Docket numbers: 1-15-CV-278055 (Santa Clara County); H044087 (Cal. App. 6th); S261392 (Cal. Sup. Ct.)
Professor Sean J. Griffith objected to a class action settlement that paid Pharmacyclics shareholders like him $0 while providing meaningless disclosures and “merger tax” of over $500,000 in attorneys’ fees.
The “strike suit” against Pharmacyclics and its board was filed in 2015 when the company announced it supported a merger plan by pharmaceutical giant AbbVie to buy all outstanding shares in a tender offer for cash and stock. Strike suits occur when meritless claims are filed against merging public companies, which entrepreneurial plaintiffs’ attorneys know are vulnerable to holdup due to the short deadlines required to successfully conclude a major transaction. Strike suit plaintiffs threaten to delay the deal through a preliminary injunction, but in reality the attorneys simply seek a “merger tax”—a payment of attorneys’ fees in order to drop the suit.
Exactly this scenario occurred with the Pharmacyclics merger. Plaintiffs alleged that the tender offer disclosures were false and that the deal shortchanged shareholders with “inadequate consideration.” But the suit was settled for only insignificant “disclosures,” such as publicly available price-to-earning ratios of companies cited by the investment bankers who analyzed the transaction. The disclosures are immaterial under Delaware’s Trulia decision, which governs the internal affairs for Pharmacyclics, a Delaware corporation, yet plaintiffs agreed to settle all class claims in exchange for these disclosures—and up to $725,000 in attorneys’ fees.
The settlement was approved by Santa Clara County Superior Court, although the court reduced the award of fees and costs to $509,158.62. Griffith appealed, but the decision was affirmed by an appellate court.
Griffith petitioned the California Supreme Court to resolve a split in California courts over whether Trulia or similar standards should be used to protect class members from disclosure-only strike suit settlements like this.
However the California Supreme Court denied the petition.
Case Documents
| Description | |
| Mar 25, 2020 | PETITION FOR REVIEW to California Supreme Court |
| Feb 14, 2020 | OPINION of the Sixth Appellate District |
| Dec 10, 2018 | REPLY BRIEF in Support of Griffith’s Appeal |
| Jul 30, 2018 | OPENING BRIEF in Support of Sean J. Griffith |
| Jul 21, 2016 | ORDER Granting Final Approval |
| Jun 20, 2016 | OBJECTION of Sean J. Griffith |