Judge drops CardioNet shareholder lawsuit
A class action lawsuit filed by shareholders who purchased CardioNet stock between April 30, 2009, and June 30, 2009, after stockholders alleged that the company violated the Securities Exchange Act of 1934 has been dismissed by a judge from the U.S. District Court for the Eastern District of Pennsylvania.
According to case filed in August 2009, the common stock purchasers alleged CardioNet executives and directors reported positive statements about its revenues and earnings while “knowingly or recklessly” disregarding that the company was experiencing a decrease in reimbursement rates.
At the time, the mobile cardiac outpatient telemetry (MCOT) reimbursements were under review by payors and could have led to a period of economic instability.
On April 24, 2009, a report was issued that outlined the potential risk that the rate of reimbursement by Highmark Medicare Services for CardioNet’s MCOT was at risk of being cut by $200. Subsequently, CardioNet’s stock dropped 13 percent.
Shareholders alleged that the company’s financial outlook for 2009, 2010 and 2011 “had no reasonable basis” because it was based on the rate of $1,123.07 rate for its MCOT system, which was likely to be reduced because of “inter alia, the cost-driven reimbursement environment which was driving down virtually all reimbursement levels set by commercial providers.”
On Aug. 10, District Judge Stewart Dalzell dismissed the case after ruling that the shareholders “failed to adequately plead that the statements at issue were false or misleading.”
Additionally, the judge ruled that the plaintiffs failed to adequately plead that “the defendants made the statements with the requisite scienter, that is, knowingly or recklessly.”
Dalzell said that the shareholders did not plead under the proper “particularity” that the Private Securities Litigation Reform Act requires, thus the reason for the dismissal.
According to case filed in August 2009, the common stock purchasers alleged CardioNet executives and directors reported positive statements about its revenues and earnings while “knowingly or recklessly” disregarding that the company was experiencing a decrease in reimbursement rates.
At the time, the mobile cardiac outpatient telemetry (MCOT) reimbursements were under review by payors and could have led to a period of economic instability.
On April 24, 2009, a report was issued that outlined the potential risk that the rate of reimbursement by Highmark Medicare Services for CardioNet’s MCOT was at risk of being cut by $200. Subsequently, CardioNet’s stock dropped 13 percent.
Shareholders alleged that the company’s financial outlook for 2009, 2010 and 2011 “had no reasonable basis” because it was based on the rate of $1,123.07 rate for its MCOT system, which was likely to be reduced because of “inter alia, the cost-driven reimbursement environment which was driving down virtually all reimbursement levels set by commercial providers.”
On Aug. 10, District Judge Stewart Dalzell dismissed the case after ruling that the shareholders “failed to adequately plead that the statements at issue were false or misleading.”
Additionally, the judge ruled that the plaintiffs failed to adequately plead that “the defendants made the statements with the requisite scienter, that is, knowingly or recklessly.”
Dalzell said that the shareholders did not plead under the proper “particularity” that the Private Securities Litigation Reform Act requires, thus the reason for the dismissal.