Updated: August 21, 2018
Status: Ongoing Case
On August 21, 2018, Labaton Sucharow LLP was named lead counsel in a securities class action lawsuit filed on behalf of its client Steamfitters Local 449 Pension Plan (“Steamfitters 449”) against Molina Healthcare, Inc. (“Molina” or the “Company”) (NYSE: MOH), and certain of its senior executives (collectively, “Defendants”). The action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder, on behalf of all persons or entities who purchased or otherwise acquired Molina common stock between October 31, 2014 and August 2, 2017, inclusive (the “Class Period”).
Molina is a managed care company, focused on 4.5 million members eligible for Medicaid, Medicare, and other government-sponsored healthcare programs. Molina’s health plans are operated by various wholly-owned subsidiaries, each of which is licensed as a health maintenance organization (HMO).
During the Class Period, Molina misled investors regarding the scalability of its existing administrative infrastructure. Molina executives falsely claimed that the Company’s existing administrative infrastructure could support rapid growth into existing Medicaid markets and new Patient Protection and Affordable Care Act health insurance marketplaces (“ACA Health Exchanges”) in a cost-effective manner. Molina later admitted that its existing administrative infrastructure was built for a “much smaller, simpler business” and was “never” designed to support the Company’s growth strategy.
The truth regarding Molina’s failed growth strategy and inadequate administrative infrastructure was revealed through a series of disappointing financial results, culminating on August 2, 2017, when the Company reported a net loss of $230 million for the quarter, termination of its ACA Health Exchange participation in Utah and Wisconsin, and a major restructuring plan. During the related earnings call, Molina revealed that its administrative infrastructure was never designed to sustain such rapid growth. On this news, Molina’s common stock price fell $3.92 per share, or 5.92 percent, to close at $62.32 per share on August 3, 2017.
The case is Steamfitters Local 449 Pension Plan v. Molina Healthcare, Inc., No. 18-cv-03579 (C.D. Cal.). Labaton Sucharow represents lead plaintiff Steamfitters Local 449 Pension Plan.