Coughlin Stoia Geller Rudman & Robbins LLP Files Class Action Suit against Psychiatric Solutions, Inc.

SAN DIEGO--(BUSINESS WIRE)--Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”) (http://www.csgrr.com/cases/psychiatricsolutions/) today announced that a class action has been commenced on behalf of an institutional investor in the United States District Court for the Middle District of Tennessee on behalf of purchasers of Psychiatric Solutions, Inc. (“Psychiatric Solutions”) (NASDAQ:PSYS) common stock during the period between February 21, 2008 and February 25, 2009 (the “Class Period”).

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Darren Robbins of Coughlin Stoia at 800/449-4900 or 619/231-1058, or via e-mail at djr@csgrr.com. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.csgrr.com/cases/psychiatricsolutions/. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The complaint charges Psychiatric Solutions and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Psychiatric Solutions provides inpatient behavioral healthcare services.

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%.

Plaintiff seeks to recover damages on behalf of all purchasers of Psychiatric Solutions common stock during the Class Period (the “Class”). The plaintiff is represented by Coughlin Stoia, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.

Coughlin Stoia, a 190-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. The Coughlin Stoia Web site (http://www.csgrr.com) has more information about the firm.