Case Page

 

Case Status:    SETTLED
On or around 10/06/2009 (Date of order of final judgment)

Filing Date: June 27, 2001

According to the Company’s FORM 10-Q for the quarterly period ended July 2, 2006, the Company has approved a settlement agreement and related agreements, which set forth the terms of a settlement between drugstore.com, the plaintiff class and the vast majority of the other issuer defendants or, in the case of bankrupt issuers, their directors and officers. Among other provisions, the settlement agreement provides for a release of drugstore.com and the Individual Defendants for the conduct alleged in the action to be wrongful. The Company would agree to undertake certain responsibilities, including agreeing to assign away, not assert, or release certain potential claims the Company may have against its underwriters. The settlement agreement also provides a guaranteed recovery of $1 billion to the plaintiffs for the cases relating to all of the approximately 300 issuers. To the extent that the underwriter defendants settle all of the cases for at least $1 billion, no payment will be required under the issuers’ settlement agreement. To the extent that the underwriter defendants settle for less than $1 billion, the issuers are required to make up the difference. On February 15, 2005, the Court granted preliminary approval of the settlement agreement, subject to certain modifications consistent with its opinion. These modifications have been made. There is no assurance that the Court will grant final approval to the settlement.

As summarized by the same SEC filing, on and after July 6, 2001, eight stockholder class action lawsuits were filed in the United States District Court for the Southern District of New York naming drugstore.com as a defendant, along with the underwriters and certain of our present and former officers and directors (the Individual Defendants), in its with our July 27, 1999 initial public offering and March 15, 2000 secondary offering (together, the Offerings). The complaints against drugstore.com have been consolidated into a single action and a Consolidated Amended Complaint, which is now the operative complaint, was filed on April 19, 2002. The action is being coordinated with approximately 300 other nearly identical actions filed against other companies or their former officers and directors. On July 15, 2002, the Company moved to dismiss all claims against it and the Individual Defendants. On October 9, 2002, the Court dismissed the Individual Defendants from the case without prejudice based on stipulations of dismissal filed by the plaintiffs and the Individual Defendants. On February 19, 2003, the Court denied the motion to dismiss the complaint against drugstore.com. On October 13, 2004, the Court certified a class in nine of the approximately 300 other nearly identical actions and noted that the decision is intended to provide strong guidance to all parties regarding class certification in the remaining cases. Plaintiffs have not yet moved to certify a class in our case.

The complaint alleges that defendants Drugstore.com, Inc. and certain individuals violated the federal securities laws by issuing and selling Drugstore.com common stock pursuant to the July 28, 1999 IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors. The complaint alleges that, in exchange for the excessive commissions, members of the underwriting group Morgan Stanley & Co., Incorporated, Donaldson, Lufkin & Jenrette and Thomas Weisel Partners LLC allocated Drugstore.com shares to customers at the IPO price of $18.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $18.00, the underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Drugstore.com stock rocketed upward (a practice known on Wall Street as ``laddering'') was intended to (and did) drive Drugstore.com's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the underwriters and their customers to reap enormous profits by buying stock at the $18.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $50 during its first day of trading and subsequently reached a peak price of $67.50 on August 27, 1999. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the underwriters required their customers to ``kick back'' some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation. The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Drugstore.com offering contained material misstatements regarding the commissions that the underwriters would derive from the IPO transaction and failed to disclose the additional commissions and ``laddering'' scheme discussed above.

COMPANY INFORMATION:

Sector: Services
Industry: Retail (Drugs)
Headquarters: United States

SECURITIES INFORMATION:

Ticker Symbol: DSCM
Company Market: NASDAQ
Market Status: Public (Listed)

About the Company & Securities Data


"Company" information provides the industry and sector classification and headquarters state for the primary company-defendant in the litigation. In general, "Securities" information provides the ticker symbol, market, and market status for the underlying securities at issue in the litigation.

In most cases, the primary company-defendant actually issued the securities that are the subject of the litigation, and the securities information and company information relate to the same entity. In a small subset of cases, however, the primary company-defendant is not the issuer (for example, cases against third party brokers/dealers), and the securities information and company information do not relate to the same entity.
COURT: S.D. New York
DOCKET #: 01-CV-05838
JUDGE: Magistrate Judge Douglas F. Eaton
DATE FILED: 06/27/2001
CLASS PERIOD START: 07/28/1999
CLASS PERIOD END: 06/15/2001
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Beatie & Osborne LLP
    599 Lexington Avenue, 42nd Floor, Beatie & Osborne LLP, NY 10022
    212.888.9000 212.888.9664 ·
  2. Lovell Stewart Halebian LLP (former New York)
    500 Fifth Avenue, Lovell Stewart Halebian LLP (former New York), NY 10110
    212.608.1900 212.719.4677 · info@lshllp.com
  3. Stull, Stull & Brody (New York)
    6 East 45th Street, Stull, Stull & Brody (New York), NY 10017
    310.209.2468 310.209.2087 · SSBNY@aol.com
No Document Title Filing Date
COURT: S.D. New York
DOCKET #: 01-CV-05838
JUDGE: Magistrate Judge Douglas F. Eaton
DATE FILED: 04/19/2002
CLASS PERIOD START: 07/28/1999
CLASS PERIOD END: 12/06/2000
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Bernstein Liebhard & Lifshitz, LLP (New York)
    10 E. 40th Street, 22nd Floor, Bernstein Liebhard & Lifshitz, LLP (New York), NY 10016
    800.217.1522 · info@bernlieb.com
  2. Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY)
    One Pennsylvania Plaza, Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY), NY 10119-1065
    212.594.5300 ·
  3. Schiffrin & Barroway LLP
    3 Bala Plaza E, Schiffrin & Barroway LLP, PA 19004
    610.667.7706 610.667.7056 · info@sbclasslaw.com
  4. Sirota & Sirota LLP
    110 Wall Street 21st Floor, Sirota & Sirota LLP, NY 10005
    888.759.2990 212.425.9093 · Info@SirotaLaw.com
  5. Stull, Stull & Brody (New York)
    6 East 45th Street, Stull, Stull & Brody (New York), NY 10017
    310.209.2468 310.209.2087 · SSBNY@aol.com
  6. Wolf Haldenstein Adler Freeman & Herz LLP (New York)
    270 Madison Avenue, Wolf Haldenstein Adler Freeman & Herz LLP (New York), NY 10016
    212.545.4600 212.686.0114 · newyork@whafh.com
No Document Title Filing Date