ADT 2006 Annual Report Download - page 85

Court of Appeals for the First Circuit affirmed the District Court’s dismissal of the amended class
action complaint.
As previously reported in our periodic filings, an action entitled Hess v. Tyco International Ltd., et
al., was filed on June 3, 2004 in the Superior Court of the State of California for the County of Los
Angeles against certain of our former directors and officers, our former auditors and Tyco. On
October 25, 2006, the Court lifted its previous order staying the case during the pendency of a related
arbitration to which Tyco was not a party. Now that the stay has been lifted, Tyco intends to ask the
Court to dismiss the action.
As previously reported in our periodic filings, the United States District Court for the District of
New Jersey granted one plaintiff’s motion for appointment as lead plaintiff in Stumpf v. Tyco
International Ltd., an action originally filed on July 28, 2003 and O’Loughlin v. Tyco International Ltd.,
an action originally filed on September 26, 2003. On December 13, 2004, lead plaintiff Mark Newby
filed a consolidated securities class action complaint purporting to represent a class of purchasers of
TyCom securities between July 26, 2000 and December 17, 2001. Plaintiff names as defendants Tyco
International Ltd., TyCom, Ltd., Goldman Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and Citigroup Inc., (the ‘‘Underwriters’’) along with certain former Tyco and TyCom
executives. The complaint asserts causes of action under Sections 11 and 15 of the Securities Act of
1933 and under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder against Tyco, TyCom, Goldman Sachs, Merrill Lynch, Citigroup and certain
former Tyco and TyCom executives. The complaint alleges the TyCom registration statement and
prospectus relating to the sale of TyCom securities were inaccurate, misleading and failed to disclose
facts necessary to make the registration statement and prospectus not misleading. Further, the
complaint alleges the defendants violated securities laws by making materially false and misleading
statements and omissions concerning, among other things, executive compensation, Tyco’s and TyCom’s
finances and TyCom’s business prospects. On February 18, 2005, the Company moved to dismiss the
consolidated securities class action complaint. On September 2, 2005, the United States District Court
for the District of New Hampshire granted in part and denied in part the Company’s motion to
dismiss. The Court granted the Company’s motion to dismiss allegations that the TyCom registration
statement and prospectus were misleading to the extent that they failed to disclose alleged looting of
Tyco by former senior executives, accounting fraud, analyst conflicts and the participation by James
Brennan in the offering, because plaintiffs failed to plead that those alleged omissions were disclosed
during the class period, with a resultant drop in the value of TyCom stock. However, the Court denied
the Company’s motion to dismiss with respect to other allegations. On September 19, 2005, plaintiff
filed a motion for reconsideration of the Court’s September 2, 2005 ruling with respect to Goldman
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated and Citigroup Inc. On January 6,
2006, the Court held that the Goldman Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and Citigroup Inc. should remain in the case on the claim concerning TyCom’s business
prospects, but that the Section 11 claim related to alleged looting of Tyco by former senior executives
was dismissed as to both the Tyco defendants and the Underwriters because the affirmative defense of
lack of loss causation was apparent on the face of the complaint. On January 13, 2006, Tyco
International Ltd. and TyCom answered the consolidated securities class action complaint. On March 8,
2006, the plaintiff filed a motion for class certification. That motion has been fully briefed and is still
pending.
As previously reported in our periodic filings, on November 27, 2002 the State of New Jersey, on
behalf of several state pension funds, filed a complaint, New Jersey v. Tyco, in the United States District
Court for the District of New Jersey against Tyco, our former auditors and certain of our former
officers and directors. On February 11, 2005, plaintiffs filed a Second Amended Complaint against
Tyco, our former auditors, and certain of our former directors and officers. As against all defendants,
the amended complaint asserts causes of action under Section 10(b) of the Securities Exchange Act of
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