Last year the Center for Class Action Fairness (CCAF) and CEI won an appellate victory over the self-serving Walgreens shareholder settlement, where the Seventh Circuit labelled merger strike suits a “racket” that “must end.”
On September 18, 2017, CCAF attorney Theodore H. Frank moved to intervene and vindicate Walgreens’ directive to end such strike suits. The underlying cases concern the acquisition of Akorn, Inc. by pharmaceutical giant Fresenius Kabi AG. Plaintiffs in these suits have convinced Akorn to pay $322,500 in attorneys’ fees, although no benefit has accrued to the class—only immaterial supplemental disclosures, just as in Walgreens. The award of attorneys’ fees constitutes an end-run around Walgreens precedent and also appears to violate the Private Securities Litigation Reform Act (PLSRA) and basic principles of federal class action law.
The Akorn cases illustrate plaintiffs’ shift in tactics since CCAF’s win in Walgreens. Instead of settling merger strike suits, plaintiffs dismiss with the understanding they will apply for “mootness fees,” of hundreds of thousands of dollars per merger. This tactic has spread like wildfire in Delaware and the Federal Courts, and has enabled a dramatic uptick in merger strike suit filings. Suits against 95 merging companies were filed in the first half of 2017 compared to only 28 in the first half of 2016.
By intervening in the Akorn cases, Frank and CCAF hope to disgorge attorneys’ fees unjustly appropriated by strike suit files, and enjoin or at least discourage the filing of frivolous strike suits nationwide.
On May 2, 2018, the district court denied CCAF’s motions to intervene in three of the six Akorn cases because the attorneys had disclaimed any entitlement to attorneys’ fees in those actions. CCAF appealed the district court’s order denying intervention to the Seventh Circuit Court of Appeals and filed its opening brief on September 10, 2018. CCAF’s motions to intervene in the other three actions remain pending in the district court.