By Dean Seal

Encompass Health and Enhabit will start taking a cut of a home-health and hospice company's profits after a federal judge ruled that the business was formed illicitly by former Encompass senior officers.

The two companies on Wednesday said the Delaware Court of Chancery has ruled that April Anthony, Luke James, and Chris Walker breached their fiduciary duty of loyalty to Encompass when they were senior officers at its former home health and hospice division, which became Enhabit after a 2022 spinoff.

The trio was found to have usurped Encompass' acquisition opportunities, used its confidential information and poached its key employees with the promise of equity in VitalCaring Group, the hospice competitor that Anthony now leads.

"VitalCaring is the direct result of their disloyalty," Vice Chancellor Lori Will wrote in an order.

Anthony and the other two former employees were also found to have taken "great pains" to conceal their actions.

The judge further ruled that VitalCaring Group's private equity backers, Vistria Group and Nautic Partners, were aware of and abetted the misconduct of the three former officers.

The Chancery Court has ordered the creation of a construct trust that entitles Encompass Health and Enhabit to 43% of VitalCaring Group's profits to be paid on a quarterly basis, as well as 43% of the exit proceeds if the company is sold.

Defendants will also have to pay $1.62 million in mitigation damages as well as attorneys' fees based on the "bad faith" concealment efforts, including falsifying records and deleting evidence.

Representatives for Vistria and Nautic didn't immediately respond to requests for comment.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

December 04, 2024 10:01 ET (15:01 GMT)

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