Glad to see there are a few of us still out here.
Anybody have any additional insight into HMSY's current legal proceedings:
Legal Proceedings
In April and May 1997, five purported class action lawsuits were commenced
in the United States District Court for the Southern District of New York
against the Company and certain of its present and former officers and
directors alleging violations of the Securities Exchange Act of 1934 in
connection with certain allegedly false and misleading statements. These
lawsuits, which sought damages in an unspecified amount, were consolidated
into a single proceeding captioned In re Health Management Systems, Inc.,
Securities Litigation (97 CIV-1965 (HB) and a Consolidated Amended
Complaint was filed. Defendants made a motion to dismiss the Consolidated
Amended Complaint, which was submitted to the Court on December 18, 1997
following oral argument. On May 27, 1998, the Consolidated Amended
Complaint was dismissed by the Court for failure to state a claim under
the federal securities laws, with leave for the plaintiffs to replead. On
July 17, 1998, a Second Consolidated Amended Complaint was filed in the
United States District Court of the Southern District of New York, which
reiterates plaintiffs' allegations in their prior Complaint. On September
11, 1998, the Company and the other defendants filed a motion to dismiss
the second Complaint. The motion was fully briefed in late November 1998,
at which time the motion was submitted to the Court. The Company intends
to continue its vigorous defense of this lawsuit.
On June 1, 1998, MedE America Corp. commenced a lawsuit against the
Company and others in the United States District Court for the Southern
District of New York. In its complaint, plaintiff alleges copyright
infringement and other violations of its rights relating to the Company's
development and sale of certain computer software, known as the Universal
Billing Platform, which was recently developed for the Company by certain
former employees of plaintiff, who are also defendants in the action,
acting as independent contractors. Plaintiff, among other relief, seeks
(i) to restrain the Company from continuing to market and sell the alleged
infringing software, and (ii) monetary damages in excess of $10,000,000.
Over a period of in excess of nine months prior to the filing of the
complaint, the parties engaged in an extensive exchange of communications,
as a result of which the Company concluded, after investigation, that
plaintiff's claims were without merit. On July 22, 1998, the Company
answered the complaint, denying the material allegations of the complaint.
Discovery has commenced and the Company intends to vigorously contest
plaintiff's claims. Pursuant to the Rules of the Court, this matter has
been referred to a court-appointed mediator, who in the context of
non-binding mediation and independent of the Court proceeding, will
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attempt to assist in settling the matter or narrowing the issues between
the parties. Absent a settlement of this matter through mediation, the
Company intends to continue its vigorous defense of this lawsuit.
On June 28, 1998, eight holders of promissory notes (the "Notes") of HHL
Financial Services, Inc. ("HHL") commenced a lawsuit against the Company
and others in the Supreme Court of the State of New York, County of
Nassau, alleging various breaches of fiduciary duty on the part of the
defendants against HHL. The complaint alleges that, as a result of these
breaches of duty, HHL was caused to make substantial unjustified payments
to the Company which, ultimately, led to defaults on the Notes and to
HHL's filing for Chapter 11 bankruptcy protection. On June 30, 1998, the
same Note holders commenced a virtually identical action (the "Adversary
Proceeding") in the United States Bankruptcy Court for the District of
Delaware, where HHL's Chapter 11 proceeding is pending. The Adversary
Proceeding alleges the same wrongdoing as the New York State Court
proceeding and seeks the same damages, i.e., $2,300,000 (the unpaid amount
of the Notes) plus interest. Plaintiffs have moved in the Bankruptcy Court
to have the Court abstain from hearing the Adversary Proceeding in
deference to the New York State Court action. The Company has opposed
plaintiffs' motion for abstention and on September 15, 1998, filed a
motion in the Bankruptcy Court to dismiss the Adversary Proceeding. This
motion was briefed in December 1998. The motions are scheduled to be heard
by the Court in April 1999. The Company intends to continue its vigorous
defense of this lawsuit.
The Company is a party to several other legal proceedings. In the opinion
of the Company's management, none of these other proceedings is expected
to have a material adverse effect on the Company's financial position,
results of operations or liquidity. |
