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Note 10 - Litigation
9 Months Ended
Sep. 30, 2026
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

10. LITIGATION

 

In connection with its business, the Company is from time to time involved in various legal actions. These legal actions may be subject to significant complexities and uncertainties, some of which are beyond the Company’s control, and may allege substantial or indeterminate monetary damages. Based on current information, management does not believe that the ultimate resolution of pending legal matters will have a material adverse effect on the Company’s consolidated financial position or liquidity. However, an adverse outcome in one or more pending legal matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

 

The Company accrues for loss contingencies when it is both probable that a loss has been incurred and when the amount of the loss can be reasonably estimated. If a loss or additional loss with respect to material legal matters is reasonably possible and the Company is able to estimate the possible loss or range of loss, the Company discloses the estimate of the possible loss or range of loss, if material and as required. However, the Company may be unable to estimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the preliminary nature of, certain legal matters.

 

 

Wage and Hour Litigation

 

On May 27, 2026, a putative collective action complaint styled Tanesha Riley v. HealthStream, Inc. was filed in the United States District Court for the Middle District of Tennessee. The plaintiff alleges that certain employees in Solution Executive sales roles were misclassified as exempt employees and were not paid overtime in violation of the Fair Labor Standards Act (“FLSA”). The plaintiff seeks back wages, liquidated damages, pre-judgment interest, and attorneys’ fees. On July 21, 2026, the Company filed its answer defending against these claims. During the quarter ended September 30, 2026, the parties exchanged discovery requests, and discovery is ongoing. Taking into account the fact that this matter remains at an early phase, the Company is unable to estimate a possible loss or range of loss, if any, related to this matter. The Company denies the allegations and intends to defend the matter vigorously.

 

Data Privacy Litigation

 

On September 24, 2026, a putative class action complaint was filed against the Company in the Chancery Court for the Twentieth Judicial District, Davidson County, Tennessee, captioned Shonda Venson v. HealthStream, Inc. On September 26, 2026, an additional putative class action complaint was filed in the same court captioned Steve Iraklianos v. HealthStream, Inc. The complaints relate to the cybersecurity incident disclosed by the Company on a Current Report on Form 8-K on July 29, 2026, as discussed below, and generally assert claims relating to the alleged compromise of personally identifiable information in connection with such incident, including claims for negligence and other common law causes of action, on behalf of putative classes of individuals whose information was allegedly affected by the incident.

 

Because the litigation remains at an early stage, the operative allegations and claims have not yet been established through consolidated complaint, no class has been certified, and the amount of damages sought has not been specified. Accordingly, the Company cannot reasonably estimate the possible loss or range of loss, if any. The Company denies the allegations and intends to vigorously defend these matters.