An investor in Prospect Medical Holdings Inc (NASDAQ:PZZ) shares has filed a lawsuit in State Court against members of the board of directors of Prospect Medical Holdings Inc alleging breaches of fiduciary duty arising out of the attempt to sell Prospect Medical Holdings to cheaply to Leonard Green & Partners, L.P.
According to the complaint the plaintiff alleges that defendants breached their fiduciary duty by the attempt to sell Prospect Medical Holdings, Inc. via an unfair process at an unfair price.

On Monday, August 16, 2010, Prospect Medical Holdings, Inc. (Nasdaq: PZZ) announced that it has entered into a merger agreement to be acquired for $8.50 per share in cash by an entity sponsored by Leonard Green & Partners, L.P. in which certain stockholders of Prospect will also participate. The total transaction value is approximately $363 million, including the assumption of approximately $158 million in Prospect's net debt. According to Prospect Medical Holdings its board of directors has approved the merger agreement and the merger price represents a 38.9% premium over the closing sale price of Prospect shares on August 13, 2010, and a 29.4% premium to the volume weighted-average closing sale price of approximately $6.57 during the 30 trading days prior to that date. Its shares (PZZ) traded before the news at roughly $7 per share and increased to $8.40 per share after the announcement.

But at least one analyst set a price target for Prospect Medical stock of $16.20 per share and some directors and officers of Prospect Medical Holdings that currently own in the aggregate approximately 10.4 million shares of Prospect's outstanding common stock (representing nearly 50% of Prospect's outstanding shares ) have entered into a voting agreement in which they have agreed to vote all of their Prospect shares in favor of the adoption of the merger agreement. These stockholders also have agreed to exchange approximately 6.2 million of their Prospect shares for equity interests in the sponsored purchasing entity in lieu of their receipt of the cash merger consideration for those shares.