In re Allergan, Inc. Proxy Violation Securities Litigation

Court: Central District of California
Case Number: 14-cv-2004
Judge: Hon. David O. Carter
Class Period: 02/25/2014 - 04/21/2014
Case Contacts: Mark Lebovitch, Jeremy P. Robinson, Michael D. Blatchley, Richard D. Gluck, Edward G. Timlin, Brandon Marsh

This case is about an insider-trading scheme by billionaire hedge fund manager Bill Ackman and a pharmaceutical company, Valeant Pharmaceuticals International, Inc. (“Valeant”), to cheat Allergan, Inc. (“Allergan”) shareholders out of over a billion dollars that rightfully belonged to them.  Specifically, Ackman, through his hedge fund Pershing Square Capital Management, and Valeant conspired to manipulate the securities laws to acquire Allergan, another pharmaceutical company, at a discount.  The insider-trading scheme began in February 2014, when Ackman began secretly buying billions of dollars of Allergan stock from investors at an average price of approximately $128 per share.  What Ackman knew – but investors did not – was that in the ensuing weeks, Valeant would be launching a hostile bid and subsequent tender offer to acquire the Allergan shares at a far higher price.  The conspiracy worked for both parties.  Ackman was able to enjoy an instantaneous profit, reaping over $1 billion in a single day, on April 22, 2014, when Ackman disclosed his Allergan position and Valeant publicly announced its unsolicited offer to acquire the company.  Ackman’s profit ultimately grew to over $2.5 billion, and he kicked back $350 million of his insider-trading proceeds to Valeant after Allergan agreed to be bought by a rival bidder for $219 per share.

The federal securities laws expressly prohibit anyone from trading on nonpublic information about an upcoming tender offer.  The purpose of the securities laws that govern tender offers such as this one is to create a level and fair playing field so that insiders with knowledge about an upcoming tender offer cannot profit from trading with unsuspecting investors who are not privy to such information.  The action asserts claims under Section 14(e) and Rule 14e-3 of the Securities Exchange Act on behalf of Allergan investors that sold their shares during February 25, 2014 and April 21, 2014 (the “Class Period”) – the period during which Ackman was secretly acquiring his near 10% stake in Allergan – and seeks to disgorge the profits that Ackman and Valeant made when the price of Allergan shares rose dramatically after Valeant launched its hostile bid and subsequent tender offer for the company. 

On May 5, 2015 , the Court appointed BLB&G client the State Teachers Retirement System of Ohio as Co-Lead Plaintiff, together with its Co-Lead Plaintiff the Iowa Public Employees Retirement System.  On August 7, 2015, Defendants moved to dismiss the claims against them.  Lead Plaintiffs opposed the motion and, on November 9, 2015, the Court denied Defendants’ motion in its entirety.  The case has now proceeded to discovery.