The Center for Class Action Fairness at the Competitive Enterprise Institute late Thursday filed an objection to the exorbitant fees sought by plaintiffs’ lawyers related to last year’s merger between the Walgreens and Boots pharmacies. Plaintiffs’ lawyers are requesting $370,000 in fees and expenses to settle a class action lawsuit that, rather than helping shareholders, made them worse off than before.
The litigation originated when Walgreen Co. was accused of withholding information from shareholders related to the drugstore’s then-pending merger with European drug store operator Alliance Boots. The plaintiffs sought to suspend the merger proceedings until alleged disclosure violations were remedied. The upshot was a proposed settlement agreement that included supplemental disclosures consisting of an additional 746 trivial words, much of which repeated verbatim information already disclosed, and the $370,000 in fees and expenses.
“Shareholders shouldn’t have to pay a ‘merger tax’ to plaintiffs’ lawyers on top of the other transaction costs,” said Melissa Holyoak, an attorney with the Center for Class Action Fairness (CCAF). “Courts are becoming increasingly impatient with this type of settlement where shareholders are paying for meaningless disclosures because defendants face enormous pressure to settle before the merger vote.
“If this settlement is approved, shareholders will pay hundreds of thousands of dollars in exchange for a few scraps of additional information that had no impact on the vote — the merger passed by over 97 percent,” said Holyoak.
The objection filed by CCAF on behalf of shareholder John Berlau argues that the class not be certified and the case be dismissed. Or, at least, reduce the class counsel’s fees to $1.
According to one study, upwards of 90 percent of mergers in recent years faced such litigation challenges. Tellingly, 71.6 percent were settled out of court; and nearly 77 percent of those settlements were disclosure-only.