The original complaint alleges that during the Class Period defendants issued materially false and misleading statements that misrepresented and failed to disclose the following: (a) that the Company was signing up fewer new customers and was not performing according to internal expectations; (b) that the Company's costs of acquiring new customers were significantly increasing; and (c) that the company's performance was being negatively impacted by competition. Then, on October 3, 2007, after the market closed, the company issued a press release announcing its preliminary third quarter 2007 results and revised earnings guidance for the full year of 2007. In response to this announcement, the price of NutriSystem common stock fell $15.98 per share, or approximately 34%, to close at $32.59 per share, on extremely heavy trading volume. Additionally, during the class period, the individual defendants and other company insiders sold 305,179 shares of their personally held NutriSystem common stock for gross proceeds in excess of $19.5 million.
According to the Company’s FORM 10-Q For the Quarterly Period Ended March 31, 2009, several putative class actions were filed in the United States District Court for the Eastern District of Pennsylvania naming NutriSystem, Inc. and certain of its officers and directors as defendants and alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaints purported to bring claims on behalf of a class of persons who purchased the Company’s common stock between February 14, 2007 and October 3, 2007 or October 4, 2007. The complaints alleged that the defendants issued various materially false and misleading statements relating to the Company’s projected performance that had the effect of artificially inflating the market price of its securities. These actions were consolidated in December 2007 under docket number 07-4215. On January 3, 2008, the Court appointed lead plaintiffs and lead counsel pursuant to the requirements of the Private Securities Litigation Reform Act of 1995, and a consolidated amended complaint was filed on March 7, 2008. The consolidated amended complaint raises the same claims but alleges a class period of February 14, 2007 through February 19, 2008. The defendants filed a motion to dismiss on May 6, 2008. The motion has been fully briefed, and oral argument was held on November 24, 2008.
On August 31, 2009, the Honorable Mary A. McLaughlin signed the Memorandum and Order granting the defendants’ motion to dismiss the Consolidated Amended Complaint. The case is now closed. On September 29, 2009, the plaintiff filed a Notice of Appeal. On May 19, 2010, the Court entered the Order from the U.S. Court of Appeals. The appeal was dismissed.