Ditech Communications Corporation ("Ditech" or the Company) provides voice processing technology for telecommunications customers.

Several purported shareholder class action lawsuits have been filed against Ditech and certain of its officers alleging that the Defendants violated federal securities laws by making misrepresentations regarding Ditech's business condition. Specifically, Defendants represented that Ditech had received two significant Voice Quality Assurance ("VQA") orders from new customers in Asia. Ditech touted this as the first success in its efforts to enter the VQA market in a rapidly growing geographical area. In fact, the orders were not solidified. The purported customers were not obligated to, and, did not purchase the services. Additionally, it is alleged that Ditech misrepresented the impact of the merger between Sprint and Nextel. Given the fact that Nextel accounted for over 40% of Ditech's revenues, certain securities analysts posited that the cost cutting and integration of Nextel and Sprint operations might result in less business for Ditech. In response, Defendants represented that the merger should not be of concern to Ditech investors and that it was "quite good" for the Company. In fact, as Defendants knew, the Nextel-Sprint merger posed a serious threat to Ditech's business, one that could erase nearly half of its revenues.

While the price of Ditech shares was artificially inflated by Defendants' false statements and failures to disclose, Company insiders sold a total of 320,000 of their personally held Ditech shares for gross proceeds of $6,715,650.

Investors began to learn the truth about the purported VQA orders on November 3, 2004, when the Company announced that the highly touted orders had not shipped, causing the Company to miss its revenue goals for the second quarter of 2005 and calling into question the Company's VQA expansion plans. The price of Ditech common stock fell by 25.5% to $16.60 per share in response to the announcement, on unusually heavy trading volume. Defendants, however, maintained this was merely a "delay" and that they still expected the orders to ship, a claim that Defendants knew, or recklessly disregarded, was misleading.

The Complaint further alleges that the truth about the impact of the Nextel-Sprint merger on Ditech was revealed after the close of trading on May 26, 2005. At that time, Ditech announced that orders from Nextel dropped substantially as a result of the Nextel-Sprint merger and that a continuing decline in orders was expected. Although Defendants did not directly address the issue in this release, the promised VQA sales to the two new customers from Asia still did not materialize, nearly a year after Defendants supposedly "secured" the orders. In response to this announcement, Ditech common stock dropped by 38%, to $7.79 per share, on unusually heavy trading volume.

According to the Company’s FORM 10-K for the Fiscal Year Ended April 30, 2008, beginning on June 14, 2005, several purported class action lawsuits were filed in the United States District Court for the Northern District of California, purportedly on behalf of a class of investors who purchased Ditech's stock between August 25, 2004 and May 26, 2005. The Complaints allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Ditech and its Chief Executive Officer and Chief Financial Officer in connection with alleged misrepresentations concerning VQA orders and the potential effect on Ditech of the merger between Sprint and Nextel, seeking monetary damages. All of the lawsuits were consolidated into a single action entitled In re Ditech Communications Corp. Securities Litigation, No. C 05-02406-JSW, and a consolidated amended Complaint was filed on February 2, 2006. The Defendants moved to dismiss the Complaint, and by order dated August 10, 2006, the court granted the Defendants' motion and dismissed the Complaint with leave to amend. The Plaintiffs filed their Second Amended Complaint on September 11, 2006. The Defendants again moved to dismiss, and by order dated March 22, 2007, the court dismissed the Second Amended Complaint with leave to amend. The Plaintiffs filed their Third Amended Complaint on April 23, 2007. On May 14, 2007, the Defendants again moved to dismiss. By order dated October 11, 2007, the court dismissed the third amended Complaint with prejudice. On November 8, 2007, the Plaintiffs filed a notice of appeal to the Ninth U.S. Circuit Court of Appeals. The appeal has been fully briefed.

On April 14, 2009, the Court entered the Order from the U.S. Court of Appeals for the Ninth Circuit. According to the Order, on April 1, 2009, the parties in Jaffe v. Ditech Comm. Corp., Case No. 07-17071, filed a Stipulated Motion for Dismissal of Appeal. The motion is granted. Therefore, pursuant to FED. R. APP. P. 42(b), it is hereby ordered that the appeal in the aforementioned case is dismissed.