Opinion ID: 781005
Heading Depth: 4
Heading Rank: 2

Heading: Other Potential Causes

Text: 66 In determining that the Plaintiffs' factual allegations were insufficient, the District Court reasoned that Plaintiffs completely ignore[d] the other factual events that occurred during the class period and the impact of those events on America West and its stock prices. In particular, the District Court expressed its concern that Plaintiffs had overlooked the labor dispute between America West and its maintenance workers during the class period in determining what factors caused America West to miss its forecasted third quarter earnings. 67 However, in reaching this finding, the District Court failed to accept Plaintiffs' allegations as true and construe them in the light most favorable to Plaintiffs. See Silicon Graphics, 183 F.3d at 983. In their Second Amended Complaint, Plaintiffs pleaded with sufficient particularity its allegations that America West's missed earnings were caused in part by its deferral of maintenance costs and then its later obligation under the settlement agreement to alleviate the problems caused by its unsafe practices. Plaintiffs adequately allege that numerous maintenance issues were caused by outsourcing of maintenance, faulty maintenance procedures and practices, inadequate supervision, lack of spare parts and airplanes, and overutilization of airplanes. Beyond the $5 million fine, Plaintiffs further support their claim by citing to remedial actions taken by America West and statements made by it in the third quarter. 68 Moreover, although the lower than expected third-quarter earnings may be partially attributable to the labor disputes, other alleged operational problems cannot be explained solely by this factor. For example, in its September 3, 1998 announcement regarding its third quarter earnings, America West admitted to unsatisfactory operational performance and described its purchase of parts and airplanes, its hiring of additional maintenance employees, and its increase in the number of maintenance facilities to address the problems it faced. Contemporary opinions of analysts indicate the labor issues, the FAA's presence due to the company's safety problems, and operational problems contributed to decreased earnings. Although not the sole cause, it appears that the ongoing maintenance issues cited by Plaintiffs may have played a substantial role. Thus, the District Court erred in finding that the existence of other factors, such as the labor disputes, precluded Plaintiffs' argument that systemic maintenance issues also contributed to America West's failure to meet its forecasted third quarter earnings 69