United States: Mergers, Acquisitions And Control Contests

Last Updated: February 4 2013
Article by Alan J. Stone

Paving the way for a multi-billion dollar merger, Milbank helps healthcare company achieve settlement with its shareholder

Milbank is defending Catalyst Health Solutions, Inc. against various shareholder class action lawsuits challenging the merger of Catalyst and SXC Health Solutions Corp., which was announced in April 2012. The merger was valued at approximately $4.4 billion. The various shareholder lawsuits, which were subsequently consolidated, alleged breaches of fiduciary duty by Catalyst and certain of its officers and directors. The lawsuits also alleged aiding and abetting breaches of fiduciary duty by SXC. We worked collaboratively with SXC’s counsel and were able to successfully settle the lawsuits by agreeing to file supplemental disclosures about the merger prior to the shareholder meeting to approve the merger. Final approval of the settlement is pending.

Milbank settles class action suit against Global Traffic Network, allowing asset sale and merger to proceed

Milbank successfully settled a class action suit for a major public traffic communication company. In August 2011, Global Traffic Network, Inc. entered into an agreement and plan of merger with GTCR Gridlock Holdings, Inc. and its subsidiaries. Pursuant to the merger agreement, GTCR agreed to purchase all outstanding Global common shares for $14 per share in cash. Before the merger closed, the plaintiff filed a petition to temporarily enjoin the sale and merger of Global. The plaintiff alleged, among other things, that the company was worth more than $14 per share, in part because the sale price did not account for Global’s future growth. The plaintiff also alleged that the statement recommending the merger to shareholders failed to disclose material information, including a potential conflict of interest with Global’s financial advisor. The plaintiff sought damages in the form of supplemental disclosure, compensatory and punitive damage, and attorney’s fees. We worked with the plaintiff and GTCR to settle the case before the temporary injunction hearing. Global agreed to supplement the statement recommending the merger, including disclosing the potential conflict of interest with its financial advisor, the sale process, and the criteria used by the financial advisor to render its fairness opinion.

Milbank’s aggressive litigation strategy achieves summary judgement ruling on liability

Milbank represents medical diagnostic equipment company Instrumentation Laboratory Co. in a hotly contested breach of contract dispute in the Southern District of California. ILC, a subsidiary of the Spanish healthcare company the Werfen Life Group, S.A., purchased San Diego-based Inova Diagnostics, Inc. in early 2008. Less than two weeks after the deal closed, Inova was sued for patent infringement in Germany regarding CCP3, an Inova product used in diagnosing rheumatoid arthritis. That suit led to a two year, multi-jurisdictional, cross-border battle resulting in a global settlement that permitted Inova to continue selling CCP3. Pursuant to the contract that governed the sale of Inova to ILC – in which the sellers represented that they had sold ILC good, valid, and unencumbered intellectual property and that no threatened lawsuits existed – ILC sought indemnification from the sellers for all of the legal costs and settlement payments incurred in protecting the right to sell CCP3. The sellers stonewalled ILC for years until we brought suit on ILC’s behalf in May 2011.

During discovery, we uncovered numerous documents evidencing that the sellers had in fact received threats of patent infringement litigation regarding CCP3 before they sold Inova to ILC, and that they had received an opinion from their patent counsel that the product infringed several patents. The sellers had discussed the threatened litigation during a Board meeting but, in a shocking revelation in the case, had failed to provide ILC during due diligence with that single page from their Board minutes – despite providing every other page of Board minutes from a five-year period. During summary judgment, Milbank presented hundreds of pages of evidence supporting its assertion that the sellers had breached the contract by making inaccurate representations and incomplete disclosures. In late August 2012, the court granted ILC’s motion, concluding that the evidence demonstrated as a matter of law that the sellers had breached numerous representations in the contract. The parties are engaged in additional summary judgment practice regarding the extent of damages that the sellers will have to pay to indemnify ILC.

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