Investors in mobile healthcare provider DocGo have asked a federal court in Manhattan to grant preliminary approval of a $12.5 million settlement resolving claims that the company misled stockholders before a $432 million New York City contract to provide emergency migrant housing drew public scrutiny.

According to a motion filed Wednesday, the settlement was reached after an unsuccessful mediation session in September. “Further discussions and negotiations subsequently took place with the Mediator, and ultimately, the Parties accepted a Mediator’s proposal to resolve the Litigation for $12.5 million, subject to the negotiation of final settlement terms and Court approval,” the filing states.

Lead counsel for the proposed class plans to request up to 33%, or approximately $4.1 million, in attorney fees, along with up to $250,000 in expenses. The class has also asked for certification solely for purposes of the settlement.

Allegations of Misleading Statements

The 2023 lawsuit claims DocGo “overstated the efficacy of its mobile health and medical transportation services” in earnings calls, press releases, and filings, inflating stock prices. Shares dropped after public scrutiny questioned the company’s services for migrants in New York City.

DocGo, based in Manhattan, was initially formed as a blank check company to raise capital ahead of its 2020 initial public offering, later merging with private firm Ambulnz.

As public scrutiny intensified, former CEO Anthony Capone allegedly reassured investors that the company was not facing a “revenue cliff” following the expiration of a city contract. Capone is also accused of misleading investors during an August 2023 interview about DocGo’s pursuit of a $4 billion, five-year U.S. Customs and Border Protection contract and its efforts to enroll migrants in New York State Medicaid.

Judicial Findings

In March, U.S. District Judge Katherine Polk Failla found that some claims were based on “indisputably false” statements made by Capone regarding his educational background and DocGo’s Medicaid efforts. The judge noted that Capone repeatedly tied his education to DocGo’s capabilities, making it plausible that investors could have viewed this information as altering the “total mix” of available information.

Other securities fraud claims, including all allegations against DocGo executives Stan Vashovsky and Andre Oberholzer, were dismissed. The court found insufficient evidence that the two executives knowingly acted on false statements, even if they failed to correct or monitor Capone’s statements.

Representatives of the parties did not immediately respond to requests for comment.

The proposed class is represented by Christopher M. Wood, Samuel H. Rudman, Eric I. Niehaus, Joseph J. Tull, and David A. Rosenfeld of Robbins Geller Rudman & Dowd LLP and Thomas C. Michaud of VanOverbeke Michaud & Timmony PC.

DocGo is represented by Jason J. Mendro of Gibson Dunn & Crutcher LLP. Capone is represented by Evan I. Cohen of Finn Dixon & Herling LLP.