Manchin v. PACS Group, Inc.

Labaton Keller Sucharow serves as lead counsel in a securities class action against PACS Group, Inc. (PACS or the Company), certain of its officers and directors, and certain of its underwriters (collectively, Defendants).  The lawsuit alleges violations under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act), U.S. Securities and Exchange Commission (SEC) Rule 10b-5, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the Securities Act) in connection with the Company’s initial public offering (IPO) and secondary public offering (SPO).  PACS is a large operator of skilled nursing facilities and post-acute care facilities in the United States headquartered in Farmington, Utah.  PACS serves over 27,000 patients daily across its national portfolio of approximately 280 facilities in 16 states.  

On November 13, 2024, a securities class action lawsuit was filed against PACS and certain officers and directors captioned Manchin v. PACS Group, Inc., No. 1:24-cv-08636 (S.D.N.Y.) (the Manchin Complaint).  On November 21, 2024, Labaton Keller Sucharow filed an expanded securities class action lawsuit on behalf of the New Orleans Employees’ Retirement System captioned New Orleans Employees’ Retirement System v. PACS Group, Inc., No. 24-cv-08882 (S.D.N.Y) (the New Orleans Complaint).  The New Orleans Complaint expanded upon the Manchin Complaint by adding additional claims in connection with the Company’s SPO and adding three additional defendants who participated in the SPO, Michelle Lewis (PACS’ Chief Accounting Officer), Evelyn Dislaver (a director on PACS’ board), and UBS Securities LLC (an SPO underwriter).  On February 11, 2025, the Court consolidated the two actions and appointed 199SEIU Health Care Employees Pension Fund as Lead Plaintiff and Labaton Keller Sucharow as Lead Counsel.

The case alleges that documents filed by Defendants in connection with the SPO (the SPO Materials) were negligently prepared and contained untrue statements of materially false statements.  Additionally, between April 11, 2024 through November 5, 2024, inclusive (the Class Period), Defendants allegedly made materially false and misleading statements regarding the Company’s business, operations, and prospects, failing to disclose: (a) that PACS inflated its Medicare revenues by misclassifying lower-acuity patients as high-acuity patients that required skilled care in violation of a Covid-era waiver, thereby securing higher reimbursement rates; (b) that after the expiration of the COVID-era waiver, PACS inflated its revenues by fraudulently billing for unnecessary treatments and for services never provided to patients; (c) that PACS’ historical revenues, competitive advantages, and growing market share were the result of systemic, improper, unethical, and/or illegal practices, and, thus, unsustainable; (d) that PACS’ risk disclosures were materially false and misleading because they characterized adverse facts that had already materialized as mere possibilities; and (e) as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and/or misleading or lacked a reasonable basis.

On November 4, 2024, Hindenburg Research published a report detailing several allegations against the Company.  On this news, PACS’ share price dropped $11.93 per share, or 27.8 percent, to close at $31.01 per share on November 4, 2024. On November 6, 2024, the Company announced that it would delay the release of its third-quarter 2024 financial results.  PACS stated that the postponement was due to the Company’s Audit Committee investigating recent third-party allegations concerning its reimbursement and referral practices.  PACS also disclosed that it had received civil investigative demands from the federal government regarding these practices, which it stated may or may not have been related to the recent third-party report.  On this news, PACS’ share price dropped $11.45 per share, or 38.8 percent, to close at $18.09 per share on November 6, 2024.

The consolidated case is Manchin v. PACS Group, Inc., No. 1:24-cv-08636 (S.D.N.Y.).  Labaton Keller Sucharow represents Lead Plaintiff 199SEIU Health Care Employees Pension Fund.