IF YOU PURCHASED OR OTHERWISE ACQUIRED AMERICAN RENAL ASSOCIATES HOLDINGS, INC. (“ARAH”) SECURITIES (NYSE-ARA) DURING THE PERIOD FROM APRIL 20, 2016 THROUGH AUGUST 18, 2016, INCLUSIVE, INCLUDING ALL PERSONS THAT PURCHASED OR OTHERWISE ACQUIRED ARAH SECURITIES PURSUANT OR TRACEABLE TO THE REGISTRATION STATEMENT FILED IN CONNECTION WITH ARAH’S APRIL 20, 2016 OFFERING, YOU COULD RECEIVE A PAYMENT FROM A CLASS ACTION SETTLEMENT.
A proposed settlement has been reached by the Parties in the class action pending in the United States District Court for the District of Massachusetts (the “District Court”), which was brought on behalf of the Settlement Class. The District Court has preliminarily approved the settlement, the terms of which are set forth in the Stipulation, and has preliminarily certified the Settlement Class for purposes of settlement only. A hearing to be held by the District Court on notice to the Settlement Class, to consider approval of the settlement, the Plan of Allocation, and the Fee and Expense Application (the “Settlement Hearing”) will be held before the Honorable Allison D. Burroughs, United States District Court Judge, in Courtroom 17, 5th Floor, at the John Joseph Moakley United States Courthouse, 1 Courthouse Way, Boston, Massachusetts 02210 at 2:00 p.m. on June 14, 2018.
On August 31, 2016, a putative class action captioned Gelsleichter v. American Renal Assocs. Holdings, Inc., No. 16 Civ. 6841 (S.D.N.Y.) (the “Gelsleichter Action”), was filed in the United States District Court for the Southern District of New York. Two days later, on September 2, 2016, the instant action was filed in the United States District Court for the District of Massachusetts. On October 28, 2016, the plaintiff in the Gelsleichter Action voluntary dismissed that case. By Order entered on November 30, 2016, the District Court appointed Errol Rudman and Rudman Partners, L.P. as Lead Plaintiffs, and appointed Kirby McInerney LLP as Lead Plaintiffs’ Counsel.
Lead Plaintiffs filed their Amended Complaint on February 1, 2017 against ARAH, Joseph A. Carlucci, Johnathan L. Wilcox, Syed T. Kamal, and Jonathan J. McDonough (the “Individual Defendants”), Centerbridge Capital Partners L.P. (“Centerbridge”), Merrill Lynch, Pierce, Fenner & Smith, Inc., Barclays Capital Inc., Goldman, Sachs & Co. (now known as Goldman Sachs & Co. LLC), Wells Fargo Securities, LLC, SunTrust Robinson Humphrey, Inc., and Leerink Partners LLC (the “Underwriter Defendants” and, together with ARAH, Individual Defendants, and Centerbridge, the “Defendants”). The Amended Complaint alleged violations of: (i) Section 11 of the Securities Act of 1933 (15 U.S.C. § 77k) against all Defendants except Jonathan J. McDonough; (ii) Section 15 of the Securities Act of 1933 (15 U.S.C. § 77o) against Centerbridge and Individual Defendants, except Jonathan J. McDonough; (iii) Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5), against ARAH and Individual Defendants; and (iv) Section 20(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78t(a)) against Centerbridge and Individual Defendants. On May 18, 2017, Defendants moved to dismiss the Amended Complaint. On October 23, 2017, Lead Plaintiffs’ Counsel filed a letter with the Court informing the Court that Lead Plaintiffs and ARAH had agreed to participate in mediation in an attempt to reach an amicable resolution of the Action and requesting that the Court hold in abeyance Defendants’ motions to dismiss until after the mediation.
On November 27, 2017, counsel for Lead Plaintiffs and ARAH participated in a mediation conducted by Jed D. Melnick, Esq. of JAMS. Following the mediation, the Parties were able to reach agreement to settle this Action for $4 million.
The settlement allows both sides to avoid the risks and cost of uncertain litigation and the uncertainty of a trial and appeals, and permits Settlement Class Members to be compensated without further delay. Lead Plaintiffs and their counsel believe the settlement is best for all Settlement Class Members. On November 28, 2017, the Parties agreed in principle to the settlement which was thereafter memorialized in the Stipulation.
Defendants have denied and continue to deny each and all of the claims and contentions alleged in the Action and the Amended Complaint. Defendants have asserted, and continue to assert, many defenses thereto, and expressly deny any wrongdoing or legal liability arising out of any of the conduct alleged in the Action and the Amended Complaint. Neither the Stipulation, nor any document referred to herein, nor any action taken to carry out the Stipulation, is, may be construed as, or may be used as an admission by or against Defendants of any fault, wrongdoing or liability whatsoever or the lack of merit of any defense that had been or could have been asserted to such claims. The District Court has not ruled on the merits of whether Defendants violated the securities laws, or any other laws or rules.
Lead Plaintiffs and Defendants, and their counsel, have concluded that the settlement is advantageous, considering the risks and uncertainties for each side of continued litigation. Lead Plaintiffs and their counsel have determined that the settlement is fair, reasonable, and adequate and is in the best interests of the Settlement Class Members. Defendants have agreed to the settlement solely to eliminate the burden and expense of further protracted litigation.
The Stipulation creates a Settlement Fund in the amount of $4,000,000 in cash, plus interest that accrues on the fund prior to distribution. Your recovery from the Settlement Fund will depend on a number of variables, such as: the number of ARAH securities that you purchased or otherwise acquired between April 20, 2016 and August 18, 2016, inclusive (the “Settlement Class Period”), including the number of ARAH securities that you purchased or otherwise acquired pursuant or traceable to ARAH’s Form S-1/A, as amended, and the Form 424B Prospectus (together, the “Registration Statement”) filed in connection with ARAH’s April 20, 2016 offering; and the timing of your purchases and any sales. Lead Plaintiffs estimate that if all eligible Claimants submit a valid Claim Form, the average distribution per damaged ARAH security will be approximately $0.46 before deduction of Court-approved fees, expenses, and incentive awards. Settlement Class Members should note, however, that this is only an estimate based on the overall number of potentially affected ARAH securities. Settlement Class Members may recover more or less than the amount estimated herein, depending on the number of shares that are the subject of valid timely claims by Settlement Class Members.
Lead Plaintiffs and the Defendants do not agree on the average amount of damages per ARAH share that would be recoverable if Lead Plaintiffs were to have prevailed in the Action. The issues on which the Parties disagree include: (1) whether any of Defendants’ Settlement Class Period statements, including in materials in connection with ARAH’s April 2016 IPO, were materially false or misleading; (2) if any statements were false or misleading, whether Defendants knew or recklessly disregarded this fact; and (3) whether, and to what extent, any of Defendants’ allegedly false or misleading statements artificially inflated the price of ARAH securities during the Settlement Class Period.
Lead Plaintiffs’ Counsel, who have been prosecuting this Action on a wholly-contingent basis since its inception, have not received any payment of attorneys’ fees for their representation of the Settlement Class and they have advanced the funds to pay expenses necessarily incurred to prosecute the Action. Lead Plaintiffs’ Counsel will apply to the Court for an award of attorneys’ fees in the amount of 33% of the Settlement Fund. In addition, Lead Plaintiffs’ Counsel will apply for reimbursement of litigation expenses (exclusive of administration costs) paid or incurred in connection with the prosecution and resolution of the claims against the Defendants, in an amount not to exceed $50,000. Lead Plaintiffs may ask the Court for up to $10,000 as an incentive award for their respective contributions to this lawsuit. Any fees, expenses, or incentive awards awarded by the Court will be paid from the Settlement Fund. Settlement Class Members are not personally liable for any such fees or expenses. If the settlement is approved, Lead Plaintiffs’ Counsel’s fee and expense application is granted in its entirety, and Lead Plaintiffs are awarded an incentive award, the average cost per ARAH share of these fees, expenses, and incentive awards will be approximately $0.16.
Lead Plaintiffs and the Settlement Class are being represented by Kirby McInerney LLP. Any questions regarding the Action or the settlement should be directed to Ira Press, Esq. at Kirby McInerney LLP, 825 Third Avenue, 16th Floor, New York, NY 10022, (212) 371-6600.
|YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT|
|Submit A Claim Form By July 6, 2018||This is the only way to be eligible to get a payment in connection with the settlement.|
|Exclude Yourself From The Settlement Class By Submitting A Written Request Postmarked No Later Than May 24, 2018||If you exclude yourself from the Settlement Class, you will not be eligible to get any payment from the Net Settlement Fund. This is the only option that allows you to be part of any other lawsuit against any of Defendants or the other Released Parties concerning the Released Claims.|
|Object To The Settlement or the Request for Fees, Expenses, and Incentive Awards By Submitting A Written Objection To Be Received No Later Than May 24, 2018||If you do not like the proposed settlement, the proposed Plan of Allocation, or the Fee and Expense Application, you may write to the District Court and explain why you do not like them. You cannot object to the settlement, the Plan of Allocation, or the Fee and Expense Application unless you are a Settlement Class Member and do not exclude yourself.|
|Go To The Settlement Hearing On June 14, 2018 At 2:00 P.M., And File A Notice Of Intention To Appear No Later Than May 24, 2018||Filing a written objection and notice of intention to appear allows you to speak in court about the fairness of the settlement, the Plan of Allocation, and/or the Fee and Expense Application. If you submit a written objection, you may (but do not have to) attend the hearing and speak to the District Court about your objection.|
|Do Nothing||If you are a member of the Settlement Class and you do not submit a Claim Form by July 6, 2018, you will not be eligible to receive any payment from the Net Settlement Fund. You will, however, remain a member of the Settlement Class, which means that you give up your right to sue about the claims that are resolved by the settlement and you will be bound by any Judgments or Orders entered by the District Court pertaining to the Action.|