Accuray Inc. designs, develops, and sells the CyberKnife system, an image-guided robotic radio surgery system for the treatment of solid tumors. The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator to deliver high doses of radiation to a tumor from different directions.
The original Complaint charges Accuray and certain of its officers and directors with violations of the Securities Act and the Exchange Act. The Complaint alleges that during the Class Period, Defendants misrepresented and failed to disclose material information concerning the quality and realistic likelihood of fulfillment of contracts in Accuray’s “backlog,” a figure representing the direct revenue that Accuray expects to receive from the sale and servicing of the CyberKnife system.
Specifically, Defendants misrepresented and/or failed to disclose the following adverse facts: (i) at the time of Accuray’s IPO, Accuray changed its definition of backlog to include both contingent and non-contingent contracts; (ii) beginning in the fiscal quarter ending March 31, 2007 (at the time of the IPO), Accuray would report backlog that consisted of both contingent and non-contingent backlog, thereby increasing the total reported backlog; (iii) Defendants materially overstated the amount of the Company’s backlog; (iv) Accuray reported as backlog orders for the CyberKnife system that did not have a substantially high probability of being booked as revenue; (v) a significant portion of commissions paid to CyberKnife sales personnel were earned prior to those potential sales being booked as revenue; (vi) Accuray sales personnel entered into contingent contracts for CyberKnife systems that did not have a substantially high probability of being booked as revenue; (vii) Accuray did not have adequate internal controls and procedures to ensure that potential orders reported as backlog had a substantially high probability of being booked as revenue; and (viii) based on the foregoing, Defendants lacked a reasonable basis for their positive statements about the Company, its backlog, earnings, operations and prospects.
On August 19, 2008, Accuray announced its fiscal fourth quarter and full year 2008 financial results for the period ended June 28, 2008 in a press release titled “Accuray Announces Results for the Fourth Quarter and Fiscal Year End 2008; 28 New Contracts Valued at $115.5 Million Signed in Fourth Quarter”. That same day, Accuray held a conference call with analysts and reiterated the financial results in the press release and revealed that Accuray removed another $39 million from backlog. Thus, Accuray removed approximately $127 million in backlog during the last three quarters of fiscal 2008.
On October 26, 2009, Judge Claudia Wilken granted the motion to consolidate several actions and granted the motion to appoint lead Plaintiff and lead Counsel. According to the Order, the Accuray Investor Group is lead Plaintiff and Coughlin Stoia Geller Rudman & Robbins LLP and Labaton Sucharow LLP are co-lead Counsel. On December 17, 2009, the lead Plaintiff filed a Consolidated Class Action Complaint and later followed with a Corrected Consolidated Class Action Complaint which was filed on December 30, 2009. On February 8, 2010, the Defendants responded by filing two motions to dismiss the Corrected Consolidated Class Action Complaint. On August 31, 2010, Judge Claudia Wilken granted the Defendants’ motion to dismiss. Plaintiffs were given until September 20, 2010, to file an amended Complaint.
On September 27, 2010, the Plaintiffs filed a First Amended Class Action Complaint. On October 4, 2010, a Corrected First Amended Class Action Complaint was filed. The Defendants filed a motion to dismiss on October 14, 2010.
Before any order on the Defendants' motion to dismiss, the parties filed a Stipulation of Settlement on April 28, 2011. According to the motion to preliminarily approve the settlement, the proposed settlement amount is $13.5 million in cash. The settlement was preliminarily approved on June 10, 2011. The final settlement hearing was set for September 1, 2011.
On December 8, 2011, the Court entered the Orders approving the plan of allocation, the motion for attorneys' fees and expenses, and dismissing the action with prejudice. The Court awarded lead Counsel attorneys’ fees of 25% of the Settlement Fund, plus reimbursement of litigation expenses in the amount of $284,279.23.
