The Complaint charges EFII and certain of its officers and directors with violations of securities laws for misrepresenting the status and strength of EFII's business operations and earnings growth. By concealing the true facts about, inter alia, the enormous build-up of unsold and excess inventory in the hands of EFII's Japanese OEM customers which represented approximately half of the Company's quarterly revenue and the delay in development and customer acceptance of its new products and technology, defendants artificially inflated EFII's stock price to as high as $56.50 a share during the Class Period, allowing EFII's top insiders to sell more than $11 million of their EFII stock at prices as high as $55 per share.

On April 9, 1998, District Court Judge Charles A. Legge granted The Khaled Group's motion for appointment of lead plaintiffs and lead counsel. On September 15, 1998, the lead plaintiff filed an Amended Class Action Complaint. On July 19, 1999, two individual defendants were voluntarily dismissed from the action without prejudice. On November 12, 1999, the Judge denied the plaintiffs' motion to dismiss defendants' counterclaim for declaratory relief and motion for voluntary dismissal. On February 18, 2000, the plaintiffs filed a renewed motion to dismiss defendants' counterclaim for declaratory relief and for voluntary dismissal pursuant to Rule 41(a)(2). On August 7, 2000, the plaintiffs’ motion to dismiss the complaint was granted with prejudice while the defendants’ motion to amend the counterclaim and motion for sanctions were denied. Judgment was entered and the complaint was dismissed. On August 10, 2000, the defendant filed a notice of appeal from the District Court’s judgment and order. On September 24, 2001, the District Court entered the certified copy of the Order from the U.S. Court of Appeals for the Ninth Circuit, affirming the decision of the District Court.