This excerpt taken from the RHB 10-Q filed Aug 7, 2007.
Item 1. Legal Proceedings
We are not a party to any material pending legal proceedings.
In the ordinary course of our business, we are a party to a number of other claims and lawsuits, as both plaintiff and defendant, which we regard as immaterial. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with our hospital and healthcare facility clients. We do not believe that any liability resulting from such matters, after taking into consideration our insurance coverage and amounts already provided for, will have a material effect on our consolidated financial position or overall liquidity; however, such matters, or the expense of prosecuting or defending them, could have a material effect on cash flows and results of operations in a particular quarter or fiscal year as they develop or as new issues are identified.
This excerpt taken from the RHB 10-K filed Mar 16, 2005.
ITEM 3. LEGAL PROCEEDINGS
We had been named as a defendant in two lawsuits in the United States District Court for the Eastern District of Missouri that alleged violations of the federal securities laws. Certain of our former and current directors and officers were also named in the action. On September 30, 2004, the court dismissed the suit with prejudice for failure to state a claim. The plaintiffs initially filed a notice of appeal with the Eighth Circuit Court of Appeals, but abandoned the appeal by submission of a motion for dismissal. The district court entered a final judgment dismissing the appeal on January 28, 2005.
A derivative lawsuit is pending in the Circuit Court of St. Louis County, Missouri against us and certain of our former and current directors and is based upon substantially the same facts as were alleged in the federal securities class action. This suit was filed on behalf of the derivative plaintiff by a law firm that had earlier filed suit against us in the federal case. The federal court hearing the securities law class action had stayed discovery in the derivative proceeding until the federal court made its ruling on our motion to dismiss. We have recently been informed by the attorneys for the derivative plaintiff that they intend to request a hearing in the state case for the purpose of obtaining a scheduling order on discovery.
In July 2003, a former independent contractor of ours and a former Baxter County Regional Hospital physical therapist filed a civil action, under the qui tam and whistleblower provisions of the False Claims Act, in the United States District Court for the Eastern District of Arkansas. The plaintiffs seek back pay, civil penalties, treble damages, and special damages from us and Baxter. The allegations contained in the suit relate to the proper clinical diagnoses, for Medicare reimbursement purposes, of patients treated at the hospitals acute rehabilitation unit for which Baxter received reimbursement in excess of $5,000,000. The plaintiffs filed the original action on August 21, 2000, under seal. After an investigation by the United States Department of Justice, on June 3, 2003, the government declined to intervene and the seal was lifted. The plaintiffs filed an amended complaint, and we and Baxter were served and notified of the civil action on July 15, 2003. We and Baxter also
initiated an internal and external audit that concluded the allegations were unfounded and that we and Baxter were in compliance with Medicare regulations. We have agreed to indemnify Baxter for all fees and expenses on all counts arising out of the action except for the whistleblower count brought by Baxters therapist. We and Baxter both filed separate motions to dismiss the action. The Court denied Baxters motion to dismiss, but granted our motion to dismiss with respect to the individual claim under the whistleblower provisions of the False Claims Act but not the other claims against us under the False Claims Act. The parties are currently engaged in discovery with respect to the remaining claims.
On May 6, 2004 we filed a civil action against The Queens Medical Center, in the United States District Court for the District of Hawaii, for breach of contract, including past due service fees plus interest in the amount of approximately $300,000. On May 26, 2004, Queens filed an answer to our complaint and a counterclaim against us, alleging breach of contract and seeking indemnification for amounts of alleged incorrect billings submitted by the skilled nursing unit we managed, additional management fees already paid to us, and an estimate of their attorneys fees, with respect to the counterclaim. Since that time, legal counsel for Queens advised the court and us that the Queens demand for indemnification and counterclaims against us were based on fabricated documents. The parties are engaged in settlement discussions pursuant to which we and Queens agreed that an independent third party would conduct an audit of a representative sample of medical records to determine if there were any incorrect billings. The independent third party has concluded that there were no incorrect billings. These findings were submitted to Queens Medicare fiscal intermediary who confirmed that there were no incorrect billings. Although the counterclaim against us has not been dismissed as yet, we do not believe that Queens counterclaim has any merit.
The Wage and Hour Division of the United States Department of Labor has been conducting an investigation of our former staffing division. The investigation is focused on minimum wage and overtime compensation of employees who worked as on-call coordinators. After a review by us of the staffing divisions wage and overtime practices with respect to office and field staff employees who also worked on-call shifts, we and the Department of Labor reached an agreement with respect to the payment by us of approximately $150,000 in the aggregate to these employees. Each employee will be sent a check, which if cashed, will release his or her claim under the Fair Labor Standards Act (but not any state law claims) for the period reviewed. These employees can also elect not to cash the check and file suit individually.
Several federal lawsuits have been filed by certain on-call, recruiting and staffing coordinators seeking overtime compensation and related damages under both federal and state law. These individuals were employed by our former staffing division. Three of these cases have been consolidated in the United States District Court for the Central District of California. The individuals sought to bring a collective or class action on behalf of all similarly situated persons. On January 3, 2005, the court granted plaintiffs motion to send notice of collective action to present and former staffing division employees although the court did not specify the exact group of employees to which the notice should be directed. At the same time, the court denied the plaintiffs request to proceed as class action under the California state law claims. Upon entry of the order allowing notices of collective action to be sent and the actual mailing of the notices, the employees to which the notices are directed will have the opportunity to opt into the case for claims dating back two years (three years if a willful violation is proven) from the date the employee files a consent to join the case. Plaintiffs counsel has informed us that it intends to file a separate state court class action reasserting the California state law claims, but we have no knowledge of such suit at this time.
In addition to the above matters, we are a party to a number of other claims and lawsuits. While these actions are being contested, the outcome of individual matters is not predictable with
assurance. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with our hospital and healthcare facility clients relating to these matters. We do not believe that any liability resulting from any of the above matters, after taking into consideration our insurance coverage and amounts already provided for, will have a material adverse effect on our consolidated financial position, cash flows or liquidity. However, such matters could have a material effect on results of operations in a particular quarter or fiscal year as they develop or as new issues are identified.