LabCorp 2011 Annual Report Download - page 43

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As previously reported, the Company reached a settlement
in the previously disclosed lawsuit, California ex rel. Hunter
Laboratories, LLC et al. v. Quest Diagnostics Incorporated,
et al., to avoid the uncertainty and costs associated with
prolonged litigation. The original lawsuit was brought against
the Company and several other major laboratories operating in
California and alleged that the defendants improperly billed the
state Medicaid program and, therefore, violated the California
False Claims Act. The complaint against the Company sought
a refund of alleged overpayments made to the Company from
November 7, 1995 through November 2009, plus simple
interest of 7% per year, calculated as of the filing date to total
$97.5. In addition, the suit sought continuing damages past
November 2009, plus treble damages, civil penalties of $0.01
per each alleged false claim, recovery of costs, attorney’s fees,
and legal expenses, and pre- and post-judgment interest.
Pursuant to the executed settlement agreement, the Company
recorded a litigation settlement expense of $34.5 (net of a
previously recorded reserve of $15.0) in the second quarter
of 2011. The Company also agreed to certain reporting
obligations regarding its pricing for a limited time period and, at
the option of the Company in lieu of such reporting obligations,
to provide Medi-Cal with a discount from November 1, 2011
through October 31, 2012. The Medi-Cal discount is not
expected to have a material impact on the Company’s
consolidated revenues or results of operations.
As previously reported, the Company responded to an
October 2007 subpoena from the United States Office
Department of Health & Human Services of Inspector General’s
regional office in New York. On August 17, 2011, the Southern
District of New York unsealed a False Claims Act lawsuit,
United States of America ex rel. NPT Associates v. Laboratory
Corporation of America Holdings, which alleges that the
Company offered UnitedHealthcare kickbacks in the form of
discounts in return for Medicare business. The lawsuit seeks
actual and treble damages and civil penalties for each alleged
false claim, as well as recovery of costs, attorney’s fees, and legal
expenses. The United States government has not intervened in
the lawsuit. The Company will vigorously defend the lawsuit.
In addition, the Company has received three other
subpoenas since 2007 related to Medicaid billing. In June
2010, the Company received a subpoena from the State of
Florida Office of the Attorney General requesting documents
related to its billing to Florida Medicaid. In February 2009, the
Company received a subpoena from the Commonwealth of
Virginia Office of the Attorney General seeking documents
related to the Company’s billing for state Medicaid. In October
2009, the Company received a subpoena from the State of
Michigan Department of Attorney General seeking documents
related to its billing to Michigan Medicaid. The Company also
responded to a September 2009 subpoena from the United
States Department of Health & Human Services Office of
Inspector General’s regional office in Massachusetts regarding
certain of its billing practices. The Company is cooperating
with these requests.
In April 2011, the Company and Orchid Cellmark Inc.
(“Orchid”) announced that they had entered into a definitive
agreement and plan of merger under which the Company
would acquire all of the outstanding shares of Orchid in a cash
tender offer. The Company received a request for additional
information (commonly referred to as a “Second Request”)
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (“HSR Act”) from the Federal Trade
Commission (“FTC”) in connection with the proposed merger
with Orchid. On December 8, 2011, the Company announced
that it had reached an agreement with the FTC that allowed
the Company to complete its acquisition of Orchid which closed
on December 15, 2011. Under the terms of the proposed
consent decree that was accepted by the FTC for public
comment, the Company is required to divest certain assets
of Orchid’s U.S. government paternity business. On
December 16, 2011, the Company sold those assets to
DNA Diagnostics Center (DDC), a privately held provider of
DNA paternity testing. Subsequent to the closing of the
Orchid transaction, the Company has received three notices of
demand for appraisal rights for shares.
On April 11, 2011, a putative class action lawsuit, Ballard v.
Orchid Cellmark, Inc., et al., was filed in the Superior Court of
New Jersey Chancery Division, Mercer County against Orchid,
individual members of Orchid’s Board of Directors, the Company,
and one of the Company’s wholly-owned subsidiaries. This
action challenged the Orchid acquisition on grounds of alleged
breaches of fiduciary duty and/or other violations of state law.
Two similar putative class action lawsuits, Kletzel v. Orchid
Cellmark, Inc., et al. and Greenberg v. Orchid Cellmark Inc., et al.,
were subsequently filed in the same court. On August 15, 2011,
all three actions were voluntarily dismissed.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements