A Medical Device Daily

HealthSouth (Birmingham, Alabama) said it and derivative stockholder plaintiffs have reached an agreement in principal with UBS Securitiesand UBS AG, as well as UBS's insurance carriers, to settle litigation filed by the derivative plaintiffs on the company's behalf, Tucker vs. Scrushy, in the Circuit Court of Jefferson County, Alabama.

HealthSouth said the settlement agreement relates only to UBS and does not affect the company's claims against Richard Scrushy and the other defendants in the Tucker action, or against the company's former independent auditors, Ernst & Young. The settlement agreement is subject to approval of the court, and HealthSouth estimates that the process for approval will take about 60 days.

HealthSouth will receive $100 million in cash and a release of all claims by UBS including the release and satisfaction of a judgment in favor of UBS, which is currently on appeal before the U.S. Court of Appeals for the Second Circuit.

HealthSouth will be obligated to pay the reasonable fees of the derivative plaintiffs' attorneys to be approved by the court. After deducting all of the company's costs and expenses in connection with the Tucker litigation, HealthSouth, pursuant to the previously disclosed settlement agreements in the consolidated federal securities litigation, will pay 25% of the net proceeds, to plaintiffs in the federal securities litigation. The balance of the proceeds will be used by HealthSouth to reduce long-term debt.

"This settlement represents another milestone in HealthSouth's recovery of damages sustained by the company under prior management," said John Whittington, executive VP, general counsel and corporate secretary. "HealthSouth and the derivative plaintiffs intend to diligently and vigorously pursue the claims against the remaining defendants including Scrushy and Ernst & Young."

HealthSouth is a provider of inpatient rehabilitative services.