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 January 24, 2002 and July 18, 2002. Among other things, the complaint alleges that throughout the Class Period Baxter issued press releases representing that its BioScience and Renal divisions would grow their earnings by percentages in the high-teens and high-single-digits, respectively, in 2002. The complaint further alleges that these, and other, representations were materially false and misleading because they failed to disclose that the Company was experiencing serious problems with its BioScience and Renal divisions. Given these, and other undisclosed problems, defendants' repeated Class Period assurances of continued growth in 2002 were lacking in any reasonable basis when made, according to the complaint. On July 18, 2002, Baxter issued a press release regarding its results for the second quarter of 2002, announcing disappointing sales growth for the BioScience division and a decline in sales for the Renal division. In addition, the Company took a $51 million charge in connection with an acquisition and a $70 million impairment charge reflecting a decline in the value of certain of the Company's investments. In response to the announcement, the price of Baxter common stock plummeted by 36.5%, falling from a $43.41 per share close on July 17, 2002, to close at $32 per share on July 18, on extremely heavy trading volume. During the Class Period, Baxter insiders sold a total of 435,700 Baxter common shares, reaping gross proceeds in excess of $23.7 million.
On October 17, 2002, the Honorable Edward A. Bobrick granted the motion to appoint Gary T. Brown, James M. and Heidi E. Hill as lead plaintiffs and approved lead plaintiffs’ selection of lead counsel. On December 6, 2002, the plaintiffs filed a Consolidated Class Action Complaint. The defendants responded by filing a motion to dismiss the Consolidated Class Action Complaint on January 24, 2003.
In a press release dated July 30, 2003, Judge Blanche M. Manning of the US District Court for the Northern District of Illinois has dismissed, in its entirety, a consolidated securities class action complaint filed against Baxter International and various officers of the company. Several plaintiffs had sued Baxter in August 2002, alleging violations of the federal securities laws in connection with Baxter's disclosures, prior to 18th July 2002, of certain estimates regarding its performance in full-year 2002. The plaintiffs filed a consolidated complaint in December 2002, and Baxter and the individual defendants then filed a motion to dismiss the complaint. On 17th July 2003, Judge Manning granted Baxter's motion and dismissed all claims against the company and its officers in their entirety. The District Court ruled that Baxter's disclosures were accompanied by substantive and sufficiently tailored cautionary language.
According to the Company’s FORM 10-Q for the quarterly period ended September 30, 2007, the Court of Appeals for the Seventh Circuit reversed a trial court order granting Baxter’s motion to dismiss the complaint and the U.S. Supreme Court declined to grant certiorari in March 2005. In February 2006, the trial court denied Baxter’s motion for judgment on the pleadings. The court has twice denied Plaintiffs’ request for certification of a class action based on the inadequacy of their class representatives but allowed Plaintiffs a final chance to find new ones. In October 2006, separate plaintiffs’ law firms identified new, different proposed class representatives, but in January 2007, the trial court found both new proposed class representatives to be inadequate. In October 2007, the Court of Appeals for the Seventh Circuit dismissed plaintiffs’ appeal of this decision, effectively ending the suit as a class action.
On April 23, 2008, the Honorable Blanche M. Manning granted the plaintiffs’ stipulation of dismissal as to certain defendants. Only three defendants remain in the action -- the company defendant and two individual defendants. In May and August 2008, the remaining defendants filed motions for summary judgment. On February 4, 2009, the defendants’ motions for summary judgment were granted and the case was terminated. On February 27, 2009, the plaintiffs filed a Notice of Appeal. The appeal is currently pending in the Seventh Circuit Court of Appeals.