NEW YORK (September 15, 2015) — Labaton Sucharow LLP announced today a $48 million settlement in the securities class action brought against the nation’s largest retail pharmacy chain CVS Caremark on behalf of the lead plaintiffs Norfolk County Retirement System and Plymouth County Retirement System.
Led by Labaton Sucharow partner Jonathan Gardner, this hard-fought case overcame a dismissal and persevered. “We think this is an excellent recovery for the class,” said Gardner. “Our team worked diligently notwithstanding challenging circumstances, and we are happy to reach a favorable resolution for the lead plaintiffs.”
The case alleges that in March 2007, CVS Corp. and Caremark Rx Inc., the nation's second largest prescription benefits manager (PBM), announced a historic merger, which hinged almost exclusively on CVS's ability to integrate Caremark's PBM business into the new entity, CVS Caremark. By November that year, the company misrepresented the status of the integration of CVS and Caremark, and falsely touted that CVS Caremark was now "operating as one company."
However, the plaintiffs allege the PBM business was never properly integrated, and this failure led directly to pervasive customer service problems, resulting in the departure of many large PBM clients. When investors learned of the cause of these terminated relationships with CVS Caremark, the company’s share price fell 20 percent. Additionally, right before CVS Caremark disclosed the loss of many major clients, the company’s CEO, CFO, and the head of PBM business cashed out more than $40 million in CVS Caremark stock for personal gain.
Norfolk County Retirement System Treasurer Joseph A. Connolly said, “After five years of vigorous prosecution, we are extremely pleased with the recovery we can now bring back to the retirees of Norfolk County, which have been achieved at no cost to the System. Labaton Sucharow's team demonstrated impressive ability in overcoming the complexities of this case."
“We work hard to ensure that our investors’ retirement funds are protected. Thanks to Jon and his team, we secured a significant recovery that reinforces our commitment to combat fraud affecting institutional investors," said Plymouth County Treasurer Thomas J. O'Brien.
The case is Richard Medoff v. CVS Caremark Corp. et al., No.09-cv-00554.