DALLAS (CN) - Tenet Healthcare cannot sue Community Health Systems over costs it incurred in fighting off several unwanted takeover offers, a federal judge ruled.
Case law does not support Dallas-based Tenet's plan to recover such expenses, and, even if they did, there "is not evidence of congressional intent to grant standing for the target corporation to recover such damages," U.S. District Judge Barbara M.G. Lynn said Wednesday.
Though Tenet had its eye on recovering the costs it incurred to conduct due diligence, it cited precedent that permitted recovery only for "costs associated with a second proxy solicitation, or a response to the allegedly false proxy materials."
Community Health had originally tried to purchase Tenet in November 2010, and went public with its offer after Tenet rejected it.
In an April lawsuit against the Brentwood, Tenn.-based company, Tenet accused it of exaggerating the value of an acquisition and the benefits of merger to the Securities and Exchange Commission. Claiming Community Health had improper hospital admissions practices, the benefits would actually be nonexistent, Tenet said.
One month later, Community Health withdrew its final offer of $7.3 billion, which Tenet had rejected as grossly inadequate.
Tenet then amended its complaint to seek damages for the costs it incurred in analyzing the offers, claiming that such analyses helped it and its shareholders fairly consider and oppose the acquisition.
Community Health applauded dismissal of the case Wednesday. "We believe Tenet's board and management team initiated this litigation for the purpose of distracting shareholders from our bid to buy their company," Community Health CEO Wayne Smith said in a statement. "From the inception of this lawsuit, we have said there was no basis for Tenet to pursue its self-serving litigation. Today's ruling brings a conclusion to Tenet's unfounded lawsuit and we are pleased to put it behind us."
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