Robbins Russell Obtains Federal Court’s Dismissals Of $1.5 Billion Securities Class Action And Stockholder Derivative Suit

The U.S. District Court for the Eastern District of Pennsylvania dismissed two lawsuits against Robbins Russell client Universal Health Services, Inc., and its directors and officers. UHS is a Fortune 500 company that, through its subsidiaries, owns and operates more than 353 inpatient medical facilities in 37 states, Washington D.C., Puerto Rico, and the United Kingdom. Robbins Russell partners Gary Orseck and Matthew Madden, along with associates Hunter Smith, Joshua Bolian, and John Goerlich, handled the cases for UHS and its officers.

In the first of its two decisions, the court dismissed a putative securities class action in which plaintiffs sought more than $1.5 billion. Plaintiffs had alleged that UHS and its officers intentionally failed to disclose that hospitals in the company’s behavioral health division inappropriately billed for patient admissions and stays. Robbins Russell moved to dismiss, and the court granted our motion. The court held that even if these alleged billing practices had actually occurred—which defendants unequivocally deny—there was no plausible allegation that the Company or its officers intentionally defrauded investors about them. The court therefore dismissed the securities class action against all defendants.

The same day, in a separate decision, the court also dismissed a stockholder derivative action. Plaintiffs in that case claimed that UHS’s directors and officers had breached fiduciary duties in connection with similar allegations of improper billing practices. On Robbins Russell’s motion to dismiss, the court held that plaintiffs failed to allege that UHS’ directors knew about the supposed conduct or consciously disregarded red flags that it was occurring.  Together, the court’s two opinions span nearly 200 pages.

“We are pleased that the Court dismissed these baseless lawsuits,” Gary Orseck said in a statement. “The Court correctly held that the plaintiff’s allegations failed to show that UHS or any of its directors and officers engaged in misconduct. UHS categorically denies the allegations in these complaints.”

See UHS execs, directors escape lawsuit over billing practices, Becker’s Hospital Review

See UHS Directors Escape Derivative Suit Over Billing Practices, Law360 (subscription required)