Delaware's chancellor declined to dismiss a lawsuit that seeks the release of $51 million from a post-merger escrow amid allegations that an Anthem subsidiary wrongfully held the funds, according to Law360.
The suit targets Anthem's mergers and acquisitions subsidiary, ATH Holding Co., over claims that it's facing over $1 billion in False Claims Act liabilities from lawsuits targeting sellers. Those sellers are subsidiaries of Aurora, Ohio-based Freedom Health and Tampa, Fla.-based Optimum Healthcare.
ATH acquired Freedom and Optimum in 2017 for an undisclosed amount. ATH then deposited over $153 million into an escrow account to cover post-deal claims against the sellers. In February 2021, $51 million was scheduled for release, but Anthem froze the escrow after False Claims Act suits were filed against providers insured by Freedom and Optimum. The Delaware court ruled March 22 that Anthem failed to back up its claim that all of the escrow holdback was at risk.
While Anthem's suit targeted Freedom and Optimum, it also names affiliates K&P Holding II, AHMS Holdings of Florida and America's 1st Choice Holdings of Florida, which held the two payers' equity during the sale.
The Delaware chancellor's ruling addressed that one of the plaintiffs suing under the False Claims Act is known to pursue meritless suits without legal counsel, and that other claims are unresolved. She warned that the court has yet to make any findings of facts or determinations of truth, including Freedom and Optimum's affiliates' arguments that precedent recoveries show Anthem's maximum exposure is less than the escrow, according to Law360.
Anthem claims it and the affiliates were under a Justice Department investigation, which is why it held the escrowed assets after the deal closed.
During arguments on the dismissal motion in October 2021, Anthem said the affiliates asked Delaware's Chancery Court to rule on the case in order to predict a liability that will be argued in Florida federal court, where the claims are pending and the affiliates are based.