SOUTHERN DISTRICT OF FLORIDA 98 8852securities.stanford.edu/filings-documents/1011/... · 11....

Case 9:98-cv-08852-ASG Document 1 Entered on FLSD Docket 12/01/1998 Page 1 of 25

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA 98

8852 ---------------------------------------- x JACK HANES, ) CIV = GOLD

Plaintiff, ) CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE

- against - ) FEDERAL SECURITIES LAWS

ANERIPATH, INC., JAMES C. NEW, ALAN LEVIN, M.D., and ROBERT P. WYNN, ) JURY TRIAL DEMANDED

MAG1tRA1E j tJ( Defendants. )

--------------------------------x

INTRODUCTION

Plaintiff, Jack Hanes, for his class action complain

(the Complaint) alleges upon information and belief (said

information and belief being based, in part, upon the

investigation conducted by and through his undersigned

attorneys) , except as to those paragraphs relating to the

plaintiff, his purchase of AmeriPath Corporation ("AmeriPath" or

the Company) common stock, and his suitability to serve as a

class representative, which is alleged upon personal knowledge,

the following:

JURISDICTION AND VENUE

1. This Court has jurisdiction over the subject

matter of this action pursuant to Section 27 of the Securities

Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78aa.

2. The claims asserted herein arise under Sections

10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and

'ii


78t(a); and Rule 10b-5 promulgated thereunder by the Securities

and Exchange Commission (the "SEC'), 17 C.F.R. § 240.10b-5.

3. Venue is proper in the district pursuant to

Section 27 of the Exchange Act because defendant AmeriPath is

headquartered in this district, transacts substantial business in

the district, and many of the alleged acts, transactions and

conduct constituting violations of law, occurred at least in

part, in this district.

4. In connection with the acts alleged in this

Complaint, defendants, directly and indirectly, used the means

and instrumentalities of interstate commerce, including the

mails, telephone communications and the facilities of the

National Securities Exchanges.

NATURE OF ACTION

5. This action is brought as a class action on behalf

of all persons or entities who purchased the common stock of

AmeriPath during the Class Period defined below to recover

damages caused to plaintiff by defendants violations of the

federal securities laws.

6. During the Class Period, defendants engaged in a

course of conduct that was designed to, and did: (i) deceive the

investing public, including plaintiff and other members of the

Class, concerning AmeriPath's operations and controls, and the

fact that significant and material portions of its income were

derived by engaging in a course of business operations based on

2


the improper preparation and filing of materially inaccurate and

inflated cost reports for reimbursement by Medicare; (ii)

artificially inflate the market price of AmeriPath common stock

during the Class Period; and (iii) cause plaintiff and other

members of the Class to purchase AmeriPath common stock at

inflated prices. In furtherance of the plan and course of

conduct, defendants took the actions as set forth herein.

THE PARTIES

7. During the Class Period, plaintiff and each member

of the Class purchased shares of ArneriPath common stock in the

open market without knowledge of the misconduct of defendants

alleged in the Complaint and suffered damages as a result.

Plaintiff and each member of the Class directly or indirectly

relied upon the individual defendants' and ArneriPath's public

statements, as more fully described below, and/or upon the

integrity of the market for AmeriPath's common stock.

8. Plaintiff purchased shares of the Company's common

stock as per the information contained in the certificate annexed

hereto.

9. Defendant AmeriPath is a corporation organized and

existing under and by virtue of the laws of the State of

Delaware. Its principal offices and corporate headquarters are

located at 7298 Gordon Road, Suite 200, Riviera Beach, Florida

33404.


10. Defendant James C. New ('New) is, and was at all

relevant times, President and Chief Executive Officer of the

Company. New signed the majority of the Company's filings with

the SEC during the Class Period.

11. Defendant Alan Levin, M.D. is, and was at all

relevant times, Chief Operating Officer and a Director of the

Company.

12. Defendant Robert P. Wynn is, and was at all

relevant times an Executive Vice President and Director of the

Company.

13. The above defendant officers and directors of

AmeriPath (the 'Individual Defendants"), by reason of their

direct and substantial management positions and responsibilities

during the time relevant to the Complaint were "controlling

persons" of AmeriPath within the meaning of Section 20 of the

Exchange Act, and had the power and influence to control

AmeriPath and exercised such control to cause the Company to

engage in the violations and improper practices complained of

herein. The Individual Defendants, because of their positions as

officers and directors of AmeriPath, had access to adverse

non-public information about the business and future prospects of

AmeriPath and acted, intentionally or recklessly, to conceal and

misrepresent such material information in violation of their

duties and responsibilities under the federal securities laws.

9


CLASS ACTION ALLEGATIONS

14. Plaintiff brings the action as a class action

pursuant to Rule 23 of the Federal Rules of Civil Procedure on

behalf of a class (the Class") consisting of all persons and

entities who purchased AmeriPath common stock between October 22,

1997, and November 23, 1998, inclusive (the "Class Period") and

were damaged thereby. Excluded from the Class are the

defendants, members of the immediate family of each of the

Individual Defendants, any entity in which any defendant has a

controlling interest, and the legal representatives, heirs,

successors, predecessors in interest, affiliates or assigns of

any defendant.

15. The Class is so numerous that joinder of all Class

members is impracticable. While the exact number of Class

members is unknown to plaintiff at the time and can only be

ascertained from the records maintained by AmeriPath or its

agents, as of November 5, 1998, there were more than 20 million

shares of AmeriPath common stock outstanding held by thousands of

shareholders throughout the United States.

16. Plaintiff's claims are typical of the claims of

the members of the Class, since all members of the Class

purchased shares of AmeriPath common stock during the Class

Period and sustained damages arising out of defendants' wrongful

conduct in violation of federal securities laws and the common

law as alleged herein.


17. Plaintiff will fairly and adequately protect the

interests of the members of the Class. Plaintiff has retained

counsel competent and experienced in class action and securities

litigation and plaintiff has no interests antagonistic to or in

conflict with the other members of the Class.

18. A class action is superior to other available

methods for the fair and efficient adjudication of the

controversy. Joinder of all Class members is impracticable. The

likelihood of individual Class members prosecuting separate

claims is remote. Since the damages suffered by individual Class

members may be relatively small, the expense and burden of

individual litigation makes it impossible for Class members

individually to seek redress for the wrongs done to them. It is

desirable for all concerned to concentrate the litigation in this

particular forum. No unusual difficulties are likely to be

encountered in the management of the class action.

19. There are questions of law and fact common to the

members of the Class which predominate over any questions

affecting any individual members. These common questions of law

and fact include, among others:

(a) whether defendants violated Sections 10(b)

and 20(a) of the Exchange Act and SEC Rule 10b-5;

(b) whether defendants participated in and/or

conspired in the common course of conduct complained of herein;

(c) whether statements disseminated to the

investing public and stockholders of AmeriPath during the Class


Period omitted to state or misrepresented material facts about

the Company's operations and controls, including the improper

preparation of cost reports for reimbursement by Medicare, the

improper structuring of transactions with healthcare providers to

improperly increase the expenses reimbursable by the government

and the wrongful provision of inducements and gifts to patients,

their relatives and their physicians to accept more product than

required and the fact that a significant and material portion of

the Company's income was derived by engaging in a course of

business that involved the latter detailed practices;

(d) whether defendants acted with knowledge or

with reckless disregard for the truth in omitting to state and/or

misrepresenting material facts about the operations and controls

of AmeriPath;

(e) whether, during the Class Period, the market

price of AmeriPath's common stock was artificially inflated due

to the non-disclosures and/or material misrepresentations

complained of herein; and

(f) whether the members of the Class have

sustained damages, and, if so, the proper measure thereof.

20. Plaintiff will rely, in part, upon the presumption

of reliance established by the fraud-on-the-market doctrine in

that:

a. defendants made public misrepresentations

during the Class Period, as alleged in the Complaint;

b. the misrepresentations were material;

7


C. shares of ArneriPath common stock were traded

on a developed national stock exchange, namely the NASDAQ

Exchange, which is an efficient market within the meaning of that

term in the context used in the Complaint; and

d. plaintiff and the other members of the Class

purchased their AmeriPath shares between the time defendants made

the misrepresentations and the time the truth was revealed,

without knowledge of the falsity of the misrepresentations.

21. Based upon the above, plaintiff is entitled to a

presumption of reliance upon the integrity of the market for the

purposes of class certification. Similarly, plaintiff is also

entitled to a presumption of reliance with respect to the

omissions alleged in the Complaint.

SUBSTANTIVE ALLEGATIONS

22. ArneriPath is a physician practice management

company providing anatomic pathology services in both outpatient

and inpatient hospital laboratories with a focus on

dermatopatho logy.

23. On October 22, 1997, the Company filed with the

SEC a Registration Statement and Prospectus (the October 1997

Prospectus") authorizing the sale of 5.6 million shares of the

Company's common stock at $16 per share.


24. The October 1997 prospectus stated:

Reliance upon Government Programs. The Company derived 57.0%, approximately 39.0% and approximately 35.5% of collections for the years ended December 31, 1995 and 1996 and for the six months ended June 30, 1997, respectively, and approximately 28.6% for the six months ended June 30, 1997 on a pro forma basis giving effect to the 1997 Acquisitions, from payments made by government sponsored healthcare programs (principally Medicare and Medicaid).

25. While the Company discussed increased scrutiny

surrounding Medicare payments and that the Company believed such

scrutiny might result in 'significant reductions in

reimbursements, " the Company failed to disclose that by the time

it had completed its IPO, it had been engaging in substantial

over-billing practices that the Individual Defendants knew would

result in substantive fines and negative publicity. The

Individual Defendants knew that had these practices been

disclosed prior to the IPO, the Company would not have been able

to raise nearly $84 million and retire substantial amounts of

debt that was to become due in 2000.

26. On December 5, 1997, the Company filed a Form 10-Q

for the quarterly period ended September 30, 1997. The 10-Q

stated, in pertinent part, that:

Healthcare Matters - The healthcare industry in general, and the services that the Company provides are subject to extensive federal and state laws and regulations. Additionally, a significant portion of the Company's net revenue is from payments by government-

wo


sponsored health care programs, principally Medicare and Medicaid, and is subject to audit and adjustments by applicable regulatory agencies. Failure to comply with any of these laws or regulations, the results of regulatory audits and adjustments, or changes in the amounts payable for the Company's services under these programs could have a material adverse effect on the Company's financial position and results of operations.

27. Although the Company discussed the regulatory

environment under which it operated, the Individual Defendants

failed to disclose that significant and material portions of its

income were derived by engaging in a course of business

operations based on the filing of materially inaccurate and

inflated Medicare cost reports. Absent this deceit and efforts

to inflate revenues, the Company would have reported materially

lower earnings and the price of its common stock would have

declined.

28. The Company also failed to state that its

operations and controls were designed so that it could continue

to conceal the fraudulent practice of filing improperly prepared

Medicare cost reports so as to artificially inflate revenues.

29. On February 27, 1998, the Company filed a Form 8-K

with the SEC announcing that on February 13, 1998, the Company

had completed the acquisition of Anatomic Pathology Associates

for approximately $8.3 million, funded by a credit facility and

186,828 shares of the Company's artificially inflated common

stock. The Company engaged in a series of other acquisitions

during the Class Period using its common stock as currency.

10


30. On March 31, 1998, the Company filed its Form 10-K

With the SEC for the year ended December 31, 1997. The 10-K

stated, in pertinent part, that:

The Company's business is subject to a variety of governmental and regulatory requirements relating to healthcare matters as well as laws and regulations that relate to business corporations in general. The Company believes that it exercises care in an effort to structure its practices and arrangements with hospitals and physicians to comply with relevant federal and state law and believes that such current arrangements and practices comply with all applicable statutes and regulations.

The Company derived approximately 39% and 29% of collections for the years ended December 1, 1996 and 1997, respectively, from payments made by government sponsored healthcare programs (principally Medicare and Medicaid)

31. On May 15, 1998, the Company filed its Form 10-Q

with the SEC. The lO-Q stated, in pertinent part, that:

Healthcare Matters - The healthcare industry in general, and the services that the Company provides are subject to extensive federal and state laws and regulations. Additionally, a significant portion of the Company's net revenue is from payments by government-sponsored health care programs, principally Medicare and Medicaid, and is subject to audit and adjustments by applicable regulatory agencies. Failure to comply with any of these laws or regulations, the results of regulatory audits and adjustments, or changes in the amounts payable for the Company's services under these programs could have a material adverse effect on the Company's financial position and results of operations.

32. The statements contained in the above 10-K and

11


lO-Q were materially false and misleading because the Company

again failed to state that its operations and controls were

designed so that it could continue to conceal the fraudulent

practice of filing improperly prepared Medicare cost reports so

as to artificially inflate revenues and bolster the Company's

common stock price.

33. On August 14, 1998, the Company filed a Form

10-Q for the period ending June 30, 1998, wherein the Company

again stated:

Healthcare Matters - The healthcare industry in general, and the services that the Company provides are subject to extensive federal and state laws and regulations. Additionally, a significant portion of the Company's net revenue is from payments by government-sponsored health care programs, principally Medicare and Medicaid, and is subject to audit and adjustments by applicable regulatory agencies. Failure to comply with any of these laws or regulations, the results of regulatory audits and adjustments, or changes in the amounts payable for the Company's services under these programs could have a material adverse effect on the Company's financial position and results of operations.

34. On October 27, 1998, the Company reported its

results for the quarter and nine months ended September 30, 1998,

the Company stated:

net revenue for the quarter ended September 30, 1998 was $47.0 million, compared to $27.8 million for the third quarter of the prior year. The majority of the increase in same practice net revenue was from the outpatient side of the business. The remaining increase in net revenue of

12


$18.0 million resulted from the operations of practices which were acquired during 1997 and 1998. Net income for the third quarter of 1998 was $5.0 million, compared to $1.7 million for the same period of the prior year. For the third quarter of 1998, net income per share increased to $0.23, based on 21.4 million diluted weighted average shares outstanding, compared to $0.13, based on 12.7 million diluted weighted average shares outstanding, for the same period in 1997.

For the nine months ended September 30, 1998, ArneriPath reported net revenue of $125.8 million, an increase of 72% over the $73.1 million reported for the same period in 1997. Same practice net revenue for the 1998 nine month period increased by $7.6 million, or 11%. Same practice hospital net revenue was flat, while the outpatient net revenue increased approximately 9%. In addition, the Medicare reimbursement increase which was effective January 1, 1998 resulted in a 2% increase in same practice net revenue. Net income for the nine-month period ended September 30, 1998 was $13.3 million, or $0.65 per share, compared to $4.0 million, or $0.33 per share, for the same period in 1997. The diluted weighted average number of shares outstanding for the nine months ended September 30, 1998 was 20.8 million compared to approximately $17.2 million, compared to $7.6 million for the same period in 1997.

35. The Company also stated that over the previous 12

months it had acquired 14 pathology practices in numerous states.

Defendant New stated with regard to the Company's purported

growth that:

'The company has demonstrated its ability to increase revenue and, more importantly, profitability. As a percent of net revenue, income from operations for the quarter ended September 30, 1998 jumped 3 percentage points, from 20% to 23%, compared to the third quarter of 1997, said James C. New, President and Chief Executive Officer of

13


AmeriPath. "Each of our acquisitions is strategically and geographically important for the company's growth. With the acquisitions already completed in 1998, we have added approximately $40 million to the company's annual net revenue run rate and have exceeded AmeriPath's acquisition plan for the full year."

36. The market's reacted positively to these

statements as the price of the Company's common stock rose from

$12 1/6 on October 26, 1998, to $14 9/16 on November 10, 1998.

However, these positive statements were again false and

misleading and issued solely to artificially inflate the

Company's common stock. Defendants failed to disclose that these

reported increases in revenues were the function of substantial

over-billing practices and a concerted scheme to overbill

Medicare since at least 1996. Defendants were aware of this but

failed to disclose it because, among other reasons, the Company

had been using its common stock as an acquisition tool during the

previous year and intended to continue this practice going

forward.

37. On November 13, 1998, the Company filed a Form 10-

Q for the period ending September 30, 1998. Again, the Company

issued a statement concerning its dependence on receiving

payments under Medicare and that the Company was subject to

routine scrutiny with regard to the receipt of these payments.

Specifically, the Company stated:

Healthcare Matters - The healthcare industry in general, and the services that the Company provides are subject to extensive federal and

14


state laws and regulations. Additionally, a significant portion of the Company's net revenue is from payments by government-sponsored health care programs, principally Medicare and Medicaid, and is subject to audit and adjustments by applicable regulatory agencies. Failure to comply with any of these laws or regulations, the results of regulatory audits and adjustments, or changes in the amounts payable for the Company's services under these programs could have a material adverse effect on the Company's financial position and results of operations.

38. The Company again failed to state that its

operations and controls were designed so that it could continue

to conceal the fraudulent practice of filing improperly prepared

Medicare cost reports. Moreover, the Company failed to disclose

that it had engaged in a substantial scheme to overbill Medicare

since at least 1996 that would result in punitive fines should it

be detected.

The Truth Concerning AmeriPath's Fraud on the Medicare System

is Finally Revealed

39. On November 23, 1997 (after the close of the

market) it was reported over the PRNewswire that the Company had

received a refund request in the amount of $2.95 million from

[Medicare] . The request follows an on-site review, in April

1997, by federal and state agencies . . . of the Company's

Medicare billing practices in 1996 at its Ft. Lauderdale

laboratory facility." The refund request is in excess of the net

income of $2 million reported for fiscal year 1996.

15


40. According to Medicare's investigators who

conducted a comprehensive medical review, the Company

overbilled Medicare in an amount of $2.95 million and will seek

the 'recoupment of this amount by December 10, 1998." Moreover,

according to the Medicare investigation:

the determination is based on their finding that AmeriPath's Ft. Lauderdale facility accepted payment for services that either were billed using an improper procedure code or were not adequately documented. This determination was made following a review of a random sample of the Company' services to 30 Medicare beneficiaries (and records, test results, other documents and services in connection therewith)

41. Significantly, Medicare investigations also stated

that they believe "an over payment for 1997 likely exists, and

that a review of a sample of 1997 services will be conducted."

42. The Market's reaction to these revelations was

swift and punitive. The Company's common stock, which closed on

November 23, 1998, at $9.09, fell to $4.875 per share on

November 24, 1998 - a decline of nearly 45% on extremely heavy

volume of 5.98 million shares - 59 times daily average volume.

Moreover, securities industry analysts at Hambrecht & Quist who

considered the news a surprise cut the Company's rating from

"buy" to 'hold"

SCIENTER ALLEGATIONS

43. As alleged herein, defendants acted with scienter

in that defendants knew that the public documents and statements

ILl


issued or disseminated in the name of the Company were materially

false and misleading, knew that such statements or documents

would be issued or disseminated to the investing public; and

knowingly and substantially participated or acquiesced in the

issuance or dissemination of such statements or documents as

primary violations of the federal securities laws. As set forth

elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding

AmeriPath, their control over, and/or receipt and/or modification

of AmeriPath's allegedly materially misleading misstatements

and/or their associations with the Company which made them privy

to confidential proprietary information concerning AmeriPath,

participated in the fraudulent scheme alleged herein. Defendants

knew and/or recklessly disregarded the falsity and misleading

nature of the information which they caused to be disseminated to

the investing public.

44. The Individual Defendants engaged in such a scheme

to inflate the price of AmeriPath common stock in order to: (i)

protect and enhance their executive positions; (ii) enhance the

value of their personal AmeriPath securities and allow for

profitable insider sales yielding millions in illegal insider

trading profits during the Class; (iii) utilize the Company's

common stock as currency to effectuate numerous acquisitions

during the class period; and. (iv) to create a public market for

their securities by virtue of the IPO.

17


45. Moreover, defendants' insider selling is highly

probative of defendants' scienter and is part of defendants'

scheme, artifice to defraud or acts, practices or course of

business in violation of Section 10(b) and Rule l0b-5. As set

forth above, while defendants were issuing false favorable

statements about the Company's business and concealing or

obscuring negative information, defendant AmeriPath and had

access to confidential information and were aware of the truth

about the Company and its operations, were benefitting from the

illegal course of business or course of conduct described in this

complaint by selling large blocks of the Company's stock at

artificially inflated prices without disclosing the material

adverse facts about the Company to which they were privy.

46. Specifically, during the class period defendants

listed below effectuated the following insider sales, which were

unusual and suspicious in nature:

i) Levin sold 10,000 shares @ $12.94 on 11/2/98;

ii) New sold 50,000 shares 8 $13 on 10/30/98;

iii) Levin sold 8,000 shares @ $13.5 on 8/12/98;

iv) New sold 20,000 shares 8 $13.31 on 8/12/98

v) Levin sold 17,200 shares 8 $16.13 on 5/4/98

vi) New sold 15,000 shares 8 $16.13 on 5/4/98

COUNT I

VIOLATION OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE 10b-5 AGAINST ALL DEFENDANTS


47. Plaintiff incorporates by reference and realleges

each and every allegation contained above.

48. This claim is asserted by plaintiff and the Class

against all defendants and is based upon Section 10(b) of the

Exchange Act, 15 U.S.C. § 78j (b) and Rule lOb-5 promulgated

thereunder.

49. During the Class Period, the defendants,

individually and in concert, directly and indirectly, engaged and

participated in a continuous course of conduct to conceal adverse

material information regarding the operational condition and

financial controls of AmeriPath as specified herein. Defendants

intentionally or recklessly employed devices, schemes, and

artifices to defraud and intentionally or recklessly engaged in

acts, practices, and a course of conduct as herein alleged in an

effort to maintain artificially high market prices for the common

stock of defendant AmeriPath. This included the formulation,

making of and/or participating in the making of untrue statements

of material facts and the omission to state material facts

necessary in order to make the statements made, in the light of

the circumstances under which they were made, not misleading.

50. Defendants' latter acts and practices operated as

a fraud and deceit upon plaintiff and other members of the Class

by creating expectations of optimism which were unrealistically

favorable in light of their knowledge or reckless disregard of

the truth concerning: the fact that significant and material

19


portions of AmeriPath's income were derived by engaging in a

course of business based upon the filing of materially inaccurate

and inflated Medicare costs reports, its improper structuring of

its transactions with healthcare providers to increase its

reimbursable expenses and its implementation of controls and

systems that were designed so that it could continue to conceal

its engagement in the fraud and abuse of the Medicare system and

its potential liability, in connection with the purchase of

AmeriPath's publicly traded securities by plaintiff and the other

members of the Class.

51. The market price of AmeriPath's common stock was

artificially inflated throughout the Class Period by the

Individual Defendants' omissions and misrepresentations.

52. The statements particularized above were false and

misleading when made by the defendants and/or in the name of

AmeriPath. By making these statements, the defendants recklessly

created a false and misleading impression in the investment

community, with respect to, inter alia, AmeriPath's income and

the preparation and filing by the Company of Medicare cost

reports and the adequacy of its controls to ensure that the cost

reports it submitted for reimbursement by Medicare were not

prepared fraudulently. These statements acted to artificially

inflate the market price of AmeriPath's common stock throughout

the Class Period. Defendants, who were under a duty to make

truthful and complete disclosures, instead recklessly or

HE


intentionally misrepresented or concealed material facts

throughout the Class Period.

53. During the Class Period, Amer-Path made the

statements identified above which were materially false and

misleading in violation of Section 10(b) of the Exchange Act and

Rule 10b-5 thereunder. These statements, among others, were

materially false and misleading and omitted to state material

facts necessary in order to make the statements made, in light of

the circumstances under which they were made, not misleading.

54. With reckless disregard for the true operational

condition of AmeriPath, the Individual Defendants caused

AmeriPath to make the misstatements and omissions of material

fact as alleged herein.

55. In direct or indirect reliance on the aforesaid

false and misleading statements, plaintiff and the other members

of the Class purchased AmeriPath common stock during the Class

Period at artificially inflated prices and were damaged thereby.

56. Relying upon the integrity of the marketplace and

the market price of AmeriPath's common stock, plaintiff and the

other members of the Class purchased ArneriPath's common stock at

artificially inflated prices and were damaged thereby.

Defendants' conduct as alleged has damaged plaintiff and the

other members of the Class in an amount which cannot presently be

ascertained.

57. Had plaintiff and the other members of the Class

known of the materially adverse information which was not

21


disclosed by defendants, they would not have purchased ArneriPath

common stock at all, or not at. the artificially inflated prices

they paid, and would not have sustained damages.

COUNT II

VIOLATION OF SECTION 20 OF THE EXCHANGE ACT AGAINST THE INDIVIDUAL DEFENDANTS

58. Plaintiff incorporates by reference and realleges

each and every allegation contained above.

59. The Count is asserted against the Individual

Defendants and is based on Section 20(a) of the Exchange Act.

The Individual Defendants acted as controlling persons of

ArneriPath, within the meaning of Section 20 of the Exchange Act.

By reason of their positions as senior officers and directors of

AmeriPath, the Individual Defendants had the power and authority

to cause or to prevent the wrongful conduct complained of herein.

60. By reason of such wrongful conduct, the Individual

Defendants are liable to plaintiff and the Class pursuant to

Section 20 of the Exchange Act. As a direct and proximate result

of defendants' wrongful conduct, plaintiff and the other members

of the Class suffered damages in connection with their purchases

of AmeriPath's common stock during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment as follows:

A. An order certifying the Class as set forth herein

and designating plaintiff as the representative thereof;

22


B. A judgment declaring the conduct of the defendants

to be in violation of law as set forth herein;

C. A judgment awarding plaintiff and the other

members of the Class compensation for the damages which they have

sustained as a result of the defendants' unlawful conduct stated

above;

D. A judgment awarding plaintiff's reasonable

attorneys' fees, experts' fees, interest and costs of suit; and

E. Granting such other and further relief as this

Court may deem just.

PLAINTIFF DEMANDS A JURY TRIAL

November 25, 1998

Respectfully submitted,

GOODKIND LABATON RUDOFF & SUCHAROW LLP

By: Emi 1 Fla. Bar No. QJ714

Peter H. Rachman Fla. Bar No. 977756 2455 B. Sunrise Blvd., Ste 813 Ft. Lauderdale, Fl 33304 954/630-1000 954/565-1312

WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP

David A.P. Brower Gregory M. Nespole 270 Madison Avenue New York, New York 10016 (212) 545-4600 (212) 545-4653

23

NOV-25-98 11:30 FROM:WO1 HALDENSTEIN ID: Case 9:98-cv-08852-ASG Document 1 Entered on FLSD Docket 12/01/1998 Page 24 of 25

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November, 19*

V*R-W--lwt

Case 8-cv ocument 1 Entered on FLSD Docket 1/01/19Page 25 of 25 JS 44 ( Rev. 12/96)

-08

CIVIL COVER SHEE1 1v1G1SI'RATh jUDLb if

The JS-44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other 11300W

FM required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required kr the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

1. (a) PLAINTIFFS DEFENDANTS

JAQ< HJ1S, tr ictusiU'y 4rst or kkIf $ U ,+her, M1.IPflTh 1 N(. C. 'i At_At' LVIN1

£HI1rt sdvciiec2. ftiei 1

(b) COUNTY OF RESIDENCE OF FIRST LISTED PLAINTIFF tJtt.pj '1 AN ('OUfITI tJY COUNTY OF RESIDENCE OF FIRST LISTED DEFENDANT (EXCEPT IN U.S PLAINTIFF CASES) . (IN U.S PLAINTIFF CAS i -

I ??Ct' - NOTE 2 LAND CONDEMNATION CASES US,ThE LOCATION F

TRACT OF LAND iNVOLVED

(C) AVIORNEYS (FIRM NAME ADDRESS. AND TELEPHONE NUMBER)

oLA.P GooD 1b P1bW x,+ .4

tr4I-ri4 1c1S'64C. I3 2..4SS Cut Sr'sc Et,&. c4-LJJ9-33

ATTORNEYS (IF KNOWN) r --

,

ST. LUCIE, INDIAN RIVER, OKEECHOBE PrGHLAN&' '

cffIZENSHIP OF PRINCIPAL PARTIES (PLACE AN X IN ONE BOX FOR PLAINTIFF

(For Diversity Cases Only) AND ONE BOX FOR DEFENDANT)

PTF DEF PTF DEF Citizen of This State o f o f Incorporated or Principal Place 04 0 4

of Business In This State

Citizen of Another State 0 2 0 2

Incorporated and Principal Plaw IJ 5 0 5 of Business In Another State

Citizen or Subject of a 0 3 0 3

Foreign Nation 0 6 0 6

(d) CIRCLE COUNTY WHERE ACTION AROSE: DADE, MONROE, BROWARI

II. BASIS OF JURISDICTION (PLACE AN X IN ONE BOXONLY)

o n US. Government eral Question Plaintiff (U.S Government Not a Party)

0? U.S. Government 0 4 Diversity Defendant (Indicate Citizenship of Parties

in I tem III)

I~, O*,10,lal

IN (PLACE AN "X" IN ONE BOX ONLY) Appeal to District

Transferred from Jud9e from o 2 Removed from n 3 Remanded from o 4 Reinstated or D 5 another district o 6 Multidistrict n i Magistrate

Proceeding State Court Appellate Court Reopened (specify) Litigation Judgment

V. NATURE OF SUIT (PLACE AN "X" IN ONE BOX ONLY)

A CONTRACT I A TORTS JIFORFEITUREIPENALTYJ A BANKRUPTCY I A OTHER STATUTES

0110 Insurance I PERSONAL INJURY PERSONAL INJURY B0 610 Agriculture

0 120 Marine I 0 310 Airplane 0 362 Personal Injury - B0 620 Other Food & Drug

0 130 Miller Act I 0 315 Airplane Product Med Malpractice BD 625 Drug Related Seizure

0 140 Negotiable instrurrient Liability 0 365 Personal Injury of Properly 21 USC 881

0 150 Recovery 01 Overpayment I 0 320 Assault Libel & Product Liability B0 630 Liquor Lawn & Enforcement of Judgment Slander 0 368 Asbestos Personal 60 640 R B & Truck

o isi Medicare Act 0 330 Federal Employers Injury Product Liability 80 650 Airline Regs B0 152 Recovery of Defaulted Liability I BD 660 Occupational

Student Loans 0 340 Marine PERSONAL PROPERTY Safety/Health Exci Vererans, 0 345 Marine Product 0 370 Other Fraud BQ 690 Other

80153 Recovery of Oxerpayrrent Liability 0 371 Truth in Lending of Veteran s Benefits 0 350 Motor Vehicle 0 380 Other Personal A LABOR

0 160 Stockholders Suits 0 355 Moroi Vehicle Properly Darrrag -----------------------I 0 190 Oltrei Corrrra,:t Product Liability 385 operly Darra.Jn 0 710 5ar Lato TA dards 0 861 HIA . 1395

0 195 Corl i art Pr,50udr Lac r. 0 360 Other Peisoral irrjui Product LahIr, 0.1 0 862 Black Lunc

0 720 labor Mqwr atiorrs 0 863 DIWC DlWI'. 05ldtl A REAL PROPERTY A CIVIL RIGHTS PRISONER PETITIONS 0 864 SSID Tine xc

.1 0 730 Lahor:Mgnc: .clino 0 865 PSI i405c•

& DiSdIOSuC 0 210 LanA crdcr'-rraPc 0 441 V nI 81 510 Motion r da It

BE 220 Foieclosure 0 442 Employment Sentence 0 740 Railway LaTor AOl FEDERAL TAX SUITS I 0 230 Bern Lease , E1ectrrrerrl 0 443 Housing, HABEAS CORPUS: I

0240 Torts to Land I Acrrarrnrnrrdasons BE 530 General A0 535 Death Penally 0 790 Other LaOcc .1 gaton

E] 245 Tort Product Lability 0 444 Welfare BE 540 Mandamus & 0111w

o 290 All Other Peal Propei1 0 440 011ie; Civil Rights 80 550 Civil Rights cO 791 Ernpl Bet I'll

BE 555 Prison Conrjiriorr Security Ac'

VI. CAUSE OF ACTION ICtTE THE US CIVIL STATUTE UNDER WHICH YOU ARE FILING AND WRITE BRIEF STATEMENT OF CAUSE DO NOT CITE JURISDICTIONAL STATUTES UNLESS DIVERSITY)

k5 L1cc_-?,r LENGTH OF TRIAL via days estimated (for both sides to try entire case) tJ C

O 422 Appeal 28 USC 158

0 423 Withdrawal 28 USC 157

A PROPERTY RIGHTS

0 820 Copyrights 830 Patent 840 TrademaP

SECURITY

A0 870 Taxes (i_i S ° Ia,lrhn or Defendant-

AD

871 IRS - Third Party 26 USC 7605

O 400 Slate Reapportionment 0 410 Antitrust O 430 Banks and Banking

BO 450 Commerce/ICC Raes/etc

0 460 Deportation

D 470 Rac er Influenced and upt Organtzalions

0 8 Selective Service 50 Securltren.lCommoditiesl

Exceanrce

O 875 Customer Crraxenge 12 USC 3410

O 891 Agricultural Acts O 892 Econom, Stabczarccn Act

0 893 Enxior,rnenta Mattes

O 894 Energy Allocation Act O 895 Preedom 01

Vrtcrrmatitrr Act

0 900 Appeal .,! Oee Determination i.rrrder E qual Access to Justice

0 950 000stitutonality of Stare Statutes

o 890 Diner Statutory Actions A OR B

VII. REQUESTED IN IF THIS IS A CLASS ACTION DEMAND $

COMPLAINT: UNDER FR .0 P 23

VIII.RELATED CASE(S) (See Instructions) IF ANY JUDGE

DATE SIGNA ~OATTORNEY OF REC

FOR OFFICE USE ONLY I I f 5 jz fl 1Z R' I ) A .rTt5r 'n.J APP1 VlrdC lFP ii non

CHECK YES only if

JURY DEMAND:

DOCKET NUMBER

.t-R't k0Loc1

Ii irnc,c

nt

0 NO

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