According to the Company’s FORM 10-K for the fiscal year ended December 31, 2004, on September 30, 2004, the court dismissed the suit with prejudice for failure to state a claim. The plaintiffs initially filed a notice of appeal with the Eighth Circuit Court of Appeals, but abandoned the appeal by submission of a motion for dismissal. The district court entered a final judgment dismissing the appeal on January 28, 2005.

As summarized by the latest docket posted, on August 19, 2002, the Court entered the Order signed by U.S. District Judge Rodney W. Sippel consolidating the cases. On October 3, 2002, the Court entered the Order approving lead plaintiff and co-lead counsel. On December 13, 2002, the plaintiffs filed a Consolidated and Amended Class Action Complaint, followed by a Corrected Consolidated and Amended Class Action Complaint filed on December 23. On February 11, 2003, the defendants responded by filing a motion to dismiss the complaint. On September 20, 2003, the Court entered the Order denying without prejudice the defendant’s motion to dismiss. On November 7, 2003, the plaintiffs filed a Second Consolidated and Amended Class Action Complaint, and, on December 8, 2003, the defendants responded to the complaint by filing a motion to dismiss the case. On September 30, 2004, the Court entered the Memorandum and Order granting the defendant’s motion to dismiss the Second Amended Complaint. That same day, the Court entered the Order of Dismissal. The case was dismissed with prejudice.

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 materially false and misleading statements to the market between February 7, 2001 and January 21, 2002. The complaint alleges that, among other things, defendants issued a series of materially false and misleading statements concerning the Company's supplemental staffing division. The complaint alleges these statements were materially false and misleading because they failed to disclose that the supplemental staffing division was experiencing serious operational problems with information systems critical for matching supply with demand and poor employee training and retention and that its revenues and earnings were declining as a result. On January 21, 2002, RehabCare issued a press release announcing that earnings for its fourth quarter 2001 would be less than half than they had reiterated in late October and that the Company would take a charge of $8.5 to $9.5 million, $3 million of which was for a reorganization of the staffing division. In reaction to the Company's disclosure, as alleged in the complaint, the price of RehabCare's common stock plummeted by 25% over one trading day on heavy volume, falling from $25.21 per share to $18.70 per share. Prior to the disclosure of the adverse facts described above, as alleged in the complaint, Rehabcare completed a secondary offering of common stock, raising $50 million for the Company and more than $8 million for RehabCare insiders. In addition, RehabCare insiders also sold $4,568,209 worth of RehabCare common stock during the Class Period at artificially inflated prices.