The original Complaint alleges that defendants violated federal securities laws by issuing a series of materially false statements. Specifically, defendants omitted information regarding the sales success and prospects of a key St. Jude product, its implantable cardioverter defibrillator systems (ICD's). The Complaint asserts that the Company pushed sales of ICD's into the fourth quarter of 2005 so as to inflate the stock price and achieve extraordinary personal benefits for top insiders, including the CEO, who sold an unusual number of shares in the open market in the early months of 2006, and received a substantial boost in his compensation for 2005's performance, including a grant of 216,000 restricted shares worth (at the time) approximately $10 million.
The complaint further alleges that on or around April 4, 2006, St. Jude revealed that it would materially miss sales projections made just weeks earlier. The Company also announced that it was undertaking an intensive customer review to determine the cause of its sales shortfall. On this news, St. Jude stock fell to $36.25 on April 4, 2006, down $5.05 from the previous day's closing price of $41.30.
According to the Company’s FORM 10-Q For The Quarterly Period Ended July 4, 2009, in April and May 2006, five shareholders, each purporting to act on behalf of a class of purchasers during the period January 25 through April 4, 2006 (the Class Period), separately sued the Company and certain of its officers in federal district court in Minnesota alleging that the Company made materially false and misleading statements during the Class Period relating to financial performance, projected earnings guidance and projected sales of ICDs. The complaints, all of which seek unspecified damages and other relief, as well as attorneys’ fees, have been consolidated. The Company filed a motion to dismiss, which was denied by the district court in March 2007. The discovery process concluded in September, and the Company filed a motion for summary judgment which was argued before the Court in January 2009. In June 2009, the Court issued its ruling granting summary judgment in favor of the Company on all claims. The plaintiffs have agreed not to appeal this matter, to pay the Company certain costs and fees and to provide a full release of all claims asserted in the action or that could have been asserted against the Company and the individual defendants.