This excerpt taken from the WBMD 8-K filed Nov 23, 2009.
Litigation Regarding Distribution of Shares in Healtheon Initial Public Offering
Seven purported class action lawsuits were filed against Morgan Stanley & Co. Incorporated and Goldman Sachs & Co., underwriters of the initial public offering of the Company (then known as Healtheon Corporation) in the United States District Court for the Southern District of New York in the summer and fall of 2001. Three of these suits also named the Company and certain of its former officers and directors as defendants. Similar suits were filed in connection with over 300 other initial public offerings that occurred in 1999, 2000 and 2001.
The complaints against the Company and its former officers and directors alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 under that Act and Section 11 of the Securities Act of 1933 because of failure to disclose certain practices alleged to have occurred in connection with the distribution of shares in the Healtheon initial public offering. Claims under Section 12(a)(2) of the Securities Act of 1933 were also brought against the underwriters. These claims were consolidated, along with claims relating to over 300 other initial public offerings, in the Southern District of New York.
After a lengthy mediation under the auspices of former United States District Judge Nicholas Politan, the issuer defendants in the consolidated action (including the Company), the issuers insurance carriers, and the plaintiffs reached an agreement on a settlement to resolve the matter among the participating issuer defendants, their insurers, and the plaintiffs. The Company, and virtually all of the approximately 260 other issuer defendants who were eligible to participate, elected to participate in the settlement. Although the Company believed that the claims alleged in the lawsuits were primarily directed at the underwriters and, as they related to the Company, were without merit, the Company believed that the settlement was beneficial to the Company because it would have reduced the time, expense and risks of further litigation, particularly since all the other eligible issuer defendants elected to participate, the Companys insurance carriers strongly supported the settlement, and the Companys insurance carriers, not the Company, would have paid any funds required under the settlement.
On June 10, 2004, plaintiffs submitted to the court a Stipulation and Agreement of Settlement with Defendant Issuers and Individuals. Although the district court had preliminarily approved the settlement, the parties terminated this settlement after the Second Circuit Court of Appeals reversed the district courts certification of the classes in nine related focus cases in a ruling that was inconsistent with the proposed settlement class. After termination of this settlement, litigation proceeded in the nine focus cases but was stayed in the cases involving the other issuers, including the Company.
After another lengthy mediation under the auspices of former Judges Politan and Daniel Weinstein, all the parties to the litigation reached a revised global settlement. This settlement calls for the underwriters and the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
insurers for the issuers to pay a total of $586 million to settle all of the approximately 300 cases outstanding. The Company is not obligated to provide any money to fund the settlement. As with the previous proposed settlement, although the Company believes that the claims alleged in the lawsuits were primarily directed at the underwriters and, as they relate to the Company, are without merit, the Company believed that the settlement was beneficial to the Company because it would reduce the time, expense and risks of further litigation, particularly since all the other eligible issuer and underwriter defendants elected to participate, the Companys insurance carriers strongly supported the settlement, and it required no payment by the Company.
On June 10, 2009, the district court granted preliminary approval to the new proposed settlement. On October 5, 2009, the court approved the final settlement in this matter.