Gainey & McKenna Healthways, Inc. ERISA Class Action Litigation Update

NEW YORK--(BUSINESS WIRE)--Gainey & McKenna announced that a stipulation of voluntary dismissal was filed in the United States District Court for the District of Tennessee in the proposed class action case entitled Banks v. Healthways, Inc., et al., Civil Action No.: 3:08-CV-00734 (the “Action”) which was brought on behalf of the named plaintiff and a proposed Class of all participants in the Healthways, Inc. 401(k) Retirement Savings Plan (the “401(k) Plan”) who purchased or held shares of Healthways stock in the 401(k) Plan at any time between May 16, 2005 and the present.

The Action alleged that Healthways, Inc. (“Healthways” or “the Company”) and other fiduciaries of the 401(k) Plan violated their fiduciary duties to the 401(k) Plan’s participants. The Action alleged that Healthways and certain individuals who were responsible for managing and administering the 401(k) Plan failed to disclose important information to the participants of the 401(k) Plan and violated their fiduciary duties. The Action also alleged that the violations of fiduciary duty caused participants who invested in Healthways stock to lose money inside the 401(k) Plan.

The Action further alleged, among other things, that (i) the Company was experiencing losses from the MHS Pilot Programs pursuant to a contingent arrangement whereby it only earned income if it were successful in reducing the medical costs of its client; (ii) the Company had never undertaken a program intended to reduce the medical costs of a population comprised of only aged and extremely poor individuals with chronic medical conditions; (iii) prior to entering in the agreements with Center for Medicare & Medicaid Services (“CMS”), the Company had done no due diligence regarding the MHS Pilot Programs; (iv) the Company had no understanding of the nature of the population it was dealing with in the MHS Pilot Programs; and (v) the Company’s stock price was artificially inflated as a result of the improper practices and mismanagement of the Company.

On January 28, 2009, the Court issued an important decision which denied the defendants’ motion to dismiss the lawsuit. The case then entered the discovery phase.

Thereafter, the Action was voluntarily dismissed with prejudice only as to the named plaintiff because the named plaintiff was unable to appear for a noticed deposition and was therefore unable to continue to prosecute the Action.

If you participated in the Healthways 401(k) Plan and held the Healthways Stock Fund inside your 401(k) Plan account at any time between May 16, 2005 and the present and are willing to act as a named plaintiff, please contact Thomas J. McKenna at Gainey & McKenna, 295 Madison Avenue, 4th Floor New York, New York 10017 by telephone at (212) 983-1300 and/or via e-mail at tjmckenna@gaineyandmckenna.com.