Kindred Healthcare, Inc, ("Kindred" or the Company) through its subsidiaries, operates a home health, hospice and community care business, transitional care hospitals, inpatient rehabilitation hospitals, and a contract rehabilitation services business across the United States. The Company operates through divisions: the Kindred at Home division, the hospital division, the Kindred Rehabilitation Services division, and the nursing center division.

The Complaint charges Kindred and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The Complaint alleges that during the Class Period, Defendants issued a series of statements to the public indicating that the Company was successfully emerging from bankruptcy and implementing a growth plan. To that end, Defendants announced an increased credit facility to facilitate acquisitions, and a public offering of Kindred common stock priced at $46 per share. The offering was crucial for Kindred, which had been struggling for months to regain its market capitalization and renewed analyst interest. A successful offering would allow the Company to resume selling its stock on the Nasdaq National Market System rather than the Over-the-Counter bulletin board, where the stock had been languishing since Kindred's emergence from bankruptcy in April 2001. During the Class Period, Defendants reported quarter after quarter of improved financial results and acquisitions. In response, Kindred stock traded at over $45 per share during April 2002. Defendants failed to reveal that due to a dramatic increase in professional liability claims, especially in Florida, Defendants were not properly reserving for these incurred claims. During May 2001, Florida had enacted reform legislation which became effective October 5, 2001. There was a marked increase in the number of professional liability lawsuits filed in Florida in anticipation of the new law taking effect. Medical liability insurance premiums skyrocketed and certain insurance companies stopped writing medical liability insurance in Florida. As a result, Kindred competitors such as Beverly Enterprises took charges in order to account for the increase in lawsuits. Defendants assured investors and analysts that Kindred (which was largely self-insured) carefully reviewed its reserves for claims on a monthly basis, and would not have to take a large "catch-up" charge since it maintained adequate reserves. Despite Defendants' failure to properly maintain reserves for millions of dollars in claims, Defendants Kuntz and Lechleiter signed sworn statements on August 13, 2002, affirming the accuracy of Kindred's financial statements and public filings. As a result of the Company's misrepresentations, Kindred investors have sustained tremendous losses. On October 10, 2002, after the close of trading, the Company shocked the market by revealing that it would withdraw its previous earnings projections for 2002 and revised its third quarter 2002 estimates.

According to the closing Order, dated January 12, 2004, from U.S. District Judge John G. Heyburn II of the U.S. District Court for the Western District of Kentucky, the consolidated putative federal class action is dismissed with prejudice. Given the arguments on both sides, the Court concludes that Plaintiffs have not alleged sufficient facts to show that Defendants have omitted material information or created a strong inference of the requisite scienter when Defendants allegedly misrepresented information to investors.