On April 19, 2007, a Notice of Appeal as to the Order granting the defendants’ motion to dismiss was filed. The appeal was then dismissed on July 13, 2007 and the case was closed.
According to press release dated March 21, 2007, the lead counsel for Patterson Companies Inc., announces that the United States District Court, District of Minnesota, granted motions to dismiss, with prejudice, a consolidated securities class action complaint and ERISA class action complaint brought against Patterson and certain officers and directors. The court also dismissed, without prejudice, a verified amended shareholder derivative complaint brought against Patterson and certain officers and directors.
As disclosed by the Company’s FORM 10-K for the fiscal year ended April 29, 2006, five purported class action lawsuits have been filed in the United States District Court for the District of Minnesota, naming the Company and certain officers and directors and alleging certain violations of the federal securities laws. On August 31, 2005, the Court entered an order consolidating the cases into a single action captioned In re Patterson Companies, Inc. Securities Litigation docketed as File No. 05cv1757 DSD/NMJ. On September 16, 2005, a derivative lawsuit was filed in the United States District Court for the District of Minnesota captioned Vance Cadd, Derivatively On Behalf of Patterson Companies, Inc. vs. James W. Wiltz, et al., docketed as File No. 05-cv-02155 RHK/AJB. This lawsuit names certain officers and directors of the Company as defendants and alleges breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. On October 11, 2005, a class action lawsuit was filed in the United States District Court for the District of Minnesota captioned Tamara Dolliver, On Behalf of Herself and All Others Similarly Situated vs. Patterson Companies, Inc., et al docketed as File No. 05-cv-02383 JNE/SRN. This class action lawsuit was brought on behalf of the participants in the Company’s Employee Stock Ownership Plan against the Company and certain officers and directors, and alleges violations of the federal Employee Retirement Income Security Act. The Cadd and Dolliver cases are predicated on essentially the same factual allegations alleged in, and are related cases to, the class action lawsuits consolidated as In Re Patterson Companies, Inc. Securities Litigation.
The original complaint charges Patterson and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Patterson distributes dental, companion-pet veterinary and rehabilitation supplies.
Specifically, the complaint alleges that the Company's Q4 was historically its largest quarter in terms of both revenue and earnings, but that defendants knew by February 2005 that the Company's Q4 and FY 2005 sales, operating profit, operating profit margin, net income and gross margin would actually decline materially in Q4 2005 and that based on business conditions knowable and then known to the defendants, the Company's Q4 and FY 2005 EPS targets were impossible to meet. According to the complaint, defendants knew missing the Company's Q4 estimates would not only be detrimental to the Company's share price, sending the Company's shares into a freefall, but also evidence the Company's inability to successfully grow the Company through acquisitions.
The complaint further alleges that as a result of the defendants' false and misleading Class Period statements, Patterson's stock traded at inflated levels during the Class Period, increasing to its historical all-time high of $53.85 per share, allowing the Company's top officers and directors to sell more than $44 million worth of their own shares at inflated prices. The Company's true financial status, including its Q4 2005 declining gross sales, declining Dental Supply segment sales, declining Dental Supply operating profits, declining Dental Supply operating profit margin, declining net income and declining gross margin growth, was ultimately disclosed on May 26, 2005. On May 26, 2005, following defendants' revelations, the Company's share price plummeted 14%, erasing $1.1 billion in market capitalization as it fell below $46 per share on record volume of over 10 million shares traded.