been harmed by alleged actions and/or omissions by the Company
in connection with the incident and that the
Company made deceptive public statements regarding privacy and data protection.
Plaintiffs assert a variety of
claims seeking monetary damages, injunctive relief, costs and attorneys’
fees, and other related relief.
On March
22, 2024, plaintiffs voluntarily withdrew two of their five causes of action.
On April 8, 2024, the court denied the
Company’s motion to dismiss the remaining claims.
The case remains pending.
On June 6, 2024, plaintiffs and the Company informed the court that they had agreed
to a term sheet for a class
action settlement of the Cruz-Bermudez Action.
The settlement agreement is subject to the parties’ finalization
and
the court’s approval.
The final settlement terms enumerated in a settlement agreement,
including the settlement
amount, will depend in part on the outcome of Henry Schein’s review of the data impacted in the cyber incident
to
determine the final class size total.
The court stayed the Cruz-Bermudez Action through September 13,
2024 and
ordered plaintiffs to move for preliminary approval of the proposed settlement by
that date.
We expect any
settlement will be for an immaterial amount.
Henry Schein, Inc. and its subsidiary, North American Rescue, LLC (“NAR”), have been named as defendants
in a
qui tam lawsuit brought under the federal False Claims Act (“FCA”), in
an action entitled
Russ and Murphy ex rel.
United States v. North American Rescue, LLC et al.
; Case No. 21-cv-04238, filed in the United States District
Court
for the Eastern District of Pennsylvania.
The case was filed under seal in 2021 by two relators (Corey
Russ and
Chris Murphy) who worked for one of NAR’s competitors.
Relators also name C-A-T Resources, LLC (“CAT-R”)
as a defendant.
CAT
-R manufactures one of the products at issue in the case (the
combat application tourniquet, or
“CAT”).
After the Department of Justice declined to intervene, the case was unsealed,
and Relators filed their first
amended complaint in November 2023.
In response to motions to dismiss filed by Henry Schein, NAR
and CAT-
R, Relators requested and obtained leave to file their Second Amended
Complaint on April 24, 2024.
Relators’
FCA claims are based on allegations that NAR and Henry Schein made false
representations and certifications in
connection with, and sold and submitted false claims for payment to the federal
government for, various medical
products that Relators contend violated certain “Buy American”
laws (e.g., the Berry Amendment and Trade
Agreements Act of 1979) and/or were not properly sterilized as noted
on the products’ packaging, and thus
misbranded.
These products include the CAT,
syringes, compressed gauze, tracheostomy kits, hypothermia
blankets, eye, ear, nose and throat kits, and trauma dressing.
Relators allege Henry Schein controlled and
supervised NAR’s alleged misconduct for a period of time.
Relators seek three times the amount of damages to be
proved at trial, statutory civil penalties, reasonable expenses, attorneys’
fees and costs, and prejudgment
interest.
On July 26, 2024, the court ruled on motions to dismiss
filed by Henry Schein, NAR and CAT-R.
The
court dismissed the claims against Henry Schein (without prejudice) and Henry
Schein is no longer in the case.
The motions to dismiss filed by NAR and CAT-R were denied.
We intend to defend ourselves vigorously against
this action.
From time to time, we may become a party to other legal proceedings,
including, without limitation, product
liability claims, employment matters, commercial disputes, governmental
inquiries and investigations (which may
in some cases involve our entering into settlement arrangements or consent
decrees), and other matters arising out
of the ordinary course of our business.
While the results of any legal proceeding cannot be predicted with certainty,
in our opinion none of these other pending matters are currently
anticipated to have a material adverse effect on our
consolidated financial position, liquidity or results of operations.
As of June 29, 2024, we had accrued our best estimate of potential
losses relating to claims that were probable to
result in liability and for which we were able to reasonably estimate a
loss.
This accrued amount, as well as related
expenses, was not material to our financial position, results of operations
or cash flows.
Our method for
determining estimated losses considers currently available
facts, presently enacted laws and regulations and other
factors, including probable recoveries from third parties.