A Medical Device Daily

A federal judge has granted class-action status to thousands of former employees of Abbott Laboratories (Abbott Park, Illinois) who say that their jobs were unfairly terminated during the spin-off of the company's hospital products business into Hospira (Lake Forest, Illinois).

A group of the former employees, who lost their jobs in 2003 and 2004, had sued Abbott and Hospira on behalf of a class of all affected workers under the Employee Retirement Income Security Act.

"The plaintiffs allege that Abbott designed the spin-off to cut off the employees' pension benefits and insulate itself from ever paying any of the increased pension obligations accrued by its older employees as they approached their peak salary years," the law office of Sprenger & Lang (Washington) said in a release on Wednesday.

The firm said Chicago Federal District Judge Robert Gettleman, in a decision rendered on Dec. 30, certified a class of plaintiffs for each of the three counts of the complaint by plaintiffs.

Abbott said in a statement that Gettleman's ruling was procedural and "has no bearing on the merits of the case." It said it was confident of prevailing in the case.

Abbott spun off Hospira in 2004, saying its products were no longer a primary company focus.

"Allegations that Hospira was created for any other purpose are unfounded and without merit," Abbott said.

Richard Scrushy, ousted CEO of rehabilitation chain HealthSouth (Birmingham, Alabama), is expected to appeal a judge's ruling that he must repay more than $47 million in bonuses he received while running the company amid a huge fraud, despite being acquitted in the scheme last year. Combined with as much as $265 million in refunds the company is seeking from the federal government for taxes it paid on overstated income during the fraud, the court-ordered repayment could help shore up the finances of HealthSouth.

Scrushy plans to appeal, according to his attorneys. "We believe the ruling is in error in that no state or federal court . . . has ever made a finding on the basis cited in this case," attorney Kile Turner said in a statement.

The ruling by Jefferson County Circuit Judge Allwin Horn III came earlier this week in a shareholder lawsuit filed in 2002, when authorities were investigating allegations of insider trading by Scrushy, HealthSouth's founder. Federal jurors acquitted Scrushy on all criminal charges last year, but Horn said that Scrushy still must repay the company $47.8 million in bonuses and interest he earned while running HealthSouth from 1997 to 2002 since the payments were tied to inflated accounting.

HealthSouth really lost money, Horn wrote, making Scrushy and other executives ineligible for any bonuses, and whether Scrushy knew of the fraud didn't matter, the judge said.

"Scrushy was unjustly enriched by these payments to the detriment of HealthSouth and to allow Scrushy to retain the benefit of these payments would be unconscionable," Horn ruled.

Horn said he wouldn't make Scrushy repay $10.4 million in bonuses for 1996, because evidence showed that the company made money that year. Evidence in Scrushy's federal trial indicated that the fraud began in mid-1996.

Scrushy sued HealthSouth last month seeking more than $70 million in compensation related to his firing in 2003, when the Securities and Exchange Commission (SEC) filed suit against Scrushy and the company, revealing the fraud.

HealthSouth has filed a countersuit asking a judge to make Scrushy repay the company unspecified damages.

Scrushy is due to enter arbitration this month in an attempt to settle the SEC suit. He has pleaded not guilty to criminal charges in a separate public bribery case in Montgomery, Alabama.