“Owner Dentists” banded together and won $130 million

Had I read this in 2007 or even 2008 I might have believed the whole scenario laid out in the lawsuit between Park Dental Group and American Dental Partners. But knowing what I know today I think it’s a case of “owner dentists” going rogue, but I could be completely wrong. 
In 2007 a Minnesota jury awarded a group of dentist $130 million dollars.  The group alleged American Dental Partners, Inc. had overstepped its bounds when it came to the treatment of their patients.  Disappointingly, the jury failed to address the claims of a corporation/non-dentist practicing dentistry without a license.  However I suspect one could say the monetary award spoke volumes.

I guess it could be a case of the smaller dental group decided to become their own “management” company and screw the Wall Street folks. But as long as dentists own the clinics, are making the decisions and delivering the treatment I don’t see a need for real concern, do you?

Star Tribune
December 13, 2007

In a landmark verdict likely to draw praise from those opposed to the growing corporate presence in medicine, a jury ordered a Massachusetts company to pay $130.6 million to a group of Twin Cities dentists who claim the company interfered with their delivery of care to patients.

A Hennepin County jury ruled Wednesday in favor of PDG PA, a professional association of 115 dentists who operate the Park Dental and Dental Specialist clinics. The dentists had accused American Dental Partners Inc., a public company to which they had outsourced most of the administrative side of the business, of overstepping its legal authority and granting itself grossly excessive fees.

[I’m wondering exactly what that grossly amount was, 100% as with CSHM]

The ruling and the mammoth award will have far-reaching implications for thousands of clinics and hospitals nationwide that in recent years have outsourced the management of their business operations to corporations that aren't owned by medical professionals, industry analysts said.

"It puts in sharp relief the tension that exists in the health care industry over who controls the practice of medicine and dentistry," said Joseph Anthony, an attorney with Anthony, Ostlund & Baer, which represented the dentists. "Will it be the doctors or will it be non-doctor-trained service providers?"

After a month long trial, American Dental and a subsidiary were found liable for, among other charges, breach of contract, breach of good faith and defamation. Late Wednesday, the jury ordered the company to pay $88.3 million in damages, then added $42.3 million in punitive damages on Thursday.

American Dental, based in Wakefield, Mass., said in a written statement that it is evaluating the verdict. Officials did not return repeated telephone calls. Shares of the company tumbled Thursday to $4.62 a share from $14.34 a share a day earlier.

The verdict stems from a dispute over a 1996 agreement in which an American Dental subsidiary, PDHC Ltd., agreed to provide the dentists with money for expansion as well as "non-dental administrative services," such as accounting, lab services and equipment maintenance. In return, the dentists agreed to pay a portion of their billing revenue to American Dental in the form of a "service fee."

[Honestly, I’ve got to give a huge thumbs up to whom ever “spun” this one.  There are lessons to be learned here, I’m sure]

American Dental Partners Lawsuits thru June 2011

From EDGAR online

American Dental Partners, Inc. ( NASDQ: ADPI) Lawsuits thru June 2011

Stockholder Litigation

On or about February 22 and 23, 2010, Special Situations Fund III L.P., Special Situations Cayman Fund, L.P., and Special Situations Fund III Q.P., L.P. excluded themselves from the class action settlement resolving consolidated actions entitled “In re American Dental Partners, Inc. Securities Litigation,” civil action number 1:08-CV-10119-RGS, and filed an opt-out complaint in the United States District Court for the District of Massachusetts, against us and certain of our executive officers, entitled “Special Situations Fund III, L.P. et al. v. American Dental Partners, Inc. et al.,” civil action number 1:10-CV-10331, which we refer to as the Opt-Out Action.

The Opt-Out Action complaint (i) asserts that the plaintiffs purchased over 500,000 shares of our common stock during the period of February 25, 2004 through December 13, 2007; (ii) alleges that we and certain of our executive officers violated the federal securities laws, in particular, Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder, by making allegedly material misrepresentations and failing to disclose allegedly material facts concerning the lawsuit by Park Dental Group against our subsidiary, PDHC, Ltd., entitled PDG, P.A. v. PDHC, Ltd., Civ. A. Nos. 27-CV-06-2500 and 27-CV-07-13030, filed in the Fourth Judicial District of Hennepin County, Minnesota on February 3, 2006 and conduct at issue in that action during the period of February 25, 2004 through December 13, 2007, which had the effect of artificially inflating the market price of our common stock; (iii) asserts control person claims under Section 20(a) of the Securities Exchange Act against the executive officers named as defendants; and (iv) claims that certain of the alleged misrepresentations also violated Section 18 of the Securities Exchange Act.

The plaintiffs seek an unspecified amount of monetary damages, costs and attorneys’ fees and any other relief the Court deems proper. We are unable to provide a range of potential damages with respect to this action.

On June 11, 2010, we and the other defendants filed a motion to dismiss the Opt-Out Action. On March 31, 2011, the Court denied the motion to dismiss with respect to the Section 10(b) and Section 20(a) claims, but granted the motion to dismiss with respect to the Section 18 claim. We intend to defend ourselves vigorously with respect to this matter.