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ArthroCare Corporation Summary: A Motion to Dismiss was filed on April 7, 2008 by Arthrocare Corporation. The Motion was due to Complaint And Supporting Memorandum. In response, the Plaintiff's Motion To Stay was filed on April 11, 2008. In addition, certain individual defendants have filed Motion To Dismiss on May 2, 2008.
According to a press release dated April 4, 2008, the complaint charges ArthroCare and certain of its officers and directors with violations of the Securities Exchange Act of 1934. ArthroCare designs, develops, manufactures, and markets medical devices for use in soft-tissue surgery. Its products are based on the patented soft-tissue surgical controlled ablation technology called Coblation technology.
Specifically, the complaint alleges that, during the Class Period, defendants issued materially false and misleading statements and failed to disclose the following adverse facts which were known to defendants or recklessly disregarded by them: that the Company’s reported financial results were materially overstated due to the improper inclusion and recognition of revenue attributable to purported “purchases” of medical devices by DiscoCare, Inc. (“DiscoCare”), an ArthroCare “sales agent” for the sale of ArthroCare medical devices. More specifically, defendants violated Generally Accepted Accounting Practices ("GAAP") in numerous material respects by, inter alia,: (i) recognizing revenue where payment for the shipment of ArthroCare’s products was not unconditional, but was entirely contingent upon the decision of third-party payers to pay for the ArthroCare device or the successful resolution of personal injury lawsuits; (ii) recognizing revenue from transactions with DiscoCare where DiscoCare did not have an unconditional obligation to pay ArthroCare for certain products; (iii) recognizing revenue from bill and hold transactions between the Company and DiscoCare involving certain products which were to be paid for pursuant to the contingent payment arrangement; and (iv) materially overstating financial results due to the improper inclusion and recognition of revenue attributable to purported “purchases” of medical devices by a related party, Device Reimbursement Services (“DRS”).
According to the complaint, during the Class Period, the Company’s stock price rose, reaching a high of $64.84 on October 31, 2007. As a result of a series of adverse news stories and partial disclosures concerning the propriety of the Company’s business relationship with DiscoCare and DRS, as well as the accuracy of the Company’s reported financial results, culminating with an article dated January 23, 2008, the price of the Company’s stock decreased to approximately $38.11 by January 25, 2008.
INDUSTRY CLASSIFICATION:
SIC Code: 3845
Sector: Healthcare
Industry: Medical Equipment & Supplies
| COMPANY/ISSUER NAME: | ArthroCare Corporation |
| COMPANY/ISSUER TICKER: | ARTC |
| COMPANY WEBSITE: | http://www.arthrocare.com |
| FIRST IDENTIFIED COMPLAINT IN THE DATABASE | |||||||||||||||||
| John J. McIlvaine, et al. v. ArthroCare Corporation, et al. | |||||||||||||||||
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| DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT | |||
| Class Action Complaint - Demand for Jury Trial | |||
| Type: Complaint | Date on the document: 4/4/2008 | ||
| US District Court Civil Docket | |||
| Type: Docket | Date on the document: 5/8/2008 | ||
| OTHER DOCUMENTS | |||
| Case Name and/or Number: | |||
| Type: | Date on the document: | ||
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