the news, Parlux stock plunged from $8.16 a share to $4. 78 a drop
of over 40% - on unusually high volumes of over 5 million shares traded - vastly higher than
the Company's average trading volume of around 1 .1 million shares traded.
JURISDICTION AND VENUE
4) This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. §§1331, 1337 and 1367 and Section 27 of the Exchange Act (15 U .S.C. § 78aa) .
5) This action ari ses under Sections 10(b) and 20(a) of the Exchange Act (15 U .S .C .
§ § 78j(b) and 78t(a)) and Rule IOb-5 promulgated thereunder (17 C .F.R. § 240 .10b-5) .
6) Venue is proper in this District pursuant to Section 27 of the Exchange Act (15
U.S.C. § 78aa) and 28 U.S.C. § 1391(b) and (c) . Substantial acts in furtherance of the alleged
fraud and/or its effects have occurred within this District and Parlux maintains its corporate
headquarters in this District at 3725 S .W. 30th Avenue, Ft . Lauderdale, FL 33312 .
7) In connection with the acts and omissions alleged in this complaint, defendants,
directly or indirectly, used the means and instrumentalities of interstate commerce, including, bu t
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not limited to, the mails, interstate telephone communications, and the facilities of the nationa l
securities markets .
PARTIES
8) Plaintiff purchased Parlux common stock during the Class Period, as set forth i n
the accompanying certification which is incorporated herein by reference, and was damaged
thereby.
9) Defendant Parlux Marketing Corporation by its own description :
. . . engages in the creation, design , manufacture , distribution, and sale offragrances and beauty-related products through specialty stores , departmentstores , and perfumeries worldwide . The company holds licenses to manufactureand dist ribute watches, cosmetics and handbags, purses and other small leathergoods, and sunglasses, as well as to manufacture and sell fragrances andgrooming items of PERRY ELLIS, PARIS HILTON, OCEAN PACIFIC, XOXO,GUESS?, and MARIA SHARAPOVA . It also has license agreements withGUND, Inc . to develop , manufacture , and dist ribute children's fragrances andrelated products on a worldwide basis under the babyGund trademark . In addition,Parlux's beauty-related products include body lotions, creams , shower gels,deodorants , soaps , and dusting powders . The company was incorporated in 1984and is headquartered in Fort Lauderdale , Flo rida . .
10) The individual defendants, at all times relevant to this action, served in the
capacities listed below and received substantial compensation :
Name Position
ILIA LEKACH Chairman, CEO and President
FRANK BUTTACAVOLI CFO, COO, Executive Vice Presiden t
11) The Individual Defendants, as senior officers and/or directors of Parlux were
controlling persons of the Company . Each exercised their power and influence to cause Parlux
to engage in the fraudulent practices complained of herein .
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12) Each of the defendants is liable as a participant in a fraudulent scheme and course
of business that operated as a fraud or deceit on purchasers of Parlux common stock, by
disseminating materially false and misleading statements and/or concealing material adverse
facts .
MOTIVE, OPPORTUNITY AND KNOWLEDGE
13) Because of their Board memberships and/or executive and managerial positions
with Parlux , each of the Individual Defendants had access to the adverse non-public information
about the business, finances, markets and present and future business prospects of Parlux
particularized herein via access to internal corporate documents, conversations or connections
with corporate officers or employees, attendance at management and/or Board of Directors'
meetings and committees thereof and/or via reports and other information provided to them in
connection therewith .
14) Defendants had a duty to promptly disseminate accurate and truthful information
with respect to Parlux ' operations and financial condition or to cause and direct that such
information be disseminated and to promptly correct any previously disseminated information
that was misleading to the market . As a result of their failure to do so, the price of Parlux
securities was artificially inflated during the Class Period, damaging plaintiff and the Class .
15) The Individual Defendants, because of their positions with Parlux , controlled the
contents of quarterly and annual reports, press releases and presentations to securities analysts .
Each Individual Defendant was provided with copies of the reports and press releases alleged
herein to be misleading prior to or shortly after their issuance and had the ability and opportunity
to prevent their issuance or cause them to be corrected . Because of their positions and access to
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material non-public information available to them but not the public, each of these defendants
knew that the adverse facts specified herein had not been disclosed to and were being concealed
from the public and that the positive representations which were being made were then false and
misleading. As a result, each of the Individual Defendants is responsible for the accuracy of
Parlux ' corporate releases detailed herein as "group-published" information and is therefore
responsible and liable for the representations contained therein .
16) Each of the defendants is liable as a primary violator in making false and
misleading statements, and for participating in a fraudulent scheme and course of business that
operated as a fraud or deceit on purchasers of Parlux stock during the Class Period . All of the
defendants had motives to pursue a fraudulent scheme in furtherance of their common goal, i .e .,
inflating the reported profits of Parlux and the trading price of Parlux stock by making false and
misleading statements and concealing material adverse information . The fraudulent scheme and
course of business was designed to and did: (i) deceive the investing public, including plaintiffs
and other Class members ; (ii) artificially inflate the price of Parlux stock during the Class
Period; (iii) cause plaintiff and other members of the Class to purchase Parlux stock at inflated
prices; (iv) allow Parlux insiders to sell their own shares of Parlux stock at artificially inflated
prices while privy to material, adverse knowledge regarding the Company's soon to be reported
financial status and (v) conceal and coverup the true financial condition of Parlux .
17) During the Class Period, defendants sold millions of dollars worth of their Parlux
stock. These sales were unusual in both timing and amount, they far exceeded defendants'
previous sales, and preceded defendants' announcements that Parlux would not meet its earning s
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expectations. The suspicious nature of the insider selling was noted in a June 13, 2006 Miami
Herald article, which stated :
Parlux Fragrances' stock has plummeted by more than half this year . But six of itsseven directors sold shares -- three cashing out their holdings entirely -- at or nearits peak .
The stock of the Fort Lauderdale perfume distributor hit an all-time high of$38 .48 on Feb . 22. Over the course of just two weeks in mid-to-late February,directors sold roughly $16 million worth of stock, according to financialdocuments .
Four months later, CEO Ilia Lekach offered to buy the company for $29 a share --less than he or the other directors got for their own stock . He withdrew that offerWednesday .
The reasons the directors gave for their sales ranged from needing the money forfamily reasons to wanting to diversify. David Wong, a founder of Form 4 Oracle,a Boston area company that tracks insider trading, said the trades could be a "redflag ."
'SOMETHING HAPPENED '
"It doesn't seem like there has been a regular pattern of selling, so it certainly is anevent," he said . "Something happened in mid-February . . . One could easily beconvinced that there is something unusual going on . "
Insider trading is illegal if the insiders sell based on private knowledge of eventsthat could send the stock down. The sales made up about 5 percent of thecompany's market value at the time .
Here were the trades :
• Frank Buttacavoli, chief financial officer, sold $2 .5 million worth of shares onFeb. 13 and 14 for an average $33 a share .
• Lekach sold $11 .7 million worth of shares through a firm he controls on Feb . 15and Feb. 16, also at about $33 a share . He still owns about 26 percent of the firm.
• His son, Isaac Lekach, who sings for an indie band in Los Angeles and sits onthe board of directors for Parlux, sold all his stock -- worth about $650,000 -- atabout $36 a share, two days after its peak .
• Esther Choukroun , CFO ofreal estate firm PIX Group, sold all her shares for$ 1 .1 million on Feb. 22.
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• Glenn Gopman, a Miami accountant, sold about $190,000 of stock at the all-time high .
None of the directors had made any market sales or purchases in the previous ninemonths . However, some of them could not have sold earlier because of a financialregulation that requires directors to hold onto stock for a year before selling .
On March 9, about two weeks after the last trade, Parlux filed a notice with theSecurities and Exchange Commission stating that some directors and officersplanned to sell more shares . Its stock fell by 9 percent .
PLAINTIFF'S CLASS ACTION ALLEGATION S
18) Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased or
otherwise acquired Parlux common stock between February 8, 2006 and August 10, 2006,
inclusive (the "Class Period"), and who were damaged thereby. Excluded from the Class are de-
fendants, members of the immediate family of each of the Individual Defendants, any subsidiary
or affiliate of Parlux and the directors, officers and employees of Parlux or its subsidiaries or
affiliates, or any entity in which any excluded person has a controlling interest, and the legal
representatives, heirs, successors and assigns of any excluded person .
19) The members of the Class are so numerous that joinder of all members is
impracticable . While the exact number of Class members is unknown to plaintiff at this time and
can only be ascertained through appropriate discovery, plaintiff believes that there are thousands
of members of the Class located throughout the United States . Throughout the Class Period,
Parlux common stock was actively traded on the NASDAQ (an open and efficient market)
under the symbol "PARL" . Record owners and other members of the Class may be identified
from records maintained by Parlux and/or its transfer agents and may be notified of th e
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pendency of this action by mail, using a form of notice similar to that customarily used in
securities class actions .
20) Plaintiffs claims are typical of the claims of the other members of the Class as all
members of the Class were similarly affected by defendants' wrongful conduct in violation of
federal law that is complained of herein .
21) Plaintiff will fairly and adequately protect the interests of the members of the
Class and have retained counsel competent and experienced in class and securities litigation .
22) Common questions of law and fact exist as to all members of the Class an d
predominate over any questions solely affecting individual members of the Class . Among the
questions of law and fact common to the Class are :
1) whether the federal securities laws were violated by defendants' acts and
omissions as alleged herein ;
2) whether defendants participated in and pursued the common course of
conduct complained of herein ;
3) whether documents, press releases, and other statements disseminated to
the investing public and the Company's shareholders during the Class Period misrepresented
material facts about the business, finances, financial condition and prospects of Parlux ;
4) whether statements made by defendants to the investing public during the
Class Period misrepresented and/or omitted to disclose material facts about the business,
finances, value, performance and prospects of Parlux ;
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5) whether the market price of Parlux common stock during the Class Period
was artificially inflated due to the material misrepresentations and failures to correct the material
misrepresentations complained of herein ; and
6) the extent to which the members of the Class have sustained damages and
the proper measure of damages .
23) A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable . Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them . There will be no difficulty in the management of this suit as a
class action.
FALSE AND MISLEADING STATEMENTSDURING THE CLASS PERIOD
24) The Class Period begins on February 8, 2006 . On that date , defendants
announced financial results for the third qua rter ended December 31, 2005 . The
press release stated :
Net sales were $56,412,315 compared to $28,748,499 in the same period of theprior year, an increase of 96% . Net income more than doubled to $5,996,089compared to $2,867,746 in the same period of the prior year . Earnings per shareon a diluted basis were $0 .57 compared to prior-year earnings of $0 .27 per share,an increase of 111 % .
For the nine-month period ended December 31, 2005, net sales were$129,557,942 compared to $74,433,059 in the prior period, an increase of 74% .Net income was $14,247,582 ($1 .35 per share on a diluted basis) compared to$7,433,559 ($0 .70 per share on a diluted basis) in the same period of the prioryear, an increase of 92%.
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Commenting upon the results, Mr . Ilia Lekach, Chairman and Chief ExecutiveOfficer, said, "Paris Hilton fragrances continued to achieve strong consumerdemand. Our GUESS? women's fragrance established a strong sales base in itsfirst holiday season, which will be expanded with the launch of the GUESS?men's fragrance this spring. Perry Ellis fragrance products retain their strength .Perry Ellis remains our largest brand, representing almost half of our totalbusiness and we will be introducing a new "Perry Ellis 18"fragrance in summer2006. It is important to note that our GUESS?, Paris Hilton and Maria Sharapovafragrances continue to be launched in a number of international markets . Weanticipate shipping Paris Hilton watches and handbags during our fourth quarter,and development for Paris Hilton cosmetics and a babyGund fragrance are onschedule for holiday 2006 ."Mr. Lekach continued, "I am especially pleased thatour earnings growth has accelerated. Assuming the acceptance of our newproduct introductions remain on course and economic conditions stay stable,our previous earnings guidance of $2.00 to $2.20 per share on revenues ofapproximately $190 million for the fiscal year ending March 31, 2006 should beachieved. "Mr. Lekach added, "Based on the continued strength of our brandsand the planned new product introductions , our preliminary guidance for fiscal2007 is for sales to exceed $300 million, with earnings in the range of $3.00 to$3.25 per share. "
25) On February 9, 2006, defendants filed a quarterly report on Form 10-Q for the
period ending December 31, 2005 . The 10-Q repeated the financial results detailed in the press
release above, and particularly emphasized the strong sales to related parties . With respect to
related party transactions, the 10-Q stated :
The Company had net sales of $18,648,334 and $30,403,037 during the nine-month periods ended December 31, 2005 and 2004 ($6,502,845 and $9,486,314during the three months ended December 31, 2005 and 2004), respectively, toPerfumania, Inc . ("Perfumania"), a wholly-owned subsidiary of E Corn Ventures,Inc . ("ECMV"), a company in which the Company's Chairman and ChiefExecutive Officer has an ownership interest and held identical managementpositions until February 2004 . Perfumania is one of the Company's largestcustomers, and transactions with them are closely monitored by the Company'sAudit Committee and Board of Directors . Perfumania offers the Company theopportunity to distribute its products in approximately 240 retail outlets and itsterms with Perfumania take into consideration the companies' over 15 yearrelationship. Pricing and terms with Perfumania reflect (a) the volume of
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Perfumania's purchases, (b) a policy of no returns from Perfumania, (c) minimalspending for advertising and promotion, (d) exposure of the Company's productsprovided in Perfumania's store windows and (e) minimal distribution costs tofulfill Perfumania orders shipped directly to their distribution center .
While the Company's invoice terms to Perfumania appear as net ninety days, forover ten years the Board of Directors has granted longer payment terms, takinginto consideration the factors discussed above . The Board evaluates the credit riskinvolved and imposes a specific dollar limit, which is determined based onPerfumania's reported results and comparable store sales performance .
Management monitors the account activity to ensure compliance with the Board
limit . Net trade accounts receivable owed by Perfumania to the Company totaled$9,501,812 and $8,566,939 at December 31, 2005 and March 31, 2005,respectively. Amounts due from Perfumania are non-interest bearing and are paidin accordance with the terms established by the Board .
ECMV's financial statements included in its Annual Report on Form 10-K for theyear ended January 29, 2005, reflect a net income of $3 .1 million compared to a
loss of $12 .9 million in the prior year. Its Quarterly Report on Form 10-Q for thethirty-nine weeks ended October 29, 2005 reflects a reduced net loss of
$3 .4 million compared to a loss of $4 .3 million in the prior year comparable
period. Management continues to evaluate its credit risk and assess thecollectibility of the Perfumania receivables. Perfumania's reported financialinformation, as well as the Company's payment history with Perfumania, indicatethat, historically, their first quarter ending approximately April 30, isPerfumania's most difficult quarter as is the case with most U.S. based retailers .
The Company is currently discussing with Perfumania their anticipated paymentswhich the Company expects will reduce their trade receivable balance and thenumber of days outstanding by March 31, 2006 . Based on management'sevaluation, no allowances have been recorded as of December 31 or March 31,2005. Management will continue to evaluate Perfumania's financial condition onan ongoing basis and consider the possible alternatives and effects, if any, on theCompany.
The Company owns 378,101 shares of ECMV common stock, which is anavailable-for-sale security and is reflected as an "investment in affiliate" in theaccompanying condensed consolidated balance sheets . As of December 31, 2005,
the fair market value of the investment was $5,822,755 or $15 .40 per share
($4,764,073 or $12 .60 per share as of March 31, 2005), based on the quoted
market price of the shares . The Company's adjusted cost basis (after a non-cashcharge to earnings during fiscal 2002 of $2,858,447, which was reported as another-than-temporary decline in the value of the investment) for the shares is$1,648,523 or $4 .36 per share .
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In addition to Perfumania, during the nine months ended December 31, 2005 and2004, the Company had net sales of $30,582,084 and $12,029,395 ($12,844,799and $4,298,684 during the three months ended December 31, 2005 and 2004),respectively, to fragrance distributors owned/operated by individuals related to theCompany's Chairman/CEO, including a distributorship for the Mexican market .These sales are included as related party sales in the accompanying condensedconsolidated statements of income and are closely monitored by the Company'sAudit Committee and Board of Directors . As of December 31, 2005 andMarch 31, 2005, trade receivables from related parties include $4,552,288 and$13,154, respectively, from these customers, which were current in accordancewith their sixty or ninety day terms .
26) The 10-Q also included certifications signed by Lekach and
Buttacavoli certifying that Parlux had no internal control issues with respect to its
financial reporting . The certifications stated :
I, Ilia Lekach, certify that :
1 . I have reviewed this report on Form 10-Q of Parlux Fragrances, Inc .
2. Based on my knowledge, this report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report ;
3 . Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report ;
4. Registrant's other certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-I5(e) for the registrant, and have :
a) Designed such disclosure controls and procedures, or caused such disclosurecontrols and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared ;
b) Evaluated the effectiveness of the registrant's disclosure controls andprocedures and presented in this report our conclusions about the effectiveness o f
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the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation ; and
c) Disclosed in this report any change in the registrant's internal control overfinancial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant'sinternal control over financial reporting ; and
5. The registrant's other certifying officers and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of registrant's board of directors (orpersons performing the equivalent functions) :
a) All significant deficiencies and material weaknesses in the design or operationof internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and reportfinancial information ; and
b) Any fraud, whether or not mate rial , that involves management or otheremployees who have a significant role in the registrant's internal control overfinancial report ing .
27) On May 9, 2006, defendants reporting "record" revenues for the fiscal year
ended March 31, 2006 . The press release stated :
Parlux Fragrances, Inc. (NASDAQ :PARL) announced today that based uponpreliminary unaudited information, the Company anticipates reporting record totalrevenues and record fully diluted earnings per share for the fiscal year endedMarch 31, 2006 .
Revenues for the fiscal year are expected to approximate $183 million, anincrease of 82% over the prior fiscal year ended March 31, 2005 . Fully dilutedearnings per share for the fiscal year ended March 31, 2006 are expected to morethan double and be in the range of $2.05 to $2 .10 per share compared to $1 .02 pershare for the prior fiscal year .
Commenting on the results, Ilia Lekach, Chairman and Chief Executive Officer,said, "Our excellent results were attributable to the continuing solid performanceof our Perry Ellis fragrances combined with the stellar growth of Paris Hiltonfragrances and the successful launch of our GUESS fragrances . We recentlyinitiated the sale of Paris Hilton watches and handbags and expect to introduc e
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Paris Hilton cosmetics and sunglasses during fiscal 2007 ."Mr. Lekach continued,"I remain optimistic for fiscal 2007 and anticipate revenues in the range of $270-$280 million and earnings in the range of $2 .80-$2 .90 per share assuming thesuccessful implementation of our anticipated new launches and stable economicconditions . "
The estimates outlined above for the fiscal year ended March 31, 2006 arepreliminary and are subject to possible adjustments as the Company completes itsyear-end procedures and the audit of its financial statements . The Companyanticipates that it will issue final results for the fourth quarter and year-end March31, 2006 in accordance with its reporting obligations by June 14, 2006 .
28) On May 17, 2006, defendants announced a 2-for-1 split of the Company's common stock
effected in the form of a stock dividend . Commenting on the stock split, defendant Lekach
stated :
The stock split is a result of the Company's solid growth and price performance .Over the past three fiscal years our significant growth in revenues has providedincreased earnings per share of over 300% and the market price of our stock hasalmost tripled. We believe that this stock split, combined with our plans forcontinuing growth, will increase retail ownership and provide pricing levels thatare accessible to a broader group of investors .
29) The statements detailed above in Parlux's SEC filings and press releases were
materially false and misleading, because at the time these statements were made : (a)
defendants were well aware that due to their board positions and/or supervision over
related parties that sales to these related parties had declined and were continuing to
materially decline ; (b) defendants knew that sales to domestic department stores had
declined; (c) the increase in sales was largely attributable to increased sales to
international distributors, which were significantly lower margin sales than those to
domestic stores ; and (d) the Company had material internal control issues which
impacted the quality of its financial reporting .
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The Truth Begins to Unravel
30) Between June 8, 2006 and August 10, 2006, material adverse information about the
Company was slowly revealed . On June 8, 2006, Parlux stock dropped 13% after two analysts
downgraded the stock due to disappointing distribution and sales of Paris Hilton-branded
products . According to an article published that date :
Stock of the Fort Lauderdale, Fla .-based company fell $3 .04, or 13 percent, to$21 .06 in early afternoon trading on the Nasdaq Stock Market .
Thursday's weakest level of $20 .18, on heavy volume, was a 52-week lowsurpassing the prior low on Oct . 27 of $21 .97. There was a 52-week high of$38.48 on Feb . 22 .
Parlux makes and markets fragrances and accessories through brands such asPerry Ellis, Ocean Pacific, Paris Hilton, XOXO, Guess, Maria Sharapova andAndy Roddick .
Feltl & Co . cut its rating of Parlux shares to "buy" from "strong buy," whileWedbush Morgan Securities downgraded the stock to "hold" from "strong buy" --both citing the recent launch of Paris Hilton-branded accessories .
"After conducting a wide round of channel checks from specialty retailers tomajor department store chains, we have not seen the newly launched watches andhandbags in nearly as many retail doors as we had earlier thought they would bein by this point," said Wedbush analyst Rommel Dionisio, who expressed concernabout Parlux's ability to hit the firm's previous near-term revenue and earningsforecasts, which he lowered .
31) Despite the fact that analysts were beginning to independently uncover the
fact that Parlux's sales had declined materially, the Company continued to hide the truth
from the investing public . On June 13, defendants issued the below press release
announcing strong sales growth .
32) On June 13, 2006, defendants issued a press release announcing that the
Company would be forced to delay the filing of its Annual Report on Form IO-K for the
year ended March 31, 2006 . The press release stated :
Parlux Fragrances, Inc. (NASDAQ:PARL) announced its unaudited fiscal 2006results reflecting sales of $182,236,594 compared to its prior year of$100,360,981, an increase of 82%. Unaudited net income was $22,483,263, or$2.13 per diluted share compared to prior year net income of $10,824,256, or$1 .02 per share, an increase of 109%, exceeding previous estimates .
On June 9, 2006, the Company filed a Form 12b-25, requesting an extension forfiling its Annual Report on Form 10-K for the fiscal year ended March 31, 2006 .Due to the increase in the Company's market capitalization as measured onSeptember 30, 2005, the Company became an accelerated filer under theSarbanes-Oxley Act of 2002 ("SOX"). While reducing the year-end filingrequirement from 90 to 75 days, SOX also required the Company to assess itsinternal controls and report on their effectiveness as of March 31, 2006 . In spite ofits best efforts and significant expense, the Company will be unable to completecertain of these new requirements by the initial filing due date of June 14, 2006 .
While the Company has grown rapidly, it has not significantly expanded itsadministrative staff to assist with the preparation of its financial statements, normodified major systems/applications for recording of transactions . Management'sreview, testing and assessment of its internal control procedures required by SOXhas identified certain documentation, design and operating deficiencies, some ofwhich management believes will be categorized as material weaknesses .Accordingly, we anticipate that management's report on the effectiveness ofinternal controls will conclude that certain internal controls were not operatingeffectively as of and during the year ended March 31, 2006 . The Company istaking immediate action to address and remediate these control deficiencies .
33) Thereafter, defendant Lekach offered to acquire the outstanding stock of the
Company. As noted in a June 14, 2006 press release :
Parlux Fragrances, Inc. (NASDAQ :PARL) announced today that its Board of Directorshad received an unsolicited letter from its Chairman and CEO, Mr . Ilia Lekach,representing PF Acquisition of Florida LLC, pertaining to the possible acquisition of allof the outstanding common stock of the Company at a proposed price of $29 .00 per sharein cash, representing a premium of 55% over the closing price of the common stock ofthe Company on June 13, 2006 .
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34) The Company noted, with respect to Lekach's offer :
Through their legal counsel, the Committee responded (the "Response") to theoffer by stating that the Committee does not believe it is prudent for Parlux tomove forward to consider the transaction with the significant financial and othercontingencies contained in the Proposal . Further, the Committee questions thepropriety of a proposed break up fee . The Committee believes that if Parluxproceeds with the Proposal and the transaction does not close, it may have a verynegative effect on Parlux. In order to protect Parlux and its shareholders, theCommittee believes that the closing contingencies should be removed from theProposal and Acquisition Co. should provide a deposit to the Company asevidence of Acquisition Co .'s ability to proceed and in recognition of thesignificant cost Parlux will incur in considering the Proposal . The Committeecontinues to state that, in the event that the transaction cannot be completed due toan inability by Acquisition Co . to obtain financing, the deposit would be used toreimburse Parlux for its costs and expenses in connection with the considerationof the Proposal .
After receiving the Response, Acquisition Co. sent a follow-up letter (the"Follow-up Letter") . The Follow-up Letter stated that Acquisition Co . does notexpect the Committee to incur any expense until Acquisition Co . has obtained itsfinancing commitments and when Acquisition Co . completes that task, it wouldexpect to proceed in a customary fashion without any deposit or waiver of thefinancial and other contingencies and with a break up fee .
35) On June 29, 2006, defendants revealed that the 10-K would continue to be delayed
due to defendants' failure to assess Parlux's internal controls . In a press release issued that
date, defendants stated :
Parlux Fragrances , Inc. (NASDAQ: PARL) announced today that the filing of itsForm 10-K would be delayed as a result of management not yet completing itsassessment of the inte rnal controls and reporting requirements under Section 404of the Sarbanes -Oxley Act of 2002 (SOX).
The Company became obligated to comply with the quicker implementationschedule under Section 404 when it became an accelerated filer on September 30,2005, the end of its second quarter. Management completed its testing and hasconcluded that its internal control procedures contain material weakness in areassuch as access to ce rtain computer master files , segregation of duties, processingof certain adjustments to accounts payable and accounts receivable, andmanagement overrides , despite the fact that the Company 's testing did notdisclose any improprieties .
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The Company is completing the assessment and reporting process involved incomplying with its SOX obligations. The Company will issue its Form 10-K afterthe assessment and reporting processes, including those of the Company'sindependent auditors, are completed .
This delay in the Company's SOX procedures is not expected to affect theCompany's previous announcement that net sales for the fiscal year ended March31, 2006 will approximate $182 million and net earnings per share will reach$2 .13 ($1 .07 post common stock split) per share .
the Securities and Exchange Commission on a timely basis, as required by theSecurities Exchange Act of 1934, as amended .
Parlux will request a hearing before the Nasdaq Listing Qualifications Panel,thereby automatically deferring the delisting of its common stock pending thePanel's review and determination . Until the Panel issues a determination and theexpiration of any exception granted by the Panel, Parlux's common stock willcontinue to be traded on The Nasdaq National Market . However, as a result of thedelayed filing of its Form 10-K, the trading symbol for the Company's commonstock will be changed from PARL to PARLE .
As announced on June 29, 2006, Parlux has delayed filing its Annual Report onForm 10-K until completion of management's assessment of the internal controlsand reporting requirements under Section 404 of the Sarbanes-Oxley Act of 2002("SOX"). Parlux intends to file its Form 10-K for the fiscal year ended March 31,2006 as soon as practicable following completion of the SOX assessment andreporting processes, including those of the Company's independent auditors .
36) On July 13, 2006, defendant Lekach announced he was withdrawing his offer t o
acquire the Company .
Additional Information Regarding Parlux 's Problems is Belatedly Revealed
37) On August 10, 2006, defendants finally revealed that sales for the quarter ended June
30, 2006 had declined materially. According to an article released on August 11, 2006 :
Shares of perfume and accessories maker Parlux Fragrances Inc . sank to a new52-week low on Friday after the company said it would not file its quarterly reporton time and quarterly results would fall well below Wall Street expectations .
-18-
Shares of Fort Lauderdale, Fla .-based Parlux, which holds the license to ParisHilton's line of accessories, dropped $3 .06, or 37 .5 percent, to $5 .10 on theNasdaq in morning trading . Earlier in the session, the shares hit a new low of$4.95. The previous 52-week range was from $7 .64 to $19 .24 .
In a filing on Thursday with the Securities and Exchange Commission, Parluxsaid its report for the quarter ending June 30 would be late because the companywas working to complete its delayed annual 10-K report for fiscal 2006, which iteventually did in July. Parlux said it would file its quarterly report by Aug . 14 orshortly afterward .
For the quarter ending June 30, the company said it expects earnings in the rangeof 4 cents to 5 cents per share -- well below the 22 cents per share forecast byanalysts, according to a Thomson Financial poll .
"The reduction is mainly attributable to the decrease in sales to U.S . departmentstores due to the acquisitions and consolidations in this sector, and a reduction insales to related parties," the company said in the filing .
Department store advertising and promotional programs also hurt earnings, Parluxsaid
UNDISCLOSED ADVERSE INFORMATIO N
38) The market for Parlux securities was open, well-developed and efficient at all
relevant times . As a result of these materially false and misleading statements and failures to
disclose, Parlux securities traded at artificially inflated prices during the Class Period . The
artificial inflation continued until the time Parlux admitted that it was experiencing declining
sales and these admissions were communicated to, and/or digested by, the securities markets .
Plaintiff and other members of the Class purchased or otherwise acquired Parlux securities
relying upon the integrity of the market price of Parlux securities and market information
relating to Parlux , and have been damaged thereby .
39) During the Class Period, defendants materially misled the investing public,
thereby inflating the price of Parlux securities, by publicly issuing false and misleading
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statements and omitting to disclose material facts necessary to make defendants' statements, as
set forth herein, not false and misleading . Said statements and omissions were materially false
and misleading in that they failed to disclose material adverse information and misrepresented
the truth about the Company, its business and operations .
40) At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by plaintiff and other members of the Class . As described herein, during the
Class Period, defendants made or caused to be made a series of materially false or misleading
statements about Parlux 's business, prospects and operations . These material misstatements and
omissions had the cause and effect of creating in the market an unrealistically positive
assessment of Parlux and its business, prospects and operations, thus causing the Company's
securities to be overvalued and artificially inflated at all relevant times . Defendants' materially
false and misleading statements during the Class Period resulted in plaintiff and other members
of the Class purchasing the Company's securities at artificially inflated prices, thus causing the
damages complained of herein .
SCIENTER ALLEGATION S
41) As alleged herein, defendants acted with scienter in that defendants knew that the
public documents and statements, issued or disseminated by or in the name of the Company were
materially false and misleading; knew or recklessly disregarded that such statements or
documents would be issued or disseminated to the investing public ; and knowingly and
substantially participated or acquiesced in the issuance or dissemination of such statements or
documents as primary violators of the federal securities laws . As set forth elsewhere herein in
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detail, defendants, by virtue of their receipt of information reflecting the true facts regarding
Parlux and its business practices, their control over and/or receipt of Parlux ' allegedly
materially misleading misstatements and/or their associations with the Company which made
them privy to confidential proprietary information concerning Parlux were active and culpable
participants in the fraudulent scheme alleged herein . Defendants knew and/or recklessly
disregarded the falsity and misleading nature of the information which they caused to be
disseminated to the investing public . The ongoing fraudulent scheme described in this complaint
could not have been perpetrated over a substantial period of time, as has occurred, without the
knowledge and complicity of the personnel at the highest level of the Company, including the
Individual Defendants .
42) The Individual Defendants engaged in such a scheme to inflate the price of Parlux
securities in order to : (i) protect and enhance their executive positions and the substantial
compensation and prestige they obtained thereby ; (ii) enhance the value of their personal
holdings of Parlux common stock ; and (iii) allow defendants to sell millions of dollars worth of
Parlux stock before the truth was revealed .
STATUTORY SAFE HARBOR
43) The federal statutory safe harbor provided for forward-looking statements under
certain circumstances does not apply to any of the allegedly false statements pleaded in this
Complaint . Further, none of the statements pleaded herein which were forward-looking
statements were identified as "forward-looking statements" when made . Nor was it stated that
actual results "could differ materially from those projected." Nor were the forward-looking
statements pleaded accompanied by meaningful cautionary statements identifying importan t
-21 -
factors that could cause actual results to differ materially from the statements made therein .
Defendants are liable for the forward-looking statements pleaded because, at the time each of
those forward-looking statements was made, the speaker knew the forward-looking statement
was false and the forward-looking statement was authorized and/or approved by an executive
officer of Parlux who knew that those statements were false when made .
APPLICABILITY OF PRESUMPTION OF RELIANCE :FRAUD-ON-THE-MARKET DOCTRINE
44) At all relevant times , the market for Parlux stock was an efficient market for the
following reasons, among others :
(a) Parlux stock met the requirements for listing, and was listed and actively
traded, on the NASDAQ, a highly efficient market ;
(b) As a regulated issuer, Parlux filed periodic public reports with the SEC
and the NASD ;
(c) Parlux stock was followed by securities analysts employed by major
brokerage firms who wrote reports which were distributed to the sales force and certain
customers of their respective brokerage firms . Each of these reports was publicly available and
entered the public marketplace ; and
(d) Parlux regularly issued press releases which were carried by national
newswires. Each of these releases was publicly available and entered the public marketplace.
45) As a result, the market for Parlux securities promptly digested current
information with respect to Parlux from all publicly-available sources and reflected such
information in Parlux 's stock price . Under these circumstances, all purchasers of Parlux
-22-
securities during the Class Period suffered similar injury through their purchase of stock a t
artificially inflated p rices and a presumption of reliance applies .
COUNT IFor Violations Of Section 10(b) Of The1934 Act And Rule 10b-5 Promulgated
Thereunder Against All Defendant s
46) Plaintiff repeats and realleges the allegations set forth above as though fully set
forth herein . This claim is asserted against all defendants .
47) During the Class Period, Parlux and the Individual Defendants, and each of them,
carried out a plan, scheme and course of conduct which was intended to and, throughout the
Class Period, did: (i) deceive the investing public, including plaintiff and other Class members,
as alleged herein ; (ii) artificially inflate and maintain the market price of Parlux common stock ;
and (iii) cause plaintiff and other members of the Class to purchase Parlux stock at artificially
inflated prices . In furtherance of this unlawful scheme, plan and course of conduct, defendants
Parlux and the Individual Defendants, and each of them, took the actions set forth herein .
48) These defendants : (a) employed devices, schemes, and artifices to defraud ; (b)
made untrue statements of material fact and/or omitted to state material facts necessary to make
the statements not misleading; and (c) engaged in acts, practices and a course of business which
operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to
maintain artificially high market prices for Parlux securities in violation of Section 10(b) of the
Exchange Act and Rule I Ob-5 . These defendants are sued as primary participants in the
wrongful and illegal conduct charged herein . The Individual Defendants are also sued herein as
controlling persons of Parlux , as alleged below .
-23-
49) In addition to the duties of full disclosure imposed on defendants as a result of
their making of affirmative statements and repo rt s , or part icipation in the making of affirmative
statements and reports to the investing public , they each had a duty to promptly disseminate
truthful information that would be material to investors in compliance with the integrated
disclosure provisions of the SEC as embodied in SEC Regulation S-X (17 C . F.R. § 210.01 et
seg.) and S-K (17 C.F.R . § 229.10 et seg .) and other SEC regulations, including accurate and
truthful information with respect to the Company 's operations, financial condition and
performance so that the market p rices of the Company's publicly traded secu rities would be
based on truthful , complete and accurate information .
50) Parlux and the Individual Defendants, individually and in concert, directly and
indirectly, by the use of means or instrumentalities of interstate commerce and/or of the mails,
engaged and participated in a continuous course of conduct to conceal adverse mate rial
information about the business , business practices , performance , operations and future prospects
of Parlux as specified herein. These defendants employed devices , schemes and artifices to
defraud , while in possession of mate rial adverse non -public information and engaged in acts,
practices, and a course of conduct as alleged herein in an effort to assure investors of Parlux '
value and performance and substantial growth , which included the making of, or the
part icipation in the making of, untrue statements of mate rial facts and omitting to state mate rial
facts necessary in order to make the statements made about Parlux and its business , operations
and future prospects in the light of the circumstances under which they were made, not
misleading , as set forth more pa rticularly herein , and engaged in transactions, practices and a
-24-
course of business which operated as a fraud and deceit upon the purchasers of Parlux securities
during the Class Period .
51) Each of the Individual Defendants' primary liability, and controlling person
liability, arises from the following facts : (i) each of the Individual Defendants was a high-level
executive and/or director at the Company during the Class Period ; (ii) each of the Individual
Defendants, by virtue of his responsibilities and activities as a senior executive officer and/or
director of the Company, was privy to and participated in the creation, development and
reporting of the Company's internal budgets, plans, projections and/or reports ; (iii) the Individual
Defendants enjoyed significant personal contact and familiarity with each other and were advised
of and had access to other members of the Company's management team, internal reports, and
other data and information about the Company's financial condition and performance at all
relevant times ; and (iv) the Individual Defendants were aware of the Company's dissemination of
information to the investing public which they knew or recklessly disregarded was materially
false and misleading .
52) These defendants had actual knowledge of the misrepresentations and omissions
of material facts set forth herein, or acted with reckless disregard for the truth in that they failed
to ascertain and to disclose such facts, even though such facts were readily available to them .
Such defendants' material misrepresentations and/or omissions were done knowingly or
recklessly and for the purpose and effect of concealing Parlux 'operating condition, business
practices and future business prospects from the investing public and supporting the artificially
inflated price of its stock. As demonstrated by their overstatements and misstatements of the
Company's financial condition and performance throughout the Class Period, the Individual
-25-
Defendants, if they did not have actual knowledge of the misrepresentations and omissions
alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking
those steps necessary to discover whether those statements were false or misleading .
53) As a result of the dissemination of the materially false and misleading information
and failure to disclose material facts, as set forth above, the market price of Parlux ' securities
was artificially inflated during the Class Period . In ignorance of the fact that the market price of
Parlux ' shares was artificially inflated, and relying directly or indirectly on the false and
misleading statements made by defendants, or upon the integrity of the market in which the
securities trade, and/or on the absence of material adverse information that was known to or
recklessly disregarded by defendants but not disclosed in public statements by defendants during
the Class Period, plaintiff and the other members of the Class acquired Parlux securities during
the Class Period at artificially inflated high prices and were damaged thereby .
54) At the time of said misrepresentations and omissions, plaintiff and other members
of the Class were ignorant of their falsity, and believed them to be true . Had plaintiff and the
other members of the Class and the marketplace known of the true performance, business
practices, future prospects and intrinsic value of Parlux , which were not disclosed by
defendants, plaintiff and other members of the Class would not have purchased or otherwise
acquired their Parlux securities during the Class Period, or, if they had acquired such securities
during the Class Period, they would not have done so at the artificially inflated prices which they
paid .
55) By virtue of the foregoing, Parlux and the Individual Defendants each violated
Section 10(b) of the Exchange Act and Rule I Ob-5 promulgated thereunder .
-26-
56) As a direct and proximate result of defendants' wrongful conduct, plaintiff and the
other members of the Class suffered damages in connection with their purchases of the
Company's securities during the Class Period .
COUNT IIFor Violations Of Section 20(a) Of The1934 Act Against Individual Defendants
57) Plaintiff repeats and realleges the allegations set forth above as if set forth full y
herein. This claim is asserted against the Individual Defendants .
58) The Individual Defendants were and acted as controlling persons of Parlux
within the meaning of Section 20(a) of the Exchange Act as alleged herein . By virtue of their
high-level positions with the Company, participation in and/or awareness of the Company's
operations and/or intimate knowledge of the Company's actual performance, the Individual
Defendants had the power to influence and control and did influence and control, directly or
indirectly, the decision-making of the Company, including the content and dissemination of the
various statements which plaintiff contends are false and misleading. Each of the Individual
Defendants was provided with or had unlimited access to copies of the Company's reports, press
releases, public filings and other statements alleged by plaintiff to be misleading prior to and/or
shortly after these statements were issued and had the ability to prevent the issuance of the
statements or cause the statements to be corrected .
59) In addition, each of the Individual Defendants had direct involvement in the day-
to-day operations of the Company and, therefore, is presumed to have had the power to control
or influence the particular transactions giving rise to the securities violations as alleged herein,
and exercised the same .
-27-
60) As set forth above, Parlux and the Individual Defendants each violated Section
10(b) and Rule I Ob-5 by their acts and omissions as alleged in this Complaint . By virtue of their
controlling positions, the Individual Defendants are liable pursuant to Section 20(a) of the
Exchange Act. As a direct and proximate result of defendants' wrongful conduct, plaintiff and
other members of the Class suffered damages in connection with their purchases of the
Company's securities during the Class Period .
BASIS OF ALLEGATIONS
61) This complaint is pleaded in conformance with Federal Rules of Civil Procedure
and the PSLRA. Plaintiff has alleged the foregoing based upon the investigation of plaintiffs
counsel, which included a review of Parlux 's SEC filings, securities analysts' reports and
advisories about the Company, press releases issued by the Company and media reports about
the Company.
PRAYER FOR RELIEF
WHEREFORE, plaintiff, on his own behalf and on behalf of the Class, prays for
judgment as follows :
(i) Declaring this action to be a class action pursuant to Rule 23(a) and (b)(3) of the
Federal Rules of Civil Procedure on behalf of the Class defined herein;
(ii) Awarding plaintiff and the other members of the Class damages in an amount
which may be proven at trial, together with interest thereon ;
(iii) Awarding plaintiff and the members of the Class pre judgment and post judgment
interest, as well as their reasonable attorneys' and experts' witness fees and other costs ; and
(iv) Such other relief as this Court deems appropriate .
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JURY DEMAND
Dated : August ' _ , 2006
Plaintiff demands a trial by jury .By: LSAXENA W HITE P .AMaya SaxenaFla Bar . No . 0095494Joseph Whit eFla Bar . No . 06210642424 North Federal HighwaySuite 307Boca Raton , FL 33431Main 800 . 361 .5096Direct 800 .361 .8708Fax: 888 . 782 .308 1
and
KAHN GAUTHIER SWICK, LLCLewis KahnMichael A . Swick650 Poydras Street, Suite 2150New Orleans , LA 70130Telephone : (504) 455-1400Facsimile : (504) 455-149 8
Attorneys for Plaintiff
%, JS 44 (Rev . 11/05)
(See instruc ti onssecond page) :
The JS 44 civil coveE sheet and the information contained herein neither replace nor supplement the filing and service ofpleadings or other papers as required by law, except as providedby local rules of court. This form, approved by the Judicial Conference of the United States in September 1974 . is reautred for the use of the Clerk of Court for the purpose of initiating
the civil docket sheet . (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM .) NOTICE: Attorneys MUST Indicate All Re-filed Cases Below .
1 . (a) PLAINTIFF S
HAUGH, THOMAS on behalf of himself and ALL others similarlysituated .
(b) County of Residence of First Listed Plaintiff Walla Walla
(EXCEPT IN U .S . PLAINTIFF CASES )
(C) Attorney's ( Firm Name, Address , and Telephone Number)
Saxena White, P .A .
2424 N . Federal Highway; Suite 307Boca Raton, FL 33431 ; 800 361-5096
CIVIL COVER SHEET
CIV - RUCK
DEFENDANTS
PARLUX FRAGRANCES Inc ., ILIA LEKACH and FRANK A .BUTTACAVOL I
County of Residence of First Listed Defendant
~,2► ~ ~SIMONTON
6(d) Check County Where Action Arose : 0 MIAMI- DADE 0 MONRO E
II . BASIS OF JURISD
0 I U .S . GovernmentPlaintiff
O 2 U .S . GovernmentDefendan t
c'~6
ICTION (Place an "X" in One Box Only )
6M 3 Federal Question(U .S . Government Not a Party )
O 4 Diversity
(Indicate Ci ti zenship of Par ti es i It III )
V cIV. NATU OF SUIT
BROWARD 0 PALM BEACH 0 MARTIN 0 ST. LUCIE 0 INDIAN RIVER -O OKEECHOBE E
of Busin.s Iq
Broward
Principal lace 0 5 0 5Another$t$te
3 0 3 Foreign Naf m '.. 0 6 O 6
(Place an -X" m One box (hn F1 I vCONTRACT TORTS FO FE TUREIPENALTY BANKRUPTCY OTHER STATUTE S
0 110 Insurance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 0 400 State Reapportionment
0 120 Marine O 310 Airplane O 362 Personal Injury - O 620 Other Food & Drug 0 423 Withdrawal 0 410 Antitrust0 130 Miller Act 0 315 Airplane Product Med. Malpractice 0 625 Drug Related Seizure 28 USC 157 0 430 Banks and Banking0 140 Negotiable Instrument Liability 0 365 Personal Injury - of Property 21 USC 881 0 450 Commerce0 150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability 0 630 Liquor Laws PROPERTY RIGHTS 0 460 Deportation
& Enforcement of Judgment Slander O 368 Asbestos Personal 0 640 R .R . & Truck 0 820 Copyrights 0 470 Racketeer Influenced andO 151 Medicare Act 0 330 Federal Employers' Injury Product O 650 Airline Regs. 0 830 Patent Corrupt Organizations0 152 Recovery of Defaulted Liability Liability 0 660 Occupational 0 840 Trademark 0 480 Consumer Credit
Student Loans 0 340 Marine PERSONAL PROPERTY Safety/Health O 490 Cable/Sat TV(Excl . Veterans) 0 345 Marine Product 0 370 Other Fraud 0 690 Other 0 810 Selective Service
0 153 Recovery of Overpayment Liability 0 371 Truth in Lending LABOR SOCIAL SECURITY IN 850 Securities/Commodities/of Veteran's Benefits 0 350 Motor Vehicle 0 380 Other Persona] 0 710 Fair Labor Standards 0 861 HIA (1395ff) Exchang e
0 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act O 862 Black Lung (923) 0 875 Customer Challenge0 190 Other Contract Product Liability 0 385 Property Damage O 720 Labor/Mgmt . Relations 0 863 DIWC DIW W (405(g)) 12 USC 341 00 195 Contract Product Liability 0 360 Other Personal Product Liability 0 730 Labor/Mgmt .Reporting 0 864 SSID Title XVI O 890 Other Statutory Action s0 196 Franchise Iniury & Disclosure Act 0 865 RSI (405(g)) 0 891 Agricultural Acts
REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS O 740 Railway Labor Act FEDERAL TAX SUITS 0 892 Economic Stabilization Act
O 210 Land Condemnation 0 441 Voting d 510 Motions to Vacate 0 790 Other Labor Litigation 0 870 Taxes (U .S . Plaintiff 0 893 Environmental Matters0 220 Foreclosure 0 442 Employment Sentence 0 791 Empl . Rot . Inc. or Defendant) 0 894 Energy Allocation Ac t0 230 Rent Lease & Ejectment O 443 Housing/ Habeas Corpus : Security Act 0 871 IRS-Third Party 0 895 Freedom of InformationO 240 Torts to Land Accommodations O 530 General 26 USC 7609 Ac t0 245 Tort Product Liability 0 444 Welfare 0 535 Death Penalty 0 900Appeal of Fee Determination0 290 All Other Real Property 0 445 Amer . w/Disabilities - 0 540 Mandamus k Other Under Equal Access
Employment 0 550 Civil Rights to Justice0 446 Amer . w/Disabilities - O 555 Prison Condition 0 950 Constitutionality o f
Other State Statute s
O 440 Other Civil Rights
V. ORIGIN (Place an "X" in One Box Only )I Original 0 2 Removed from 0 3 Re-filed-
Proceeding State Court (see VI below)
VI. RELATED/ RE-FILEDCASE(S).
VII . CAUSE OFACTION
VIII . REQUESTED INCOMPLAINT :
O 4 Reinstated or 0 5 Transferred fromReopened another distric t(specify)
PTF DEF C7 PTF DEF1 JX I Incorporated or~cipal Place 0 4 &M 4
of Businessin This State ~J
(IN U .S . PLAINTIFF CASES ONLY )
NOTE : IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT
LAND INVOLVED .
Attome s (If Known)
M A G -19T-RATE TUDGZ
y
"wnHIGHLANDS
III. CITIZENSHIP OF PRINCIPAL PARTiPlace attt3° in One Box for Plaintiff(For Diversity Cases Only) and Opt,: Box for Defendant)
Citizen of This Stat e
Citizen of Another State IP' 2 0 2 Incorporated ardf.
Citizen or Subject of a O
Foreign Countr y
a) Re-filed Case 0 YES 0 N O
JUDGE DOCKETNUMBER
t0
Appeal to District0 7 Judge fro m
MagistrateJu dpment
Cite the U .S . Civil Statute under which you are filing and Write a Brief Statement of Cause ( Do not cite jurisdicti onal statutes unlessdiversity):
15 U .S .C . Sections 78j(b) abd 78t(a)
LENGTH OF TRIAL via days estimated (for both sides to try entire case)
0 CHECK IF THIS IS A CLASS ACTIONUNDER F .R.C.P . 2 3
ABOVE INFORMATION IS TRUE & CORRECT TOTHE BEST OF MY KNOWLEDGE
SIGN
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OF ATTORNEY OF RECORD
FO
AMOUN
0 6 MultidistrictLitigation
b) Related Cases 0 YES G'N O
CHECK YES only if demanded in complaint :
JURY DEMAND: [Yes No
DATE
/6 6NLY
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