Robert L. Lach, Trustee, et al. v. Humana, Inc., et al. 08 ...securities.stanford.edu/filings-documents/1039/HUM... · Case3-08-cv-00181-JGH Document 1 Filed 04/04/2008 Page2 of 19

Case 3-08-cv-00181-JGH Document 1 Filed 04/04/2008 Page 1 of 19

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF KENTUCKY

AT ELOUISV I L

ROBERT L. LACH, TRUSTEE andPMR INVESTMENT CO., LLC on behalf ofthemselves and all those similarly situated

Plaintiffs,

vs.

HUMANA, INC. and MICHAEL B.McCALISTER and JAMES H. BLOEM,

Defendants

81-Civil Action No.(Judge )

CLASS ACTION COMPLAINT

(Jury Trial Demanded)

Plaintiffs, by and through their attorneys, state upon personal knowledge as to allegations

about themselves, otherwise, the allegations are based upon the investigation of counsel which

has included, inter alia, review and analysis of filings made by Humana, Inc. ("Humana" or the

"Company") with the Securities and Exchange Commission ("SEC"), press releases issued by

Humana, securities analysts' reports and media reports concerning Humana.

NATURE OF THE ACTION

I. This is a class action on behalf of all persons, other than Defendants and certain

related persons, who purchased Humana common stock on the open market during the period

from February 4, 2008 through March 11, 2008, inclusive (the "Class Period") to recover

damages caused by Defendants' fraudulent scheme to artificially inflate the price of Humana

common stock through a series of false and misleading statements to the market in violation of

the federal securities laws. Defendants advised investors on February 4, 2008 that Humana was


raising its estimates for the full year 2008 earnings per share to $5.35 to $5.55, and estimates

for the first quarter of 2008 earnings per share to $0.80 to $0.85. Defendants basicly reiterated

the Company's commitment to meeting these projections on February 12, 2008 and again on

February 28, 2008. Despite these repeated assurances, Defendants were well aware of or

recklessly disregarded numerous factors which were having a negative impact on Humana's

earnings throughout this period, including that the Company faced serious cost control issues

which made attaining full year and first quarter 2008 earnings per share projections impossible.

Then, before trading opened on March 12, 2008 Defendants stunned the market by announcing

that, contrary to their assurances, full year 2008 earnings per share of $5.35 to $5.55 was being

cut to $4.00 to $4.25. First quarter 2008 earnings per share guidance was also being cut from

$0.80 to $0.85 to $0.44 to $0.46. This news caused the price of Humana stock to fall

approximately 10% on March 12, 2008 on a trading volume of more than 64 million shares.

JURISDICTION AND VENUE

2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§78j(b) and 78t(a)] and

Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R. §240.lOb-5].

3. This Court has jurisdiction of this litigation pursuant to §27 of the Exchange Act,

as amended [15 U.S.C. §78aa], and 28 U.S.C. §1331.

4. Venue is proper in this District pursuant to §27 of the Exchange Act and 28

U.S.C. §1391(b) and (c). The acts, conduct and scheme complained of herein , including the

preparation, issuance and dissemination of materially false and misleading information to the

investing public, occurred in part in this District. The Company has its principal place of

business in this District.

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5. In connection with the acts, conduct, and scheme alleged in this Complaint,

Defen(Alants , directly and indirectly, used the means and instrumentalities of interstate

commerce , including the mails and telephonic communications and the facilities of the national

securities exchanges.

PARTIES

6. Plaintiff Robert L. Lach, Trustee, as set forth in the accompanying certification,

incorporated by reference, purchased the common stock of Humana at artificially inflated prices

during the Class Period and has been damaged thereby.

7. Plaintiff PMR Investment Co., LLC , as set forth in the accompanying

certification, incorporated by reference, purchased the common stock of Humana at artificially

inflated prices during the Class Period and has been damaged thereby.

8. Defendant Humana is a Delaware corporation with its principal place of business

located at 500 West Main Street, Louisville, Kentucky 40202. The Company provides various

health and supplemental benefit plans for employer groups, government benefit programs, and

individuals in the United States.

9. Defendant Michael B. McCallister ("McCallister") served at all relevant times as

the Company's President, Chief Executive Officer and a Director.

10. Defendant James I. Bloem ("Bloe^^" ) served at all relevant times as the

Company's Chief Financial Officer, Sr. Vice President and Treasurer. McCallister and Bloem

are collectively referred to as the "Individual Defendants").

THE ROLE AND RESPONSIBILITYOF THE INDIVIDUAL DEFENDANTS

11. Because of the Individual Defendants' positions with the Company, they had

access to the material adverse undisclosed information about the Company's business,

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operations, operational trends, financial statements and markets via access to internal corporate

documents (including the Company's operating plans, budgets, forecasts and reports of actual

operations compared thereto), conversations and connections with other corporate officers and

employees, attendance at management and Board of Directors meetings with committees

thereof and via reports and other information provided to them

12. It is proper to treat the Individual Defendants as a group for pleading purposes

and to presume that the false, misleading and incomplete information conveyed in the

Company's public filings, press releases, and other publications as alleged herein are the

collective actions of the narrowly defined group of Defendants identified above. The Individual

Defendants, by virtue of their high-level positions with the Company, directly participated in

the management of the Company, were directly involved in the day-to-day operations of the

Company at its highest levels, and were privy to confidential proprietary information

concerning the Company and it's business, operations, growth, financial statements, and

financial condition as alleged herein. The Individual Defendants were involved in drafting,

producing, reviewing and/or disseminating the false and misleading statements and information

alleged herein, and were aware, or recklessly disregarded, that the false and misleading

statements were being issued regarding the Company, and approved or ratified these statements,

in violation of the federal securities laws.

13. As officers and controlling persons of a publicly-held company whose common

stock was, and is, registered with the SEC pursuant to the Exchange Act and is traded on the

New York Stock Exchange and governed by the provisions of the federal securities laws, the

Individual Defendants each had a duty to promptly disseminate accurate and truthful

information with respect to the Company's financial condition and performance, growth,

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operations , financial statements , business , markets, management and earnings , and to correct

any previously-issued statements that had become materially misleading or untrue, so that the

market price of the Company ' s publicly-traded common stock would be based upon truthful

and accurate information. The Individual Defendants ' misrepresentations and omissions during

the Class Period violated these specific requirements and obligations.

14. The Individual Defendants participated in the drafting , preparation , and/or

approval of the various public and shareholder and investor reports and other communications

complained of herein and were aware of, or recklessly disregarded , the misstatements contained

therein and omissions therefrom , and were aware of their materially false and misleading

nature. Because of their Board membership and/or executive and managerial positions within

Humana, each of the Individual Defendants had access to the adverse undisclosed information

about Humana ' s financial condition and performance as particularized herein and knew (or

recklessly disregarded) that these adverse facts rendered the positive representations made by or

about Humana and its business issues or adopted by the Company materially false and

misleading.

15. The Individual Defendants , because of their positions of control and authority as

officers and/or directors of the Company, were able to and did control the content of the various

SEC filings , press releases and other public statements pertaining to the Company during the

Class Period. Each Individual Defendant was provided with copies of the documents alleged

herein to be misleading prior to or shortly after their issuance and/or had the ability and/or

opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the

Individual Defendants is responsible for the accuracy of the public reports and releases detailed

herein and is therefore primarily liable for the misrepresentations contained herein.

-5-

16. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil

Procedure 23(a) and 23(b)(3) on behalf of himself and a class (the "Class") of all persons who

purchased Humana common stock during the Class Period (from February 4, 2008 through

March 11, 2008), and who were damaged thereby. Excluded from the Class are Defendants,

any parent, subsidiary, affiliate, officer, or director of Humana, any entity in which any

excluded person has a controlling interest, and the legal representatives, heirs, successors and

assigns of any excluded person.

17. The members of the Class are so numerous that joinder of all members is

impracticable. Humana has approximately 170 million shares outstanding held by thousands of

record and beneficial owners. While the exact number of Class members is unknown to

Plaintiffs at the present time, Plaintiffs reasonably believes that there are, at a minimum,

thousands of members of the Class located throughout the United States. During the Class

Period, Humana's stock was actively traded on the New York Stock Exchange, an efficient

market.

18. Plaintiffs will fairly and adequately represent and protect the interests of the

members of the Class. Plaintiffs have retained competent counsel experienced in class and

securities litigation and intends to prosecute this action vigorously. Plaintiffs are members of

the Class and do not have interests antagonistic to, or in conflict with, the other members of the

Class.

19. Plaintiffs' claims are typical of the claims of the members of the Class. Plaintiffs

and all members of the Class purchased Humana's common stock during the Class Period at

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artificially inflated prices and have sustained damages arising out of the same wrongful course

of conduct.

20. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) Whether the federal securities laws were violated by Defendants' acts and

omissions as alleged herein;

(b) Whether Defendants participated in and pursued the common course of

conduct and fraudulent scheme complained of herein;

(c) Whether the statements disseminated to the investing public, including

purchasers of Humana stock, during the Class Period omitted and/or misrepresented material

facts about the business, financial condition, and performance of Humana;

(d) Whether Defendant acted knowingly or recklessly in omitting to state

and/or misrepresenting material facts; and

(e) Whether Plaintiffs and the other members of the Class have sustained

damages and, if so, the appropriate measure thereof.

21. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy since, among other things, joinder of all members of the Class

is impracticable. Furthermore, as the damages suffered by individual Class members may be

relatively small, the expense and burden of individual litigation make it virtually impossible for

many Class members individually to seek redress for the wrongful conduct alleged. Plaintiffs

do not foresee any difficulty in the management of this litigation that would preclude its

maintenance as a class action.

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22. Plaintiffs will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine ine that, among other things:

(a) Defendants made public misrepresentations or failed to disclose material

facts during the Class Period;

(b) The omissions and misrepresentations were material;

(c) The stock of Humana traded in an efficient market;

(d) The misrepresentations alleged would tend to induce the market to

misjudge the value of the stock of Humana; and

(e) Plaintiffs and the other members of the Class purchased the common stock

between the time the Defendants failed to disclose or misrepresented material facts and the time

the true facts were disclosed, without knowledge of the omitted or misrepresented facts.

23. Based upon the foregoing, Plaintiffs and the other members of the Class are

entitled to a presumption of reliance upon the integrity of the market for, at least, the purpose of

class certification, as well as for ultimate proof of their claims on the merits. Plaintiffs will also

rely, in part, upon the presumption of reliance established by a material omission.

24. The names and addresses of at least the owners of the Huaman stock purchased

during the Class Period are available from Humana and/or its transfer agent(s) and/or brokerage

firms. Notice can be provided to purchasers and sellers of the securities by a combination of

published notice and first class mail using techniques and forms of notice similar to those

customarily used in class actions arising under the federal securities laws.

THE FRAUDULENT SCHEME AND DEFENDANT'SROLE AND RESPONSIBILITY WITH RESPECT THERETO

25. During the Class Period, Defendants embarked upon and participated in a plan,

scheme and a course of conduct which was intended to and, throughout the Class Period, did:

-8-


(i) deceive the investing public, including Plaintiffs and the other Class members, regarding,

among other things, the business, financial condition and performance of Humana;

(ii) artificially inflate and manipulate the market price of Humana stock; and (iii) cause

Plaintiffs and the other members of the Class to purchase Humana stock at artificially

manipulated prices. In furtherance of the foregoing unlawful plan, scheme and course of

conduct, Defendants, among other acts of deception, issued or caused to be issued, during the

Class Period, a series of false and misleading public statements, as described herein, which

operated as a fraud and deceit upon the market for the stock, Plaintiffs and the other members

of the Class.

DEFENDANTS' FALSE AND MATERIALLYMISLEADING STATEMENTS DURING THE CLASS PERIOD

26. On February 4, 2008, the first day of the Class Period, Humana issued a press

release announcing its financial results for the fourth quarter of 2007 and raising its earnings

estimate for the full year 2008. For the full year 2008, the Company stated that it expected EPS

in the range of $5.35 to $5.55, while EPS for the first quarter of 2008 was expected to be in the

range of $0.80 to $0.85.

27. In a conference call that same day, Defendants told analysts that per share

earnings would be in the range previously announced. Specifically, Defendant McCaliister

stated:

[T]his morning we raised our 200[8] earnings per share guidanceto a range of $5.35 to $5.55, with continued membership growthand strong operational execution driving these results.

We believe the 2007 achievements just described position us wellfor 2008, both in terms of the existing environment and futuretrends.

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Case 3:08-cv-00181-J Document 1 Filed 04/04/2008 Page 10 of 19

28. Defendant Bloem also commented on the Company's purportedly glowing

outlook, stating in pertinent part:

The primary factor driving this less pronounced patter is the

composition of our 2008 PDP [Prescription Drug Plan]

membership, which has changed from last year. We have nearly

300,000 fewer low-income senior members effective January 1,

with a higher percentage of non-low-income seniors in our

Enhanced plan and a lower percentage of non-low-income senior

members in the Complete plan. The decline in the percentage of

low-income members is particularly relevant in analyzing the

quarterly patterns, because these seniors have a steeper declining

slope to their quarterly benefits ratio progression versus the

remaining Part D members, with the first quarter ratio much higher

on low incomes than the overall average and the fourth quarter

much lower. Consequently, our lower membership in the low-

income block is anticipated to lower quarterly benefits ration

pattern in the first half of the year and raise it slightly in the back

half of the year compared to 2007.

So here is the twofold take away. The composition of our PDP

membership will have a significant impact on the quarterly pattern

of our Medicare benefits ratio without necessarily impacting the

full year ratio. And then secondly, the 2008 quarterly Medicare

benefits ratio pattern is expected to drive our quarterly earnings per

share for this year.

Finally, also as expected, prescription drug trends were in the mid

to high single digits. Based on our ongoing deep-dive analysis of

benefit expense trend factors, we do not foresee any significant

changes to the components of our cost trends as we move into

2008, as is stated in this morning's press release. So accordingly,

we remain confident of our ability to meet our 2008 Commercial

pretax earnings target of $280 million to $300 million and we look

forward to sharing our progress with you each quarter.

29. The market closely followed Defendants positive statements concerning earnings

per share for full year 2008 and the first quarter of 2008. As example, following these

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announcements, Carl McDonald, an analyst with Oppenheimer & Co. wrote that "Humana

seems well positioned for EPS upside in 1100 10. "

30. On February 12, 2008, Defendant Bloem participated in the T?LS Global

Healthcare Services Conference in New York, NY and reiterated that the Company expected

EPS in a range of $5.35 to $5.55 for full year 2008.

31. Then on February 28, 2008, Defendant McCallister again affirmed to the market

the Company's ability to achieve earnings targets during a Merrill Lynch Investor Meeting in

Toronto, Canada, stating that the Company expected EPS in the range of $5.35 to $5.55 for full

year 2008.

32. The statements referenced above were materially false and misleading because

Defendants failed to disclose that:

i. the Company was unable to properly calculated the prescription drug

costs of its newly acquired members.

ii. the Company's costs associated with its prescription drug plans had

dramatically increased; and

iii. as a result of the foregoing, Defendants' statements concerning the

Company's anticipated earnings per share for the full year and first quarter of 2008 lacked a

reasonable basis at all relevant times and were therefore materially false and misleading.

THE TRUTH IS REVEALED

33. On March 12, 2008, before the market opened for trading, the Company shocked

investors by issuing a press release headlined "Humana Revises Earnings Guidance." In this

press release, the Company disclosed that it would be revising the financial guidance that it had

given to investors over the previous days and weeks. Specifically, the Company stated that its

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first quarter 2008 EPS were now expected to be in the range of $0.44 to $0.46, versus pervious

guidance of $0.80 to $0.85 per share. Earnings guidance for the full year was slashed as well.

The Company now stated that it was expected to be $4.00 to $4.25 per share, versus previous

guidance of $5.35 to $5.55. The Company attributed these drastically revised earnings to

"updated projections for the company's FY08 and stand-alone PDP financial performance."

The press release further explained that the revised projections are "based upon analysis of

pharmacy claims through February 2008. Higher-than-anticipated claims volumes for the

stand-alone PDPs year to date are reflective of a combination of factors including: Enhanced

Plan actuarial assumptions versus experience, Enhanced Plan new member experience, and

Standard Plan member mix."

34. Following this announcement, shares of Humana stock declined $6.50 per share

to close at $40.88 per share on high trading volume.

35. The market for Humana's common stock was open, well-developed and efficient

at all relevant times. As a result of these materially false and misleading statements and failures

to disclose, Humana's common stock traded at artificially inflated prices during the Class

Period. Plaintiffs and other members of the class purchased or otherwise acquired Humana

common stock relying upon the integrity of the market price of Humana's common stock and

market information relating to Humana, and have been damaged thereby.

36. Defendants, throughout the Class Period, reassured the market that its earnings

per share for full year and first quarter were accurate and that Humana was "on pace" to meet

its financial goals. These publicly issued statements were false and misleading when issued.

Additionally, Defendants failed to disclose material facts necessary to make their statements not

false and misleading. And as a result Humana's common stock price was artificially inflated

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during the Class Period. The statements and omissions were materially false and misleading in

that they failed to disclose material adverse information and misrepresented the truth about the

Company, its business and operations , as alleged herein.

37. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly and proximately caused or were a substantial contributing cause of

the damages sustained by Plaintiffs and other members of the Class. As described herein,

during the Class period, Defendants made or caused to be made a series of materially false or

misleading statements about Humana's business operations, thus causing the Company's

common stock to be overvalued and artificially inflated at all relevant times. Defendants'

materially false and misleading statements during the Class Period resulted in Plaintiffs and

other members of the Class purchasing the Company's common stock at artificially inflated

prices, thus causing the damages complained of herein.

38. As alleged herein, Defendants acted with scienter in that Defendants knew that

the public documents and statements issued or disseminated in the name of the Company were

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 Humana, their control over, and/or receipt and/or

modification of Humana's allegedly materially misleading misstatements and/or their

associations with the Company which made them privy to confidential proprietary information

concerning Humana, participated in the fraudulent scheme alleged herein.

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STATUTORY SAFE HARBOR & LOSS CAUSATION

39. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

The statements are historical or present tense statements. To the extent that any of the

statements were "forward-looking statements," none of the statements was accompanied by

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from the statements made. To the extent that the statutory safe harbor might

otherwise apply to any statements pleaded herein because they are "forward-looking,"

Defendants are liable for those statements because at the time each of those statements was

made, the speaker knew the statement was false and the statement was authorized and/or

approved by an executive officer of Humana who knew that those statements were false when

made.

40. During the Class Period, Defendants engaged in a scheme to deceive the market

and a course of conduct that artificially inflated Humana's stock price and operated as a fraud

or deceit on Class Period purchasers of Humana stock by misrepresenting the Company's

business. During the Class Period, Defendants did not adequately disclose, among other things,

the increased costs that it was experiencing with the Company's prescription drug plans. Later,

however, when Defendants ' prior misrepresentations were disclosed and became apparent to

the market, Humana stock fell precipitously as the prior artificial inflation came out of

Humana's stock price. As a result of their purchases of Humana stock during the Class Period,

Plaintiffs and other members of the Class suffered economic loss, i.e., damages under the

federal securities laws.

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41, Defendants' false and misleading statements had their intended effect and caused

Humana stock to trade at artificially inflated levels throughout the Class Period, reaching as

high as $81.50 per share on the first day of the Class Period.

42. On March 12, 2008, the Company announced that it would be revising its

earnings estimates because of, among other things, increased costs that it was experiencing with

the Company's prescription drug plans. Following this announcement, shares of Humana stock

fell as alleged herein.

COT TNT I

AGAINST DEFENDANTS FOR VIOLATION OFSECTION 10(b) OF THE EXCHANGE ACT AND SEC RULE 10b-5

43. Plaintiffs repeat and reallege each and every allegation contained in each of the

foregoing paragraphs as if fully set forth in full herein.

44. This Count is asserted against Defendants and is based upon Section 10(b) of the

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

45. During the Class Period, Defendants, directly or indirectly, engaged in a common

plan, scheme, and unlawful course of conduct pursuant to which they knowingly or recklessly

engaged in acts, transactions, practices, and courses of business which operated as a fraud and

deceit upon Plaintiffs and the other members of the Class, and made various deceptive and

untrue statements of material facts 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 to Plaintiffs and the other members of the Class. The purpose and effect of said

scheme, plan, and unlawful course of conduct was to induce Plaintiffs and the other members of

the Class to purchase Humana stock during the Class Period at artificially manipulated prices.

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46. During the Class Period, Defendants, pursuant to said scheme, plan, and unlawful

course of conduct, knowingly and recklessly issued, caused to be issued, participated in the

preparation and issuance of deceptive and materially false and misleading statements to the

investing public as particularized above.

47. The statements set forth herein were materially false and misleading for the

reasons set forth above in paragraph 33.

48. At all relevant times, Defendants had actual knowledge that the statements

complained of herein were materially false and misleading and intended to deceive Plaintiffs

and the other members of the Class. In the alternative, Defendants acted in reckless disregard

for the truth in that it failed or refused to ascertain and disclose such facts as would have

revealed the materially false and misleading nature of the statements complained of herein

although such facts were readily available to Defendants. The facts and omissions of

Defendants were committed willfully or with reckless disregard for the truth. In addition,

Defendants knew or recklessly disregarded that material facts were being misrepresented or

omitted as alleged herein.

49. Defendants: (a) employed devices, schemes, and artifices to defraud;{ (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading ; and (c) engaged in acts , practices and a course of business which

operated as a fraud and deceit upon the purchasers of the Company's common stock during the

Class Period.

50. Plaintiffs and the Class have suffered damages in that, in reliance on the integrity

of the market, they paid artificially inflated prices for Humana common stock. Plaintiffs and

the Class would not have purchased Humana common stock at the prices they paid, or at all, if

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they had been aware that the market prices had been artificially and falsely inflated by

Defendants' misleading statements.

51. As a direct and proximate result of these Defendants' wrongful conduct, Plaintiffs

and the other members of the Class suffered damages in connection with their purchase of

Humana common stock during the Class Period.

C"I TNT TT

AGAINST INDIVIDUAL DEFENDANTS FOR

VIOLATION OF SECTION 20(a) OF THE EXCHANGE ACT

52. Plaintiffs repeat and reallege each and every allegation contained in each of the

foregoing paragraphs as if fully set forth in full herein.

53. The Individual Defendants acted as controlling persons of Humana within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By reason of their positions as

officers and/or directors of Humana, and their ownership of Humana stock, the Individual

Defendants had the power and authority to cause Humana to engage in the wrongful conduct

complained of herein. By reason of such conduct, the Individual Defendants are liable pursuant

to §20(a) of the Exchange Act.

WHEREFORE, Plaintiffs, on behalf of themselves and the members of the Class, pray

for judgment as follows:

A. Declaring this action to be a proper class action and certifying Plaintiffs as

the proper representatives of the Class under Rule 23 of the Federal Rules of Civil Procedure;

B. Awarding compensatory damages in favor of Plaintiffs and the other

members of the Class against Defendants for the damages sustained as a result of the

wrongdoing of Defendants, together with interest thereon;

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C. Awarding Plaintiffs and the Class their costs and disbursements incurred

in this action as permitted by law, including counsel fees and expert fees; and

D. Granting such other and further relief as the Court may deem just and

proper.

Dated: April 3, 2008 Respectfully submitted,

C. Richard ColvinC. Richard Colvin KY Bar #86067STRAUSS & TROY50 E. RiverCenter Blvd., Suite 1400Covington, KY 41011(513) 621-8900 - phone(513) 629-9444 - faxE-mail: ([email protected] )

/s/William K. FlynnWilliam K. Flynn KY Bar #81509Richard S. WayneThomas P. GlassMatthew R. ChasarSTRAUSS & TROYThe Federal Reserve Building150 East Fourth StreetCincinnati, OH 45202-4018(513) 621-2120 - phone(513) 629-9426 - faxE-mail: (wk [email protected] )

E-mail: (rsrvayne @ strausstroy. corn)

E-mail: (tpgiass @ strausstroy. corn )

E-mail: ([email protected])

STATMAN HARRIS & EYRICH, LLCAlan J. StatmanJeffrey P. Harris441 Vine Street, Suite 3700Cincinnati, OH 45202(513) 621-2666 - phone(513) 621-4896 - fax

Attorneys for Plaintiffs

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JURY DEMAND

Plaintiffs demand a trial by jury on all issues.

/s/William K. FlynnWilliam K. Flynn KY Bar #8 1509

1560984 2.DOC

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I. Robert L. Lach, hereby terrify that the following is true and correct to the best of my

knowledge, information and belief:

J . I have reviewed the Complaint and authorize, its filing.

2. 1 did not. acquire/purchase the security that is the subject of this action at the

direction ofcounsel or in order to participate ire this private action,

3. T am willing to serve as a representative party on behalf of the class, includingproviding testimony at deposition and mai, if appropriate

4, To the, best of my current knowledge, the following are all my transactions inHumana, Inc. securities during the period from February 4, 2008 through March 11, 2008 (the"Class Period"):

Robert L Each, Trustee fbv Mitchell Lich Under Agreement dared 411198

SECURITIES TRANSACTION PRICE

_ Humana , Inc. ^- Boueht 0LL 500 shares 76.97 2/6/08

Robert L. Lath, Trastee_/bo Patrick Lach Under Agreement dated 4/1198

S CUR TKS TRANSACTION "C DATE

uma,la, Inc. ^_^au h 500 shares 76.99 2/6/08

Robert L. Lach, Trustee Chantal M. Lerch, Trustee Under Agreement dated 8/23191

SECURITIES TRANSACTION PRICE DATE

L- umana, rnc. Boujht 500 shares j 7?.O5 ?lbl0$ J

PAM Xnvestment Cu., LLC

SECURIT1`ES TRANSACTION PRICE DATE

. u,nana, I^:t . I c,.tg,ht 500 shares 76.93 2/6108

Case -JGH Document 1-2 Filed 04/04/2008 Page 2 of 2

5. During the last three years, I have not served or sought to serve as a classrepresentative in any case brought under the federal securities laws.

f, r have not been promised any payment for serving as a representative party onbehalf of the class beyond my pro rata share of any recovery, except as ordered or approved by

the Court, including any award for reasonable costs and expenses (including lost wages) directly

relating to the representation of the class.

Signed under the penalties of perjury this 3 day of April, 2008.

1 . ert . ch, Trustee

ubert T^. i_. 3rlPMR Investmen


UNITED STATES DISTRICT COURTWESTERN DISTRICT OF KENTUCKY

AT LOUISVILLE

Robert L . Lach, Trustee and PMR Investment Co., LLC,on behalf of themselves and all those similarly situated,

vs.

Humana, Inc., Michael B. McCalister and James H. Bloem

DISCLOSURE OF CORPORATE AFFILIATIONSAND FINANCIAL INTEREST

PMR Investment Co., LLC.(name of party)

makes the following disclosure:

1. Is said party a subsidiary of affiliate of a publicly-owned corporation? No

If the answer is YES, list below the identity of the parent corporation oraffiliate and the relationship between it and the named party:

2. Is there a publicly-owned corporation, not a party to the appeal, thathas a financial interest in the outcome? No

if the answer is YES list the identity of such corporation and thenature of the financial interest:

I F S u

(Signature of Counsel)4/4/08

(Date)

1565943_1.DOC


NOTICE OF LAWSUIT AND REQUEST FORWAIVER OF SERVICE OF SUMMONS

TO: Humana, Inc.

as: of:

A lawsuit has been commenced against you (or the entity on whose behalf you areaddressed). A copy of the Complaint is attached to this Notice. It has been filed in the UnitedStates District Court for the Western District of Kentucky and has been assigned docket number

This is not a formal summons or notification from the Court, but rather my request that yousign and return the enclosed Waiver of Service in order to save the cost of serving you with ajudicial summons and an additional copy of the Complaint. The cost of service will be avoided if Ireceive a signed copy of the Waiver within 30 days after the date designated below as the date ofthis Notice and Request. I enclose a stamped and addressed envelope (or other means of cost-free return) for your use. An extra copy of the Waiver is also attached for your records.

If you comply with this request and return the signed Waiver, it will be filed with the Courtand no summons will be served on you. The action will then proceed as if you had been servedon the date the waiver is filed, except that you will not be obligated to answer the Complaintbefore 60 days from the date designated below as the date on which this Notice is sent (or before90 days from that date if your address is not in any judicial district of the United States).

If you do not return the signed waiver within the time indicated, I will take appropriate stepsto effect formal service in a manner authorized by the Federal Rules of Civil Procedure and willthen, to the extent authorized by those Rules, ask the Court to require you (or the party on whosebehalf you are addressed) to pay the full costs of such service. In that connection, please readthe statement concerning the duty of parties to waive the service of the summons, which is setforth at the foot of the Waiver form.

2008.I affirm that this request is being sent to you on behalf of Plaintiffs, this 4th day of April,

C. Richard ColviRichard S. WayneWilliam K. FlynnThomas P. GlassMatthew R. ChasarSTRAUSS & TROYThe Federal Reserve Building150 East Fourth StreetCincinnati, Ohio 45202-4018(513) 621-2120


WAIVER OF SERVICE OF SUMMONS

TO: Richard S. Wayne, Strauss & Troy, The Federal Reserve Building, 150 East Fifth Street,Cincinnati, Ohio 45202-4018

I acknowledge receipt of your request that I waive service of a summons in the action ofRobert L. Lach, Trustee, et al. v. Humana, Inc., et al. in the United States District Court for theWestern District of Kentucky. I have also received a copy of the Complaint in the action, twocopies of this instrument, and a means by which I can return the signed Waiver to you withoutcost to me.

I agree to save the cost of service of a summons and an additional copy of the Complaintin this lawsuit by not requiring that I (or the entity on whose behalf I am acting) be served withjudicial process in the manner provided by Rule 4.

I (or the entity on whose behalf I am acting) will retain all defenses or objections to thelawsuit or to the jurisdiction or venue of the Court except for objections based on a defect in thesummons or in the service of the summons.

I understand that a judgment may be entered against me (or the party on whose behalfam acting) if an answer or motion under Rule 12 is not served upon you within 60 days after April4, 2008.

Date Signature

Printed or typed name

As of(Title) (Corporate Defendant)

Duty to Avoid Unnecessary Costs of Service of Summons

Rule 4 of the Federal Rules of Civil Procedure requires certain parties to cooperate in saving unnecessary cost of service of the summons

and complaint. A defendant located in the United States who, after being notified of an action and asked by a plaintiff located in the United States to

waive service of a summons, fails to do so will be required to bear the cost of such service unless good cause be shown for its failure to sign and return

the waiver.It is not good cause for a failure to waive service that a party believes that the complaint is unfounded or that the action has been brought in

an improper place or in a court which lacks jurisdiction over the subject matter of the action or over its person or property. A party who waives service of

the summons shall retain all defenses and objections (except any relating to the summons or to the service of the summons), and may later object to the

jurisdiction of the court or to the place where the action has been brought.

A defendant who waives service must within the time specified on the waiver form serve on the plaintiff's attorney (or unrepresented plaintiff)

a response to the complaint and must also file a signed copy of the response with the court. If the answer or motion is not served within this time, a

default judgment may be taken against that defendant. By waiving service, a defendant is allowed more time to answer than if the summons had been

actually served when the request for waiver of service was served.

1563247_1. DOC.1



TO

as

Michael B. NicCalister

President, Chief Executive Officer and Director of: Humana, Inc.




If you do not return the signed Waiver within the time indicated, 1 will take appropriatesteps to effect formal service in a manner authorized by the Federal Rules of Civil Procedure andwill then, to the extent authorized by those Rules, ask the Court to require you (or the party onwhose behalf you are addressed) to pay the full costs of such service. In that connection, pleaseread the statement concerning the duty of parties to waive the service of the summons, which isset forth at the foot of the Waiver form.

I affirm that this Request is being sent to you on behalf of Plaintiffs, this 4th day of April,2008.

ar G ;: rc^C. Richard ColvinRichard S. WayneWilliam K. FlynnThomas P. GlassMatthew R. ChasarSTR O TROYAUSSThe Federal Reserve Building

150 East Fourth Street

Cincinnati, Ohio 45202-4018

(513) 621-2120



TO: Richard S. Wayne, Strauss & Troy, The Federal Reserve Building, 150 East Fifth Street,Cincinnati, Ohio 45202-4018

i acknowledge receipt of your request that I waive service of a summons in the action ofRobert L. Lach, Trustee, et a!. v. Humana, Inc., et a!. in the United States District Court for theWestern District of Kentucky. I have also received a copy of the Complaint in the action, twocopies of this instrument, and a means by which I can return the signed Waiver to you withoutcost to me.



I understand that a judgment may be entered against me (or the party on whose behalf Iam acting) if an answer or motion under Rule 12 is not served upon you within 60 days after April4, 2008.

Date Signature








an improper place or in a court which lacks jurisdiction over the subject matter of the action or over its person or property, A party who waives service of







1563247_1. DOC.1



TO: James H. Bloem

as: Chief Financial Officer, Sr. Vice President and Treasurer of: Humana, inc.




If you do not return the signed Waiver within the time indicated, i will take appropriatesteps to effect formal service in a manner authorized by the Federal Rules of Civil Procedure andwill then, to the extent authorized by those Rules, ask the Court to require you (or the party onwhose behalf you are addressed) to pay the full costs of such service. In that connection, pleaseread the statement concerning the duty of parties to waive the service of the summons, which isset forth at the foot of the Waiver form.

I affirm that this request is being sent to you on behalf of Plaintiffs, this 4th day of April,2008.

C. Richard Colvin iRichard S. WayneWilliam K. FlynnThomas P. GlassMatthew R. ChasarSTRAUSS & TROYThe Federal Reserve Building150 East Fourth StreetCincinnati, Ohio 45202-4018(513) 621-2120



TO: Richard S. Wayne, Strauss & Troy, The Federal Reserve Building, 1050 East Fifth Street,Cincinnati , Ohio 45202-4018

I acknowledge receipt of your request that I waive service of a summons in the action ofRobert L. Lach, Trustee, et a!. v. Humana, Inc., et a!. in the United States District Court for theWestern District of Kentucky. I have also received a copy of the Complaint in the action, twocopies of this instrument, and a means by which I can return the signed Waiver to you withoutcost to me.



I understand that a judgment may be entered against me (or the party on whose behalf Iam acting) if an answer or motion under Rule 12 is not served upon you within 60 days after April4, 2008.

Date Signature








an improper place or in a court which lacks jurisdiction over the subject matter of the action or over its person or property. A party who waives service of







1563247_1. DOC.1

1AcJS 44 (Rev. 11/04) Case 3: 08-cv-00181-J Iy k H. 041('; -°` -'31-H

The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided

by local rules o€court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating

the civil docket sheet. (SEE INS'I`RUCI'IONS ON THE RI v i IRSE OF THE FORM.)

1. (a) PLAINTIFFS

Robert L. Lach, Trustee and PMR Investment Co., LLC, on behalf ofthemselves and all those similarly situated

(b) County of Residence of First Listed Plaintiff Hamilton Co., Ohio

(EXCEPTIN U.S. PLAIN IFF CASES)

(c) Attorney's (Firm Name, Address, and Telephone Number)

William K. Flynn, Strauss &. Troy, 150 E. Fourth Street. Cincinnati, Ohio45202-4018 (513) 621-2120

DEFENDANTS

Humana, Inc., Michael B. McCalister and James H. Bloem

County of Residence of First Listed Defendant

(IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

LAND INVOLVED.

Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an "X" in one Box Onty) Ill . CITI/ENSt-IIP OF PRINCIPAL PARTIES(Ptaee an "X" in One Box for Plaintiff(For Diversity Cases Only) and One Box for Defendant)

7 I U.S. Government A 3 Federal Question PTh DEF PTF DEF

Plaintiff (U.S. Government Not a Party) Citizen of This State 771 1 O t Incorporated or Principal Place El 4 (14

of Business In This State

O 2 U.S. Government I_J 4 Diversity Citizen of Another State 0 2 C) 2 Incorporated and Principal Place El 5 El 5

Defendant(Indicate Citizenship of Parties in Item III)

of Business In Another State

Citizen or Subject of a 0 3 71 3 Foreign Nation O 6 O 6

Forei gn Count

IV NATITDIi fAI QTTIT

CON'I RACT TORTS FORFFFFURE/PENALTY BANKRUPTCY OTHER STATUTES

O I 10 Insurance PERSONAL INJURY PERSONAL INJURY El 610 Agriculture 171422 Appeal 28 USC 158 CP 400 State Reapportionment

E1 120 Marine Ll 310 Airplane 0 362 Personal Injury - El 620 Other Food & Drug 0 423 Withdrawal 171 410 Antitrust

r] 130 Miller Act 0 315 Airplane Product Med. Malpractice 9 625 Drug Related Seizure 28 USC 157 O 430 Banks and Banking

0 140 Negotiable Instrument Liability CI 365 Personal Injury - of Property 21 USC 881 0 450 Commerce

Li 150 Recovery of Overpayment n 320 Assault, Libel & Product Liability 0 630 Liquor Laws PROPER'T'Y }2IGHTS 0 460 Deportation

& Enforcement of Judgment Slander O 368 Asbestos Personal 0 640 R.R. &-Truck O 820 Copyrights 0 470 Racketeer Influenced and

[7) 151 Medicare Act q 330 Federal Employers' Injury Product 1 650 Airline Regs. 0 830 Patent Corrupt Organizations

(7) 152 Recovery of Defaulted Liability Liability El 660 Occupational O 840 Trademark 0 480 Consumer Credit

Student Loans O 340 Marine PERSONAL PROPERTY Safety/Health El 490 Cable/Sat TV

(Excl. Veterans) L-3 345 Marine Product 0 370 Other Fraud El 690 Other O 810 Selective Service

fB 153 Recovery of Overpayment Liability L7 371 Truth in Lending LABOR SOCIAL SECURITY [0 850 Securities/Commodities'

of Veteran's Benefits 1-1 350 Motor Vehicle 0 380 Other Perrnnal 171 710 Fair Labor Standards D 861 HIA (1395ff) Exchange

i- 160 Stockholders' Suits 1 355 Motor Vehicle Property Damage Act 0 862 Black Lung (923) Ct 875 Customer Challenge

0 190 Other Contract Product Liability 13 385 Property Damage D 720 Labor/Mgmt. Relations O 863 DIWCIDIWW (405(g)) 12 USC 3410

I-1 195 Contract Product Liability O 360 Other Personal Product Liability 0 730 Labor/Mgmt,Reporting 0 864 SSID Title XVI 890 Otlter Statutory Actions

13 196 Franchise Injury & Disclosure Act El 865 RSI (405( g)) LI 891 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS El 740 Railway Labor Act FEDERAL 'IAX SUITS 3 892 Economic Stabilization Act

171 210 Land Condemnation 0 441 Voting D 510 Motions to Vacate 1-1 790 Other Labor Litigation 0 870'1"axes (U.S. Plaintiff O 893 Environmental Matters

D 220 Foreclosure Cl 442 Employment Sentence 11 791 Empl. Ret. Inc. or Defendant) 3 894 Energy Allocation Act

El 230 Rent Lease & Ejectment 0 443 Housing; Habeas Corpus: Security Act L7 871 IRS-Third Party 3 895 Freedom of Information

Cl 240 Torts to Land Accommodations El 530 General 26 USC 7609 Act

11 245 Tort Product Liability O 444 Welfare 0 535 Death Penalty El 900Appeal of Fee Determination

El 290 All Other Real Property 0 445 Amer. w; Disabilities - 0 540 Mandamus & Other Under Equal Access

Employment O 550 Civil Rights to Justice

0 446 Amer. w/Disabilities - O 555 Prison Condition O 950 Constitutionality of

Other State Statutes

0 440 Other Civil Rights

V. ORIGIN (Place an "X" in One Box Only) Appeal to District

Transferred from06

fromC] 7 Ju

1 Original 73 2 Removed from Remanded from 4 Reinstated or another district Multidistrict MagistrateProceedin g, State Court App ellate Court Reo pened ( s pecify ) Litigation Judgment

Cite the U.S. Civil statute Linder which you are t t tt g (Do not cite jurisdictional statutes unless diversity):S ecu s and Exchange Actof 3

VI. CAUSE OF ACTION Brief description of cause:M ix rirrncrntat-rn an(9 nm icwir)rn nfm air rial ir)fnrm mFnn Ah tit-tina Cnmrannv

VII. REQUESTED IN 711 CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint:

COMPLAINT UNDER F.R.C.P. 23 JURY DEMAND: 71 Yes 0 No

VIII. RELATED CASE(S)IF ANY

(See ins t ructions ):JUDGE DOCKET NUMBER

DATE NATURE OF ATTORNEY OF RECORD

04/03/2008 I j ,{

RECEIPT # AMOUNT APPLYING IFP JUDGE MAG. JUDGE

Documents

Robert L. Lach, Trustee, et al. v. Humana, Inc., et al. 08 ...securities.stanford.edu/filings-documents/1039/HUM... · Case3-08-cv-00181-JGH Document 1 Filed 04/04/2008 Page2 of 19