The original Complaint charges that Sun Healthcare and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing materially false and misleading statements concerning the impact that changes in the Medicare reimbursement system brought about by the prospective payment system ("PPS") would have on the Company's business prospects and operating results. Specifically, the Complaint alleges that defendants failed to disclose (a) that profit margins and reimbursement rates for ancillary services would be substantially lower under PPS; (b) that the goodwill of Sun Healthcare's domestic facilities had become impaired as a result of the PPS; and (c) that the financial results of the Company would be materially and adversely impacted because certain operations acquired from Retirement Care Associates by Sun Healthcare had been unprepared for the conversion to PPS during the Class Period.

By Order dated July 12, 1999, the Court appointed Joel Shpigel, Marc Blatstein and William Gabriel as Lead Plaintiffs, and approved Lead Plaintiffs’ selection of counsel. The Consolidated Amended Complaint for Violation of the Securities Exchange Act of 1934 was filed September 10, 1999 (the “Consolidated Complaint”). The Consolidated Complaint alleges violations of §§10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on behalf of a class of persons who purchased or otherwise acquired the common stock of Sun Healthcare Group, Inc. during the period between June 2, 1998 and February 1, 1999. The Consolidated Complaint asserted claims against Sun, Andrew L. Turner, Marc G. Wimer, and Robert D. Woltil. In October 1999, Sun filed for bankruptcy. In December 2000, the parties stipulated and the Court ordered the dismissal of all claims against Sun without prejudice. Plaintiffs’ claims against Sun were extinguished in its bankruptcy proceeding. As a result, the individual defendants filed their motion to dismiss the Consolidated Complaint on December 5, 2000. The Court heard oral argument on the individual defendants’ motion on September 25, 2001 and issued its Order granting the motion to dismiss with prejudice on January 15, 2002. On January 31, 2002, the Court entered a judgment dismissing the Litigation. Thereafter, on February 14, 2002, plaintiffs filed a motion to amend the judgment dismissing this action with prejudice. On April 21, 2003, the Court denied plaintiffs’ motion to amend. On May 20, 2003, plaintiffs filed a Notice of Appeal. That appeal was fully briefed and pending at the time a settlement was reached. On June 3, 2004, the Tenth Circuit Court of Appeals conditionally remanded the case back to this Court for approval of the settlement.

On September 22, 2004, a Stipulation of Settlement was filed establishing a settlement fund in the amount of $5,000,000 in cash. The settlement was preliminarily approved on September 29, 2004. On December 13, 2004, Chief Judge Martha Vazquez granted the motion for final approval of settlement and plan of allocation of settlement proceeds. Judge Vazquez granted the motion for award of attorney fees & reimbursement of expenses. The Final Judgment and Order was entered that same day, dismissing the case with prejudice.