Confidential
Settlement – $375,000Judge
Court
USDC Northern
Attorneys
Plaintiff
Defendant
Facts
In 1992 Plaintiff physician shareholders incorporated their health care facility at the suggestion of Defendant health care corporation's subsidiary. Pursuant to the written management agreement, Defendant's subsidiary managed and operated the business for the benefit of the shareholders. All drugs were to be purchased from Defendant's subsidiary; and a primary source of referrals were to come from the Plaintiff physician shareholders. Although, as shareholders, there was an economic incentive to refer their patients to the corporation, there were no legal obligations to do so. Plaintiffs alleged that, as a separate agreement and after the business proved profitable, Defendant's subsidiary agreed that it would purchase the business for a price equal to 3-times the annual net profit, based upon its 3 most profitable months of operation (this alleged agreement was oral). In January of 1994, California passed legislation which made it unlawful for shareholders to refer their own patients to the corporation. The legislation became effective on January 1, 1995. Between January 1994 and November 1994, Plaintiffs alleged that Defendant reassured them that it would purchase their stock in the corporation, based upon said formula. All of the said alleged representations were oral. Plaintiffs alleged that in November 1994, Defendant informed the shareholders that it had decided not to purchase the stock because some of the shareholders had stopped referring patients to the corporation for various reasons; Defendant alleged that the net profits of the corporation had decreased considerably over the last 6 months of 1994. Plaintiffs also alleged that since the date of commencement of operations, Defendant had had exclusive possession and control over all of the business records of the corporation; and therefore, the Plaintiffs allegedly could not verify those representations at the time.
Settlement Discussions
Offers and demands were not disclosed.
Damages
$1,400,000.
Other Information
This matter was settled within 4 weeks after the filing of the complaint.
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