State Supreme Court weighs in on UnitedHealth options case
The Minnesota Supreme Court has left little legal room for a federal court to throw out a settlement between UnitedHealth Group and its former CEO Bill McGuire.
The state's highest court told a federal judge that he doesn't have the authority to substitute his own business judgment in deciding whether the settlement was reasonable.
The court did say, however, the judge has the authority to determine whether the group that created the settlement was unbiased and acted in good faith.
The suit stemmed from a stock options backdating scandal at UnitedHealth in 2006, over which McGuire lost his job. Last December, Minnetonka-based UnitedHealth announced a settlement calling for McGuire to give back $400 million in stock options and other pay.
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U.S. District Judge James Rosenbaum, who's presiding over the case, asked the Minnesota Supreme Court whether he could investigate the settlement's merits and possibly reject it.
A special litigation committee assembled by the company had brokered the settlement. The committee was made up of two former state Supreme Court justices, Kathleen Blatz and Edward Stringer. Rosenbaum has raised concerns that the committee made no findings of fact in connection with the settlement.
The Minnesota Supreme Court's ruling says Rosenbaum has the authority to determine whether the committee was sufficiently independent.
The court ruling identified one relevant factor in judging the committee's independence. The ruling points out that UnitedHealth's board had the authority to add members to the committee.
The Supreme Court noted the board could dilute the votes of the original two members by expanding the committee. However, the board has not expanded the committee.
The justices sent the decision back to Judge Rosenbaum saying, "We leave the final analysis of the UnitedHealth Special Litigation Committee independence to the discretion of the federal district court."
The ruling does not affect a freeze on McGuire's stock options.
