Quest Diagnostics 2009 Annual Report Download - page 42

We contest liability or the amount of damages as appropriate in each pending matter. In view of the
inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek
substantial or indeterminate damages or where investigations or proceedings are in the early stages, we cannot
predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be
resolved, when they ultimately will be resolved, or what the eventual settlement, fine, penalty or other relief, if
any, might be. Subject to the foregoing, we believe, based on current knowledge, that the outcome of all other
pending matters will not have a material adverse effect on our consolidated financial condition, although the
outcome of such matters could be material to our results of operations and cash flows in the period that such
matters are determined or paid, depending on, among other things, the levels of our revenues or income for such
period.
In 2005, the Company received a subpoena from the U. S. Attorney’s Office for the District of New Jersey.
The subpoena seeks the production of business and financial records regarding capitation and risk sharing
arrangements with government and private payers for the years 1993 through 1999. The Company cooperated
with the U. S. Attorney’s Office.
In 2005, the Company received a subpoena from the U. S. Department of Health and Human Services,
Office of the Inspector General, seeking business records including records regarding the Company’s relationship
with health maintenance organizations, independent physician associations, group purchasing organizations, and
preferred provider organizations relating back to 1995. The Company has cooperated with the investigation.
Subsequently, in November 2009, the U.S. District Court for the Southern District of New York partially
unsealed a civil complaint, U. S. ex rel. Fair Laboratory Practices Associates v. Quest Diagnostics Incorporated,
filed against the Company under the whistleblower provisions of the federal False Claims Act. The complaint
alleges, among other things, violations of the federal anti-kickback law and the federal False Claims Act in
connection with the Company’s pricing of laboratory services. The complaint seeks damages for alleged false
claims associated with laboratory tests reimbursed by government payors, treble damages and civil penalties.
In 2006 and 2008, the Company and several of its subsidiaries received subpoenas from the California
Attorney General’s Office seeking documents relating to the Company’s billings to MediCal, the California
Medicaid program. The Company has cooperated with the government’s requests. Subsequently, the State of
California intervened as plaintiff in a civil lawsuit, California ex rel. Hunter Laboratories, LLC v. Quest
Diagnostics Incorporated., et al., filed in California Superior Court against a number of clinical laboratories,
including the Company and several of its subsidiaries. The complaint alleges overcharging of MediCal for testing
services. The complaint was originally filed by a competitor laboratory in California under the whistleblower
provisions of the California False Claims Act. The complaint was unsealed on March 20, 2009.
In June 2009, a shareholder plaintiff filed a purported derivative action in the Superior Court of New Jersey,
Morris County, on behalf of the Company against certain present and former directors and officers of the
Company based on, among other things, their alleged breaches of fiduciary duties in connection with the
manufacture, marketing, sale and billing related to certain test kits manufactured by NID. The complaint includes
claims for, among other things, breach of fiduciary duty and waste of corporate assets and seeks, among other
things, damages and remission of compensation received by the individual defendants.
In 2009, the Company and certain of its subsidiaries also received subpoenas from state agencies in three
states which seek documents relating to the Company’s Medicaid billing practices in those states. The Company
is cooperating with the requests.
The federal or state governments may bring claims based on new theories as to the Company’s practices
which management believes to be in compliance with law. In addition, certain federal and state statutes, including
the qui tam provisions of the federal False Claims Act, allow private individuals to bring lawsuits against
healthcare companies on behalf of government or private payers. The Company is aware of certain pending
individual or class action lawsuits, and has received several subpoenas, related to billing practices filed under the
qui tam provisions of the False Claims Act and/or other federal and state statutes, regulations or other laws. The
Company understands that there may be other pending qui tam claims brought by former employees or other
“whistle blowers” as to which the Company cannot determine the extent of any potential liability.
Item 4. Submission of Matters to a Vote of Security Holders
None.
32