Several purported shareholder class action lawsuits have been filed against the company and certain of its present and former executive officers in the US District Courts of Nevada and Florida. On June of 2004 the Nevada and Florida actions were transferred and later consolidated in the US Court for the Southern District of Texas. On October of 2004 the actions were consolidated and an amended complaint was filed.
According to the amended complaint defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that throughout the Class Period, defendants falsely stated that company’s cemetery operations complied with all applicable laws and regulatory requirements and that its cemetery facilities were “well-maintained and kept in good condition.” The company no only failed to disclose problems with mishandled of the cemetery facilities, but to disclose not having enough money in reserve to deal with lawsuits stemming from the mismanagement of the cemeteries.
More specifically, the complaint alleges that defendants falsely represented in the Company’s Form 10-K for the 2001 in its continue efforts to conceal material information. In the Company’s Form 10-K, is stated that management did not expect any pending litigation against the Company to have a material adverse effect on company’s financial position, liquidity, or results of operations. This misrepresentation was made despite defendants’ knowledge of the practices and the substantial liability that the Company faced as a result.
Ultimately, in April 2002, defendants were forced to respond to state investigator’s discovery of human remains in a wooded area 200 yards north of the burial grounds at the Company’s West Palm Beach cemetery. Specifically, after the market’s close on April 18, 2002, the last day of the Class Period, defendants issued a press release that, for the first time, publicly acknowledged the egregious conduct at the Florida cemeteries, which the Company’s management had enabled for years. In response to this disclosure, the price of Service Corp.’s common stock closed at $3.60 per share on April 19, 2002, a sharp 22% decline from the prior day’s closing price of $4.63 per share.
On January 3, 2005, the defendants filed a motion to dismiss the Consolidated Amended Class Action Complaint.
On August 31, 2010, Judge Lynn N. Hughes signed the opinion on summary judgment, dismissing the action for failure to state a claim. The Final Dismissal was entered that same day, and the case is now terminated.