Coram Healthcare came out $165 million ahead in its prolonged legal battle with Caremark International.
Denver-based Coram and Caremark, which is a subsidiary of Birmingham, Ala.-based MedPartners, last week agreed to settle a lawsuit and related claims stemming from Coram's $309 million acquisition of Caremark's home infusion business in April 1995.
Coram, a provider of home infusion therapies, sued Caremark five months after the acquisition in San Francisco Superior Court, charging that Caremark overvalued the unit and failed to disclose the full depth of a federal fraud investigation into its practices. Coram sought up to $5.2 billion in damages.
Caremark, a pharmacy benefits and disease management company, filed a countersuit against Coram in October 1995 in U.S. District Court in Chicago as well as counterclaims against Coram in the San Francisco lawsuit. Caremark alleged that Coram devalued its securities by concealing plans to merge in April 1995 with Lincare Holdings, a home respiratory company. That merger later fell through.
The litigation was to be resolved by Integrated Health Services' proposed acquisition of Coram, but that deal also collapsed. Soon after, Caremark withdrew 12 of 13 counts in its lawsuit against Coram and continued to pursue more than $17 million it argued Coram still owed it from the sale. Early last month, the proceedings in the San Francisco litigation began to move forward.
Under the settlement announced last week, Caremark agreed to forgive a total of $120 million in promissory notes that Coram gave to Caremark in connection with the sale. Caremark also will pay $45 million in cash to Coram by Sept. 1. In addition, the companies said they would drop any related disputes between them and dismiss their counterclaims.
Coram said it will record a one-time pretax gain of $165 million as a result. Caremark, which merged with MedPartners, the nation's largest physician practice management company, in September 1996, said it will incur additional charges of $75 million related to certain discontinued operations in the second quarter.