Delaware Court of Chancery Awards Damages and Other Relief to Encompass Health and Enhabit for Misconduct by April Anthony, Other Former Officers, and Private Equity Firms Vistria Group and Nautic Partners
Rhea-AI Summary
Encompass Health and Enhabit have won a significant legal victory in the Delaware Court of Chancery against former senior officers April Anthony, Luke James, and Chris Walker for breaches of fiduciary duty. The court found that while employed at Encompass Health, these officers misappropriated acquisition opportunities, used confidential information, and recruited employees for a competing venture.
The Court awarded damages against private equity firms Vistria Group and Nautic Partners for aiding these breaches. The remedy includes a constructive trust entitling Encompass Health and Enhabit to 43% of VitalCaring Group's profits and future exit proceeds, approximately $1.62 million in mitigation damages, and attorneys' fees due to defendants' bad faith conduct including evidence tampering.
Positive
- Court victory grants 43% of VitalCaring Group's profits and future exit proceeds to Encompass Health and Enhabit
- Awarded $1.62 million in mitigation damages plus attorneys' fees
- Successfully protected stockholder interests against corporate misconduct
Negative
- Company suffered from misappropriation of business opportunities by former senior officers
- Experienced unauthorized use of confidential information
- Lost key employees to competitor through improper recruitment
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The case was the subject of a 7-day trial in December 2023. After considering "the damning record presented at trial," the Court found that, while employed by Encompass Health,
In addition to finding breaches of fiduciary duty by
As a remedy for these actions, the Court of Chancery imposed a constructive trust entitling Encompass Health and Enhabit to receive 43 percent of VitalCaring Group's profits, to be paid quarterly, and 43 percent of the exit proceeds if and when VitalCaring Group is sold. The Court also awarded mitigation damages in the amount of approximately
Encompass Health and Enhabit launched the litigation to protect the interests of their stockholders in the wake of the illegal and outrageous conduct of
The defendants in the case who were found liable include Walker, The Vistria Group, Vistria Fund III, Vistria senior partner David Schuppan, Nautic Partners, Nautic Partners IX, Nautic managing director Christopher Corey, and the holding company that owns VitalCaring Group.
About Encompass Health
Encompass Health (NYSE: EHC) is the largest owner and operator of rehabilitation hospitals in
About Enhabit Home Health & Hospice
Enhabit Home Health & Hospice (NYSE: EHAB) is a leading national home health and hospice provider working to expand what's possible for patient care in the home. Enhabit's team of clinicians supports patients and their families where they are most comfortable, with a nationwide footprint spanning 256 home health locations and 112 hospice locations across 34 states. Enhabit leverages advanced technology and compassionate teams to deliver extraordinary patient care. For more information, visit ehab.com.
Forward-Looking Statements
Statements contained in this press release which are not historical facts, such as those relating to the likelihood, timing and allocation of any monetary remedies recovered by Encompass Health and Enhabit, are forward-looking statements. In addition, Encompass Health or Enhabit may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date made, and neither Encompass nor Enhabit undertakes a duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual results or events may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual results or events to differ materially from those anticipated include, but are not limited to, an appeal of the verdict by the defendants and any related adverse appellate decision; the financial position of the defendants to the extent it may limit the timeliness or ability of the defendants to deliver any monetary remedy awarded, including future profits and exit proceeds, if any, to be delivered through the constructive trust ordered by the court; and other factors which may be identified from time to time in Encompass Health's or Enhabit's SEC filings and other public announcements, including in the Forms 10-K for the year ended Dec. 31, 2023 and Forms 10-Q for the quarters ended Mar. 31, 2024, Jun. 30, 2024, and Sept. 30, 2024 for either Encompass Health or Enhabit.
Encompass Health contacts: | Enhabit contacts: |
Media: Polly Manuel | 205 970-5912 | Media: Erin Volbeda | 972 338-5141 |
Investor Relations: Mark Miller | 205 970-5860 | Investor Relations: Jobie Williams | 469 860-6061 |
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SOURCE Encompass Health Corp.