A federal judge has denied VitalCaring’s request to reconsider a ruling requiring that a portion of the company’s future profits be placed in trust for the benefit of Encompass Health (NYSE: EHC) and Enhabit Inc. (NYSE: EHAB).

The case dates back to 2022, when Encompass Health spun off its home health and hospice business, creating a standalone entity called Enhabit Inc. At that time, April Anthony served as the CEO of the Encompass home-based care segment.

Encompass Health has long alleged that Anthony and her team engaged in unethical practices during the establishment of VitalCaring while the Enhabit spinoff was in progress. In 2021, Encompass sought an injunction against Anthony, claiming she had violated her employment agreement by breaching non-competition and non-solicitation clauses and misappropriating trade secrets.

On Dec. 2, 2024, Delaware Vice Chancellor Lori W. Will ruled in favor of Encompass Health and Enhabit on their claims of breach of fiduciary duty and aiding and abetting breaches of fiduciary duty. The court ordered that 43% of VitalCaring’s future profits be placed in trust to benefit Encompass and Enhabit. The remaining 57% would go to VitalCaring’s private equity backers, the Vistia Group and Nautic Partners.

In a revised opinion issued on Feb. 18, Will denied VitalCaring’s request to reconsider that decision and provided clarification on the matter.

“The facts of this case create unusual complications,” the judge wrote in her statement of rejection. “VitalCaring is the product of vast disloyalty that was purposefully aided and abetted by the private-equity-affiliated defendants. The defendants took the plaintiffs’ staff, resources, information and corporate opportunities to construct this competing enterprise. Equity demanded a solution to attend to the possibility of future profits and simultaneously discourage the defendants from taking the enterprise to leave the plaintiffs remediless. The outcome is imperfect. Still, it is equitable.”

VitalCaring requested that the court reevaluate the allocation of funds in the trust, arguing that the current approach overlooks the time value of money. Specifically, they claimed it improperly compares the undiscounted future value of VitalCaring’s exit proceeds with the present value of the contributions made by private-equity investors. This request was also denied.

“This allocation was based on an assessment of expected gains, meaning ‘the amount they expect to receive above their capital contributions’,” Will wrote. “The defendants have not identified any overlooked controlling principle of the law. They cite no authority, providing that wrongdoers are entitled to reimbursement for their cost of capital in a constructive trust. It is within the court’s discretion to proceed otherwise.”