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ArthroCare Corporation Summary: Several class actions were filed in the U.S. District Court for the Southern District of Florida and Western District of Texas. The original complaint filed in the Southern District of Florida 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.
For the case first filed on April 4, 2008, in the Southern District of Florida, titled John J. McIlvaine, et al. v. ArthroCare Corporation, et al., case number 08-CV-80343, on April 7 and May 2, 2008, the defendants filed two motions to dismiss the complaint. On June 4, 2008, the motions were denied as moot. On July 17, 2008, Senior Judge Kenneth L. Ryskamp granted the motion to appoint the Iron Workers Fund as lead plaintiff and approved lead plaintiff’s selection of Coughlin Stoia Geller Rudman & Robbins LLP as lead counsel. On September 10, 2008, the defendants filed a motion to change venue. On October 17, 2008, the lead plaintiffs filed an Amended Class Action Complaint. On October 28, 2008, Senior Judge Kenneth L. Ryskamp granted the motion to change venue to the Western District of Texas - Austin.
For the case filed on July 25, 2008, in the Western District of Texas, titled James Strong, et al. v. ArthroCare Corporation, et al., case number 08-CV-00574, on August 27, 2008, the defendant filed a motion to dismiss the complaint. On October 28, 2009, Judge Sam Sparks issued the Order consolidating the two actions pending in the Western District of Texas under lead case Strong v. ArthroCare Corp., et al., Civil Action 08-CV-00574. On November 25, 2008, Judge Sparks issued the Order on the defendant’s motion to dismiss. According to the Order, the pending motion is dismissed without prejudice to refiling at a later date. Further, McIlvain v. ArthroCare Corp., et al., Civil Action No. 08-CB-80343, which has been transferred to this District from the Southern District of Florida, was also consolidated with the lead case. On December 10, 2008, Judge Sparks issued the Order granting the motion to appoint the DeKalb County Pension Plan as lead plaintiff and approved the lead plaintiff’s choice of Chitwood Harley Harris LLP as lead counsel. (DeKalb was appointed lead plaintiff over previously appointed Iron Workers Fund in McIlvain v. ArthroCare Corp., et al.). In June and July 2009, two more cases were consolidated with the lead action.
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 | ||
| Order Appointing Iron Workers' Funds As Lead Plantiff And Coughlin, Stoia, Geller, Rudman & Robbins LLP As Lead Counsel | |||
| Type: Order Appointing LP/LC | Date on the document: 7/16/2008 | ||
| Amended Class Action Complaint | |||
| Type: Complaint | Date on the document: 10/17/2008 | ||
| Order Granting Defendants' Motion to Transfer | |||
| Type: Court Transfer Order | Date on the document: 10/28/2008 | ||
| U.S. District Court Civil Docket | |||
| Type: Docket | Date on the document: 10/30/2008 | ||
| REFERENCE COMPLAINT | |||||||||||||||||
| James Strong, et al. v. ArthroCare Corporation, et al. | |||||||||||||||||
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| DOCUMENTS FOR THE REFERENCE COMPLAINT | |||
| Class Action Complaint for Violations of Federal Securities Laws - Jury Trial Demanded | |||
| Type: Complaint | Date on the document: 07/25/2008 | ||
| Order | |||
| Type: Order of Consolidation | Date on the document: 10/28/2008 | ||
| Order | |||
| Type: Order of Consolidation | Date on the document: 11/25/2008 | ||
| Order | |||
| Type: Order Appointing LP/LC | Date on the document: 12/10/2008 | ||
| Order | |||
| Type: Order of Consolidation | Date on the document: 06/12/2009 | ||
| U.S. District Court Civil Docket | |||
| Type: Docket | Date on the document: 07/31/2009 | ||
| OTHER DOCUMENTS | |||
| U.S. District Court Civil Docket | |||
| Case Name and/or Number: John J. McIlvaine, et al. v. ArthroCare Corporation, et al. | |||
| Type: Docket | Date on the document: 08/19/2009 | ||
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