D09345 - Complaint Counsel's Motion for Leave to File a Reply to ...
Transcript of D09345 - Complaint Counsel's Motion for Leave to File a Reply to ...
ORIGINAL UNITED STATES OF AMERICA
BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERICA et al
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
Pursuant to Rule 322(d) of the Commissions Rules of Practice 16 CFR sect 322(b)
Complaint Counsel respectfully moves for leave of cour to file a response to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production
(Supplemental Brief) A proposed order is attached as Exhibit A
On Februar 112011 Respondents fied their Motion to Compel (Motion) which
Complaint Counsel opposed on Februar 182011 Pursuant to this Courts Order of Februar
242011 (the Order) Complaint Counsel fied its Supplemental Opposition to the Motion
(Supplemental Opposition) In the Supplemental Opposition Complaint Counsel addressed
the Cours Order and further addressed the arguments made in Respondents Motion
Respondents Supplemental Brief however goes beyond the scope of their initial Motion
and sets forth new arguments and evidence that Complaint Counsel could not have addressed in
Counsels Supplemental Opposition For example Respondents Supplemental Brief argues that
the Revised Privilege Log is inadequate because documents are grouped together Supplemental
Brief at 2 i Yet Respondents did not present that argument in their Motion even though
Complaint Counsel produced its Supplemental Privilege log on Januar 182011 containing the
examples cited in the Supplemental Brief Instead Respondents first raised this issue in their
Supplemental Opposition and only conferred with Complaint Counsel after the Supplemental
Opposition was fied and even then it was only in conjunction with discussion regarding their
own failure to produce a privilege log as required by Rule 338A(a)2 Furhermore
Respondents new argument is baseless as Complaint Counsels Revised Privilege Log is
modeled after the privilege log this Cour found satisfactory in In re Hoechst Marion Roussel
Inc but provides even more detail in its descriptions3 See 2000 FTC LEXIS 134 (Aug 18
i Respondents misquotes the Order calling question the other authorities by Respondents
purort support their arguments Compare Supplemental Brief at 2 (latest attempt at privilege log does not show that each page and portion thereof is in fact protected from disclosure) with Order at 5 (declaration will demonstrate that each and every document sought to be withheld including each page and portion thereof has is (sic J in fact been reviewed and is in fact protected from disclosure) Rich Feinstein did in fact review each page and portion of every document withheld
2 Whle arguing strenuously that Complaint Counsel be required to produce a more detailed
privilege log Respondents admitted that they withheld responsive documents but did not prepare a privilege log at all in violation of Rule 338A 16 CFR sect 338A(a) Further Counsel for Respondents stated that they had no intention of producing any privilege log until after this Cour rules on the instant Motion Respondents failure to even prepare a privilege log constitutes a waiver of any privilege regardless of the outcome of this Motion See Bregman v District of Columbia 182 FRD 352 (DDC 1998) ((PJlaintifts failure to comply with FedRCivP 26(b )(5) requiring him to fie a privilege log bars in itself any claim of privilege whatever its basis)
3 Respondents complaint that they cannot identify whether the individuals identified are
Commission employees is yet another new issue that they failed to confer about and is obviously specious As Respondents well know Complaint Counsel has already stated that every one of the privileged communications was between either the Commission and the CAAG or the Commission and the Interim Manager or Interim Monitor (or his counsel) Further the email extensions from this and the prior privilege logs indicate all Commission employees Finally the identities of Commission employees are publicly available on the Commissions website or had they bothered to ask from Complaint Counsel directly
2
2000)
Complaint Counsel could not have anticipated that Respondents would continue to
misrepresent the nature of the litigation brought by California Department of Justice Office of
the Attorney General (CAAG) against Respondents and the nature ofCAAGs investigation
into the transaction at issue in light of Ms Naglers declaration Despite Ms Naglers
declaration averrng that CAAG has not made its decision about the instant transaction
Respondents continue to mislead this Cour by falsely asserting that the CAAG and the FTC did
not see eye-to-eye on the transaction Supplemental Brief at 5 and for the first time identify an
industry report that they believe substantiates their claims about the CAAGs qui tam action At
the same time Respondents fail to mention that LabCorp s own Form 10- K fiing properly
characterizes the qui tam action to be about improper biling to Medi-Cal (LabCorp Form 10-K
at 34 (March 12011) attached hereto as Exhibit B) and that capitation rates are only relevant
because LabCorp does not pass along the benefits of capitation to Medi-Cal Complaint Counsel
should be entitled to respond to this erroneous assertion
Complaint Counsel also could not have anticipated that Respondents would raise the new
argument that Complaint Counsels litigation hold is evidence that its privilege does not apply
That is yet another issue that Respondents was never discussed with Complaint Counsel and is
based on the flawed assumption about Complaint Counsels litigation hold Furher they assert
the same privilege that they attack by invoking the joint defense or attorney client privileges over
materials exchanged with a third par several months prior to the paries even entering into
Asset Purchase Agreement at issue on May 17 2010 or attorney work product privilege over
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materials generated several months prior to the transaction4 They should not be permitted to
have it both ways
In order for the Cour to make a fully informed decision about the merits of Respondents
Motion these points need to be addressed and clarfied for the Cour Rule 322(d) allows reply
and sureply briefs in circumstances where the paries wish to draw the Administrative Law
Judges or the Commissions attention to recent important developments or controllng authority
that could not have been raised earlier in the pars principal brief 16 CFR sect 322(d)
As noted above Respondents Supplemental Motion sets fort arguments that go beyond
their initial Motion and introduce new material regarding the position of CAAG in a maner that
could not have been anticipated by Complaint CounseL Complaint Counsel conferred about this
motion with Counsel for Respondents on March 172011 and they do not oppose Complaint
Counsels request to address Respondents new arguments concerning the grouping of
documents on the Revised Privilege Log and Complaint Counsels litigation hold but
Respondents have stated they hope that in the event this Cour grants Complaint Counsel the
right to file a reply that it would not affect the timing of this Cours ruling on the Motion
4 See Exhibit C (excerpts of Respondents parial privilege log produced during the Commissions Par II investigation) As evident from these excerpts Complaint Counsels privilege log is much more detailed than Respondents log
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F or the foregoing reasons Complaint Counsel respectfully requests that the Court grant
its Motion for Leave to File a Supplemental Reply to Respondents Supplemental Motion to
Compel Document Production Complaint Counsel will fie its reply within one business day of
the Cour granting this motion
Dated March 17 2011 Respectfully submitted
Thomas Greene Es Michael R Moiseyev Esq Jonathan S Klarfeld Esq Stephane A Wilkinson Esq
Federal Trade Commission 600 Pennsylvania Avenue NW Washington DC 20580 TeL (202) 326-2531 Fax (202) 326-2655 tgreene2ftcgov
Complaint Counsel
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UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
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In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
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government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
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UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
Brief at 2 i Yet Respondents did not present that argument in their Motion even though
Complaint Counsel produced its Supplemental Privilege log on Januar 182011 containing the
examples cited in the Supplemental Brief Instead Respondents first raised this issue in their
Supplemental Opposition and only conferred with Complaint Counsel after the Supplemental
Opposition was fied and even then it was only in conjunction with discussion regarding their
own failure to produce a privilege log as required by Rule 338A(a)2 Furhermore
Respondents new argument is baseless as Complaint Counsels Revised Privilege Log is
modeled after the privilege log this Cour found satisfactory in In re Hoechst Marion Roussel
Inc but provides even more detail in its descriptions3 See 2000 FTC LEXIS 134 (Aug 18
i Respondents misquotes the Order calling question the other authorities by Respondents
purort support their arguments Compare Supplemental Brief at 2 (latest attempt at privilege log does not show that each page and portion thereof is in fact protected from disclosure) with Order at 5 (declaration will demonstrate that each and every document sought to be withheld including each page and portion thereof has is (sic J in fact been reviewed and is in fact protected from disclosure) Rich Feinstein did in fact review each page and portion of every document withheld
2 Whle arguing strenuously that Complaint Counsel be required to produce a more detailed
privilege log Respondents admitted that they withheld responsive documents but did not prepare a privilege log at all in violation of Rule 338A 16 CFR sect 338A(a) Further Counsel for Respondents stated that they had no intention of producing any privilege log until after this Cour rules on the instant Motion Respondents failure to even prepare a privilege log constitutes a waiver of any privilege regardless of the outcome of this Motion See Bregman v District of Columbia 182 FRD 352 (DDC 1998) ((PJlaintifts failure to comply with FedRCivP 26(b )(5) requiring him to fie a privilege log bars in itself any claim of privilege whatever its basis)
3 Respondents complaint that they cannot identify whether the individuals identified are
Commission employees is yet another new issue that they failed to confer about and is obviously specious As Respondents well know Complaint Counsel has already stated that every one of the privileged communications was between either the Commission and the CAAG or the Commission and the Interim Manager or Interim Monitor (or his counsel) Further the email extensions from this and the prior privilege logs indicate all Commission employees Finally the identities of Commission employees are publicly available on the Commissions website or had they bothered to ask from Complaint Counsel directly
2
2000)
Complaint Counsel could not have anticipated that Respondents would continue to
misrepresent the nature of the litigation brought by California Department of Justice Office of
the Attorney General (CAAG) against Respondents and the nature ofCAAGs investigation
into the transaction at issue in light of Ms Naglers declaration Despite Ms Naglers
declaration averrng that CAAG has not made its decision about the instant transaction
Respondents continue to mislead this Cour by falsely asserting that the CAAG and the FTC did
not see eye-to-eye on the transaction Supplemental Brief at 5 and for the first time identify an
industry report that they believe substantiates their claims about the CAAGs qui tam action At
the same time Respondents fail to mention that LabCorp s own Form 10- K fiing properly
characterizes the qui tam action to be about improper biling to Medi-Cal (LabCorp Form 10-K
at 34 (March 12011) attached hereto as Exhibit B) and that capitation rates are only relevant
because LabCorp does not pass along the benefits of capitation to Medi-Cal Complaint Counsel
should be entitled to respond to this erroneous assertion
Complaint Counsel also could not have anticipated that Respondents would raise the new
argument that Complaint Counsels litigation hold is evidence that its privilege does not apply
That is yet another issue that Respondents was never discussed with Complaint Counsel and is
based on the flawed assumption about Complaint Counsels litigation hold Furher they assert
the same privilege that they attack by invoking the joint defense or attorney client privileges over
materials exchanged with a third par several months prior to the paries even entering into
Asset Purchase Agreement at issue on May 17 2010 or attorney work product privilege over
3
materials generated several months prior to the transaction4 They should not be permitted to
have it both ways
In order for the Cour to make a fully informed decision about the merits of Respondents
Motion these points need to be addressed and clarfied for the Cour Rule 322(d) allows reply
and sureply briefs in circumstances where the paries wish to draw the Administrative Law
Judges or the Commissions attention to recent important developments or controllng authority
that could not have been raised earlier in the pars principal brief 16 CFR sect 322(d)
As noted above Respondents Supplemental Motion sets fort arguments that go beyond
their initial Motion and introduce new material regarding the position of CAAG in a maner that
could not have been anticipated by Complaint CounseL Complaint Counsel conferred about this
motion with Counsel for Respondents on March 172011 and they do not oppose Complaint
Counsels request to address Respondents new arguments concerning the grouping of
documents on the Revised Privilege Log and Complaint Counsels litigation hold but
Respondents have stated they hope that in the event this Cour grants Complaint Counsel the
right to file a reply that it would not affect the timing of this Cours ruling on the Motion
4 See Exhibit C (excerpts of Respondents parial privilege log produced during the Commissions Par II investigation) As evident from these excerpts Complaint Counsels privilege log is much more detailed than Respondents log
4
F or the foregoing reasons Complaint Counsel respectfully requests that the Court grant
its Motion for Leave to File a Supplemental Reply to Respondents Supplemental Motion to
Compel Document Production Complaint Counsel will fie its reply within one business day of
the Cour granting this motion
Dated March 17 2011 Respectfully submitted
Thomas Greene Es Michael R Moiseyev Esq Jonathan S Klarfeld Esq Stephane A Wilkinson Esq
Federal Trade Commission 600 Pennsylvania Avenue NW Washington DC 20580 TeL (202) 326-2531 Fax (202) 326-2655 tgreene2ftcgov
Complaint Counsel
5
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
2000)
Complaint Counsel could not have anticipated that Respondents would continue to
misrepresent the nature of the litigation brought by California Department of Justice Office of
the Attorney General (CAAG) against Respondents and the nature ofCAAGs investigation
into the transaction at issue in light of Ms Naglers declaration Despite Ms Naglers
declaration averrng that CAAG has not made its decision about the instant transaction
Respondents continue to mislead this Cour by falsely asserting that the CAAG and the FTC did
not see eye-to-eye on the transaction Supplemental Brief at 5 and for the first time identify an
industry report that they believe substantiates their claims about the CAAGs qui tam action At
the same time Respondents fail to mention that LabCorp s own Form 10- K fiing properly
characterizes the qui tam action to be about improper biling to Medi-Cal (LabCorp Form 10-K
at 34 (March 12011) attached hereto as Exhibit B) and that capitation rates are only relevant
because LabCorp does not pass along the benefits of capitation to Medi-Cal Complaint Counsel
should be entitled to respond to this erroneous assertion
Complaint Counsel also could not have anticipated that Respondents would raise the new
argument that Complaint Counsels litigation hold is evidence that its privilege does not apply
That is yet another issue that Respondents was never discussed with Complaint Counsel and is
based on the flawed assumption about Complaint Counsels litigation hold Furher they assert
the same privilege that they attack by invoking the joint defense or attorney client privileges over
materials exchanged with a third par several months prior to the paries even entering into
Asset Purchase Agreement at issue on May 17 2010 or attorney work product privilege over
3
materials generated several months prior to the transaction4 They should not be permitted to
have it both ways
In order for the Cour to make a fully informed decision about the merits of Respondents
Motion these points need to be addressed and clarfied for the Cour Rule 322(d) allows reply
and sureply briefs in circumstances where the paries wish to draw the Administrative Law
Judges or the Commissions attention to recent important developments or controllng authority
that could not have been raised earlier in the pars principal brief 16 CFR sect 322(d)
As noted above Respondents Supplemental Motion sets fort arguments that go beyond
their initial Motion and introduce new material regarding the position of CAAG in a maner that
could not have been anticipated by Complaint CounseL Complaint Counsel conferred about this
motion with Counsel for Respondents on March 172011 and they do not oppose Complaint
Counsels request to address Respondents new arguments concerning the grouping of
documents on the Revised Privilege Log and Complaint Counsels litigation hold but
Respondents have stated they hope that in the event this Cour grants Complaint Counsel the
right to file a reply that it would not affect the timing of this Cours ruling on the Motion
4 See Exhibit C (excerpts of Respondents parial privilege log produced during the Commissions Par II investigation) As evident from these excerpts Complaint Counsels privilege log is much more detailed than Respondents log
4
F or the foregoing reasons Complaint Counsel respectfully requests that the Court grant
its Motion for Leave to File a Supplemental Reply to Respondents Supplemental Motion to
Compel Document Production Complaint Counsel will fie its reply within one business day of
the Cour granting this motion
Dated March 17 2011 Respectfully submitted
Thomas Greene Es Michael R Moiseyev Esq Jonathan S Klarfeld Esq Stephane A Wilkinson Esq
Federal Trade Commission 600 Pennsylvania Avenue NW Washington DC 20580 TeL (202) 326-2531 Fax (202) 326-2655 tgreene2ftcgov
Complaint Counsel
5
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
materials generated several months prior to the transaction4 They should not be permitted to
have it both ways
In order for the Cour to make a fully informed decision about the merits of Respondents
Motion these points need to be addressed and clarfied for the Cour Rule 322(d) allows reply
and sureply briefs in circumstances where the paries wish to draw the Administrative Law
Judges or the Commissions attention to recent important developments or controllng authority
that could not have been raised earlier in the pars principal brief 16 CFR sect 322(d)
As noted above Respondents Supplemental Motion sets fort arguments that go beyond
their initial Motion and introduce new material regarding the position of CAAG in a maner that
could not have been anticipated by Complaint CounseL Complaint Counsel conferred about this
motion with Counsel for Respondents on March 172011 and they do not oppose Complaint
Counsels request to address Respondents new arguments concerning the grouping of
documents on the Revised Privilege Log and Complaint Counsels litigation hold but
Respondents have stated they hope that in the event this Cour grants Complaint Counsel the
right to file a reply that it would not affect the timing of this Cours ruling on the Motion
4 See Exhibit C (excerpts of Respondents parial privilege log produced during the Commissions Par II investigation) As evident from these excerpts Complaint Counsels privilege log is much more detailed than Respondents log
4
F or the foregoing reasons Complaint Counsel respectfully requests that the Court grant
its Motion for Leave to File a Supplemental Reply to Respondents Supplemental Motion to
Compel Document Production Complaint Counsel will fie its reply within one business day of
the Cour granting this motion
Dated March 17 2011 Respectfully submitted
Thomas Greene Es Michael R Moiseyev Esq Jonathan S Klarfeld Esq Stephane A Wilkinson Esq
Federal Trade Commission 600 Pennsylvania Avenue NW Washington DC 20580 TeL (202) 326-2531 Fax (202) 326-2655 tgreene2ftcgov
Complaint Counsel
5
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
F or the foregoing reasons Complaint Counsel respectfully requests that the Court grant
its Motion for Leave to File a Supplemental Reply to Respondents Supplemental Motion to
Compel Document Production Complaint Counsel will fie its reply within one business day of
the Cour granting this motion
Dated March 17 2011 Respectfully submitted
Thomas Greene Es Michael R Moiseyev Esq Jonathan S Klarfeld Esq Stephane A Wilkinson Esq
Federal Trade Commission 600 Pennsylvania Avenue NW Washington DC 20580 TeL (202) 326-2531 Fax (202) 326-2655 tgreene2ftcgov
Complaint Counsel
5
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
In the Matter of ) )
LABORATORY CORPORATION OF AMERI CA et aI
) ) )
Docket No 9345
PUBLIC
Respondents ) ) )
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBIT A
Proposed Order
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
(PROPOSED) ORDER
Upon consideration of Complaint Counsels Motion for Leave to File a Reply
to Respondents Supplemental Brief in Furer Support of their Motion to Compel Document
Production and the Court being fully informed
IT is HEREBY ORDERED that Complaint Counsels Motion is GRANTED and
it is fuher ORDERED that Complaint Counsel shall fie its reply to Respondents
Supplemental Brief in Furher Support of their Motion to Compel Document Production within
one business day of the date of this Order
Date March _2011 D Michael Chappell Chief Administrative Law Judge
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345
LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITB
Excerptsrom LabCorp Form 10-K (March 1 2011)
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
LABORATORY CORP OF AMERICA HOLDINGS(LH)
10-K Annual report pursuant to section 13 and 15( d) Filed on 03012011 Filed Period 12312010
4~~~ir
ll-~~~~~tl~ - - _ _ _ _ I~ THOSON REUTERS~iy~~ll lYl Weumlstikw BUSINESS(lampi~il
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
All of the Companys primar laboratoiy facilities have been built or improved for the single purpose of providing clinicallaboratoiy testing services TheCompany believes that these facilities are suitable and adequate and have suffcient production capacity for its curently foreseeable level of operations The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases it could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations
Item 3 LEGAL PROCEEDINGS
The Company was a part in a patent case originally fied by Competitive Technologies Inc and Metabolite Laboratories Inc in the United States District Court for the District of Colorado After a jur trial the district court entered judgment against the Company for patent infringement with total damages and attorneys fees payable by the Company of approximately $78 milion The underlying judgment has been paid The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Cour On June 22 2006 the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratoiy judgment action initiated by the Company addressing the plaintiffs claims for post trial damages On August IS 2008 the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims Metabolite Laboratories Inc fied an appeal to the Federal Circuit The Federal Circuit transferred the appeal to the Tenth Circuit Court of Appeals and oral argument was heard on November 17 2010 On Februaiy 2 201 I the Tenth Circuit Cour of Appeals affrmed the Distrct Court judgment in favor of the Company
A subsidiaiy of the Company DIAN ON Systems Inc (DIAON) is the appellant in a wrongful termination lawsuit originally fied by G Berr Schumann in Superior Cour in the State of Connecticut After a juiy trial the state court entered judgment against DIANON with total damages attorneys fees and pre-judgment interest payable by DIANON of approximately $100 millon DIANON fied a notice of appeal in December 2009 and the case has been transferred to the Connecticut Supreme Court DIANON has disputed liability and intends to contest the case vigorously on appeaL
As previously reported on May 22 2006 the Company received a subpoena from the California Attorney General seeking documents related to biling to the states Medicaid program During the third quarter of 2008 the Company received a request from the California Attorney General for additional information On March 202009 a qui tam lawsuit California ex reI Hunter Laboratories LLC et al v Quest Diagnostics Incorporated et aI which was joined by the California Attorney General and to which the previous subpoena related was unsealed The lawsuit was brought against the Company and several other major laboratories operating in Californa and alleges that the defendants improperly biled the state Medicaid program and therefore violated the California False Claims Act The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim as well as recoveiy of costs attorneys fees and expenses The original complaint was dismissed on the basis of (i) misjoinder and (ii) lack of particularity in the claims and a separate amended complaint was fied against the Company on December 142009 The Company fied an answer to the new complaint on Februar 5 2010 The Company participated in mediation on December 62010 and Februaiy 102011 The case is curently scheduled for trial on Januar 30 2012
During the third quarter of 20 i 0 the Company responded to an audit from the California Departent of Health Care Services (DHCS) of one of the Companys California laboratories for the period of Januaiy 12010 through June 30 2010 DHCS subsequently indicated that this laboratoiy charged the Medi-Cal program more than what was charged to other payers for some lab services and that this is inconsistent with DHCSs current interpretation of California regulations DHCS provided the Company with a proposed agreement related to the Companys billng to the Medi-Cal program including a requirement that the Company charge Medi-Cal the lowest price it charges others for a particular laboratoiy test The Company disagrees with DHCS contentions and interpretation of its regulations and believes that it has properly charged the Medi-Cal program under all applicable laws and regulations The Company has subsequently received a self-audit letter and a similar audit request relating to another Company laboratoiy The Company is continuing to cooperate with DHCS with respect to the audits
34
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
In addition the Company has received three other subpoenas since 2007 related to Medicaid biling In June 2010 the Company received a subpoena from the State of Florida requesting documents related to its biling to Florida Medicaid In Februaiy 2009 the Company received a subpoena from the Commonwealth of Virginia seeking documents related to the Companys billing for state Medicaid In October 2009 the Company received a subpoena from the State of Michigan seeking documents related to its billing to Michigan Medicaid The Company also responded to an October 2007 subpoena from the United States Offce ofInspector Generals regional offce in New York and a September 2009 subpoena from the United States Offce ofInspector Generals regional offce in Massachusetts regarding certain of its biling practices The Company is cooperating with the requests
On August 192010 Aetna Inc Aetna Health Holdings LLC and Aetna Health Management LLC fied a lawsuit against Laboratoiy Corporation of America Holdings in the United States District Court for the Eastern Distrct of Pennsylvania alleging unfair competition misrepresentation intederence and breach of contract and violation of trade secret laws Aetna is seeking unspecified monetaiy damages and equitable relief The Company intends to vigorously defend the lawsuit
The Company acquired certain assets of Westcliff Medical Laboratories (Westcliff) on June 162010 On June 25 2010 the Company and the FederalTrade Commission (FTC) entered into a letter agreement (Agreement) whereby the Company agreed to hold the Westcliff business separate and indepenilent of the Company from the date the Company acquired the Westcliff assets until the Agreement was set to terminate on December 3 2010 The Company subsequently responded to a subpoena and Civil Investigative Demand from the FTC regarding the acquisition On December i 2010 the FTC issued an administrative complaint challenging the Westcliff acquisition (Administrative Proceeding) A hearing in the Administrative Proceeding before an FTC administrative law judge is scheduled to begin on May 2 201 I in Washington DC and the Company intends to vigorously defend itself in that proceeding On December i 2010 the FTC also fied an action in federal cour in the District of Columbia seeking a temporaiy restraining order and preliminar injunction to prevent the Company from integrating the Westcliffassets upon the expiration of the Agreement The Company successfully movedfor transfer of the federal district court matter to the United States Distrct Cour for the Central District of Californa and the Company voluntarily agreed to extend the Agreement until the federal distrct court ruled on the FTCs request for a preliminaiy injunction On Februaiy 22 2011 the federal distrct court denied the preliminaiy injunction and dissolved the temporaiyrestraining order allowing the Company to integrate the Westcliff assets into its business operations On Februaiy 23 2011 the FTC fied a notice of appeal to the Ninth Circuit Cour of Appeals and a motion with the federal district court requesting a preliminaiy injunction maintaining the Agreement pending a decision from that appeaL The Company will vigorously defend itself in those proceedings
Several of these matters are in their early stages of development and management cannot predict the outcome of such matters In the opinion of management the ultimate disposition of such matters is not expected to have a material adverse effect on the financial position of the Company but may be material to the Companys results of operations or cash flows in the period in which such matters are finally determined or resolved
The Company is involved from time to time in various claims and legal actions including arbitrations class actions and other litigation arising in the ordinaiy course of business Some of these actions involve claims that are substantial in amount These matters include but are not limited to intellectual propert disputes professional liability employee related matters and inquiries including subpoenas and other civil investigative demands from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing biling practices or requesting comment on allegations of bilingirregularities that are brought to their attention through biling audits or third parties The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinaiy course of its business Such inquiries can relate to the Company or other healthcare providers The Company works cooperatively to respond to appropriate requests for information
The Company is also named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws These suits tyically allege that the Company has made false statements andor certifications in connection with claims for payment from federal or state health careprograms They may remain under seal (hence unkown to the Company) for some time while the
35
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
government decides whether to intervene on behalf ofthe qui tam plaintiff Such claims are an inevitable part of doing business in the health care field today
The Company believes that it is in compliance in all material respects with all statutes regulations and other requirements applicable to its clinical laboratoiy operations The clinical laboratoiy testing industiy is however subject to extensive regulation and the courts have not interpreted many of these statutes and regulations There can be no assurance therefore that those applicable statutes and regulations wil not be interpreted or applied by a prosecutorial regulatoiy or judicial authority in a manner that would adversely affect the Company Potential sanctions for violation of these statutes and regulations include significant fines and the loss of various licenses certificates and authorizations
Item 4 (REMOVED AND RESERVED)
PART II
Item 5 MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Common Stock trades on the New York Stock Exchange (NYSE) under the symbol LH The following table sets fort for the calendar periods indicated the high and low sales prices for the Common Stock reported on the NYSE Composite Tape
Year Ended December 31 2009 first Quarer
Second Quarer Third Quarer d
Fourth Quarter
Year Ended December 31 2010 FirsfQuarer Second Quarter Third Quarer Fourth Quarter
High
7709 8300 7894 8948
Low
5325 5708 62Q6 6381
6949 7312 7158 7575
Holders
On Februaiy 18201 i there were 401 holders of record of the Common Stock
Dividends
The Company has not historically paid dividends on its common stock and does not presently anticipate paying any dividends on its common stock in the foreseeable futue In addition the Companys senior credit facilities place certin limits on the payment of dividends For further information on these limits please refer to Financing Activities under Managements Discussion and Analysis of Financial Condition and Results of Operations and Note i i to Consolidated Financial Statements
36
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION
)In the Matter of )
) Docket No 9345 LABORATORY CORPORATION OF )AMERICA et aI PUBLIC)
)Respondents )
)
COMPLAINT COUNSELS MOTION FOR LEAVE TO FILE A REPLY TO RESPONDENTS
SUPPLEMENTAL BRIEF IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DOCUMENT PRODUCTION
EXHIBITC
Excerpts from Respondents Partial Privilege Log
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
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CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
Lab
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Pag
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4
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition
CERTIFICATE OF SERVICE
I certify that I filed via hand delivery an original with signature and one paper copy and a pdfvia electronic mail that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production with
Donald S Clark Secretar Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-159 Washington DC 20580 secretarftcgov
I also certify that I delivered via hand delivery one paper copy and one pdf copy that is a true and correct copy of the paper original via electronic mail of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
The Honorable D Michael Chappell Administrative Law Judge Federal Trade Commission 600 Pennsylvania Avenue NW Rm H-l13 Washington DC 20580 oaljftcgov
I also certify that I delivered via electronic mail one pdf copy that is a true and correct copy of the paper original of the foregoing Complaint Counsels Motion for Leave to File a Reply to Respondents Supplemental Brief in Further Support of their Motion to Compel Document Production to
J Robert Robertson Corey Roush Benjamin Holt Hogan Lovells US LLP Columbia Square 555 Thirteenth Street NW Washington DC 20004
Counsel for Defendants Laboratory Corporation of America and ~Laboratory Corporation of Arca ~~ ~
March 172011 sa DeMarc 1 Sleig
Federal Trade Commission Bureau of Competition