Hueston Hennigan Obtains Dismissal in Allergan Derivatives Case


In a resounding victory for Allergan, Inc., a California federal judge on Wednesday dismissed a derivative shareholder suit accusing the pharmaceutical giant's board members of intentionally marketing the drug Botox, its most successful product, for off-label uses.

In March 2015, Actavis PLC, a Dublin-based pharmaceutical company, purchased Allergan for $66 billion. When Allergan ceased existence as a publicly owned company and became a wholly owned subsidiary of Actavis, the plaintiffs also ceased to be shareholders of Allergan.

Despite longstanding case law that clearly established that plaintiffs must remain shareholders throughout the course of litigation -- and despite assurances by Hueston Hennigan attorneys John Hueston, Douglas Dixon and Lauren Shaw that Allergan would vigorously contest plaintiffs' standing pursuant to Rule 23.1 of the Federal Rules of Civil Procedure -- the plaintiffs nonetheless persisted.

But only for a time. After Allergan filed its motion to dismiss the case on the basis that the plaintiffs lacked standing following the merger, the plaintiffs relented and agreed to a dismissal with prejudice, bringing five years of litigation to an end.

With Allergan's acquisition, not only did the plaintiffs lose standing, said Mr. Dixon, but their claims against the company's board also evaporated.

"In a derivative case, shareholders contend that board members are not capable of making a decision to pursue litigation on behalf of the company; obviously, those claims do not and cannot apply to the board of Actavis," said Mr. Dixon. "The law required no less than a dismissal in this instance."

"This is not merely a procedural ending to this case," added Mr. Hueston. "In years of investigation and litigation regarding the question of off-label marketing of Botox, not even federal regulators brought actions against any of Allergan's board members personally. This was clearly a case brought by plaintiffs' attorneys who believed they found an opening for profit," he said.

The case is Willa Rosenbloom v. David E. I. Pyott et al., case number 8:10-cv-01352, in the U.S. District Court for the Central District of California.