8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): March 10, 2008

MedQuist Inc.

(Exact Name of Issuer as Specified in Charter)

New Jersey	0-19941	22-2531298
(State or Other Jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification
Incorporation or Organization)		Number)

1000 Bishops Gate Blvd., Suite 300	08054
Mt. Laurel, New Jersey	(Zip Code)
(Address of Principal Executive Offices)

(856) 206-4000
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Item 1.01. Entry into a Material Definitive Agreement.

Litigation Settlement

     On March 10, 2008, MedQuist Inc. (the “Company”) executed a Settlement Term Sheet (the “Term Sheet”) with Partners Healthcare System, Northbay Healthcare Group, Hospital Corporation of America, St. Lukes Regional Medical Center, Palisades Medical Center, Mt. Sinai Medical Center, Ascension Health Ministry, Bayonne Medical Center, Bon Secours Health System, Inc., South Broward Memorial Hospital District and University of Colorado, and all related or associated facilities (collectively, the “Settling Plaintiffs”) regarding the settlement of all claims and potential claims of the Settling Plaintiffs against the Company and all individual defendants (collectively, the “Defendants”) from a lawsuit. The lawsuit, entitled South Broward Hosp. Dist., et al. v. MedQuist Inc., et al., Civil Action No. 05-CV-2206-JBS-AMD, was originally filed against the Company in the United States District Court for the Central District of California on September 9, 2004 (the “Lawsuit”), which was later transferred to the United States District Court for the District of New Jersey (the “Court”). By the terms of the Term Sheet, the Company shall make a single lump sum payment of $7,537,001.83 to settle all claims and potential claims of the Settling Plaintiffs against the Defendants from the Lawsuit. The Settling Plaintiffs will release the Defendants from any and all claims and dismiss the Lawsuit in its entirety with prejudice. The Term Sheet requires the Settling Plaintiffs and the Defendants to enter into a settlement agreement (the “Settlement Agreement”) containing standard, non-monetary terms in addition to the settlement payment and general release set forth above. The ultimate settlement of all claims and potential claims of the Settling Plaintiffs against the Defendants from the Lawsuit is subject to the execution of the Settlement Agreement. Because the parties are not settling on a class-wide basis, no class will be certified, and thus there is no requirement to give notice. None of the Defendants will admit to any wrongdoing in connection with the settlement.

     A copy of the Term Sheet is attached as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference. A copy of the press release announcing the execution of the Term Sheet is also attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

     The Company has no other material relationship with any of the Settling Plaintiffs other than Partners Healthcare System, Northbay Healthcare Group, Hospital Corporation of America, Ascension Health Ministry and Bon Secours Health System, Inc., each of which currently purchases services or products from the Company.

Governance Agreement Amendment

     On March 12, 2008, the Company and Koninklijke Philips Electronics N.V. (“Philips”) entered into an amendment (the “Amendment”) to the Governance Agreement by and between the Company and Philips dated May 22, 2000, as amended (the “Governance Agreement”). The Supervisory Committee of the Board of Directors of the Company (the “Board”), which is comprised of three independent directors and is responsible for, among other things, the general oversight, administration, amendment and enforcement of all material agreements or arrangements between the Company and Philips, approved the Amendment.

     The Amendment establishes the number of directors and the composition of the Board and certain of its committees in the event the number of Independent Directors (as defined in the Governance Agreement) on the Board is less than three. In the event the number of Independent Directors on the Board is less than three, the Amendment requires the Company to use its commercially reasonable efforts to nominate and elect additional Independent Directors in order to maintain three Independent Directors on the Board. The Amendment also authorizes the Board to change the composition of the Board and any Board committee as necessary to comply with the securities laws or rules and regulations promulgated by the Securities and Exchange Commission (the “SEC”) or the rules of any stock exchange on which the Company’s stock is listed or traded.

     Philips owns approximately 70% of the outstanding common stock of the Company. The Company is a party to various agreements with Philips or subsidiaries of Philips. These agreements are described in the Company’s Definitive Proxy Statement for its Annual Meeting of Shareholders held on December 31, 2007, which was filed with the SEC on December 17, 2007.

     A copy of the Amendment is attached as Exhibit 10.2 to this Form 8-K and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The attached Exhibit Index is incorporated herein by reference.

Disclosure Regarding Forward-Looking Statements:

     Some of the statements in this Current Report on Form 8-K constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not historical facts but rather are based on the Company’s current expectations, estimates and projections regarding the Company’s business, operations and other factors relating thereto. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are used to identify these forward-looking statements. The forward-looking statements contained in this Current Report on Form 8-K include, without limitation, statements about settling claims and potential claims of the Settling Plaintiffs arising from the Lawsuit. These statements are only predictions and as such are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict, including, without limitation, the risk that the Company does not settle any of the claims or potential claims of the Settling Plaintiffs arising from the Lawsuit and the risk of possible future claims against the Company. For a discussion of these risks, uncertainties and assumptions, any of which could cause our actual results to differ from those contained in the forward-looking statement, see the section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, entitled “Risk Factors” and discussions of potential risks and uncertainties in the Company’s subsequent filings with the SEC.

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.

	MedQuist Inc.
Date: March 14, 2008	By:	/s/ Howard S. Hoffmann
		Howard S. Hoffman
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit
Number	Exhibit
10.1	Settlement Term Sheet dated March 10, 2008 by and among (i) MedQuist Inc. and (ii) Partners Healthcare System, Northbay Healthcare Group, Hospital Corporation of America, St. Lukes Regional Medical Center, Palisades Medical Center, Mt. Sinai Medical Center, Ascension Health Ministry, Bayonne Medical Center, Bon Secours Health System, Inc., South Broward Memorial Hospital District and University of Colorado, and all related or associated facilities.
10.2	Amendment to the Governance Agreement dated March 12, 2008 by and between MedQuist Inc. and Koninklijke Philips Electronics N.V.
99.1	Press Release of MedQuist Inc. issued on March 14, 2008.

EX-10.1

Exhibit 10.1

SETTLEMENT TERM SHEET

South Broward Hosp. Dist., et al. v. MedQuist Inc., et al.
Civil Action No.: 05-CV-2206-JBS-AMD

Settling Parties: The SETTLING PARTIES consist of Partners Healthcare System, Northbay Healthcare Group, Hospital Corporation of America, St. Lukes Regional Medical Center, Palisades Medical Center, Mt. Sinai Medical Center, Ascension Health Ministry, Bayonne Medical Center, Bon Secours Health System, Inc., South Broward Memorial Hospital District, and University of Colorado, and all related or associated facilities.

Settlement Payment: MedQuist shall make a single lump sum payment of $7,537,001.83 (the “SETTLEMENT PAYMENT”) to resolve all claims (including all AAMT and non-AAMT related claims) of the SETTLING PARTIES against MedQuist and all individual defendants that were or might have been raised in the above-referenced action, including all claims relating to any billing issues.

Greenberg Traurig shall have sole discretion to decide how to distribute the SETTLEMENT PAYMENT among the SETTLING PARTIES. However, MedQuist has not agreed and will not agree to make any payment in excess of the accommodation offers to the SETTLING PARTIES. In this context, it is understood and agreed that the $7,537,001.83 SETTLEMENT PAYMENT consists of the total sum of the accommodation offers to the SETTLING PARTIES, including the value of all credits converted to cash, plus reasonable legal fees and an additional $550,000 as reimbursement for litigation expense. Other than as expressly provided herein, all parties shall bear their own expenses and costs of suit.

MedQuist is not waiving, and expressly reserves the right, to seek reimbursement from the SETTLING PARTIES for all amounts outstanding and unpaid for services rendered (“aged AR”). With respect to Partners specifically, before any of the SETTLEMENT PAYMENT will be released by the MedQuist, Partners must bring current its aged AR.

Confidentiality: The individual settlements MedQuist has entered into with other customers to date have been confidential. Accordingly, while the lump sum SETTLEMENT PAYMENT will need to be publicly disclosed, the individual amounts distributed to the SETTLING PARTIES shall be confidential and not revealed to each other or any third party.

Settlement Agreement: The SETTLING PARTIES shall execute a comprehensive settlement agreement, including mutual general releases of MedQuist Inc. and all individual defendants with no admissions of any wrongdoing. The settlement agreement will include standard, non-monetary terms, including but not limited to governing law and choice of forum, the Court’s continuing jurisdiction over implementation of the settlement, where notices are to be sent, discovery of additional facts not being a basis to rescind the agreement, opportunity to consult with counsel and receive independent advice before signing the agreement, representations and warranties and survival of same, non-disparagement provision, complete agreement of the parties and full integration, modifications solely in writing, authority to sign on behalf of entity, severability provision, signatures in counterparts.

Should Defendant MedQuist Inc. and/or Defendant MedQuist Transcriptions, Ltd. (collectively the “MedQuist Defendants”) become subject to a case or proceeding under any Chapter of Title 11 of the United States Code within 90 days of the SETTLEMENT PAYMENT, and if the SETTLEMENT PAYMENT or any part thereof is rescinded or reduced in amount, restored or otherwise returned, whether as a voidable preference, fraudulent transfer or otherwise, then unless any such deficiency in the SETTLEMENT PAYMENT is repaid within 45 days, the SETTLING PARTIES’ claims against all Defendants in the above-referenced action which were released under this settlement shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

The SETTLING PARTIES must also covenant not to bring any further individual or class claims in any proceeding arising out of the allegations in the above-referenced action and cooperate with MedQuist by advising the Company if they are contacted to discuss or provide testimony in connection with any proceeding related to the billing issues or receive a document request or subpoena to produce documents in any such proceeding.

Dismissal with Prejudice: Upon execution of the settlement agreement by all parties, plaintiffs shall dismiss all individual and class claims in the above-referenced action against MedQuist and all individual defendants, with prejudice, and the parties shall execute all other documents necessary to effectuate Court approval of the dismissal of the suit. Upon execution of the settlement agreement by all parties, plaintiffs shall promptly seek the Court’s approval of the dismissal of the action.

AGREED TO:

On behalf of the SETTLING PARTIES:		On behalf of MedQuist Inc.:
By:	/s/ Mark Hogge	By:	/s/ Neal Marder (SRS)
	Mark Hogge		Neal Marder
	Greenberg Traurig, LLP		Winston & Strawn LLP
	2101 L Street, NW, Suite 1000		333 South Grand Avenue
	Washington, D.C. 20037		Los Angeles, CA 90071
	Tel: 202.530.8591		Tel: 213.615.1728
	Fax: 202.261.2659		Fax: 213.615.1750

EX-10.2

Exhibit 10.2

March 12, 2008

Koninklijke Philips Electronics N.V.
Rembrandt Tower
Amstelplein 1
1096 HA Amsterdam,
The Netherlands

Re: Amendment to the Governance Agreement by and between Koninklijke Philips Electronics N.V. (“Purchaser”) and MedQuist Inc. (the “Company”) dated May 22, 2000, as amended (the “Governance Agreement”)

Ladies and Gentleman:

This letter constitutes an amendment to the Governance Agreement. The Governance Agreement shall be amended as follows:

• Sections 1.1(j) through 1.1(m) are hereby renumbered to be Sections 1.1(k) through 1.1(n), respectively.

• A new Section 1.1(j) is added to the Governance Agreement to read as follows:

“Adjustment Number” means a number determined by subtracting the number of Independent Directors on the Board at any given time from three.

• A new Section 3.1(h) is hereby added to the Governance Agreement to read as follows:

The provisions of this Agreement notwithstanding, at any time that the number of Independent Directors shall be less than three: (a) (i) if the number of directors constituting the whole Board of Directors has otherwise been fixed at seven directors, the number of directors constituting the whole Board of Directors shall be set at seven less the Adjustment Number and the Board of Directors shall consist solely of four Purchaser Directors and the Independent Directors that remain on the Board of Directors, and (ii) if the number of directors constituting the whole Board of Directors has not otherwise been fixed at seven directors, the number of directors constituting the whole Board of Directors shall be reduced by the Adjustment Number; and (b) the number of Independent Directors on the Board of Directors is less than the number of Independent Directors required for any particular committee of the Board of Directors pursuant to this Agreement, the number of Independent Directors required for such committee shall be

Koninklijke Philips Electronics N.V.
March 12, 2008
Page 2

equal to the number of Independent Directors on the Board of Directors. The Board of Directors and the Nominating Committee shall, at any time the number of Independent Directors is less than three, use commercially reasonable efforts to nominate and have elected a number of Independent Directors equal to the Adjustment Number.

• A new Section 3.1(i) is hereby added to the Governance Agreement to read as follows:

The provisions of this Agreement notwithstanding, the parties hereto shall use commercially reasonable efforts to ensure that the composition of the Board of Directors and the composition of each committee of the Board of Directors complies with (i) any applicable laws and (ii) the rules of any stock exchange on which the Company’s stock is listed or traded.

• A new clause is added to the end of Section 3.4(a)(i) to read as follows:

; provided, however, that if the number of directors constituting the whole Board of Directors is seven or less, the Nominating Committee shall, subject to Section 3.1(h), consist solely of two Independent Directors and one Purchaser Director;

• A new clause is added to the end of Section 3.4(a)(ii) to read as follows:

; provided, however, that if the number of directors constituting the whole Board of Directors is seven or less, the Compensation Committee shall, subject to Section 3.1(h), consist solely of two Independent Directors and one Purchaser Director;

Except as amended hereby, all of the terms and provisions of the Governance Agreement shall remain in full force and effect.

Koninklijke Philips Electronics N.V.
March 12, 2008
Page 3

Please indicate your agreement with the above amendment by signing where indicated below and returning one copy of this letter amendment to MedQuist Inc., 1000 Bishops Gate Blvd., Suite 300, Mt. Laurel, New Jersey 08054, USA, Attention: General Counsel. All capitalized terms not defined herein shall have the same meanings as given to them in the Governance Agreement. Pursuant to the terms of the Governance Agreement, this letter amendment has been approved by the Supervisory Committee and will be effective as of the date it is executed by Purchaser as indicated below.

Sincerely,
MedQuist Inc.
By:	/s/ Howard S. Hoffmann
	Howard S. Hoffmann, CEO & President

Agreed by:

Koninklijke Philips Electronics N.V.

By:	/s/ Stephen H. Rusckowski
	Stephen H. Rusckowski
	Member, Royal Philips Board of
	Management (Philips Healthcare)

Date: March 12, 2008

EX-99.1

Exhibit 99.1

MedQuist Announces Entry Into Settlement Term Sheet Resolving South Broward Litigation

MedQuist Inc. (Pink Sheets: MEDQ.PK). On March 10, 2008, the company executed a settlement term sheet with the individual named plaintiffs and certain other putative class members represented by plaintiffs’ counsel in the South Broward customer class action. As previously announced, on September 9, 2004, a putative class action was filed against the company and certain present and former officers in the U.S. District Court for the Central District of California entitled South Broward Hospital District, d/b/a Memorial Regional Hospital, et al. v. MedQuist Inc. et al., Case No. CV-04-7520-TJH-VBKx). In the complaint, plaintiffs alleged that the Company overcharged certain non-federal governmental hospitals and medical centers for transcription services. Plaintiffs twice amended the complaint adding and dropping named plaintiffs. On March 30, 2005, the action was transferred to the U.S. District Court District for the District of New Jersey and assigned Case No. 05-CV-2206-JBS-AMD. Plaintiffs filed a Third Amended Complaint on January 4, 2006. Under the settlement term sheet, the Company will pay $7,537,001.83 to resolve all claims by the individual named plaintiffs and certain other putative class members represented by plaintiffs’ counsel but not named in the action. The settling parties will release the company and all individual defendants from any and all claims and dismiss the action in its entirety with prejudice. The settlement is subject to formal documentation by the parties. Because the parties are not settling on a class-wide basis, no class will be certified, and thus there is no requirement to give notice. Neither the company, nor any of the individual defendants, has admitted or will admit to liability or any wrongdoing in connection with the proposed settlement.

About MedQuist:

MedQuist is a leading provider of clinical documentation workflow solutions in support of the electronic health record. MedQuist provides electronic medical transcription, health information and document management products and services, including digital dictation, speech recognition, Web-based transcription, electronic signature, mobile dictation devices, and outsourcing services.

Disclosure Regarding Forward-Looking Statements:

Some of the statements in this press release constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not historical facts but rather are based on the company’s current expectations, estimates and projections regarding the company’s business, operations and other factors relating thereto. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are used to identify these forward-looking statements. The forward-looking statements contained in this press release include, without limitation, statements about proposed settlement and the dismissal of the case. These statements are only predictions and as such are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict, including, without limitation, the risk that the settlement agreement is not consummated, the risk that the case is not dismissed with prejudice, and the risk of possible future claims against the company. For a discussion of these risks, uncertainties and assumptions, any of which could cause our actual results to differ from those contained in the forward-looking statement, see the section of the company’s Annual Report on Form 10-K for the year ended December 31, 2006, entitled “Risk Factors” and discussions of potential risks and uncertainties in the MedQuist’s subsequent filings with the Securities and Exchange Commission.

SOURCE MedQuist Inc.
03/14/2008
CONTACT: Kathleen Donovan, Chief Financial Officer of MedQuist Inc.
+1-856-206-4000

Web site: http://www.medquist.com
(MEDQ)