Matria Healthcare has announced the dismissal of the securities class action pending against the company in the N.D. of Ga. The court’s opinion addresses the issue of whether in-and-out traders (i.e., investors who both bought and sold their shares during the class period) can be effective lead plaintiffs.
Only one person filed suit against Matria on a class action basis and he was subsequently named lead plaintiff. The proposed class period extended from October 24, 2000 to June 25, 2002, when the company disclosed problems with its information technology capabilities, but the lead plaintiff had sold all of his Matria shares on February 6, 2002.
In its opinion (Barr v. Matria Healthcare, Inc., 2004 WL 1551566 (N.D. Ga. July 7, 2004)), the court found that it was “undisputed that the Plaintiff sold his stock in response to an adverse market reaction to the Defendants’ January 30, 2002 press release.” The January 30 press release, however, made no mention of Matria’s information technology problems. As a result, the court found that the lead plaintiff could not demonstrate loss causation because the relevant misrepresentations “were not disclosed until well after the Plaintiff had sold his stock at the still artificially inflated price.”
Holding: Motion to dismiss granted with prejudice (also on other grounds).