Top Class Actions
Let’s hope that WebMD has a cure for what ails it… which would be a securities class action. The online health information company was served this week, reportedly, over allegations that certain of its officers and directors violated the Securities Exchange Act of 1934. (Given the number of securities suits that cite this particular infraction, I’m going to assume that the SEA is not a popular read).
FYI—in case your computer’s been down for the past 10 years—WebMD provides health information services to consumers, physicians and other healthcare professionals, employers, and health plans through its public and private online portals, mobile applications, and health-focused publications in the United States.
The lawsuit was filed on behalf of purchasers of the common stock of WebMD Health Corp. (“WebMD” or the “Company”) between February 23, 2011 and July 15, 2011, inclusive (the “Class Period”).
The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and prospects. Specifically, defendants misrepresented and/or failed to disclose the following adverse facts: (i) that WebMD was experiencing sponsorship cancellations due to extended legal and regulatory reviews; (ii) that WebMD’s customers, including several consumer product companies, were delaying advertising on the Company’s website as a result of smaller advertising budgets; and (iii) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and its prospects.
On July 18, 2011, WebMD announced its preliminary second quarter financial results and lowered its financial guidance for 2011. In reaction to the Company’s announcement, the price of WebMD stock fell $14.01 per share, or 30%, to close at $32.48 per share, on extremely heavy trading volume.
Top Settlements
All you new parents out there—heads-up—the Department of Health and Human Services recently settled a lawsuit brought by the parents of a toddler who allegedly sustained injuries as a result of receiving immunizations. Details as to which immunizations were administered were not released, unfortunately.
The settlement for $8,713,625, agreed by the parents, included future lost earnings, past and future pain and suffering, past and future medical expenses, attendant care, rehabilitation, and residential expenses for their child.
The parents alleged the child began suffering febrile seizures within 24 hours of having the immunizations.
Apparently, results of testing revealed that the child had suffered a stroke, lack of muscle coordination, loss of hearing and loss of sight. The parents also alleged that the child suffered significant delays, including speech, intellect and fine motor skills development. At the age of nine, the child required a G-tube for nutrition and was not potty trained. It is worth noting that this is not a common situation, but that is precisely what makes it all the more heart-wrenching.
Wachovia Pick-A-Pay proposed setlement anything but picayune… Here’s one for the records—as in size of potential settlement—if it’s approved that is. A Wachovia securities class action, led by The Orange County Employees’ Retirement System, the Louisiana Sheriffs’ Pension and Relief Fund, and the Southeastern Pennsylvania Transportation Authority, the court-appointed representatives of a class of investors who purchased certain Wachovia Corporation (Wachovia) bonds and preferred securities pursuant or traceable to numerous public offerings between July 31, 2006 and May 29, 2008, may have reached a settlement—in the amount of $627 million. Shut the front door!
According to the press release, the combined $627 million recovery is among the 15 largest securities class action recoveries in history. It also is believed to be the largest settlement ever in a class action case asserting only claims under the Securities Act of 1933. The case also represents one of the handful of largest securities class action recoveries ever obtained where there were no parallel civil or criminal securities fraud actions brought by government authorities.
The lawsuit was based on allegations that the Wachovia offering materials at issue misrepresented and/or omitted to disclose material facts concerning the nature and quality of Wachovia’s multi-billion dollar option-ARM (adjustable rate mortgage) “Pick-A-Pay” mortgage loan portfolio, and that Wachovia’s publicly disclosed loan loss reserves were materially inadequate at all relevant times, in violation of Generally Accepted Accounting Principles (“GAAP”). So—it all comes back to mortgages…
The lawsuit alleges that the undisclosed problems in the “Pick-A-Pay” mortgage loan portfolio brought Wachovia to the brink of insolvency by September 2008. Cast your mind back—Wachovia was one of the largest financial institutions to be “bailed out” during the financial crisis, when Wells Fargo & Company agreed to acquire it in early October 2008.
Both settlements must be reviewed and approved after formal notice is provided to the class.
OK. That’s it for this week. See you at the Bar.