Federal Court certifies $891 million class action lawsuit against Community Health Services after appeals court revives case

The U.S. District Court for Middle Tennessee has certified an $891 million class action filed in 2011 against Franklin-based Community Health Systems for an alleged Medicare fraud scheme. In a detailed Memorandum opinion, Federal Judge Eli Richardson set forth in detail the facts upon which he relied for the certification. Memorandum of Certification CHS case. Those facts are not established as true, but as part of his task in determining whether to certify the class, the Judge accepts them as being true. Class certification in a class-action lawsuit helps to determine who is able to join in the class action to obtain possible damages. The certification identifies the plaintiff with the lawsuit through similarities in factors of the individual damages and the larger case. Without certifying a class, the litigation cannot proceed with named plaintiffs and defendants, and other issues may also arise that unravel the entire case. This is the Complaint: CHS COmplaint

In this case, the certification verifies that all persons and entities who purchased CHS common stock from July 27, 2006 through April 8, 2011 were potentially damaged by the company’s alleged misuse of an in-house admissions guide that incentivized physicians to admit Medicare patients to the hospital instead of lower-acuity outpatient facilities and, as a result, allegedly misled investors on the hospital operator’s success. The actual individuals who may join are specifically set forth in the Memorandum in which the Court said: “The Court will CERTIFY the following Class: All persons and entities who purchased the publicly traded common stock of CHS from July 27, 2006, through April 8, 2011, inclusive and who were damaged thereby. Excluded from the Class are Defendants, the officers and directors of the company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entities in which Defendants have or had a controlling interest.”

The securities fraud lawsuit stemmed from a lawsuit filed by executives of Dallas-based Tenet Healthcare, who faced a potential buyout by CHS. In their complaint, Tenet’s leaders alleged multiple counts of fraud through failing to disclose “improper” admissions practices that they said artificially inflated CHS’ stock price, boosting its ability to pay for its proposed $7.3 billion acquisition of Tenet. CHS shares tumbled more than 30 percent on the news of Tenet’s suit.

The securities lawsuit was rekindled after an appeals panel found that CHS executives’ admissions combined with the fraud allegations were enough to keep the shareholders’ case alive.

The motion for certification was filed by lead plaintiff NYC Funds, who will now serve as the class representative. That firm Lowey Dannenberg was appointed by the Judge as Class Counsel.