According to the latest docket posted, on May 1, 2002, the case was transferred from the U.S. District Court for the Central District of California to the Northern District of California. On November 25, 2002, the Court entered the Order denying the defendants' motion to dismiss. On June 14, 2004, the Court entered the Stipulation and Order of Dismissal with Prejudice, with each party to bear their own costs, except as set forth in the Stipulation of Settlement executed in the State Court Action and the Judgment entered therein. According to the Notice of Pendency for the state action, the settlement fund was in the amount of $3,550,000.

As stated in the complaint, this case arises from a stock price depression scheme accomplished in just 34 days through a deliberate and material violation of generally accepted accounting principles ('GAAP'). Within these 34 days, from October 10, 2000 to November 12, 2000, defendants successfully: issued a false earnings announcement, causing the price of ADAC Laboratories, Inc.'s ('ADAC' or the 'Company') stock to drop in half; issued themselves stock options that would have been worthless but for their misrepresentation; transformed those worthless stock options, other unvested options and a 'change in control' golden parachute into over $14 million in compensation; and consummated a below market value merger.

The complaint also alleges that Defendants' scheme arose from their desire to sell ADAC to a larger company, and to individually profit from the award and exercise of stock options worth millions of dollars that would vest immediately upon the sale. During February 2000, ADAC engaged an investment banker to solicit acquisition offers for the Company. As a result of these efforts only one potential acquirer, Koninklijke Philips Electronics, N.V. ('Philips'), a Dutch conglomerate, emerged. Although Philips was willing to purchase ADAC, its offering price of $18 per share was significantly below the price at which ADAC stock was then trading on the open market. The Philips proposal also required ADAC to dispose of its unprofitable computer software subsidiary, HealthCare Information Systems ('HCIS').

Further, the complaint allege that defendants implemented this scheme to depress the price of ADAC common stock below Philips' $18 per share offering price. This scheme, then would enable defendants to consummate the merger with Philips, the only interested acquirer, and to profit from the award and accelerated vesting of lucrative stock options that had not yet even been awarded. On October 10, 2000, in an unprecedented early press release, defendants announced disappointing revenues for the completed fourth quarter 'in the range of $83 million,' and 'earnings per share excluding non-ordinary items of $0.10 to $0.15.' Following this announcement, the price of ADAC common stock dropped significantly, falling from $19.313 to $11.625 per share in a single day.