The opinion of the court was delivered by: William C. Conner, District Judge.
This class action is brought by plaintiffs on behalf of all
those who purchased common stock of the Bairnco Corporation
("Bairnco") between March 13, 1989 and April 2, 1990. The
Amended Class Action Complaint (hereinafter "Complaint")
alleges violations of Section 10(b) of the Securities Exchange
Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated
This action is currently before the Court on defendants'
motion to dismiss the Complaint pursuant to Rules 9(b) and
12(b)(6) of the Fed.R.Civ.P.
Central to plaintiffs' claim is the following excerpt from
Bairnco's 1988 Annual Report:
Keene's management and its counsel believe that
the disposition of the existing and possible
unasserted asbestos claims and other cases will
not have a material adverse effect on Keene.
Accordingly, management of the corporation
[Bairnco] believes that the disposition of such
claims, along with various other lawsuits, will
not have a material adverse effect on the
consolidated financial position of the
Complaint ¶ 42(a). The Annual Report went on to explain that
this conclusion was premised on five factors:
(1) Keene's insurance coverage; (2) Keene's
experience to date with asbestos cases and their
settlement, including Keene's review of the trends
with respect to new case filings; (3) the benefit
derived from the cooperation of co-defendants . .
. (4) the potential reduction of Keene's share of
indemnity as Manville and possibly other
responsible parties, such as the U.S. Government,
pay a share of liability contribution to asbestos
case costs and (5) the book accrual established by
Keene. . . .
These statements, which plaintiffs allege to be false and
misleading, were consistently repeated in Bairnco's annual and
quarterly reports to the public during the class period,
On January 23, 1990, defendants announced a restructuring of
Bairnco in which Keene would be "spun off" and shares of its
stock distributed to Bairnco, shareholders in proportion to
their Bairnco holdings.
In a press release issued on March 28, 1990, Bairnco reversed
its prior assurances regarding the asbestos claim risks. The
release stated that the management of Keene could not determine
whether or not Keene's ultimate liability on asbestos claims
would have a "material adverse effect upon Keene's financial
position." Complaint ¶ 54. In the five business days following
the press release, the per-share price of Bairnco common stock
fell more than 50% in value, from $13.625 to $6.25.
In its 1989 10-K report, filed on or about April 2, 1990,
Bairnco disclosed that "substantially all of Keene's remaining
insurance coverage" was subject to litigation or dispute and
would not be available until after such ...