According to the docket posted, on September 12, 2002, the plaintiff Alpert Group filed a notice of appeal from the Order and Judgment, issued on February 26, 2002, dismissing the action. On September 24, 2003, the Court entered the Judgment/Mandate of the U.S. Court of Appeals affirming the decision of the District Court.
Previously, on February 26 2002, the Court issued a Memorandum Opinion and Order granting motion to dismiss plaintiffs' third amended complaint for violation of the Securities Exchange Act of 1934, and all plaintiffs' claims were dismissed with prejudice. The final Judgment, issued pursuant to the Court's Order, adjudged and decreed that plaintiffs take nothing by their suit against Physicians Resource Group (PRG) and individual defendants and all relief not expressly granted herein is denied. The Judgment also stated that all allowable and reasonable costs are taxed against plaintiffs.
Within December 1997 and February 1998 six securities class actions were filed against this company. Soon after they were amended and filed in two groups. The first group included the Longman, Peltz, and Hall actions (collectively the 'Longman Action'), which was the first complaint filed. And the second group comprised the Schiller, City of Philadelphia, and Rutherford actions (collectively the 'Schiller Action').
These cases all raise claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the '1934 Act') and Rule 10b-5 promulgated thereunder. The plaintiffs seek compensatory damages, legal interest and attorneys' fees. The procedural history of these cases is complex because of the number of cases at issue, the theories of liability raised, the number of plaintiffs' counsel involved, and the unique requirements of the Private Securities Litigation Reform Act of 1995.
In July 1998, after a motion to consolidate the Schiller Action and the Longman Action was denied, the Schiller Action plaintiffs filed their first amended complaint to include the allegations and the alleged class contained in the Longman Action. The factual allegations in the amended Schiller Action cover an alleged 26-month class period from September 15, 1995 to November 19, 1997.
In November 1998, the Schiller Action plaintiffs filed a separate lawsuit under the 1934 Act against Arthur Andersen LLP ("Andersen") in the United States District Court for the Northern District of Texas, Dallas Division, styled Jeffrey Schiller and Diversified Investment Holdings LP, On Behalf of Themselves and All Others Similarly Situated v. Arthur Andersen & Co. LLP; Civil Action No. 3-98CV2753-R (the "Andersen Action"). The Schiller Action plaintiffs then moved to consolidate the Andersen Action with the Shareholder Action, while also requesting leave of court in the Shareholder Action to file a second amended complaint. The Bankruptcy Court granted the Schiller Action plaintiffs' request for leave to file a second amended complaint on September 22, 2000. At the same time, the Bankruptcy Court denied PRG's motion to dismiss the first amended complaint, without prejudice to PRG refiling its motion to dismiss directed to the second amended complaint.
In April 1999, the court granted lead plaintiff status to Robert Alpert ('Alpert'), a major shareholder of PRG and a member of the Equity Committee, who selected Milberg Weiss Bershad Hynes & Lerach as class counsel. On behalf of all of the defendants, PRG moved to dismiss the operative amended complaint.
In essence, plaintiffs in the Schiller Action allege claims of corporate mismanagement and a failure to disclose the same under the federal securities laws. These claims fall into four categories: (i) statements/omissions concerning PRG's ability to do business (including the competency of its accounting department, the ability to integrate acquired Eyecare Practices, management expertise, the viability of PRG's business plan, etc.); (ii) predictions of PRG's earnings and growth; (iii) statements/omissions concerning PRG's accounting policies (improper revenue recognition, etc.); and (iv) statements/omissions concerning the value of PRG's acquisition of EyeCorp and EquiMed in 1996. The alleged class period in the original Schiller Action runs from September 15, 1995, when PRG announced the acquisition of EyeCorp, until March 27, 1997, the date on which PRG announced that due to a decline in its stock price the Company would not be able to maintain its acquisition pace.
More specifically, the original complaint alleges that during the Class Period, PRG and its top officers falsified its reported profits while issuing false statements about PRG's operations, its success in integrating acquisitions, including the operating efficiencies and cost savings being and to be achieved thereby, its ability to continue to make acquisitions and its future earnings per share ('EPS') growth. These false statements drove PRG stock to an all-time high of $34-3/8 per share in May 1996. PRG and its insiders (the 'defendants') made these allegedly false statements to artificially inflate PRG's stock price so that during the Class Period: (i) PRG could sell 4.25 million new shares of stock to the public at $28.50 per share raising $115 million; (ii) PRG could issue (sell) over 14 million shares of stock to complete the acquisitions of over 150 ophthalmic and optometric practices during 1996-1997; and (iii) PRG could sell new convertible debentures raising $125 million. However, in late 1996 when PRG announced it would temporarily slow the pace of its acquisitions, its stock declined sharply. Then, as 1997 unfolded, PRG's President, Chairman, and Chief Financial Officer were all fired as PRG revealed it would take millions in non- recurring special charges for uncollectible accounts receivable and closing of physician practices resulting in a huge 3rdQ 1997 loss, that PRG would abandon its expansion/acquisition program and not acquire any more eye care physician practices and it had hired investment banking firms to try to sell the Company. PRG's stock collapsed to as low as $2-5/8 per share, 93% below its Class Period high of $34-3/8 per share.
NOTE: On February 1, 2000, the Company filed for bankruptcy pursuant to Chapter 11 of the U.S. Bankruptcy Code in the Northern District of Texas.