Care, Shareholder Will Drop Opposing Lawsuits : Settlement: The 4-year legal fight between the nursing home operator and Ralph E. Hazelbaker ends.

A costly four-year legal battle between Care Enterprises Inc., the nursing home operator now emerging from bankruptcy, and dissident shareholder Ralph E. Hazelbaker ended Friday in what both sides called a welcome divorce.

As part of the deal, each side will drop the lawsuits it has filed against the other, and Hazelbaker will surrender his 3% interest in Care by returning to the company 200,785 shares of its common stock without seeking payment.

Although announced Friday, the settlement was approved Oct. 16 by the U.S. Bankruptcy Court in Los Angeles. As part of the move to completely sever ties with Tustin-based Care, Hazelbaker and his family partnerships sold their $40 million worth of Care debentures on the open market.

“We all wanted to sever the relationship,” said Carl Fry, Hazelbaker’s attorney. He said Hazelbaker was willing to turn in the Care stock because he “didn’t think it was worth anything. We don’t want an investment in Care Enterprises.”

Douglas Drumwright, Care’s chief executive officer, called the settlement “a total divorce.”

The storm of litigation began when Care sued Hazelbaker in August, 1986, to stop him from terminating its contracts to manage two nursing homes his company owned. Hazelbaker retaliated by suing Care for alleged mismanagement of the homes.

More than 20 suits and countersuits have been filed by Care and Hazelbaker since then, but none have gone to trial. The legal wrangling cost Care Enterprises “in excess of $1 million,” said Drumwright.

Hazelbaker sold Care his Americare nursing home operation in 1985. He later formed Paradigm Corp., a health care company in Columbus, Ohio, and retained Care to operate nine of Paradigm’s nursing homes.

Care, founded in 1965, became one of the nation’s 10 largest nursing home chains.

But it sustained huge losses after a major expansion drive that concluded with its 1985 acquisition of Americare.

Care filed a Chapter 11 bankruptcy petition on March 28, 1988.

A reorganization plan, calling for Care to emerge from bankruptcy court supervision by the end of the year, was approved in April.

The settlement agreement between Hazelbaker and Care “resolves all the litigation and ongoing disputes,” said Care’s general counsel, Gary Sanders.

He said Care also has renegotiated its leases of three nursing homes in Albuquerque, N.M., that are owned by Hazelbaker-led partnerships.

In addition, he said, Hazelbaker has agreed to pay Care $970,000 for maintenance of the facilities over the last four years.