Home Care, Inc. ("HCI") is a publicly held corporation engaged in the business of providing home-based infusion therapy to cancer, HIV/AIDS, and blood disorder patients. A substantial share of HCI's revenues came from third-party payers such as insurers, as well as Medicare and Medicaid programs. 

HCI's in-house lawyers prepared a comprehensive guide at the direction of the Board of Directors, regarding compliance with Federal health care provider regulations including the Anti-Referral Payments Law ("ARPL"). This Law prohibits health care providers from paying any form of remuneration to induce the referral of Medicare or Medicaid patients. The guide was used by the HCI Patient Services team managers to train and supervise the home care technicians and providers who administered infusions to patients. 

HCI's Marketing and Development team was unaware of the guide or of the provisions of ARPL. Consequently, that team routinely entered into contracts with physicians and hospitals for consultation services and research grants. The consultants and researchers prescribed or recommended services or medical products that HCI provided to Medicare and Medicaid patients. None of the Marketing and Development contracts were reviewed by HCI's lawyers.

Unbeknownst to the other members of the HCI Board, Dan - a Director - instructed the Marketing and Development Manager to issue grants to physicians working for a hematology practice. In exchange the hematologists helped HCI purchase infusion equipment suitable for home use at a discount. They also paid Dan a commission of 10% of the grant amounts issued by HCI. 

After an extended investigation, the Federal Department of Justice indicted HCI and Dan on several charges, including violation of the provisions of ARPL. HCI negotiated a consolidated plea agreement whereby a fine of $250 million was paid by HCI. 

After making a demand, a derivative action was brought by shareholders against the HCI Board seeking reimbursement to HCI of the $250 million fine and $100 million in attorneys' fees. 

 

Which fiduciary duties, if any, were breached by the HCI Board? Discuss fully.

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In the scenario described several potential breaches of fiduciary duties by the HCI Board are evident Fiduciary duties generally include the duty of c... View the full answer