According to the Company’s FORM 10-K For The Fiscal Year Ended December 31, 2002, on August 20, 2002, United States District Judge Deborah K. Chasanow entered an order in the United States District Court for the District of Maryland dismissing the complaint. On September 17, 2002, the plaintiffs appealed the District Court's decision to the United States Court of Appeals for the Fourth Circuit. On December 30, 2002, the appeal was dismissed by the United States Court of Appeals for the Fourth Circuit. This decision ends the matter.

The original complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between February 7, 2000, and July 5, 2000. For example, as alleged in the complaint, on February 7, 2000, defendants issued a press release announcing the Company's planned acquisition of Avesta Technologies Inc. ("Avesta), and representing that the combined organization would experience 50% growth in top line revenue during 2000-2001. This statement was false and misleading, and defendants knew, or recklessly disregarded its falsity, because the Company had no reasonable basis for asserting a 50% revenue growth. Following the acquisition, defendants failed to disclose that the Company was experiencing significant difficulty in the integration of Avesta, which negatively impacted its overall operations. On July 5, 2000, Visual Networks announced that its second quarter of 2000 earnings would fall well below analysts' consensus estimates, due in large part, to the diversion of Company resources resulting from Avesta acquisition. In response to this announcement, the stock price of Visual Networks plummeted by 56%.