Founded in 1950, Duane Reade, Inc. ("Duane" or the Company) is a drugstore chain in the New York metropolitan area.

The original Complaint alleges 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 during the Class Period, thereby artificially inflating the price of Duane Reade securities. On April 25, 2002, the start of the Class Period, Defendants issued Duane's First Quarter 2002 earnings new release for the quarter ending March 31, 2002. Duane reported recorded first quarter sales and earnings results as follows: net sales increased 12.5% to $305.8 million and net income was $5.3 million, or $0.22 per share, before a previously disclosed one-time non-cash charge, compared to net income of $2.6 million, or $0.14 per share, in the prior year period. With respect to the slight decline in gross profit margin for the quarter, Defendants stated in the news release that it was "primarily attributable to the temporary dampening of front-end sales in the post September 11 period and also due to a $0.4 million LIFO provision in the period." In addition, Defendants misled the public by presenting a very positive outlook for the second quarter projecting that Duane would earn between $0.40 to $0.44 cents per share. Suddenly, on July 25, 2002, Defendants issued a news release announcing that Duane's second quarter profits had plummeted by more than half because the Company had failed to disclose previously that a) in connection with the "$218 convertible notes offering," which was completed in April 2002, it had incurred expenses of $7.7 million, after tax, which expenses would sharply reduce Duane's profits in the second quarter of 2002 and cause the Company to report earnings significantly lower than the level Defendants told the market to expect; b) had sharply lowered prices in their stores commencing in April 2002 and planned to continue such program throughout the second quarter in an effort to increase revenues, knowing that this would cause reduced profit margins in the second quarter; c) was experiencing increased "shrink," primarily due to increased theft and vendor errors, which would further erode profits in the second quarter of 2002; d) was experiencing an increase in sales of generic drugs as a percentage of total drug sales, which sales were at lower prices than sales of branded equivalents; e) was experiencing a fall-off in higher margin items, including cosmetics, snacks, jewelry and toys; and f) had embarked on a program, beginning in April 2002 when Defendants learned that they would receive $9 million in business interruption insurance proceeds from the claims submitted in the aftermath of September 11, to open in the second quarter five additional stores to the number of new stores originally planned to be opened during the second quarter which, together with the three additional unplanned stores opened in the first quarter of 2002, would cause Duane to incur additional costs of $1.5 million, including $800,000 in store pre-opening expenses, in the second quarter of 2002. In response to the surprise negative announcement on July 25, 2002, the price of the Company's common stock dropped from a closing price of $23.55 per share on July 24, 2002 to a closing price of $14.60 per share on July 25, 2002.

On December 4, 2002, the Court entered the Order signed by U.S. District Judge Naomi R. Buchwald granting the amended motion for an order consolidating all related actions. The Court further granted the motion to appoint Capstone Asset Management Company as lead Plaintiff and granted the motion to approve Schiffrin & Barroway, LLP as lead Counsel and Bernstein Liebhard & Lifshitz, LLP as liaison Counsel. On February 3, 2003, the Plaintiff filed a Consolidated Amended Complaint, and the Defendants responded by filing a motion to dismiss.

According to the Company’s FORM 10-Q for the quarterly period ended September 25, 2004, on December 1, 2003, the district judge granted the Company’s motion to dismiss the Plaintiff’s action, with prejudice. The Plaintiffs subsequently filed an appeal. On August 17, 2004, the US Court of Appeals affirmed the district court’s ruling in favor of the Company.