Several separate lawsuits filed by private parties and the United States Securities and Exchange Commission ("SEC") claim that HealthSouth Corporation ("HealthSouth") and others provided investors with false and misleading information that artificially inflated the value of HealthSouth securities, in violation of federal securities laws. Some of these lawsuits have been filed as class actions against HealthSouth and other individuals, asking for money damages on behalf of certain purchasers of HealthSouth securities.

The class action lawsuits were consolidated into two cases in the United States District Court for the Northern District of Alabama, Southern Division.  The names of the consolidated lawsuits are In re HealthSouth Stockholder Litigation, Master File No. CV-03-BE-1501-S and In re HealthSouth Bondholder Litigation, Master File No. CV-03-BE-1502-S.  These consolidated lawsuits are called the "class actions."  

Another lawsuit against HealthSouth was filed in the same Court by the United States Securities and Exchange Commission ("SEC").  The name of that lawsuit is Securities and Exchange Commission v HealthSouth Corporation and Richard M. Scrushy, Civil Action No. CV-03-J-0615-S (the "SEC case"). 

You can read additional information at the Case Documents link of this website.

HealthSouth negotiated two separate settlements in order to resolve these claims: one with the SEC (the "SEC Settlement") and one with the Stockholder and Bondholder Classes (the "class actions settlement"). To settle the SEC claim, HealthSouth paid $100 million to be distributed among certain investors. In addition, to settle the class actions, HealthSouth negotiated a settlement which was valued at the time it was reached at approximately $445 million (in cash and securities). Due to subsequent fluctuations in HealthSouth's stock price, the settlement's value may increase or decrease by the time it is distributed. Under the terms of the settlement, HealthSouth paid $230 million in cash and will issue, after adjustment for HealthSouth's one-for-five reverse stock split, 5,023,732 shares of HealthSouth common stock and 8,151,265 warrants.

The SEC Plan of Allocation was approved by the Court on April 23, 2007.

On January 11, 2007, the Court approved the class actions settlement. On February 11, 2008, the Court approved a proposed Plan of Allocation for distributing the class actions settlement funds and the proposal for award of attorneys' fees. A Court hearing was held on January 29, 2009 for an appeal that was filed by a class member objecting to certain aspects of the class actions settlement and the Plan of Allocation. The 11^th U.S. Circuit Court of Appeals ruled on the appeal, rejecting the objections to the settlement. No further appeals have been filed. Preparations to pay valid claims, including confirmation of claimant addresses, are underway and checks will be mailed upon approval of the courts overseeing the cases.

Claim Forms were mailed on November 1, 2007. The deadline for submitting a claim was February 28, 2008. To date, late claims have been processed because they have not delayed distribution of the settlement funds. You may still submit a Claim Form with the required documentation to support all transactions. If you do submit a claim now, it will be marked late, and it may not be processed if it would delay distribution of the settlement funds. With respect to all late-submitted claims, even if they are otherwise valid, there can be no assurance that they will be accepted. That is a determination that the Courts will make.

Francis E. McGovern is the Court-Appointed Distribution Fund Administrator. A court appointed third-party Claims Administrator, Rust Consulting, is processing claims, and will issue payments and other benefits.