According to the latest docket posted, on April 23, 2003, the Ninth Circuit Court of Appeals dismissed the appeal by the appellants. Earlier, a Notice of Appeal was filed by the plaintiffs after U.S. District Court Judge Ronald S. Lew granted the defendants' motion to dismiss the First Amended Complaint with prejudice, entered on May 28, 1998.
As previously reported by the Company's FORM 10-Q For the Quarterly Period Ended June 30, 2000, for Pacificare Health Systems Inc., which acquired FHP International, in 1997, Tim Brady and other individuals filed a purported class action suit against PacifiCare, several PacifiCare officers and several former officers of FHP in the United States District Court for the Central District of California. In addition, in 1997, Brady and other individuals filed a purported class action suit against PacifiCare and several PacifiCare officers and several former officers of FHP in the Orange County Superior Court. The trial courts dismissed both of the Brady cases and these cases are concluded following the plaintiff’s dismissal of appeals.
The original complaint alleges certain of the directors and officers of FHP International Corporation carried out a fraudulent scheme, by which they have (1) manipulated and mislead the shareholders of the Company into voting to approve a merger transaction in which the shareholders have received consideration for their shares of the Company's stock which is inadequate and unfair and (2) sought to misappropriate a disproportionate ownership interest in the Company's wholly owned subsidiary known as Talbert to themselves, by deceiving shareholders into not exercising rights to purchase shares in Talbert, among other things. As an integral part of the fraudulent scheme, shareholder approval of the merger transaction (the "Merger") between the Company and PacifiCare Health Systems, Inc. ("PacifiCare") was obtained by way of material misrepresentations and omissions of material facts (as described hereinafter). Furthermore, the conspiring directors and officers of the Company are planning to "spin off" Talbert as a new entity, in a manner such that the conspiring directors and officers can unfairly appropriate a large portion of the equity ownership of Talbert to themselves at an unconscionably low price. As part of this process, any of the Company's shareholders who decide to invest in Talbert, despite defendants' misrepresentations and omissions designed to discourage such a decision, will be compelled to pay out new money to purchase an interest in a business that already was part of the Company.