According to the court docket, on June 5, 2007 the Judge entered his final order and judment, cementing the settlement for $18.7 million and ending a class-action securities fraud lawsuit filed against St. Louis-based D&K Healthcare Resources Inc., which McKesson acquired in 2005. Judge Limbaugh, on the same day, granted attorney's fees of 25% of the settlement fund and awarded over $107,000 in expenses reimbursement.
On October 5, 2004, the Court entered the Order signed by U.S. District Judge Stephen N. Limbaugh granting the movant Local 655's motion for appointment as Lead Plaintiff and for approval of Lead and Liaison Counsel. On November 15, 2004, the plaintiff filed a Consolidated Class Action Complaint, and then a Corrected Consolidated Class Action Complaint on November 18, 2004. The defendants responded by filing various motions to dismiss the Corrected Consolidated Class Action Complaint in January and February 2005. On June 23, 2006, the plaintiff filed a Second Amended Consolidated Class Action Complaint. That day, the Court entered the Order granting the defendant Bristol-Myers Squibb's January 28, 2005 motion to dismiss. According to the Order, all claims, as contained in Count I of the Second Amended Complaint, shall be dismissed in their entirety as to defendant BMS. The Court also entered the Order granting an individual defendant’s February 4, 2005 motion to dismiss. According to the Order, the allegations contained in the Second Amended Complaint are insufficient to establish controlling person liability upon defendant Richard Plotnick pursuant to Section 20(a) of the Exchange Act, and thus, Count II, as directed against defendant Plotnick, will be dismissed. Last, the Court also entered the Order denying defendant D & K Healthcare Resources, Inc. and the Individual Defendants' February 4, 2005 motion to dismiss.
The original action charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities.
More specifically, the complaint charges defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. More specifically, the complaint alleges that, throughout the Class Period, defendants issued numerous statements to the market concerning the Company's financial results, which failed to disclose and/or misrepresented the following adverse facts, among others: (1) that the Company's seemingly positive financial results were, in material part, based on its incentive- laden deals with Bristol which could not be sustained in the long-term; (2) given the terms of the incentive-laden deals with Bristol, the Company was subject to the heightened risk that Bristol would stop providing it with favorable purchasing opportunities; and (3) based on the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and their earnings projections throughout the class period.
Further, the complaint alleges that on September 16, 2002, after the close of trading, D&K Healthcare shocked the market when it announced that it was reducing its 'EPS guidance before one-time charges related to the implementation of SFAS 142 to approximately $0.13 -- $0.17, from $0.30 to $0.31.' According to the Company, during the first two months of the fiscal 2003 first quarter, D&K's internal revenue and margin objectives for its national chain business were not achieved. The sales shortfall is principally the result of fewer than expected purchasing and sales opportunities available during the period. D&K's sales in the national chain business have been variable from month to month historically, driven largely by opportunistic purchases from pharmaceutical companies for distribution primarily to national chains. In response to this announcement, on September 17, 2002, the price of D&K Healthcare common stock dropped more than 60% to close at $9.51 per share on unusually high trading volume.