Johnson & Weaver recently achieved a monumental recovery for the benefit of HCA Holdings, Inc. in a case pending in Tennessee state court.
More than four years after HCA stockholders stepped into the shoes of HCA to pursue claims against certain officers and directors of the company in a derivative capacity, the parties reached a settlement. The settlement was reached through hard-fought, arm’s-length bargaining following numerous written settlement exchanges, after two in-person mediations with a well-respected retired federal judge.
On April 12, 2016, after notice was sent to HCA stockholders, the judge approved the settlement, which provided major monetary and non-monetary relief, including:
- A $19 million payment to HCA in settlement of the plaintiffs’ claims that HCA was damaged as a result of alleged breaches of fiduciary duty, representing one of the largest monetary recoveries ever obtained in a shareholder derivative action in Tennessee.
- A prohibition on the use of HCA funds to settle a related securities class action absent a majority vote of independent directors of HCA, after consulting with outside counsel.
- The implementation (and maintenance for five years) of robust corporate governance reforms designed to address the alleged misconduct and corporate governance faults leading to the action.
HCA and its board of directors agreed that Johnson & Weaver’s efforts “were a material factor in the Company’s ability to extinguish a potential $1 billion exposure” and “in the Company’s decision to adopt and/or implement the Improvements.”
In addition, HCA stated that the $19 million “would not have been obtained for the Company but for Plaintiffs’ efforts in the Action.”
The mediator, retired federal judge Layn R. Phillips, also opined on the value of the settlement. “Having mediated hundreds of derivative actions over the past 20 years, I can say with confidence that such a monetary payment is an exceptional result for the benefit of HCA and Plaintiffs.”