On September 28, 2006, the Court entered the Final Judgment and Order of Dismissal with Prejudice. According to the Order, the Court approves the Settlement set forth in the Stipulation and finds that said Settlement is, in all respects, fair, just, reasonable and adequate to the Settlement Class. Further, counsel for Plaintiffs and the Settlement Class are awarded fees in the amount of $925,000 or 25% of the Settlement Fund, plus reimbursement of expenses in the amount of $41,000, plus interest to the same extent that interest has been earned on the Settlement Fund, both to be paid from the Settlement Fund pursuant to the terms of the Stipulation.
According to the Company’s FORM 10-Qf the quarterly period ended: June 30, 2006, on May 30, 2006, the Court filed an Order preliminarily approving the Stipulation of Settlement, which the parties had filed with the Court on March 23, 2006. The Court has set September 25, 2006 as the date for a final hearing to approve the settlement and authorized notice to the class of the settlement terms. The class of potential plaintiffs includes purchasers of STAAR’s securities between October 6, 2003 and January 5, 2004. The terms of the settlement are set forth in the Stipulation of Settlement. It provides, among other things, that without admission of liability STAAR will, in consideration of their agreement to settle, pay to the plaintiffs’ total consideration of $3,700,000. STAAR’s insurance carrier has agreed to pay the costs of the settlement except for approximately $100,000 in administrative costs payable by the Company and any further defense costs, provided STAAR’s total expenditure in connection with the lawsuit will not exceed the $500,000 retention amount under its insurance policy, which was fully accrued as of December 30, 2005.
On April 15, 2005, a Consolidated Complaint was filed, and the defendants responded by filing a motion to dismiss the Consolidated Complaint. On September 29, 2005, the Court entered the Order signed by U.S. District Judge S. James Otero denying the defendants’ motion to dismiss the Consolidated Complaint.
As disclosed by the Company’s Form 10-K for the fiscal year ended December 31, 2004, since September 1, 2004, multiple class action lawsuits have been filed in the United States District Courts for the Central District of California and the District of New Mexico against the Company and its Chief Executive Officer on behalf of all persons who acquired the Company’s securities during various periods between April 3, 2003 and September 28, 2004. On December 15, 2004, the Court ordered consolidation of the complaints that had been filed in the United States District Court for the Central District of California and directed that the plaintiffs file a consolidated complaint as soon as practicable. The plaintiffs have proposed a stipulation pursuant to which they would file a consolidated amended complaint on or about April 29, 2005. The New Mexico action was voluntarily dismissed on January 28, 2005.
The original Complaint charges Staar Surgical and its CEO with violations of federal securities laws. Plaintiff claims that defendants' omissions and material misrepresentations concerning Staar Surgical's business operations and prospects artificially inflated the Company's stock price, inflicting damages on investors. Staar Surgical develops, manufactures and distributes products, including implantable lenses, used by ophthalmologists and other eye care professionals to improve or correct vision in patients with cataracts, refractive conditions and glaucoma.
The Complaint alleges that defendants knew or recklessly disregarded that their public statements concerning Staar Surgical's implantable lenses ('ICLs') were materially false and misleading because they failed to disclose significant problems with the manufacture of these devices. These significant problems included, but were not limited to: (i) methods, facilities and/or controls used for the manufacture, packing and storage of the ICLs that were not in conformance with Current Good Manufacturing Practice; and (ii) failure to establish and maintain procedures to assure that valid methods were used to test the raw materials and finished ICL devices. Plaintiff further alleges that defendants knew but failed to adequately report to the Federal Food & Drug Administration ('FDA') the existence of serious injuries and/or malfunctions attributable to Staar Surgical's IOL/ICL which were likely to cause or contribute to serious injuries, despite defendants' knowledge of these malfunctions and injuries. Significantly, these serious problems jeopardized Staar Surgical's ability to gain FDA approval for U.S. marketing of its ICLs - anticipated to be the 'dominant revenue generators for the Company over the next four to five years.' None of these serious problems, however, which threatened FDA approval of Staar Surgical's ICLs, were timely disclosed to investors. On January 6, 2004, the FDA website posted a warning letter to Staar Surgical concerning serious violations of manufacturing standards and the failure of the Company to adequately report to the FDA the existence of adverse events associated with the Company's ICLs. This news shocked the market and sent the price of Starr Surgical shares plummeting, to close almost 18% below the previous day -- one day before the disclosure of the FDA's warning letter -- thereby damaging investors.