Scrushy v. Tucker
Citation | 70 So.3d 289 |
Decision Date | 15 April 2011 |
Docket Number | 1081424. |
Court | Supreme Court of Alabama |
Parties | Richard SCRUSHYv.Wade C. TUCKER and the Wendell J. Cook, Sr., Testamentary Trust, John P. Cook, trustee, derivatively, for and on behalf of HealthSouth Corporation. |
OPINION TEXT STARTS HERE
Susan Walker of Waldrep Stewart & Kendrick, Birmingham, for appellant.John D. Haley, Ralph D. Cook, Bruce J. McKee, and Michael D. Ermert of Hare, Wynn, Newell & Newton, LLP, Birmingham; John Q. Somerville of Galloway & Somerville, Birmingham; Frank P. DiPrima, Morristown, New Jersey; Steven P. Gregory, Birmingham; and Ronald A. Brown of Prickett Jones & Elliott, P.A., Wilmington, Delaware, for the Tucker appellees.David G. Hymer and Anne Marie Seibel of Bradley Arant Boult Cummings LLP, Birmingham, for HealthSouth Corporation.WOODALL, Justice.
In this shareholder-derivative action, Richard Scrushy, a former director and former chief executive officer (“CEO”) of HealthSouth Corporation (“HealthSouth”), a Delaware corporation, appeals from a judgment against him for $2,876,103,000. This action was commenced on August 28, 2002, on behalf of nominal defendant HealthSouth by Wade C. Tucker, a shareholder of HealthSouth since August 18, 1998. We affirm.
I. Facts and Procedural Background
Certain aspects of this case have already come before us during this long and intricate litigation. See Scrushy v. Tucker, 955 So.2d 988 (Ala.2006) ( ); and Ernst & Young, LLP v. Tucker, 940 So.2d 269 (Ala.2006) (“ Tucker ”). It was the first of a number of derivative actions to be commenced by various HealthSouth shareholders against Scrushy and other former HealthSouth officials and related parties in various forums including (1) the Jefferson Circuit Court, (2) the United States District Court for the Northern District of Alabama (“the Federal derivative actions”), and (3) the New Castle Chancery Court in Delaware, Biondi v. Scrushy, 820 A.2d 1148 (Del.Ch.2003), restyled and resolved, In re HealthSouth Shareholders Litig., 845 A.2d 1096 (Del.Ch.2003), aff'd, 847 A.2d 1121 (Del.2004) (table) (“the Delaware derivative actions”).
The derivative actions appear to have been sparked by the “ ‘public scrutiny of HealthSouth's financial integrity,’ ” which “ ‘first became intense in the summer of 2002.’ ” Tucker, 940 So.2d at 273 ( ).
In March 2003, federal authorities learned that, beginning at least as early as 1994, HealthSouth corporate officers had engaged in a fraudulent accounting scheme of “massive” proportion. United States v. Martin, 455 F.3d 1227, 1230 (11th Cir.2006). The fraud involved a conspiracy by HealthSouth officers
Id. Throughout the litigation of this case, the accounting scheme has been referred to as “the fraud,” which practice will generally be followed throughout this opinion.
Criminal charges were filed against various alleged conspiratorial HealthSouth officers as early as April 2003 in the United States District Court for the Northern District of Alabama. Eventually, at least 15 “ ‘senior HealthSouth executives ... [pleaded] guilty to sundry and various criminal acts, including criminal fraud, specifically regarding the accuracy, reliability, falsification and fabrication of the financial information and documentation that HealthSouth was legally required to file during the years 1996 through 2002.’ ” Scrushy, 955 So.2d at 993 ( ).
Meanwhile, complaints in the pending derivative actions were amended to assert claims reflecting the latest revelations of fraud and mismanagement. In that connection, on August 8, 2003, Tucker filed a third amended complaint and a fourth amended complaint, asserting claims alleging, among other things, (1) improper “interested transactions,” waste and “misappropriation of corporate assets”; (2) unjust enrichment; (3) breach of contract; (4) conspiracy; (5) “intentional, reckless, and innocent misrepresentation and suppression”; (6) breach of fiduciary duty of loyalty, related to fraud, false accounting, and “insider trading”; and (7) seeking to impose a constructive trust.
The pertinent allegations of the complaint included the following:
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For all the alleged wrongful conduct, the complaint sought “money damages.” Additionally, the complaint specifically requested “ [d]isgorgement of amounts received as the result of breaches of fiduciary duty, waste of corporate assets, conflicted and prohibited transactions, misappropriation of corporate opportunities and assets, [and] unjust enrichment,” as well as “ [d]isgorgement of all compensation including but not limited to salary ... as the result of the wrongful acts and breaches of fiduciary duty, breaches of contract, and breaches of duty of good faith.” (Emphasis added.) It also sought “all such other relief at law and equity to which the corporation may be entitled.”
Additionally, the third amended complaint averred that no pre-suit demand had been made “on the Board of Directors to take action to press the...
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