The original complaint alleges Defendants HORIZON and certain of its officers and directors violated the securities laws by issuing a series of materially false and misleading statements and omissions concerning the business and financial operations of HORIZON.
Specifically, the complaint alleges that prior to the Class, HORIZON began an aggressive campaign to expand though acquisition of existing pharmacies. Defendants purportedly utilized a sophisticated computer system for inventory control with a network node in each pharmacy in order to keep pace with its expanding chain of pharmacies. Throughout the Class Period, defendants knew yet failed to disclose and materially misrepresented that this computer system, inter alia, had serious deficiencies with its prescription pricing communications technology and that its system was not updating prices properly. As prescription prices rose daily, HORIZON was unable to properly charge customers. Because HORIZON had inadequate internal controls over the computer system that in press releases HORIZON had touted as the cornerstone of its strategy for success, gross margins were penalized, negatively affecting the Company's gross profits and earnings and requiring the Company at the end of the Class Period to belatedly take charges of approximately $2 million for its incorrect pricing of pharmaceuticals. Moreover, throughout the Class Period defendants touted the Company's purportedly increasing revenues, earnings, and ability to maximize profits from efficiencies in the very technologies that HORIZON had allowed to fail.
The complaint further alleges that during the Class Period, HORIZON common stock traded at a high of $12 per share on December 24, 1998. As soon as the truth about the Company's billing problems and its negative financial results were disclosed on March 3, 1999, HORIZON common stock plummeted approximately 31%, from $8.25 to $5.68, on over 10 times daily volume throughout the Class Period.
On September 16, 1999, the defendants filed a motion to dismiss the Class Action Complaint, and on May 17, 2000, the motion was granted with leave to amend. On June 30, 2000, the plaintiff filed a First Amended Complaint, and the defendants responded by filing a motion to dismiss the First Amended Complaint on July 21, 2000. On March 21, 2001, District Court Judge Barbara M. G. Lynn denied the motion to dismiss. On July 24, 2001, a notice of commencement of bankruptcy proceedings was filed as to defendant Horizon Pharmacies. On August 20, 2001, Judge Lynn granted the plaintiffs' renewed motion for consolidation of (any future) related actions, the appointment of the Gable Group as lead plaintiff and for the appointment of lead counsel. On February 26, 2002, the Court granted the plaintiffs’ renewed motion for class certification. In November 2002, two out of the three co-lead counsels withdrew as counsel. On April 8, 2003, a Stipulation and Agreement of Settlement was filed. HORIZON and the Individual Defendants agreed to pay $300,000 to Plaintiff's Counsel as the Settlement Amount.
The settlement was preliminarily approved on July 31, 2003 and fully approved as fair, reasonable and adequate by the Order and Final Judgment dated October 14, 2003. The complaint was dismissed with prejudice. The plaintiffs’ counsel was awarded the sum of $30,000 in fees and $44,171.43 in reimbursement of expenses.