A New York Stock Exchange arbitration panel awarded $5 million to physician shareholders who contended that investment banking firm CS First Boston provided them with an imprecise fairness opinion of the Critical Care America/Medical Care International merger in 1992.
The ruling was widely believed to mark the first time an arbitration panel rather than a court has settled such a case and also one of the first reviews of an investment banking firm's fairness opinion.
In its July 29 ruling, the three-member panel concluded that CS First Boston failed to thoroughly investigate Critical Care America's financial estimates while it was conducting a fairness opinion of the merger. Shortly after Critical Care merged with Medical Care in September 1992, Medical Care's stock price dropped 50%, a result of the company's announcement that Critical Care's home infusion earnings would be much lower than its earlier estimates.
The group of physician shareholders filed a $13 million arbitration complaint with the NYSE in 1993.
In its decision, the arbitration panel ordered CS First Boston to pay the group $4.5 million in damages, $500,000 in attorneys fees and $13,500 in administrative costs.
At deadline, neither the group nor CS First Boston could be reached for comment.