Tenet Co-Founders Sue Firm Claiming Breach of Contract
Amanda Bronstad
The co-founders of Tenet Healthcare Corp. have sued the Santa Barbara hospital operator for more than $30 million, claiming breach of an employment contract and fraud.
Former chairman and chief executive Richard Eamer and former president and chief operating officer Leonard Cohen filed the lawsuit Dec. 7 in Los Angeles Superior Court. The two held various management positions within the company, then called National Medical Enterprises Inc., after founding it in 1969. They left in 1993, and the company became Tenet in 1995.
Tenet spokesman Harry Anderson said the case is without merit.
The case hinges on when options expired on 880,000 Tenet shares, collectively held by Eamer and Cohen. The options, which carried an exercise price of $22.43 a share, were awarded to the co-founders in 1991. The two left in 1993.
“When they left, they were notified, as part of their severance package, that their options would expire in three years,” Anderson said.
Between their 1993 departure and the purported 1996 expiration of the options, the highest price Tenet stock traded at was $23.37, barely above the $22.43 exercise price.
Eamer and Cohen claim they had “anti-forfeiture provisions” in their employment agreements setting the options’ expiration date at 10 years after the ir 1991 award. That would put the expiration date in August of this year, by which time its shares had risen way above the exercise price. (Last week, the stock was trading at $59.)
Eamer and Cohen claim they tried to exercise the options earlier this year, but were told they had expired.
Allan Browne of Browne & Woods LLP in Los Angeles, who represents the two, said the suit is based on the $32.2 million the co-founders would have realized in profit, given today’s share price. But it could end up being more than $100 million with punitive damages.
Bad Publicity
The former chief executive of now-defunct Ceryx Inc. of Santa Paula sued the Los Angeles Times and its parent company, Tribune Co., for libel and defamation, claiming a Dec. 5, 2000 story about the company caused her to resign and forced the company to file for bankruptcy protection.
Dorriah Page, who resigned before Ceryx filed for Chapter 7 bankruptcy protection Nov. 6, 2001, filed the lawsuit Dec. 4 in Los Angeles Superior Court. In the lawsuit, Page says the L.A. Times, the reporters and editors of the story, accused her of lying about her educational background and previous work experience. The article also said Page lied about obtaining patents on certain products of Ceryx, which made low-emission diesel catalytic converters.
The article caused Dow Chemical Co. to end its deals with Ceryx and the California Energy Commission to hold back a grant to the company, the lawsuit asserts.
L.A. Times spokesman David Garcia declined to comment.
Staff reporter Amanda Bronstad can be reached at (323) 549-5225 ext. 225, or at
[email protected].
