Last week, the Alabama Supreme Court upheld a Jefferson County judge’s ruling that a lawsuit against CVS Caremark Corp. can proceed as a class-action to represent roughly 70,000 investors who assert that they lost $3.2 billion in a securities fraud during the 1990s. The case arises from twenty-one lawsuits filed by investors in 1998 against MedPartners, which was founded by former HealthSouth CEO Richard Scrushy. In those suits, MedPartners was accused of making misrepresentations to the public regarding its financial well-being. The suits were consolidated and settled for $56 million after MedPartners was about to go bankrupt, and $50 million was the most that its insurance would pay. The company changed its name to Caremark in 2000 and merged with CVS seven years later.
One original plaintiff, John Lauriello, filed a fraud claim in 2003 asserting that MedPartners was dishonest about how much its insurance would pay during settlement negotiations. He alleged that in October 1999, before the settlement was completed, MedPartners paid for unlimited insurance coverage. Lauriello claimed that if the plaintiffs had know that at the time, they could have negotiated a more favorable settlement for them.
CVS Caremark has countered that the additional insurance coverage was known or should have been known by the plaintiffs before the settlement was finalized, as it was discussed in press releases, communications with plaintiffs’ attorneys, and within a filing with the SEC. Additionally, the company contends that the statute of limitations bars the plaintiffs claims and has fought against the claims being treated as a class actions. The Alabama Supreme Court disagreed on the last contention, upholding Judge Tom King’s certification of the class with an opt-out provision.
Opt-out notices will have to be sent to the 70,000 investors in the class. Because many of the addresses of investors from 16 years ago may no longer be valid, attorneys will also have to advertise the opt-out provision. Once the opt-out process is complete, the case can then proceed on the merits. Plaintiffs will have to prove there was fraud during the settlement and will have to get experts to say what the case could have been settled for if they had known about the unlimited insurance coverage.
If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies or visit frankowskifirm.com.