plaintiff, · southern district of new york e cap^0^ zubair patel, individually and on behalf ofall...
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DISTRICT COURTUNITED STATES
SOUTHERN DISTRICT OF NEW YORK e CAP^0^
ZUBAIR PATEL, Individually and On Behalfof All Others Similarly Situated,
Plaintiff,
L-3 COMMUNICATIONS HOLDINGS, INC.,MICHAEL T. STRIANESE, and RALPH G.D'AMBROSIO,
Defendants
COMPLAINT FOR VIOLATION O 4HI
Case No
JUDGE
14 CV 6038CLASS ACTION
. •>
en ~-^ a
DEMAND FOR JURY TRIAL u > c -n
o
's- %
CJ
FEDERAL SECURITIES LAWS
individually and on behalf of all other personsPlaintiff Zubair Patel ("Plaintiff), i
similarly situated, by his undersigned attorneys:
following based upon personal knowledge as 1
belief as to all other matters, based upon, inter
his attorneys, which included, among other thi
conference calls and announcements made by
Commission ("SEC") filings, wire and
Communications Holdings, Inc. ("L-3" or
about the Company, and information readily
substantial evidentiary support will exist for
opportunity for discovery.
for t is complaint against defendants, alleges the
himself and his own acts, and information and
dlia, the investigation conducted by and through
;s, a review of the defendants' public documents,
fend ants, United States Securities and Exchange
releases published by and regarding L-3
"Company"), analysts' reports and advisories
dbtainable on the Internet. Plaintiff believes that
thing:
deil
pr<:sii
thb
tie allegations set forth herein after a reasonable
NATURE OF THE ACTION
1. This is a federal securities class action on behalf of a class consisting of all
who purchased or otherwise acquired L-3
20141 both dates inclusive (the "Class Period").
Defendants' violations of the federal securities laws
persons other than Defendants (defined
securities between April 25, 2013 and July 30,
Plaintiff seeks to recover damages caused by
and to pursue remedies under Sections 10(b)
(the "Exchange Act") and Rule 10b-5 promulg;
of its top officials.
2. L-3 is a prime contractor in
3 is also a leading provider of a broad rangi
products used on military and commercial
Communications Corporation, L-3 provides
surveillance, and reconnaissance systems; aircraft
security solutions in the United States and i
3. The Company operates in four s
Communication Systems, and National
headquartered in New York, New York. L-3
under the ticker symbol "LLL".
4. AsofDecember31,2013,
sales were generated from contracts (revenue ai
to design, develop, manufacture, modify, u]
electronic equipment, and to provide related er,
buyer's specifications. According to the
generally fixed-price, cost-plus, or time-and
belo w)
aid 20ia) of the Securities Exchange Act of 1934
thereunder, against the Company and certainiited
aerospace systems and national security solutions. L-
of communication and electronic systems and
platforms. Through its subsidiary, L-3
c|)rjimand, control, communications, intelligence,
modernization and maintenance; and national
inten tation illy
cgments: Aerospace Systems, Electronic Systems,
Security Solutions. L-3 was founded in 1997 and is
trades on the New York Stock Exchange ("NYSE")
appro!ximat ly 47% of the Company's consolidated net
e(ments), which mostly require the Company
test and integrate complex aerospace and
gineeting and technical services according to the
Comp}ii].y, tiese revenue arrangements or contracts are
material type and are covered by accounting
anger
pgrade:
standards for construction-type and production-type contracts and federal government
contractors.
5. Substantially all of L-3's cost-p
U.S. Government, primarily the Department of
Government are multi-year contracts that are
these multi-year contracts are based on amounts!
6. Throughout the Class Period
statements regarding accounting matters at |]
Specifically, Defendants made false and/or
(1) L-3's financial statements contained errors
on a fixed-price maintenance and logistics
operating income; (2) net sales with respect to
contract were overstated; (3) the Company lacjkid
reporting; and (4) as a result of the foregi
materially false and misleading at all relevant tifnfes.
7. On July 31, 2014, before the
"Preliminary Second Quarter 2014 Results,
to the disclosure of a concurrent internal
uls and time-and-material contracts are with the
Defense. Certain of the contracts with the U.S.
funded annually by the customer, and sales on
abprdpriated (funded) by the U.S. Government.
Defendants made materially false and misleading
(fompany's Aerospace Systems segment.
misldadirlg statements and/or failed to disclose that:
he
rejlatefi to the improper deferral of cost overruns
^ppokt contract resulting in overstatement of
fixed-price maintenance and logistics support
adequate internal and control over financial
o nig, the Company's financial statements were
hi
he
markets opened for trading, L-3 announced
Company announced preliminary results due
ac<|oUntihg review into matters at the Company's
Aerospace Systems segment. According to the press -elease
The review relates to accounting mattessegment, and is being conducted withlegal advisors. The Company currentlycharge of $84 million against operatin jsales of approximately $43 million. Ofrelates to periods prior to 2014, and appfrcjxim|atelyhalf of 2014, of which $30 millionAdditionally, as a result of the review,operating income for the Aerospacemillion for the second half of 2014.
at Ihe Company's Aerospace Systemsassistance of outside accounting and
expects to incur an aggregate pre-taxincome and a related reduction in net
diarges, approximately $50 million$34 million relates to the first
? to the second quarter of 2014.CCompany has lowered its estimated
ems segment by approximately $35
:he
The adjustments primarily relateinappropriately deferred and overstatementsrespect to a fixed-price maintenance aid loyistiof performance on this contract beganon January 31, 2015. The Company bjbljevethese adjustments are the result of rr isconductAerospace Systems segment. The miscjpiiduqtCorporate staff and external auditors
hsse
relate
the
Syst
to contract cost overruns that were
of net sales, in each case withics support contract. The period
1, 2010, and is scheduled to ends that the amounts associated with
and accounting errors at theincluded concealment from L-3's
8. Moreover, according to the lily 3 1, 2014 press release, L-3 management
immediately terminated certain employees in thjb Aerospace Systems segment.
9. As a result of this news, sharps
extremely heavy volume, to close at $104.96 on
10. As a result of Defendants'
decline in the market value of the Company's
suffered significant losses and damages.
JURISDICTION AND VENUE
11. The claims asserted herein arise!
Exchange Act (15 U.S.C. §§78j(b) and §78t(a
SEC(17C.F.R. §240.10b-5).
12. This Court has jurisdiction over
§1331 and §27 of the Exchange Act.
of L-3 fell $14.68, or more than 12%, on
Jfilyi 1,2014.
wrongful acts and omissions, and the precipitous
sjbdurit es, Plaintiff and other Class members have
4nder and pursuant to §§10(b) and 20(a) of the
|) ^nd Rule 10b-5 promulgated thereunder by the
the subject matter of this action under 28 U.S.C.
13. Venue is proper in this District
§78aa) and 28 U.S.C. §1391(b) as a significant
subsequent damages, took place within this District.
14. In connection with the acts, conflict
Defendants, directly or indirectly, used the mefcfls
including but not limited to, the United States
facilities of the national securities exchange.
tnfrsu&nt to §27 of the Exchange Act (15 U.S.C.
portion of the Defendants' actions, and the
aad other wrongs alleged in this Complaint,
ard instrumentalities of interstate commerce,
, interstate telephone communications and therjiail
15. Plaintiff, as set forth in the accotnpan
reference herein, acquired L-3 securities at artificiallj
was damaged upon the revelation of the alleged
16. Defendant L-3 is a prime contractor
solutions. L-3 is also a leading provider of
systems and products used on military and
York, New York and trades on the NYSE undei
17. Defendant Michael T. Strianese
the "Individual Defendants."
PARTIES
dng Certification, which is incorporated by
inflated prices during the Class Period and
cbrrebtive disclosures.
n aerospace systems and national security
broad range of communication and electronic
al platforms. L-3 is headquartered in New
the s;/mbol "LLL".
Strianese") has served, at all relevant times, as
'fleer ("CEO") of L-3.
$io ("D'Ambrosio") has served, at all relevant
Cfficer("CFO")ofL-3.
rh *n 17 - 18 are sometimes referred to herein as
con mierc
('
the Chairman, President and Chief Executive O
18. Defendant Ralph G. D'Ambro
times, as Senior Vice President and Chief Financial
19. The defendants referenced above
20. Defendant L-3 and the Individu il Defendants are referred to herein, collectively,
as the "Defendants."
SUBSTANTIVE ALL ;gations
Background
21. L-3 Holdings, a Delaware corporation
operating income and cash flows from its
Corporation. L-3 Communications Corporation
Intelligence, Surveillance and Reconnaissance
Communications ("C3") systems, platform and
and ground vehicles, and national security solutibns
range of electronic systems used on military
the United States Department of Defense ("
intelligence agencies, the U.S. Department of
State (DoS), allied international government!
yr|oll>
De
organized in April 1997, derives all of its
•owned subsidiary, L-3 Communications
aware corporation, is a prime contractor in
("ISR") systems, Command, Control,
ics solutions for aircraft, maritime vessels
L-3 is also a leading provider of a broad
conlimercial platforms. L-3 customers include
") and its prime contractors, U.S. Government
Ifcjmeland Security ("DHS"), U.S. Department of
and domestic and international commercial
logis
and
'DoD
customers.
22. The Company has four reportabl ?
as the Platform & Logistics Solutions ("P&LS
("AM&M") reportable segments), (2)
(4) National Security Solutions.
23. As of December 31, 2013,
were generated from contracts (revenue arraij;
develop, manufacture, modify, upgrade, test
equipment, and to provide related engineering]
specifications. These revenue arrangements orj
time-and-material type and are covered by
production-type contracts and federal governmeht
^egnjients: (1) Aerospace Systems (also reported
Aircraft Modernization and Maintenanceand
Electro lie Systems, (3) Communication Systems, and
appfokimMely 47% of L-3's consolidated net sales
;emetits) that require the Company to design,
j^nd irtegrate complex aerospace and electronic
and technical services according to the buyer's
contracts are generally fixed-price, cost-plus, or
Recounting standards for construction-type and
cor tractors.
24. Substantially all of L-3's cost-plus
with the U.S. Government, primarily the TjoD
Government are multi-year contracts that are
these multi-year contracts are based on amounts
Materially False
type and time-and-material type contracts are
Certain of the contracts with the U.S.
funded annually by the customer, and sales on
appropriated by the U.S. Government.
and Misleading
Statements Issuecj During the Period
25. On April 25, 2013, the Company
first quarter ended March 29, 2013. For the
$2.11, a net sales increase of 1% to $3.2 bil
million, funded orders of $2.9 billion, funded
financial guidance. With respect to the P&LS
issued a press release announcing results for the
qjiajrterJ L-3 reported diluted earnings per share of
ion, net cash from operating activities of $146
backlog of $10.5 billion, and reaffirmed 2013
reportable segment, L-3 reported:
increased by $3 million compared to theP&LS net sales for the2013 first quarte^2012 first quarter [$616.5 million v.increased by $56 million, which was n<million for Logistics Solutions. Theprimarily due to increased volumeDepartment of National Defence, EC-1international head-of-state aircraft modli
decrease in Logistics Solutions was prirlaplyorder for U.S. Army contract field telamwhich was completed in 2012.
$614 million]. Platform Solutions salesejarly tally offset by a sales decline of $53
Platform Solutions sales increase was
aircraft maintenance for the Canadian
aircraft for the U.S. Air Force (USAF),i^icat ons, and the Australia C-27J. The
due to the competitive loss of a tasksupport services in Southwest Asia,
fa:
P&LS operating income for the 2013 fii stcompared to the 2012 first quarter [$i 7margin declined by 80 basis points tomix for Platform Solutions.
26. On May 7, 2013, the Compary
signed by defendant D'Ambrosio, and reiterated
financial results and financial position. In
certifications pursuant to the Sarbanes-Oxley 4-ct of
quarter decreased by $5 million, or 8%,5 million v. $62.3 million]. Operating
$% primarily due to lower margin sales
filed a Form 10-Q with the SEC which was
the Company's previously announced quarterly
addtion, the Form 10-Q contained signed
2002 ("SOX") by defendants Strianese and
D'Ambrosio, stating that the financial information
disclosed any material changes to the Company
27. On July 25, 2013, the Company
second quarter ended June 28, 2013. For the qiiahter
$2.03, a net sales increase of 2% to $3.2 bill
million, funded orders of $3.5 billion, funded
contained in the Form 10-Q was accurate and
internal control over financial reporting.
is!sue<| a press release announcing results for the
•, L-3 reported diluted earnings per share of
ic-n, rjet cash from operating activities of $250
backlog of $10.8 billion, and updated 2013
financial guidance. With respect to the P&LS reportable segment, L-3 reported
Second Quarter. P&LS net sales for tl emillion, or 5%, compared to the 2012Platform Solutions sales increased by $46sales decline of $17 million for Logistic sincrease was primarily due to increasec iolutnemaintenance for the Canadian Departme ntfor U.S. Air Force (USAF) EC-130aircraft. The decrease in Logistics Soluiotns \Vasloss of a task order for U.S. ArmySouthwest Asia, which was completedservices due to the loss of the Joint Primarycontract for the USAF, partially offset t yand sustainment services for USAF trair irig ailrcraft
2013 second quarter increased by $29ijecoid quarter [$620.3M v. $591.5M].
million, which was partially offset by aSolutions. The Platform Solutions sales
for the Australia C-27J, aircraftof1National Defence, and modifications
aircraft and international head-of-stateprimarily due to the competitive
c<t>ntr&ct field team support services in12, and reduced fleet managementAircraft Training Systems (JPATS)
inci eased volume for field maintenance
in 2C
P&LS operating income for the 2013 s|cbnd$14 million, or 28%, compared to the 2012increased by 190 basis points to 10.6% prim;for Logistics Solutions.
quarter of $66 million increased bysecond quarter. Operating margin
rily due to higher margin sales mix
First Half: P&LS net sales for the 2013compared to the 2012 first half [$1,23sales increased by $102 million, which$71 million for Logistics Solutions. TheLogistics Solutions sales decrease werequarter.
first half increased by $31 million, or 3%,
P&LS operating income for the 2013million, or 8%, compared to the 2012basis points to 10.0% primarily dueSolutions.
6J8M v. $1,205.5M]. Platform Solutionswas partially offset by a sales decline ofPlatf )rm Solutions sales increase and the
due to trends similar to the 2013 second
first half of $123 million increased by $10fij-sl: half. Operating margin increased by 60tip higher margin sales mix for Logistics
28. On August 1, 2013, the Compafiy
signed by defendant D'Ambrosio, and reiterated
financial results and financial position. In additior
certifications by defendants Strianese and D
,r filed a Form 10-Q with the SEC which was
the Company's previously announced quarterly
:., the Form 10-Q contained signed SOX
Arhbrcsio, stating that the financial information
contained in the Form 10-Q was accurate and disclosed any material changes to the Company's
internal control over financial reporting.
29. On October 29, 2013, the Compkriy islsued a press release announcing results for
the third quarter ended September 27, 2013
share from continuing operations of $2.23,
activities of $221 million, funded orders of $
F|or the? quarter, L-3 reported diluted earnings per
nelt saleb of $3.0 billion, net cash from operating
1.1 billion, funded backlog of $10.6 billion, and
updated 2013 financial guidance. With respect :o the P&LS reportable segment, L-3 reported:
Third Quarter. P&LS net sales formillion, or 9%, compared to the 2012Solutions sales decreased by $71 millionincrease of $12 million for Logisticsdecrease was primarily for the Australikdeliverables, U.S. Navy maritime patrolsequestration and reduced deliveries ofILogistics Solutions was primarily dueand sustainment services for U.S. Air
new competitively won contract.
the 20 3 third quarter decreased by $59thij-d qiiarter [$590M v. $649M]. Platform
, which was partially offset by a salesSblutons. The Platform Solutions sales
C-2'M aircraft due to timing of contractaircraft due to reduced funding caused byaircraft cabin assemblies. The increase in
increased volume for field maintenance
(USAF) training aircraft driven by ato
P&LS operating income for the 2013$13 million, or 20%, compared todecreasedby 120basis points to 8.8% pfiijnariLogistics Solutions.
Force
1hird quarter of $52 million decreased bythird quarter. Operating margin
y due to lower margin sales mix forthe 2012
Year-to-Date: P&LS net sales for the
million, or 1%, compared to the2012 ye|ar-Logistics Solutions sales decreased bya sales increase of $32 million for PlatformSolutions was primarily dueto the comietitivlecontract field team support services in2012, and reduced fleet managementAircraft Training Systems contract for •'.
2)13 year-to-date period decreased by $27iate period [$1,827M v. $1,854M].
million, which was partially offset bySolutions. The decrease in Logistics
loss of a task order for U.S. ArmyS<f>uth|west Asia, which was completed in
due to the loss of the Joint PrimaryU5j>AF. These decreases were partially
•to-
59
se -vices
he
offset by increased volume for field niainteitianceUSAF training aircraft. Platform Solutionsincreased volume for USAF EC-130 i
aircraft maintenance for the Canadian iDebartjnentoffset by lower volume for the Jointaircraft, and U.S. Navy maritime patrolaircraft cabin assemblies.
Carg
and sustainment services for
sales increased primarily due tointelrnational head of state aircraft, and
of National Defence, partially;b Aircraft (JCA), Australia C-27J
aircraft, as well as reduced deliveries of
P&LS operating income for the 2013decreased by $3 million, or 2%, confip&recOperating margin decreased by 10 bajsiisdecrease in sales for Logistics Solutions;
year-to-date period of $176 millionto the 2012 year-to-date period,
to 9.6%) primarily due to the
30. Also, on October 29, 2013, the
was signed by defendant D'Ambrosio, and
quarterly financial results and financial positidn,
SOX certifications by defendants Strianese
information contained in the Form 10-Q was
Company's internal control over financial report
31. On January 30, 2014, the Compiijy
the fourth quarter ended December 31, 2013. |:
share from continuing operations of $2.17, n<t
activities of $646 million, funded orders of $'. >
issued initial financial guidance for 2014. With
reported:
pc ints
<Pqmpftny filed a Form 10-Q with the SEC which
^iterated the Company's previously announced
addition, the Form 10-Q contained signed
D'Ambrosio, stating that the financial
aftctiratfc and disclosed any material changes to the
In
and
mg.
or th
sales
Obi
issued a press release announcing results for
5 quarter, L-3 reported diluted earnings per
of $3.3 billion, net cash from operating
lion, funded backlog of $10.3 billion, and
resbect to the P&LS reportable segment, L-3
Fourth Quarter: P&LS net sales formillion, or 2%, compared to the 2012 fduithSolutions sales decreased by $31 millis!;, w.increase of $18 million for Logisticsdecrease was primarily due to loweraircraft resulting from reduced fundirigsequestration cuts and lower U.S. Air Forcevolume as the program nears comple ionaircraft due to timing of contract deliveries
tin 20 3 fourth quarter decreased by $13quarter [$616M v. $629M]. Platformlich was partially offset by a sales
. The Platform Solutions sales
for U.S. Navy maritime patroltaused by the U.S. Government;USAF) Joint Cargo Aircraft (JCA)
partially offset by Australia C-27JThe increase in Logistics Solutions
Solut.ons
volurie
10
for field maintenance and sustainmentwas primarily due to increased volumeservices for USAF training aircraft dri\and U.S. Army C-12 aircraft.
en b> a new competitively won contract
P&LS operating income for the 2013included severance charges of $2 milcompared to the 2012 fourth quarter,points to 8.3% primarily due to lowerpartially offset by improved contract
fouith quarter of $51 million, whichion, decreased by $6 million, or 11%,
Opera:ing margin decreased by 80 basis(nargin sales mix for Logistics Solutions,brmance for Platform Solutions.perf(
Full Year: P&LS net sales for the year$40 million, or 2%, compared to the yeardecline for Logistics Solutions [$2,441»N|1remained substantially the same as 201^primarily due to the competitive loss ofteam support services in Southwestreduced fleet management services dueTraining Systems (JPATS) contract for ;'offset by increased volume for field maintenanceUSAF training aircraft and U.S. Arm/higher volume on USAF EC-130 andaircraft maintenance for the Canadian Dbp-artrhentby lower volume for U.S. Navy mari1:reduced deliveries of aircraft cabin assemblies
ended December 31, 2013 decreased by^ndefd December 31, 2012 due to a sales
$2,483]. Platform Solutions salesdecrease in Logistics Solutions was
task order for U.S. Army contract fieldwhich was completed in 2012, and
th 5 loss of the Joint Primary AircraftUSAF. These decreases were partially
and sustainment services for
C-112 aircraft. For Platform Solutions,ipteqiational head of state aircraft, and
of National Defence was offset
riatrol aircraft and JCA, as well as
v.
The
A sia.
to
•he
P&LS operating income for the yearwhich included severance charges of $7compared to the year ended December20 basis points to 9.3% primarily duSolutions.
er)d<led December 31, 2013 of $227 million,rjiilli rjn, decreased by $9 million, or 4%,
2(12. Operating margin decreased byto fie decrease in sales for Logistics
32. On February 25, 2014, the
was signed by defendants D'Ambrosio and
announced quarterly and annual financial result^
K contained signed SOX certifications by defendants
financial information contained in the Form
changes to the Company's internal control over
ComjbaW lied its annual report on Form 10-K which
Sti(ianes$, and reiterated the Company's previously
^nd financial position. In addition, the Form 10-
Strianese and D'Ambrosio, stating that the
was accurate and disclosed any material10-K
financial reporting.
11
33. On May 1, 2014, the Company Hs$uea;
first quarter ended March 28, 2014. For the qftafter.
$2.01, net sales of $3.0 billion, funded orders
and increased 2014 financial guidance. With
segment, L-3 reported:
of $3
2014Aerospace Systems net sales for theor 9%, compared to the 2013 first quar|e|"$62 million for Platform Systems andLogistics Solutions remained substantiadecreased: (1) $24 million due to lovjAircraft (JCA) volume as the contract n pafs c<pdue to lower volume for aircraft main
National Defense due to timing and redi^dvolume for U.S. Navy maritime patrolcaused by U.S. Government sequestrfetireduced deliveries of aircraft cabin as pepiblioffset by a sales increase of $19 millionof contract deliverables. ISR Systemsand volume for small ISR aircraft and
drawdown in Afghanistan, partially off^ejt b>and fleet management services to thecustomers.
firs':
[$$(42illy
er U
a press release announcing results for the
L-3 reported diluted earnings per share of
0 billion, funded backlog of $10.4 billion,
respect to the Aerospace Systems reportable
quarter decreased by $104 million,,082M v. $1,186]. Sales decreased
million for ISR Systems. Sales fordie same. Platform Systems salesS. Air Force (USAF) Joint Cargompletion, (2) $22 million primarily
for the Canadian Department offjinding, (3) $19 million due to lower
iircraft resulting from reduced fundingcuts, and (4) $16 million due toes. These decreases were partially
Alustralia C-27J aircraft due to timingdeclined primarily due to lower sales
aircraft systems due to the U.S. militaryhigher volume for logistic support
anjd ISR platforms for foreign military
:e:ianoe
on
for.
sjkles
DbD
Aerospace Systems operating income f<million, or 19%, compared to the 2013margin declined by 130 basis points to fQ.5°Abasis points primarily due to lowerpartially offset by 70 basis points due tc60 basis points due to improved contrac
the 2014 first quarter decreased by $26rist quarter [$114M v. $140M]. Operating
Operating margin declined by 260arid mix changes. This decrease was
lbwejr pension expense of$8 million andperformance.
sajieis
34. The statements referenced in
=1
1][ 25 |- 33 above were materially false and/or
failed to disclose the following adverse factsmisleading because they misrepresented and
pertaining to accounting matters at the ComrJaijiy's
known to Defendants or recklessly disregarded by
and/or misleading statements and/or failed t<|>
contained errors related to the improper deferral
Aerospace Systems segment, which were
tftiem. Specifically, Defendants made false
disclose that: (1) L-3's financial statements
of eost overruns on a fixed-price maintenance
12
and logistics support contract resulting in
respect to the fixed-price maintenance and loJ$i$tics
Company lacked adequate internal and control
foregoing, the Company's financial statements
relevant times.
over$tar.em|ent of operating income; (2) net sales with
support contract were overstated; (3) the
Oyer ffnancial reporting; and (4) as a result of the
were materially false and misleading at all
The Tru<h Emerges
35. On July 31, 2014, before the
"Preliminary Second Quarter 2014 Results."
to the disclosure of a concurrent internal acdoimtih:
marjcets opened for trading, L-3 announced
h|e Cbmpany announced preliminary results due
g review into matters at the Company's
Aerospace Systems segment. According to the Dress -elease:
The review relates to accounting matterssegment, and is being conducted withlegal advisors. The Company currencharge of $84 million against operatingsales of approximately $43 million. Ofrelates to periods prior to 2014, andhalf of 2014, of which $30 millionAdditionally, as a result of the reviewoperating income for the Aerospacemillion for the second halfof 2014.
at
itly
g
these
die Company's Aerospace Systemstlje assistance of outside accounting and
expects to incur an aggregate pre-taxincipme and a related reduction in net
charges, approximately $50 millionapiflroxm Lately $34 million relates to the first
relates to the second quarter of 2014.the Company has lowered its estimatedsteris segment by approximately $35>y
The adjustments primarily relateinappropriately deferred and overstaten^eni^respect to a fixed-price maintenanceof performance on this contract beganon January 31, 2015. The Company rMlevelsthese adjustments are the result ofAerospace Systems segment. The misdbriducttCorporate staff and external auditors.
ti contract cost overruns that were
and
of net sales, in each case withlotistics support contract. The period
E^eeemper 1, 2010, and is scheduled to endthat the amounts associated with
rfi^conjduct and accounting errors at theincluded concealment from L-3's
36. Moreover, according to the July 31, 2014 press release, L-3 management
immediately terminated certain employees in trie
37. As a result of this news, shares
heavy volume, to close at $104.96 on July 31,
cf
20
Aerospace Systems segment.
-3 fell $14.68, or more than 12% on extremely
14.
13
38. As a result of Defendants' wrongful acts and omissions, and the precipitous
decline in the market value of the Company's spquriqes, Plaintiff and other Class members have
suffered significant losses and damages.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
39. Plaintiff brings this action as a
Procedure 23(a) and (b)(3) on behalf of a
otherwise acquired L-3 securities traded on the
were damaged upon the revelation of the all^
Class are Defendants herein, the officers and
members of their immediate families and their
class action pursuant to Federal Rule of Civil
CJtlaJss, consisting of all those who purchased or
MYSlf during the Class Period (the "Class"); and
ed corrective disclosures. Excluded from the
pirectors of the Company, at all relevant times,
gal representatives, heirs, successors or assigns
controlling interest.
so numerous that joinder of all members is
urities were actively traded on the NYSE.
imkhown to Plaintiff at this time and can be
and any entity in which Defendants have or had
40. The members of the Class ar^i
-:> se<impracticable. Throughout the Class Period, h
While the exact number of Class members i|
i
ascertained only through appropriate discovery
thousands of members in the proposed Class.
may be identified from records maintained by 11-3 or
pendency of this action by mail, using the forni of
securities class actions.
41. Plaintiffs claims are typical of
members of the Class are similarly affected t y
federal law that is complained of herein.
Plaintiff believes that there are hundreds or
R[eco "d owners and other members of the Class
its transfer agent and may be notified of the
notice similar to that customarily used in
trie claims of the members of the Class as all
Defendants' wrongful conduct in violation of
14
42. Plaintiff will fairly and adequately
Class and has retained counsel competent an|o
Plaintiffhas no interests antagonistic to or in cohffict
43. Common questions of law and fact
predominate over any questions solely affectinlg
questions of law and fact common to the Class are
protect the interests of the members of the
experienced in class and securities litigation.
with those of the Class.
sxist as to all members of the Class and
individual members of the Class. Among the
• whether the federal securities
alleged herein;la!ws sre violated by Defendants' acts asw
• whether statements made by DeClass Period misrepresented maand management of L-3;
whether the Individual Deferld^ntsmisleading financial statements <luring
• whether Defendants acted kno\fri}iglyj or recklessly in issuing false andmisleading financial statements; j
• whether the prices of L-3 sejctritifcsartificially inflated because of theherein; and,
• whether the members of the Claj sis the proper measure of damage ?.
ehdarits to the investing public during thetefial facts about the business, operations
caused L-3 to issue false and
the Class Period;
during the Class Period wereDefendants' conduct complained of
hav i sustained damages and, if so, what
44. A class action is superior to all
adjudication of this controversy since joinder
the damages suffered by individual Class mergers
burden of individual litigation make it impo|si|ble
redress the wrongs done to them. There will b(
a class action
45. Plaintiff will rely, in part, upon jhe presumption of reliance established by the
fraud-on-the-market doctrine in that:
15
other available methods for the fair and efficient
(If all members is impracticable. Furthermore, as
may be relatively small, the expense and
for members of the Class to individually
difficulty in the management of this action asno
• Defendants made public misrepfe^ent^tions or failed to disclose materialfacts during the Class Period;
• the omissions and misrepresentafio|ns ^ere material;
• L-3 securities are traded in efficient markets;
• the Company's shares were licju^d ahd traded with moderate to heavyvolume during the Class Period;
the Company traded on the NYS
• the misrepresentations and omissionsreasonable investor to misjudge f\$ vai
anc was covered by multiple analysts;
ass
alleged would tend to induce aue of the Company's securities; and
purchased and/or sold L-3 securitiesto disclose or misrepresented
facts were disclosed, withoutfacts.
• Plaintiff and members of the C
between the time the Defendafitkmaterial facts and the time he tijueknowledge of the omitted or misrepresented
failed
46. Based upon the foregoing, Plainnff
presumption of reliance upon the integrity of the rriarltet
47. Alternatively, Plaintiffs and tie
presumption of reliance established by the Sup rejme
of Utah v. United States, 406 U.S. 128, 92 S.
information in their Class Period statements in
and the members of the Class are entitled to a
m4mbers of the Class are entitled to the
ourt in Affiliated Ute Citizens of the State
. 2^30 (1972), as Defendants omitted material
ion of a duty to disclose such information,
Ct
viola
as detailed above.
counti:
Violation of Section 10(b) of T le Exchange Act and Rule 10b-5Against Al [Defendants
48. Plaintiff repeats and realleges ^aeh ajnd every allegation contained above as if
fully set forth herein.
49. This Count is asserted against EJeffend|ants and is based upon Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j(b), andRule 10ty-£ promulgated thereunder by the SEC.
16
Defendants Engaged in a plan, scheme, conspiracy and
kno\^i^igly or recklessly engaged in acts, transactions,
operated ad a fraud and deceit upon Plaintiff and the
statements of material facts and omitted to state
50. During the Class Period,
course of conduct, pursuant to which they
practices and courses of business which
other members of the Class; made various untrue
material facts necessary in order to make the
under which they were made, not misleading:
defraud in connection with the purchase and
and, throughout the Class Period, did: (i)
other Class members, as alleged herein; (ii)
L-3 securities; and (iii) cause Plaintiff and
acquire L-3 securities and options at artificially
scheme, plan and course of conduct,
herein.
51. Pursuant to the above plan
Defendants participated directly or indirectly
and annual reports, SEC filings, press release
above, including statements made to securities
influence the market for L-3 securities
statements made, in light of the circumstances
and elmployed devices, schemes and artifices to
sMe of) securities. Such scheme was intended to,
deceiVe the investing public, including Plaintiff and
artificially inflate and maintain the market price of
members of the Class to purchase or otherwise
inflated prices. In furtherance of this unlawful
Defendafiti, aifd each of them, took the actions set forth
oth* r
schefne, conspiracy and course ofconduct, each ofthe
ii the preparation and/or issuance of the quarterly
other statements and documents described
anaysts and the media that were designed to
reports, filings, releases and statements were
fa fed tc disclose material adverse information and
and
Such
materially false and misleading in that they faj
misrepresented the truth about L-3's finances and
52. By virtue of their positions a:
materially false and misleading statements an<.
thereby to deceive Plaintiff and the other memrj
business prospects.
L-3, Defendants had actual knowledge of the
rriatoiial omissions alleged herein and intended
of the Class, or, in the alternative, Defendantsers
17
acted with reckless disregard for the truth in thp
such facts as would reveal the materially false
although such facts were readily available to D4fenda|nts
were committed willfully or with reckless disr|e,
knew or recklessly disregarded that material
described above.
the1' failed or refused to ascertain and disclose
and nisleading nature of the statements made,
Said acts and omissions of Defendants
for the truth. In addition, each defendant
were being misrepresented or omitted as
gard
facts
53. Defendants were personally motjv&ted
information necessary to make the statements r|o1
the sale of L-3 securities from theirpersonal po: tffolio|s
54. Information showing that Defenflaiits
for the truth is peculiarly within Defendants' Jbnlowl
and/or directors of L-3, the Individual Defendant ha|i
affairs.
to make false statements and omit material
55. The Individual Defendants are
misleading in order to personally benefit from
acted knowingly or with reckless disregard
^dge and control. As the senior managers
knowledge of the details of L-3's internal
liable x>th directly and indirectly for the wrongs
portions' of control and authority, the Individual
ctly, control the content of the statements of L-
company, the Individual Defendants had a duty
information with respect to L-3's businesses,
prospects. As a result of the dissemination of
releases and public statements, the market price
thjrofughbut the Class Period. In ignorance of the
inancial condition which were concealed by
the Class purchased or otherwise acquired L-3
complained of herein. Because of their
Defendants were able to and did, directly or
3. As officers and/or directors of a publicly-hel
to disseminate timely, accurate, and truthful
operations, future financial condition and
the aforementioned false andmisleading report|
for L-3's securities was artificially inflated
adverse facts concerning L-3's business andj
Defendants, Plaintiff and the other members o f
inci ire
futuje
18
securities at artificially inflated prices and relief1upon the price of the securities, the integrity of
the market for the securities and/or upon statements disseminated by Defendants, and were
damaged thereby.
56. During the Class Period, L-3's ^eburities were traded on an active and efficient
market. Plaintiff and the other members of
misleading statements described herein, whic
disseminated, or relying upon the integrity of trie
of L-3 securities at prices artificially inflated by
the ("lass, relying on the materially false and
he Defendants made, issued or caused to be
market, purchased or otherwise acquired shares
Defendants' wrongful conduct. Had Plaintiff
At
and the other members of the Class known the truth, they would not have purchased or otherwise
asecl or otherwise acquired them at the inflated
se:s ar d/or acquisitions by Plaintiff and the Class,
lower than the prices paid by Plaintiff and the
o|f L-|3's securities declined sharply upon public
of Plaintiff and Class members,
ed herein, Defendants knowingly or recklessly,
1.0(H) of the Exchange Act and Rule 10b-5
acquired said securities, or would not have purpb;
prices that were paid. At the time ofthe purch^
the true value of L-3 securities was substantially
other members of the Class. The market price
disclosure of the facts alleged herein to the inju y
57. By reason of the conduct allej i
directly or indirectly, have violated Section;
promulgated thereunder.
58. As a direct and proximate resulj
the other members of the Class suffered dama
pf Defendants' wrongful conduct, Plaintiffand
connection with their respective purchases,;eis in
acquisitions and sales of the Company's securities during the Class Period, upon the disclosure
that the Company had been disseminating misrepresented financial statements to the investing
public.
15
COl NT I
Violation of SettiohThe Exchange Act Again st
59. Plaintiff repeats and realleges
foregoing paragraphs as if fully set forth herein.
60. During the Class Period, the Indifidu^l
and management of L-3, and conducted and participated
of L-3's business affairs. Because of their serupr
information regarding L-3's business practices.
61. As officers and/or directors cjf
Defendants had a duty to disseminate accuratp
financial condition and results of operations,
issued by L-3 which had become materially fals^
62. Because of their positions of
Individual Defendants were able to, and did, lotntrol
releases and public filings which L-3 dissemii|al|ed
Throughout the Class Period, the Individual DMendknts
cause L-3 to engage in the wrongful acts ccj^n|plai|ned
therefore, were "controlling persons" of L-;
Exchange Act. In this capacity, they parti(firjate|
artificially inflated the market price of L-3 securities
63. Each of the Individual Defendants
20(a) ofThe Individual Defendants
each and every allegation contained in the
Defendants participated in the operation
, directly and indirectly, in the conduct
positions, they knew the adverse non-public
a publicly owned company, the Individual
and
and
truthful information with respect to L-3's
to correct promptly any public statements
or misleading.
control and authority as senior officers, the
the contents of the various reports, press
i|n the marketplace during the Class Period.
exercised their power and authority to
of herein. The Individual Defendants
within the meaning of Section 20(a) of the
in the unlawful conduct alleged which
thelrefore, acted as a controlling person of L-3.
alnd/or being directors of L-3, each of the
actions of, and exercised the same to cause, L-
By reason of their senior management positijpijis
Individual Defendants had the power to direct tihe?
2C
3 to engage in the unlawful acts and conduct
Defendants exercised control over the general
control the specific activities which comprise
the other members of the Class complain.
64. By reason of the above conduct^
Section 20(a) of the Exchange Act for the violafiobs
PRAYER
1
complained of herein. Each of the Individual
operations of L-3 and possessed the power to
pr mary violations about which Plaintiff andthe
die Individual Defendants are liable pursuant to
committed by L-3.
BELIEFIOR
WHEREFORE, Plaintiffdemands judgment
A. Determining that the instant aclifoh
Rule 23 of the Federal Rules of Civil Pribcedute
representative;
B. Requiring Defendants to pay dj^nfiage[s sustained by Plaintiff and the Class by
reason of the acts and transactions alleged hereiji
C. Awarding Plaintiff and the
judgment interest, as well as their reasonable at^orfneyjs
D. Awarding such other and further! relief
DEMAND FOR
oth&r
Plaintiff hereby demands a trial by jury.
igainst Defendants as follows:
may be maintained as a class action under
, and certifying Plaintiff as the Class
meipbers of the Class prejudgment and post-
' fees, expert fees and other costs; and
as this Court may deem just and proper.
TRIAL BY JURY
21