This litigation alleges that fraud was committed during the settlement of a securities class action in 1999. That case was settled in 1999 for $56 million because the Court was falsely told that the $56 million fund represented all of the defendant’s available liability insurance coverage. It was discovered years later that the defendant, in fact, possessed an UNLIMITED insurance policy. This lawsuit alleges that the settling class was defrauded and damaged in 1999 because the case would probably have settled for far greater than $56 million had the truth been known about the unlimited insurance coverage.
The case that settled in 1999 was a “global” (all related state and federal court actions) settlement of shareholder and derivative lawsuits against MedPartners, Inc. [now known as Caremark RX, Inc.] arising out of a massive accounting fraud scandal at MedPartners. See "Order and Final Judgment" of July 10, 1999, in Griffin v. MedPartners, Inc., case numbers CV-98-02671, etc., Jefferson County, Alabama, Circuit Court.
In the fall of 2003, attorney John Haley of the Birmingham, Alabama, law firm of Hare, Wynn, Newell & Newell, LLP, learned from documents produced in a different lawsuit that MedPartners, in 1998-99, possessed an unlimited insurance policy issued by a subsidiary of American International Group, Inc. (“AIG”). This discovery is the basis of the present litigation that alleges that MedPartners/Caremark and AIG committed fraud in 1999 in settling the case for $56 million without disclosing the existence of the unlimited insurance coverage.
The original complaint was filed on October 22, 2003, and is styled: John Lauriello, etc. v. Caremark Rx, Inc., et al., case number CV-03-6630, Circuit Court of Jefferson County, Alabama. The amended complaint was filed on April 6, 2004. On January 31, 2005, Circuit Judge Tom King ordered this case (CV-03-6630) to proceed as a class action, because a class was previously certified in 1999 and still exists. On October 20, 2006 (Ex parte Caremark RX, Inc., case numbers 1040821, 1040908, and 1040977), the Alabama Supreme Court reversed and remanded the case to the Circuit Court to apply ordinary class action principles in determining whether the fraud-in-the-settlement claim should be certified to proceed as a class action. Presently, a scheduling conference is set for March 2007 for the Circuit Court to meet with the lawyers to discuss exactly how this litigation will proceed.
John Lauriello seeks to prosecute this fraud-in-the-settlement claim against MedPartners/Caremark and AIG on behalf of a class that is defined as those who were members of the class in the Griffin case that was settled in 1999. Lauriello is represented by the law firm of Hare, Wynn, Newell & Newell, LLP (lawyers John W. Haley, Ralph D. Cook, Bruce J. McKee, and Michael D. Ermert), in association with two other Birmingham, Alabama, law firms: James L. North & Associates (James J. North and J. Timothy Francis), and Galloway & Somerville LLC (John Q. Somerville).
In their 1994 Annual Report, Caremark indicates the following in regards to this litigation:
On October 31, 2003, Caremark Rx was served with a purported class action lawsuit filed by John Lauriello in the Circuit Court of Jefferson County, Alabama. The lawsuit was filed on behalf of a purported class of persons who were participants in the 1999 settlement of then pending securities class action and derivative lawsuits against Caremark Rx and others. Also named as defendants are several insurance companies that had provided coverage to Caremark Rx up to the time of the settlement. The lawsuit seeks, among other things, to recover approximately $3.2 billion in compensatory damages plus unspecified punitive damages, pre-judgment interest, costs and attorneys’ fees from the defendants for their alleged intentional, reckless, and/or negligent misrepresentation and suppression of material facts relating to the amount of insurance coverage that was available to pay any settlement or judgment arising out of securities and derivative claims that were resolved by the 1999 settlement. Alternatively, the lawsuit seeks to re-open the judgment approving the 1999 settlement. On January 15, 2004, Caremark Rx and the other defendants moved to dismiss the lawsuit. Caremark believes the claims are without merit and intends to defend itself vigorously.
