Securities Regulation Daily Wrap Up, FIDUCIARY DUTIES—D. Minn.: Shareholder derivative complaint against UnitedHealth Group officers and directors illuminates anticompetitive practices, (Jun 20, 2025)

By Rebecca E. Hoffman, J.D.

Among other allegations, the subsidiary’s acquisition of Change Healthcare, as well as the defendants’ “upcoding” and other schemes, triggered antitrust concerns, the complaint alleged.

A UnitedHealth Group Inc. shareholder representative has asked the federal district court in Minnesota to declare that nine directors and officers breached their fiduciary duties by causing subsidiary Optum to acquire an entity whose customers competed with Optum’s internal businesses, without implementing promised firewalls to protect sensitive information, and by engaging in other anticompetitive conduct that was concealed from the public (Kogut v. Hemsley, No. 25-cv-02562 (D. Minn. Jun. 19, 2025)).

Parties. Plaintiff Merry Kogut has been a shareholder since 2020. Nominal defendant UnitedHealth Group, Inc., owns United Healthcare, the largest health insurance provider in the country, and Optum, which provides other health care services. The individual defendants are directors, some of whom served in other roles during the relevant time, such as CEO and chair of the audit committee.

Jurisdiction. The plaintiff claimed that the defendants violated Exchange Act Section 14(a), 10(b), 20(a) and Rules 4a-9 and 10b-5, providing federal question jurisdiction, and that the complained-of acts were conducted by way of interstate commerce. Defendant UnitedHealth has its headquarters and conducts business in Minnesota.

Facts. The complaint explained that UnitedHealthcare is the health insurance arm of the company, and Optum is the health services arm. Optum’s acquisition of Change Healthcare, which “act[s] as the ‘pipes’ of the industry by processing insurance claims and moving data between entities,” enabled the company to expand and dominate the health care industry by acting as both payer and provider. Although the Department of Justice challenged the proposed acquisition, citing the potential for extraordinary access to customer health data, it was ultimately allowed to proceed, in part because the company asserted its firewalls would provide security. The current complaint states that the company failed to employ these safeguards after it acquired Change.

The plaintiff also pointed to practices such as the defendants’ “HouseCalls” program, whereby nurse practitioners visit patients and engage in “upcoding,” which is a practice of adding diagnosis codes designating conditions for which patients are not actually being treated. Other alleged anticompetitive acts included threatening to cancel contracts of hospitals working with primary care practices that competed with Optum, or forcing hospitals into unfair contracts.

After a massive data breach in 2024, the spotlight stayed on the company as a Wall Street Journal article revealed the DOJ’s antitrust investigation, which led in turn to further publicity. The complaint noted that the DOJ is also conducting a criminal investigation into possible Medicare fraud.

Claims. The plaintiff charged the defendants with breaching fiduciary duties, wasting corporate assets, unjust enrichment, and gross mismanagement. The complaint also alleges that the individual defendants conspired, aided and abetting one another, and were responsible for material misrepresentations in earnings calls, interviews, and SEC filings, in violation of the securities laws.

“The conduct of the Individual Defendants complained of herein involves a knowing and culpable violation of their obligations as directors and officers of UnitedHealth, the absence of good faith on their part, or a reckless disregard for their duties to the Company and its shareholders that the Individual Defendants were aware, or should have been aware, that their conduct posed a risk of serious injury to the Company.”

Furthermore, “the Individual Defendants had a duty to prevent and not to effect the dissemination of inaccurate and untruthful information with respect to the Company’s financial condition, performance, growth, operations, financial statements, business, products, management, earnings, internal controls, and present and future business prospects,” the plaintiff said.

The complaint also noted that the company has suffered great loss, having had to repurchase 14 million shares of its stock at artificially inflated prices, having incurred legal liabilities, and having lost investors and customers as a result of authorities’ scrutiny. “As a direct and proximate result of the Individual Defendants’ misconduct, UnitedHealth has lost and will continue to lose and expend many millions of dollars.”

Relief Requested. The plaintiff asks the court to declare that the defendants breached their fiduciary duties, award damages and pre- and post-judgment interest to the company, mandate company changes to prevent further conduct against the company’s interests—including allowing the shareholders to nominate at least five board candidates—and awards of restitution and costs.

The case is No. 25-cv-02562.

Attorneys: Brant D. Penney (Reinhardt Wendorf & Blanchfield) for Merry Kogut.

Companies: UnitedHealth Group Inc.

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