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Investors Sue Over Proposed Acquisition

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Lawyers are trying to organize a class action suit on behalf of shareholders who own stock in a company that writes and sells insurance and related services aimed at older consumers.

The lawyers have filed a complaint in the suit, Elizabeth A. Connolly et al. vs. Universal American Financial Corp. et al., in a state court in Westchester County, N.Y., according to Universal American Financial Corp., Rye Brook, N.Y.

The plaintiffs allege in the complaint that the directors of Universal American breached their fiduciary duties to Universal American shareholders earlier this year when they permitted Universal American to agree to pay $630 million in stock and cash for MemberHealth Inc., Cleveland.

MemberHealth is a pharmacy benefit manager and the sponsor of Medicare Part D prescription drug plans.

The plaintiffs in the Connolly suit want the court to issue an injunction to block the MemberHealth deal and award damages in an amount to be determined later, Universal American says.

“Universal American has reviewed the complaint and believes that the lawsuit is without merit and intends to defend against the claims vigorously,” Universal American says in a statement about the Connolly suit.

Some of the plaintiffs in the Connolly suit, including Green Meadows Partners, also have filed other suits seeking to keep top company executives from joining with private equity firms to buy control over Universal American from the public investors who now own the company’s shares.