Cutsforth v. Renschler
| Decision Date | 18 September 2002 |
| Docket Number | No. 8:98-CV-2424-T-30TGW.,8:98-CV-2424-T-30TGW. |
| Citation | 235 F.Supp.2d 1216 |
| Parties | Craig CUTSFORTH, etc., Plaintiff(s), v. Arnold C. RENSCHLER, et al., Defendant(s). |
| Court | U.S. District Court — Middle District of Florida |
Mark C. Gardy, Karin E. Fisch, Abbey & Gardy, LLP, New York City, Michael E. Criden, Hanzman & Criden, P.A., Coral Gables, FL, Leo W. Desmond, Law Office of Leo W. Desmond, West Palm Beach, FL, Stanley M. Grossman, Pomerantz, Haudek, Block, Grossman & Gross, LLP, Julian H. Kreeger, Robert R. Adler, Milberg, Weiss, Bershad, Hynes & Lerach, Boca Raton, FL, Mark J. Heise, Heise Markarian, P.A., Miami, FL, Patrick V. Dahlstrom, Pomerantz, Haudek, Block, Grossman & Gross, LLP, Chicago, IL, Stephen J. Fearon, Jr., New York City, for Plaintiffs.
Thomas George Long, Barnett, Bolt, Kirkland & Long, Tampa, FL, Todd R. David, Craig H. Kuglar, Jason N. Poulos, Alston & Bird, LLP, Atlanta, GA, for Defendants.
Mark C. Gardy, Stephen J. Fearon, Jr., Abbey & Gardy, LLP, New York City, Leo W. Desmond, Law Office of Leo W. Desmond, West Palm Beach, FL, Steven G. Schulman, Samuel G. Schulman, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, New York City, Melvyn I. Weiss, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, San Diego, CA, Julian H. Kreeger, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, Boca Raton, FL, David L. Mandelbaum, Law Offices of David L. Mandelbaum, New York City, Jack E. Reise, Cauley, Geller, Bowman & Coates, LLP, Boca Raton, FL, for Movants.
THIS CAUSE came on for consideration upon the Report and Recommendation submitted by Magistrate Judge Thomas G. Wilson (Dkt.# 118), Plaintiffs' Objection to Report and Recommendation (Dkt.# 120), and Defendants' response (Dkt.# 122).
The Court notes that Plaintiffs have objected to, among other things, the Magistrate's use of a map to determine the distance between two particular cities in discounting one of Plaintiffs' contentions.1 Plaintiffs contend that this "consideration of matters outside the pleadings effectively converted the Defendants' motion to dismiss into a motion for summary judgment." (Page 3 of Plaintiffs' Objection to Report and Recommendation). Defendants counter that it was appropriate for the Magistrate to take judicial notice of commonly available information of geography. It is unnecessary for this Court to resolve this dispute since the geographical information was not critical to the analysis contained in the Report and Recommendation. The Magistrate had already dispensed with Plaintiffs' contention by determining from the Complaint and available documents, particularly document # 83, that the existence of two pharmacies in towns in Colorado with overlapping delivery routes would be inconsequential to the investing public regarding PharMerica, an entity with approximately 160 pharmacy facilities located across thirty-seven states. (Page 82, Report and Recommendation).
This Court, without relying on the map mileage between the two towns in Colorado, is of the opinion that the Magistrate Judge's Report and Recommendation should be adopted, confirmed, and approved. The Court notes that Plaintiffs have not sought the opportunity to further amend the existing Second Amended Complaint.
ACCORDINGLY, it is therefore, ORDERED AND ADJUDGED:
1) The Report and Recommendation of the Magistrate Judge is adopted, confirmed, and approved in all respects (except for the reference to the mileage on page 83 thereof), and said Report and Recommendation is made a part of this order for all purposes, including appellate review.
2) The Defendants' Motion to Dismiss (Dkt.# 83) is GRANTED. The Second Amended Complaint is DISMISSED with prejudice.
This suit is brought as a securities class action on behalf of purchasers of the common stock of defendant PharMerica from January 7, 1998, through July 24, 1998. The suit seeks to impose liability under the Securities Exchange Act of 1934 against PharMerica and certain of its officers based on their alleged dissemination of materially false and misleading statements about PharMerica's business and financial condition and the purported success of its aggressive acquisition program. Such a suit must meet the heightened pleading requirements of the Private Securities Litigation Reform Act. The plaintiffs' second amended complaint fails to meet those requirements. Accordingly, I recommend that the defendants' motion to dismiss that complaint (Doc. 83) be granted. Moreover, I recommend that the dismissal be with prejudice since the plaintiffs have had a fair and sufficient opportunity to submit a viable complaint.
The plaintiffs are a putative class of persons who purchased common stock in PharMerica, Inc., between January 7, 1998, and July 24, 1998. PharMerica is a corporation that was registered with the Securities and Exchange Commission (SEC) and whose common stock was actively traded on the NASDAQ market during the class period. It provided pharmacy products and services to the elderly, chronically ill, and disabled in long-term care and alternate site settings, such as skilled nursing and assisted living facilities. It also supplied mail-order pharmacy services to workers' compensation and catastrophic care markets.
The individual named defendants were purportedly officers of PharMerica during the class period. Thus, it is alleged (apparently inaccurately) that defendant Arnold Renschler was its president and chief executive officer and a member of its board of directors; defendant Robert Della Valle was the company's executive vice president and chief executive officer; and defendant James Shelton was the company's executive vice president and chief financial officer (Doc. 81, pp. 9-10).
PharMerica was formed in December 1997, through a merger of the Pharmacy Corporation of America (PCA) and Capstone Pharmacy Services (Capstone), two corporations that provided institutional pharmacy products and services. It was perceived that changes in the institutional pharmacy industry favored the consolidation of pharmacies because, among other things, larger size equated to larger discounts from suppliers and a national market presence was purportedly beneficial in competing for contracts. Accordingly, in light of these benefits that prompted the merger of Capstone and PCA, PharMerica declared that after the merger it would employ a "growth through acquisition" strategy in order to increase its sales and improve its profitability.
In furtherance of its growth strategy, PharMerica pursued the acquisition of many pharmaceutical companies during the first and second quarters of 1998. The second amended complaint (which for convenience will usually be referred to simply as "the complaint") focuses on the press releases announcing a number of acquisitions.1 Thus, the complaint alleges that in a press release dated January 7, 1998, PharMerica stated (id. at pp. 14-15):
[It] ... ha[d] expanded its pharmacy network on both coasts with the acquisitions of Sweetwater Pharmacy in Spring Valley, Calif., and Hollins Manor Pharmacy in Roanoke, VA.
Together, the acquisitions are expected to generate $11.2 million as a result of services provided to nearly 4,300 beds.2
The following day, January 8, 1998, PharMerica announced its acquisition of the Medical Arts Pharmacy of Pittsburgh. It stated that "[t]he acquisition marks Pharmerica's [sic] entry into the Pittsburgh metropolitan area and is expected to generate $8.4 million as a result of services provided to nearly 1,350 beds" (id. at p. 16).
On January 15, 1998, PharMerica issued a press release publicizing its acquisition of Resident Care Pharmacy in North Carolina, saying that "[t]he acquisition is expected to generate $14.5 million as a result of services provided to approximately 3,800 beds" (id. at p. 17).
On January 20, 1998, PharMerica announced its acquisition of Express Pharmacy Services (EPS) and Tmesys, Inc., providers of mail-order pharmacy services for the workers' compensation industry. The press release allegedly said that "[w]ith an average annual growth rate of 21% since 1993, EPS and Tmesys are expected to generate more than $30 million in revenue this year" (id. at p. 18).
On February 9, 1998, PharMerica issued a press release announcing record revenues of $195.3 million and pro forma net income of $7.2 million, or $.12 per share, for the fourth quarter ending December 31, 1997. In this regard, Renschler allegedly commented (id. at pp. 25-26):
The record levels of revenues and earnings before non-recurring charges reported for the fourth quarter and twelve months of fiscal 1997 reflect the continuing strong operating trends of our Company and the successful consummation of the merger announced last year. I am pleased to report that we have achieved the milestones in connection with the merger which we anticipated would be completed by year end.
. . . . .
During the fourth quarter we acquired pharmacy operations which will add approximately $34 million in annualized revenues and expand our service coverage in several key states. With our new credit facility in place we will have additional capital resources to continue our strategic acquisition program.
. . . . .
Our commitment is to provide superior pharmacy services to our patients while creating value for our shareholders.
On February 18, 1998, PharMerica announced the acquisition of Kentucky Health Services, Inc., making PharMerica the largest institutional pharmacy services provider in Kentucky. The press release said that this acquisition was expected to generate $20.6 million in 1998 (id. at p. 28).
On February 27, 1998, PharMerica announced, as "part of [its] strategic plan to improve efficiencies of scale and expand geographic reach," its acquisition of a Michigan pharmaceutical company (id. at p. 29):
Pharmerica [sic] ... is entering...
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