The complaint alleges that during the Class Period, defendants issued materially false and misleading statements concerning the Company’s safeguards and controls over its operations, including at its Riveredge Hospital (“Riveredge”) facility. Defendants downplayed incidents at the Company’s facilities, indicating that the deficiencies had all been resolved. Defendants assured investors that corrective actions had already been taken at the Company’s facilities to improve the quality, safety and risk management. Additionally, defendants issued materially false and misleading statements regarding the Company’s financial results and compliance with Generally Accepted Accounting Principles. Specifically, the Company failed to properly account for its contingent liabilities related to the deficiencies surrounding its operations. As a result of defendants’ false and misleading statements, Psychiatric Solutions stock traded at artificially inflated prices during the Class Period, reaching a high of $39.71 per share on July 8, 2008.
On February 20, 2008, the beginning of the Class Period, Psychiatric Solutions issued its 2007 financial results, increasing earnings guidance for 2008. Just over a week later, the Company filed its Form 10-K for 2007, representing it had “higher quality care” than its competitors and assuring that Psychiatric Solutions was in compliance with applicable government regulations.
On July 17, 2008, the Chicago Tribune (“Tribune”) issued an investigative report which disclosed unreported violence among juvenile patients at the Company’s Riveredge facility. As a result of the Tribune’s investigation, the Illinois Department of Children and Family Services (“DCFS”) placed a hold on admitting youths in the custody of the state to Riveredge. As a further result, the Department of Justice initiated an investigation into the facility and its operations.
Then, on February 25, 2009, Psychiatric Solutions announced disappointing fourth quarter and year-end financial results due to the problems at Riveredge. The Company missed its 2008 income guidance from continuing operations of $2.02 to $2.03 per diluted share, instead reporting $1.92 per diluted share. The guidance miss was based upon the problems at the Company’s Riveredge facility, including the effect of the continuing hold at the facility by DCFS, additional charges related to the investigation and an increase in the Company’s general and professional liability reserves. On this news, Psychiatric Solutions’ stock fell $9.79 per share to close at $17.50 per share on February 26, 2009, a 1-day decline of 35%.
On April 30, 2010, District Judge William J. Haynes, Jr., signed the order granting the motion to appoint the Central States, Southeast and Southwest Areas Pension Fund as lead plaintiff.
On June 15, 2010, a Consolidated Complaint For Violation Of The Federal Securities Laws was filed by the lead plaintiffs against the defendants. On July 15, 2010, the defendants filed a motion to dismiss the Consolidated Complaint. The defendants' motion to dismiss was denied on March 31, 2011.
On September 15, 2011, the plaintiffs filed a motion to certify the class.
On October 10, 2014, the parties entered into a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on October 15.
On January 16, 2015, the Court issued an Order awarding attorneys' fees and expenses. This was followed by a Final Judgment approving the Settlement and dismissing this case with prejudice.