Lead plaintiff, the New Orleans Employees' Retirement System, brought this securities class action against NovaGold Resources Inc. ("NovaGold") and several of NovaGold's directors and officers. As alleged in the December 30, 2008 Complaint, NovaGold misled investors about the economic feasibility of its largest mining project, Galore Creek. On October 25, 2006, NovaGold, based on a purportedly independent engineering study, declared that Galore Creek was economically feasible. Over the course of the next thirteen months, NovaGold continued to tout Galore Creek's economic viability, including launching a $200 million secondary offering of common stock and obtaining a joint venture partner for the project. In reality, however, NovaGold's own internal analysis revealed that construction costs were materially above the publicly disclosed figures, which cast significant doubt on the economic viability of Galore Creek. Finally, on November 26, 2007, with construction costs projected at more than double those disclosed in October 2006, NovaGold announced the suspension of mine construction at Galore Creek. As a result of this news, NovaGold's common stock price dropped by over fifty percent.
The Amended Complaint was filed on December 30, 2008, asserting numerous claims against defendants, including securities fraud claims under the Securities Exchange Act of 1934.
On January 23, 2009, the defendants moved to dismiss all claims in the action. On June 5, 2009, U.S. District Judge Denise Cote sustained the securities fraud claims against NovaGold and the "Controlling Person" claims against several of NovaGold's directors and officers, including Rick Van Nieuwenhuyse (NovaGold's President and CEO), Robert J. MacDonald (NovaGold's Senior Vice-President and CFO), Peter W. Harris (NovaGold's Senior-Vice President and COO), Douglas Brown (NovaGold's Vice-President of Business Development); and Directors George Brack, Michael H. Halvorson, Gerald J. McConnell, Clynton R. Nauman, and James L. Philip.
On September 10, 2010, the Court granted final approval to a C$28,000,000 (approximately US$26,600,000) settlement of the action. The settlement resolves the claims of NovaGold's shareholders who purchased shares from October 25, 2005 through January 16, 2008 on the American Stock Exchange and Toronto Stock Exchange. The settlement is currently being distributed to Authorized Claimants.