VistaCare, Inc. provides hospice services in the United States.

The original Complaint alleges that throughout the Class Period, Vistacare reported record revenue and overall growth and profitability in publicly disseminated press releases and SEC filings, and forecasted positive earnings and revenue targets. The Complaint further alleges that Defendants managed to report quarter after quarter of record financial growth because, unbeknownst to investors, Defendants failed to properly reserve its Medicare reimbursements. The truth began to emerge on August 5, 2004. On that date, after the close of trading, the Company issued a press release announcing second quarter financial results for the quarter ending June 30, 2004. The press release stated that results for the quarter were impacted by the Company's decision to accrue $6.2 million in the quarter for its Medicare cap reserve. This news caused a dramatic decline in Vistacare's share price from a closing price of $18.72 on August 5, 2004 to $15.28 on August 6, 2004, for a total one day decline of over 18%.

By Order dated August 19, 2005, the Court granted Ernst & Young’s motion to dismiss Plaintiffs’ claims against Ernst & Young, but denied the Defendants’ motion to dismiss the Complaint as against the Defendants.

As disclosed by the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, between August and September 2004, approximately five Complaints were filed individually and on behalf of all others similarly situated in the United States District Court for the District of Arizona against the Company and two of its officers alleging violations of the federal securities laws arising out of declines in the Company’s stock price in 2004. The five lawsuits were consolidated in April 2005. On June 16, 2006, the Company entered into a settlement agreement with the Plaintiffs, agreeing to pay $4,600,000 to settle this case, all of which is being paid for by insurance. The settlement was preliminarily approved by the Court on July 6, 2006 and was set for a final determination on September 29, 2006.

On September 29, 2006, the Court entered the Order and Final Judgment. The action was certified as a class action, and the settlement was approved as fair, reasonable and adequate. Plaintiffs' Counsel was awarded 25% of the Gross Settlement Fund in fees and $353,064.87 in reimbursement of expenses.