Cyberonics, Inc. - Securities Class Action

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Stanford Law School

Cyberonics, Inc. Summary: According to a press release dated September 10, 2008, a federal appeals court has backed a district court's decision to dismiss with prejudice a securities class action against Cyberonics Inc., which included allegations of stock option backdating following a drop in the company's stock price.

On October 4, 2007, the Court entered the Memorandum Opinion signed by U.S. District Judge Gray H. Miller granting the Defendants' motion to dismiss plaintiffs' supplemented first amended complaint. That day, the Court entered the Final Judgment and the case was terminated. On October 18, 2007, the Plaintiffs filed a Notice of Appeal. The appeal is currently pending in the U.S. Court of Appeals for the Fifth Circuit.

On August 17, 2006, the Plaintiffs filed a First Amended Complaint and the Defendants responded by filing a motion to dismiss the First Amended Complaint.

According to a press release dated July 21, 2006, Cyberonics, Inc. announced that on July 20, 2006, the United States District Court for the Southern District of Texas dismissed the plaintiffs' consolidated complaint against the Company and certain of its officers and directors in the putative securities class action lawsuit styled In re Cyberonics, Inc. Securities Litigation, Civil Action H-05-2121, described in the Company's Form 10-Q filed with the Securities and Exchange Commission on March 6, 2006. The Court ruled that the consolidated complaint failed to state any claim under the federal securities laws because it failed to allege material misstatements with particularity, failed to allege facts sufficient to raise a strong inference of intent or severe recklessness, and failed to allege sufficiently the causal connection between the plaintiffs' loss and the defendants' actions. The Court noted that "the deficiencies in Plaintiffs' complaint might well extend beyond the point of cure," but granted plaintiffs the right to amend their complaint in light of the strong legal presumption favoring a right to amend. Under the terms of the Court's Order, the plaintiffs will have 30 days to file a further amended complaint in an attempt to cure the deficiencies.

The complaint alleges that defendants violated the federal securities laws during the Class Period by failing to disclose and misrepresenting material adverse facts known to defendants or recklessly disregarded by them, including that defendants were engaged in serious violative manufacturing and quality practices that would have a serious negative impact on prospects for the Company's VNC product approval and that, while well aware of true nature of the serious issues facing FDA approval of the VNC system for the depression indication, Company insiders sold over $1.98 million of Company stock during the Class Period. As a result, the Complaint alleges, the value of the Company's stock was materially and artificially inflated during the Class Period.

Cyberonics engages in the design, development, and commercialization of medical devices, which claim to provide therapy, Vagus Nerve Stimulation (VNS), for the treatment of epilepsy and other debilitating neurological and psychiatric disorders.

INDUSTRY CLASSIFICATION:
SIC Code: 3845
Sector: Healthcare
Industry: Medical Equipment & Supplies

COMPANY/ISSUER NAME:	Cyberonics, Inc.
COMPANY/ISSUER TICKER:	CYBX
COMPANY WEBSITE:	http://www.cyberonics.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Richard Darquea, et al. v. Cyberonics, Inc., et al.

COURT: S.D. Texas	DOCKET NUMBER: 05-CV-02121
JUDGE NAME: Hon. Sim Lake
DATE FILED: 6/17/2005	SOURCE: Notice of Filing
CLASS PERIOD START: 6/15/2004	CLASS PERIOD END: 10/1/2004
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Federman & Sherwood 120 North Robinson, Suite 2720, Oklahoma City, OK, 73102 (voice) 405-235-1560, (fax) , wfederman@aol.com Finkelstein & Krinsk LLP 501 West Broadway, Suit 1250, San Diego, CA, 92101 (voice) 877.493.5366, (fax) 619.238.5425, Law Offices of Charles J. Piven, P.A. World Trade Center-Baltimore,401 East Pratt Suite 2525, Baltimore, MD, 21202 (voice) 410.332.0030, (fax) , pivenlaw@erols.com Law Offices of Marc S. Henzel 273 Montgomery Ave. Suite 202, Bala Cynwyd, PA, 19004 (voice) 610.660.8000, (fax) 610.660.8080, securitiesfraud@comcast.net Schatz & Nobel, P.C. 330 Main Street, Hartford, CT, 06106 (voice) 800.797.5499, (fax) 860.493.6290, sn06106@AOL.com Scott & Scott LLC (Connecticut) P.O. Box 192, 108 Norwich Avenue, Colchester, CT, 06415 (voice) 860.537.5537, (fax) 860.537.4432, scottlaw@scott-scott.com The Emerson Firm 2228 Cottondale Avenue, Suite 100, Little Rock, AR, 72202 (voice) 800.663.9817, (fax) 501.907.2556, epllp@emersonpoynter.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 7

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint For Violations Of Federal Securities Laws
Type: Complaint		Date on the document: 06/17/2005

REFERENCE COMPLAINT

In Re: Cyberonics, Inc. Securities Litigation

COURT: S.D. Texas	DOCKET NUMBER: 05-CV-02121
JUDGE NAME: Hon. Sim Lake
DATE FILED: 8/17/2006	SOURCE: Docket
CLASS PERIOD START: 2/5/2004	CLASS PERIOD END: 8/1/2006
TYPE OF COMPLAINT: First Amended
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Finkelstein & Krinsk LLP 501 West Broadway, Suit 1250, San Diego, CA, 92101 (voice) 877.493.5366, (fax) 619.238.5425, Scott & Scott LLC (Connecticut) P.O. Box 192, 108 Norwich Avenue, Colchester, CT, 06415 (voice) 860.537.5537, (fax) 860.537.4432, scottlaw@scott-scott.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Complaint for Violations of the Federal Securities Laws
Type: Complaint		Date on the document: 11/30/2005
First Amended Class Action Complaint
Type: Complaint		Date on the document: 08/17/2006
Final Judgment
Type: Other		Date on the document: 10/04/2007
Memorandum Opinion
Type: Memorandum		Date on the document: 10/04/2007
US District Court Civil Docket
Type: Docket		Date on the document: 1/11/2008

OTHER DOCUMENTS

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

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