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HealthSouth Derivative Litigation

Montgomery McCracken’s Delaware office defended a former HealthSouth director against shareholder derivative claims brought in the Delaware Court of Chancery in connection with a host of transactions involving the troubled HealthSouth Corporation. As part of a coordinated defense, Montgomery McCracken argued that the Delaware case – brought by a large institutional investor (The Teachers’ Retirement System of Louisiana, with more than $12 billion under management) – must, on principles of comity and judicial efficiency, yield to earlier-filed, coordinated derivative cases pending in Alabama. In opposing the motion to stay, the TRSL argued that progress in the Alabama proceedings had been glacial, that the complaint filed in Delaware was superior to the complaints filed in Alabama, that the TRSL’s Delaware attorneys were more experienced in this type of litigation, and that HealthSouth’s interests would better be served by prompt recoveries from directors and third parties even if it did require the opening of a second litigation front.

Then┬áVice Chancellor Strine rejected the TRSL’s arguments, and his opinion and order granting a complete stay of the Delaware derivative case was a significant victory for Montgomery McCracken’s client and for the many other defendants who faced the unsettling prospect of having to litigate these claims in multiple jurisdictions.