Court Denies Defendants’ Motion to Dismiss in Allergan Derivative Shareholder Litigation

SFMS is pleased to announce that the Delaware Chancery Court has denied Defendants’ Motion to Dismiss in a shareholder derivative litigation involving Allergan, Inc. (“Allergan”). The 82-page decision likely will be treated as a seminal case in Delaware corporate jurisprudence. SFMS is counsel for plaintiff, UFCW Local 1776 & Participating Employers Pension Fund (“UFCW”) in this matter, and is co-lead counsel in the case. On June 11, 2012, Defendants’ Motion to Dismiss was denied by the Court. The Court found that the Delaware action was not precluded by the dismissal of a similar California action. The decision on the Motion to Dismiss was issued by Vice Chancellor Travis Laster. In this litigation, Plaintiffs allege that Allergan marketed Botox for off-label uses (such as, for migraine headaches) in violation of the Food, Drug, and Cosmetics Act, 21 U.S.C. Sec. 301 et seq. and the Public Health Service Act, 42 U.S.C. Sec. 262, et seq. Further, Plaintiffs allege that Allergan’s board of directors knew of and supported marketing off-label uses for Botox. The UFCW undertook efforts to obtain books and records from Allergan under Delaware law and intervened in this action. With the benefit of documents obtained pursuant to the UFCW’s demand, Plaintiffs filed an amended derivative complaint on July 8, 2011. Defendants moved to dismiss Plaintiffs’ complaint. The Court denied Defendants’ Motion and stated that demand was excused as futile because the allegations in the complaint support a “reasonable inference that the Board knowingly approved a business plan that contemplated illegal off-label marketing in the United States.” Further, the Court held that the complaint states a claim under Rule 12(b)(6). In so ruling, the Delaware Chancery Court specifically approved of the approach taken by SFMS and the UFCW to protect the rights of Allergan in a derivative capacity.

For a copy of the Court’s Opinion, please
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If you have any questions regarding this case, please email James E. Miller, or Scott R. Shepherd