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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) N/A
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TRANSCEND SERVICES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-18217 33-0378756
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3353 PEACHTREE ROAD NE, SUITE 1000, ATLANTA, GEORGIA 30326
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(Address of principal executive offices)
Registrant's telephone number, including area code (404) 364-8000
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
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The Company is filing this Report to update the status of its lawsuit
against 16 workers' compensation insurance carriers in the Superior Court of the
State of California, Los Angeles County, seeking $115 million in compensatory
damages plus punitive damages for abuse of process, intentional interference
with contractual and prospective economic relations, negligent interference and
unlawful or unfair business practices (the "Lawsuit"). The Lawsuit has been
previously described in detail in the Company's Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q.
Following a hearing in November 1996, the Los Angeles County Superior
Court, on December 20, 1996, sustained the defendants' demurrer to the Second
Amended Complaint of the plaintiffs (including the Company and certain of its
subsidiaries), with leave to further amend the complaint. The Court determined
in such ruling that exclusive jurisdiction with respect to the claims contained
in the Lawsuit resides with the California Workers' Compensation Appeals Board
and that the Superior Court of the State of California is an improper forum.
The Company has been advised by counsel that there is no remedy for the damages
claimed in the Lawsuit from the California Workers' Compensation Appeals Board.
However, the plaintiffs will file a Third Amended Complaint with the Superior
Court and a hearing is expected to be held respecting the Third Amended
Complaint by the end of the first quarter of 1997. If the Court sustains the
defendants' demurrer at such hearing, a final order dismissing the Lawsuit will
be entered and the Company expects to appeal any such ruling. If the Superior
Court's ruling is upheld on appeal, the cross complaints against the plaintiffs
also are likely to be dismissed.
With respect to any future expenses related to the Lawsuit, commencing in
December 1996 and for the remainder of the case, the Company is only responsible
for out-of-pocket expenses and the payment to its legal counsel of a percentage
of any recovery awarded in the Lawsuit. In the third quarter of fiscal 1996, the
Company expensed approximately $1.3 million of legal expenses connected with the
Lawsuit (previously, these legal expenses were accounted for as a prepaid asset
on the Company's balance sheet) and began to expense such costs on a current
basis. All future out-of-pocket legal expenses, in excess of the capped legal
fees, will continue to be expensed on a current basis going forward.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSCEND SERVICES, INC.
By: /s/ David M. Murphy
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David M. Murphy
Chief Financial Officer
Dated: January 28, 1997
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