The ATI Physical Therapy lawsuit settlement totals roughly $31 million, approved by a federal judge in Chicago on September 24, 2024. It resolved securities fraud claims and SPAC-related fiduciary duty claims tied to ATI’s June 2021 merger with Fortress Value Acquisition Corp. II, after which the stock collapsed on news that the company was losing therapists far faster than it had told investors.1Law360. ATI to Pay $31M in SPAC Merger Litigation Settlement
What Shareholders Alleged
The lead case, Burbige v. ATI Physical Therapy, Inc., was filed in the U.S. District Court for the Northern District of Illinois in August 2021 and consolidated other investor suits before Judge Edmond E. Chang.2Law360. ATI Physical Therapy SPAC Merger Litigation Two Israeli institutional investors, Phoenix Insurance Company Ltd. and The Phoenix Pension & Provident Funds, served as lead plaintiffs.3Bernstein Litowitz Berger & Grossmann LLP. Order Preliminarily Approving Settlement and Providing for Notice
The class period ran from February 22, 2021 through October 19, 2021. Plaintiffs said ATI and its leadership made two sets of misleading statements during that stretch. On staffing, the company publicly described a “high rate of retention” and “adequate clinical staffing levels” while therapists were leaving at rates the complaint pegged as high as 41%. On growth, ATI repeatedly affirmed its 2021 earnings guidance and told investors it was on track to open at least 90 new clinics.4Bernstein Litowitz Berger & Grossmann LLP. ATI Physical Therapy Case
On July 26, 2021, roughly five weeks after the merger closed, ATI reversed course. It cut earnings guidance, said it would open only 55 to 65 new clinics for the year, and blamed accelerating therapist attrition and competition for clinicians. The stock fell 43% in a single session, closing at $4.72.5Rosen Legal. ATI Physical Therapy Inc. Case The board fired CEO Labeed Diab two weeks later. According to the consolidated complaint, Diab and CFO Joseph Jordan had been receiving monthly scorecards and attending quarterly meetings where the attrition numbers were laid out, even as they publicly described “very high retention” and “low turnover.”6CaseMine. ATI Physical Therapy Ruling The SEC opened an inquiry in November 2021.7Bloomberg. SEC Probes SPAC-Backed ATI Physical Therapy on Earnings Guidance
The SPAC-Specific Claims
A parallel set of actions, referred to as the “Multiplan Actions” after a Delaware Chancery Court decision recognizing fiduciary duties owed by SPAC directors, attacked the merger process itself.8Bernstein Litowitz Berger & Grossmann LLP. Memorandum in Support of Motion for Final Approval of Settlement These included a consolidated federal derivative case, Ghaith, and two Delaware Chancery cases, Robinson and Goldstein v. Diab.
The direct theory in Goldstein mattered for how the settlement was structured. SPAC investors who held FVAC Class A stock on the June 11, 2021 redemption deadline had a choice: cash out at roughly $10 per share, or hold through the merger. Plaintiffs said that if the staffing crisis had been disclosed, those investors would have redeemed at $10 instead of holding stock that soon collapsed.9SEC. ATI Derivative Settlement Notice That group became its own subclass in the settlement.
Defendants across all the actions included former CEO Labeed Diab, former CFO Joseph Jordan, more than a dozen directors from the ATI and FVAC boards, Fortress Acquisition Sponsor II, LLC, and Fortress Investment Group LLC. All denied wrongdoing.10SEC. ATI Derivative Settlement Stipulation
How the $31 Million Breaks Down
The global settlement has two components.
The $24.9 Million Direct-Claims Fund
The larger fund resolved the federal securities class action and the direct Multiplan claims. Within it, $6 million was carved out specifically for the Multiplan Subclass, which covers shareholders who held FVAC Class A stock on the June 11, 2021 redemption date and did not redeem.8Bernstein Litowitz Berger & Grossmann LLP. Memorandum in Support of Motion for Final Approval of Settlement
Payments to the two subclasses are calculated differently. For the securities subclass, each claimant’s recovery depends on when they bought and sold ATI or FVAC shares during the class period, with adjustments reflecting estimated artificial inflation in the share price at those times. For the Multiplan subclass, the $6 million is divided on a straight per-share basis among eligible claimants.11Bernstein Litowitz Berger & Grossmann LLP. Declaration of Austin P. Van in Support of Motion for Final Approval
The $6.45 Million Derivative Payment
The derivative claims in Ghaith and Goldstein settled separately. Defendants’ excess directors-and-officers insurance carriers paid $6.45 million directly to ATI Physical Therapy, with an additional $1.55 million set aside for plaintiffs’ attorneys’ fees and expenses, subject to court approval.10SEC. ATI Derivative Settlement Stipulation Because these are derivative claims, the money went to the company itself rather than to individual shareholders.
Deadlines and Distribution
The claims filing deadline was October 18, 2024. Strategic Claims Services was appointed as claims administrator and processed the filings. The first distribution of funds to eligible claimants took place in November 2025, with further distributions on a rolling basis as claims processing continues.4Bernstein Litowitz Berger & Grossmann LLP. ATI Physical Therapy Case Shareholders who missed the October 2024 filing deadline cannot participate.
The Fortress Sponsor Was Excluded
Fortress Acquisition Sponsor II, the SPAC sponsor, tried to claim a portion of the settlement fund, which the court described as roughly 40% of the total. In April 2026, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower-court ruling barring it from recovering anything. The settlement agreement defined Fortress as a “defendant,” and defendants were excluded from the payout. The Seventh Circuit resolved the appeal in an unsigned, unpublished opinion.12Bloomberg Law. ATI Physical Therapy’s SPAC Sponsor Barred From Settlement Fund
Where ATI Stands Now
The settlement did not fix the underlying business. ATI’s 2024 annual filing acknowledged “substantial doubt about our ability to continue as a going concern,” pointing to continued therapist attrition, elevated contract-labor costs, possible clinic closures, and the risk of breaching loan covenants.13SEC. ATI Physical Therapy 2024 Annual Report The New York Stock Exchange suspended trading in ATI shares on December 3, 2024 and began delisting proceedings after the company fell below the exchange’s minimum market capitalization threshold.14ICE/NYSE. NYSE to Commence Delisting Proceedings Against ATI Physical Therapy
On August 1, 2025, ATI was taken private in a merger led by existing stockholders together with Knighthead Capital Management and Marathon Asset Management. Unaffiliated shareholders received $2.85 per share in cash, valuing the company at an enterprise value of $523.3 million. The acquiring group already held more than 90% of voting shares before closing.15ATI Physical Therapy. ATI Goes Private The clinics continue to operate under the ATI brand, headquartered in Downers Grove, Illinois, with Sharon Vitti as CEO.