CHS, Quorum to pay $18M to end shareholder lawsuit

A group of shareholders asked a federal judge July 21 for preliminary approval of an $18 million settlement in their class-action lawsuit against Franklin, Tenn.-based Community Health Systems and its spinoff Brentwood, Tenn.-based Quorum Health, according to Law360.

The parties reached the settlement agreement after two full days of mediation earlier this year. The settlement would resolve a shareholder lawsuit alleging Quorum's stock was trading at an inflated price after its spinoff from CHS in 2016. 

In April 2016, CHS spun off 38 hospitals and a management company to form Quorum. The lawsuit, filed in 2016 and amended in 2017, alleges investors were tricked into buying Quorum stock at inflated prices because CHS, Quorum and several company executives failed to disclose that Quorum's goodwill and long-lived assets were impaired prior to the spinoff. The plaintiffs, a class of investors who acquired Quorum stock after the spinoff, allege the companies' failure to disclose the impairment charges violated federal securities law.

The settlement would cover those who bought Quorum common stock between May 2016 and August 2016. There were approximately 30 million shares of Quorum common stock purchased during that period, according to a notice of proposed settlement. If those who purchased all affected Quorum shares participate in the settlement, the average recovery per share would be 60 cents before deduction of any fees or other expenses. 

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