Pre-Paid Legal Services, Inc. - Securities Class Action

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_______________
Copyright (c) 2001
Stanford Law School

Pre-Paid Legal Services, Inc. Conclusion: The original complaint alleges that during the class period, Pre-Paid continually announced favorable earnings and growth in the number of 'associates' who sold its policies, when, in fact, many of its associates were no longer generating new business and were not repaying advances from the company and the company's earnings were manipulated and overstated by improperly capitalizing commission expenses and failing to write off uncollectible advances. As a result, Pre-Paid's stock traded at inflated levels during the class period, increasing to as high as $48.75 per share. On 01/17/2001, the Wall Street Journal published a story on Pre-Paid's accounting scheme. Upon these disclosures, Pre-Paid stock dropped to $20.00 per share.

By Order dated May 15, 2001, the Court (i) consolidated several actions under the above caption; (ii) appointed Lead Plaintiffs for the Class; and (iii) appointed Co-Lead Counsel for the Class.

On June 14, 2001, a Consolidated Amended Complaint (the “Complaint”) was filed. The Complaint asserted violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder against Pre- Paid, certain of its officers and directors, and for the first time also named Deloitte. Plaintiffs alleged that Pre-Paid, and certain of its officers and directors (collectively, the “Pre-Paid Defendants”), materially misstated Pre-Paid’s 1998, 1999, and 2000 financial statements. As against Deloitte, the Complaint alleged that Deloitte falsely represented during the Class Period that Pre-Paid’s 1998, 1999, and 2000 financial statements fairly presented Pre-Paid’s financial condition and results of operations in accordance with GAAP and allegedly falsely represented that it had audited those financial statements in accordance with GAAS. The Complaint claimed that the alleged misrepresentations and omissions caused the price of Pre-Paid stock to be artificially inflated during the Class Period, to the alleged injury and damage of the plaintiffs.

Deloitte moved to dismiss the Complaint, arguing, among other things, that Plaintiffs had not and could not plead that Deloitte acted with scienter and that the claims were barred by the statute of limitations. The Pre-Paid Defendants filed a motion to dismiss the Complaint also arguing, among other things, that scienter had not been adequately pled. By Orders dated March 5, 2002 and March 25, 2002, the Court agreed with Deloitte and the Pre-Paid Defendants and dismissed the District Court Action with prejudice.

Plaintiffs filed Notices of Appeal to the Tenth Circuit on April 2, 2002, April 23, 2002, and June 5, 2002.

The Parties have engaged in an extensive arms’-length mediation process utilizing the mandatory mediation program of the Tenth Circuit. Through that process and over the period of six months, the Parties negotiated an agreement in principle for the Parties to settle the Action with Deloitte, subject to the approval of the Court. The Action with respect to the Pre-Paid Defendants has not been settled and is currently still the subject of an appeal to the Tenth Circuit.

On December 10, 2004, the Court approved the $925,000 settlement with defendant Deloitte & Touche.

On September 18, 2006, the court entered the Mandate from the U.S. Court of Appeals for the Tenth Circuit. According to the Mandate, the judgment from the District Court granting the Pre-Paid Defendants’ motion to dismiss the action without leave to amend is affirmed. The Pre-Paid Defendants are the Pre-Paid Legal Sevices, Inc. and the five individual officer and director defendants.

INDUSTRY CLASSIFICATION:
SIC Code: 8111
Sector: Services
Industry: Personal Services

COMPANY/ISSUER NAME:	Pre-Paid Legal Services, Inc.
COMPANY/ISSUER TICKER:	PPD
COMPANY WEBSITE:	http://www.prepaidlegal.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Gordon Gradwell, et al. v. Pre-Paid Legal Services, Inc., et al.

COURT: W.D. Oklahoma	DOCKET NUMBER: 01-CV-00182
JUDGE NAME: Hon. Robin J. Cauthron
DATE FILED: 01/22/2001	SOURCE: Business Wires
CLASS PERIOD START: 04/19/1999	CLASS PERIOD END: 01/16/2001
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Barrack, Rodos & Bacine (San Diego - former) 402 West Broadway , San Diego, CA, 92101 (voice) 619.230.0800, (fax) 619.230.1874, info@barrack.com Berger & Montague PC 1622 Locust Street, Philadelphia, PA, 19103 (voice) 800.424.6690, (fax) 215.875.4604, investorprotect@bm.net Cauley, Geller, Bowman, Coates & Rudman LLP (San Diego, CA) 225 Broadway, Suite 1900, San Diego, CA, 92010 (voice) 619.702.7350, (fax) 619.702.7351, Dreier Baritz & Federman 120 N. Robinson, Suite 2720, Oklahoma City, OK, 73102 (voice) 405.235.1560, (fax) 405.239.2112, info@dreierbaritz.com Edward J. Carreiro , , , (voice) , (fax) , Law Offices of Marc S. Henzel (Lawrence) 335 Central Avenue, Lawrence, NY, 11559 (voice) 516.374.0707, (fax) 516.295.3473, securitiesfraud@comcast.net Lieff, Cabraser, Heimann & Bernstein LLP Embarcadero Center West 275 Battery Street, Suite 3000, San Francisco, CA, 94111-3339 (voice) 415.956.1000, (fax) 415.956.1008, Lytle, Sould & Curlee , , , (voice) , (fax) , Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA) 600 West Broadway, 1800 One America Plaza, San Diego, CA, 92101 (voice) 800.449.4900, (fax) , support@milberg.com Schatz & Nobel, P.C. 330 Main Street, Hartford, CT, 06106 (voice) 800.797.5499, (fax) 860.493.6290, sn06106@AOL.com Spector, Roseman & Kodroff (Philadelphia) 1818 Market Street; Suite 2500, Philadelphia, PA, 19103 (voice) 215.496.0300, (fax) 215.496.6610, classaction@srk-law.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 11

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Complaint For Violation Of The Securities Exchange Act Of 1934
Type: Complaint		Date on the document: 01/22/2001

REFERENCE COMPLAINT

In Re: Pre-Paid Legal Services, Inc. Securities Litigation

COURT: W.D. Oklahoma	DOCKET NUMBER: 01-CV-00182
JUDGE NAME: Hon. Robin J. Cauthron
DATE FILED: 06/14/2001	SOURCE: Business Wires
CLASS PERIOD START: 03/18/1999	CLASS PERIOD END: 05/15/2001
TYPE OF COMPLAINT: Consolidated Complaint
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Berger & Montague PC 1622 Locust Street, Philadelphia, PA, 19103 (voice) 800.424.6690, (fax) 215.875.4604, investorprotect@bm.net Schiffrin & Barroway LLP 3 Bala Plaza E, Bala Cynwyd, PA, 19004 (voice) 610.667.7706, (fax) 610.667.7056, info@sbclasslaw.com Wolf Haldenstein Adler Freeman & Herz LLP (New York) 270 Madison Avenue, New York, NY, 10016 (voice) 212.545.4600, (fax) 212.686.0114, newyork@whafh.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 3

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Amended Complaint
Type: Complaint		Date on the document: 06/14/2001
Judgment
Type: Other		Date on the document: 03/05/2002
Order
Type: Order		Date on the document: 03/05/2002
Order
Type: Order		Date on the document: 02/10/2004
Motion For Preliminary Approval Of Partial Settlement And Brief In Support
Type: Motion		Date on the document: 04/28/2004
Notice Of Pendency Of Class Action And Of Partial Settlement
Type: Notice		Date on the document: 08/06/2004
Order Of Preliminary Approval Of Partial Class Action Settlement
Type: Order		Date on the document: 08/06/2004
Final Order Approving Class Settlement
Type: Order		Date on the document: 12/10/2004
U.S. District Court Civil Docket
Type: Docket		Date on the document: 12/10/2004
Order and Judgement
Type: Order		Date on the document: 07/14/2006
U.S. District Court Civil Docket
Type: Docket		Date on the document: 11/13/2006

OTHER DOCUMENTS

Case Name and/or Number:
Type:		Date on the document:

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