LabCorp 2015 Annual Report Download - page 116

Index
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On November 2, 2014, the Company entered into a definitive merger agreement to acquire Covance for $6,150.7 in cash and Company common stock.
The transaction closed on February 19, 2015. Prior to the closing of the transaction, purported stockholders of Covance filed two putative class action
lawsuits. One of the lawsuits, captioned Berk v Covance Inc., et al., C.A. No. 10440-VCL, was filed in the Delaware Court of Chancery on December 9, 2014.
The other lawsuit, captioned Ojeda v. Herring et al., No. MER-C-92-14, was filed in the Superior Court of New Jersey, Chancery Division, Mercer County,
New Jersey, on November 12, 2014. Both suits named as defendants Covance, members of the Covance board of directors, the Company and Neon Merger
Sub, Inc., a wholly owned subsidiary of the Company that was merged out of existence in connection with the Acquisition. The lawsuits alleged breach of
fiduciary duty and/or other violations of state law arising out of the proposed acquisition. Each suit sought, among other things, injunctive relief enjoining
the merger. On January 21, 2015, the case in New Jersey was voluntarily dismissed without prejudice by the Plaintiff. After limited discovery, the parties
agreed on certain additional disclosures to the Company's definitive proxy statement filed on November 26, 2014, which were made in a supplement to the
definitive proxy statement filed on February 9, 2015 (Covance Supplemental Disclosures). On December 1, 2015, the Court approved a stipulation under
which Plaintiffs voluntarily dismissed the action, with prejudice as to the named Plaintiff only. The Court retained jurisdiction solely for the purpose of
adjudicating Plaintiffs' counsel's anticipated application for an award of attorney’s fees and reimbursement of expenses in connection with the Covance
Supplemental Disclosures. The Company subsequently agreed to pay $0.2 to Plaintiff’s counsel for attorney’s fees and expenses in full satisfaction of their
claim for attorney’s fees and expenses in the action. The Court has not been asked to review, and will pass no judgment on, the payment of the attorneys' fees
and expenses or their reasonableness.
In December 2014, the Company received a Civil Investigative Demand issued pursuant to the U.S. False Claims Act from the U.S. Attorney’s Office for
South Carolina, which requests information regarding remuneration and services provided by the Company to physicians who also received draw and
processing/handling fees from competitor laboratories Health Diagnostic Laboratory, Inc. and Singulex, Inc. The Company is cooperating with the request.
In March 2015, the Company received a subpoena from the Attorney General of the State of New York, which requests information regarding the
Company’s relationship with Direct Laboratories LLC. The Company cooperated with the request, and the matter was settled in December 2015.
The Company holds an investment in a joint venture partnership located in Alberta, Canada. The Canadian partnership has a license to conduct
diagnostic testing services in the province of Alberta. Substantially all of its revenue is received as reimbursement from the Alberta government's healthcare
programs. In December 2013, Alberta Health Services (AHS), the Alberta government's healthcare program, issued a request for proposals for laboratory
services that included the scope of services performed by the Canadian partnership. In October 2014, AHS informed the Canadian partnership that it had not
been selected as the preferred proponent. In November 2014, the Canadian partnership submitted a vendor bid appeal upon the belief that there were
significant flaws and failures in the conduct of the request for proposal process, which drove to a biased conclusion. AHS established a Vendor Bid Appeal
Panel to hear the appeal, and the hearing was conducted in February 2015. In August 2015, AHS was directed to cancel the request for proposal process.
Subsequently, the Canadian partnership entered into a one-year extension through March 31, 2017 of its existing contract with AHS. If the contract is not
renewed after March 2017, then the Canadian partnership's revenues would decrease substantially and the carrying value of the Company's investment could
potentially be impaired.
Under the Company's present insurance programs, coverage is obtained for catastrophic exposure as well as those risks required to be insured by law or
contract. The Company is responsible for the uninsured portion of losses related primarily to general, professional and vehicle liability, certain medical costs
and workers' compensation. The self-insured retentions are on a per occurrence basis without any aggregate annual limit. Provisions for losses expected under
these programs are recorded based upon the Company's estimates of the aggregated liability of claims incurred. At December 31, 2015, the Company had
provided letters of credit aggregating approximately $45.4, primarily in connection with certain insurance programs. The Company’s availability under its
Revolving Credit Facility is reduced by the amount of these letters of credit.
The Company leases various facilities and equipment under non-cancelable lease arrangements. Future minimum rental commitments for leases with
non-cancelable terms of one year or more at December 31, 2015 are as follows:
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