LabCorp 2011 Annual Report Download - page 44

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On May 2, 2011, a putative class action lawsuit, Tsatsis v.
Orchid Cellmark, Inc., et al. was filed in the United States
District Court for the District of New Jersey against Orchid,
individual members of Orchid’s Board of Directors, the
Company, and a subsidiary of the Company. This federal
court action challenged the Orchid acquisition on grounds of
alleged breaches of fiduciary duty and violations of the federal
securities laws. On May 12, 2011, the plaintiff filed a motion
for preliminary injunction seeking to enjoin the transaction.
On May 13, 2011, the Court denied the plaintiff’s request
for an expedited hearing. On June 27, 2011, the action was
voluntarily dismissed.
Three similar shareholder class actions, Silverberg v. Bologna,
et al., Nannetti v. Bologna, and Locke v. Orchid Cellmark, Inc.,
et al., were filed in the Court of Chancery of the State of
Delaware and subsequently consolidated into one action,
In re Orchid Cellmark Shareholder Litig. On May 4, 2011, the
plaintiffs in the consolidated action filed a motion for preliminary
injunction seeking to enjoin the transaction. On May 12, 2011,
the Court of Chancery denied the motion for preliminary
injunction, and plaintiffs’ motion for an expedited appeal was
subsequently denied on May 16, 2011. Since that time, there
has been no substantive activity in the Delaware litigation.
In October 2011, a putative stockholder of the Company
made a letter demand through his counsel for inspection of
documents related to policies and procedures concerning the
Company’s Board of Directors’ oversight and monitoring of the
Company’s billing and claim submission process. The letter
also seeks documents prepared for or by the Board regarding
allegations from the California ex rel. Hunter Laboratories,
LLC et al. v. Quest Diagnostics Incorporated, et al., lawsuit
and documents reviewed and relied upon by the Board in
connection with the settlement of that lawsuit. The Company
is responding to the request pursuant to Delaware law.
On November 18, 2011, the Company received a letter
from United States Senators Baucus and Grassley requesting
information regarding the Company’s relationships with its
largest managed care customers. The letter requests
information about the Company’s contracts and financial
data regarding its managed care customers. The Company
is cooperating with the request.
The Company is a defendant in two putative class actions
related to overtime pay. In September 2011, a putative class
action, Peggy Bryant v. Laboratory Corporation of America
Holdings, was filed against the Company in the United States
District Court for the Southern District of West Virginia, alleging
on behalf of employees similarly situated that the Company
violated the Federal Fair Labor Standards Act and applicable
state wage laws by failing to pay overtime. The complaint seeks
monetary damages, liquidated damages equal to the alleged
amount owed, costs, injunctive relief, and attorney’s fees. In
December 2011, a putative class action, Debra Rivera v.
Laboratory Corporation of America Holdings, was filed
against the Company in the United States District Court for
the Middle District of Florida alleging on behalf of employees
similarly situated that the Company violated the Federal Fair
Labor Standards Act by failing to pay overtime. The complaint
seeks monetary damages, liquidated damages equal to the
alleged amount owed, costs, and attorney’s fees. The Company
intends to vigorously contest both cases.
The Company is involved from time to time in various claims
and legal actions, including arbitrations, class actions, and other
litigation, arising in the ordinary course of business. Some of
these actions involve claims that are substantial in amount. These
matters include, but are not limited to, intellectual property
disputes, professional liability, employee related matters, and
inquiries, including subpoenas and other civil investigative
demands, from governmental agencies and Medicare or
Medicaid payers and managed care payers reviewing billing
practices or requesting comment on allegations of billing
irregularities that are brought to their attention through billing
audits or third parties. The Company receives civil investigative
demands or other inquiries from various governmental bodies
in the ordinary course of its business. Such inquiries can
relate to the Company or other healthcare providers. The
Company works cooperatively to respond to appropriate
requests for information.
The Company is also named from time to time in suits
brought under the qui tam provisions of the False Claims Act
and comparable state laws. These suits typically allege that
the Company has made false statements and/or certifications
in connection with claims for payment from federal or state
health care programs. They may remain under seal (hence,
unknown to the Company) for some time while the government
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements