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Amgen Beats Decade-Old Investor Suit

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Law360, Los Angeles -- A California judge Tuesday dismissed a decade-old action claiming Amgen Inc.'s board caused more than $1 billion in damages by overseeing an off-label drug marketing scheme, saying the shareholder failed to make a demand on the officials to instigate litigation before filing her suit.

Shareholder Judy Durgin’s suit, brought in May 2007, relates to allegedly misleading statements the pharmaceutical giant made about off-label uses for two of its drugs, Aranesp and Epogen. In 2012, the company pled guilty in federal court to misbranding Aranesp and agreed to a combined $762 million civil and criminal payout to resolve the allegations about its sales and marketing practices. It also paid tens of millions of dollars to resolve state claims and an investor class action.

In his Tuesday ruling, U.S. District Judge Philip Gutierrez said Durgin also failed to adequately allege, with the legally required specificity, that she didn’t make a prelitigation demand on the board because to do so would have been “futile.” He also noted that she asked the court to introduce into evidence 24 new exhibits in support of her complaint.

“Here, plaintiff seeks to circumvent the fact that she has not pled particularized facts as required … by attempting to amend her complaint through judicial notice of facts purportedly demonstrating demand futility,” the judge wrote in his 18-page ruling. “This is improper.”

The request, and the reliance on the documents, “constitutes a tacit admission” that the complaint lacked the needed pleadings to excuse the lack of demand on Amgen’s board, he said. While Durgin had argued that making such a demand on the board would have been a waste of time, the complaint on its own didn’t create a “reasonable doubt that Amgen’s board of directors was incapable of exercising independent and disinterested business judgment in responding to a demand,” the judge said.

Amgen attorney Douglas Dixon of Hueston Hennigan LLP told Law360 on Tuesday that he was very happy with the ruling.

“There’s high standard for alleging demand futility and boilerplate conclusory allegations won’t get you there, and that’s all that plaintiff offered,” Dixon said during a telephone interview. “We think the judge absolutely got the right result and we’re very pleased that it’s also with prejudice so we can put this litigation behind us.”

Counsel for Durgin was not immediately reachable for comment on Tuesday.

In her filing in opposition to the motion to dismiss filed by Amgen and joined by the individual board defendants, Durgin said federal courts regularly find such a demand isn’t necessary in circumstances like hers. During the nine years the case was stayed, she said, the biotechnology company copped to criminal charges and shelled out about $928 million in settlements and forfeitures over the same allegations.

“There can be no doubt that the board’s actions (and conscious inaction) caused Amgen to violate the law and, in turn, caused significant harm and damages to the company,” Durgin said. “The acting U.S. attorney of the Eastern District of New York confirmed that ‘instead of working to extend and enhance human lives, Amgen illegally pursued corporate profits while jeopardizing the safety of vulnerable consumers suffering from a disease. Americans expect – and the law requires – much more.'”

During oral arguments on Monday, Durgin’s attorney, James Jaconette of Robbins Geller Rudman and Dowd LLP, argued that the documents supported the complaint, but said if the court was struggling with the complaint’s securities fraud claim, it could be let go.

“The breach of fiduciary duty claims stand on their own,” the attorney said. “Candidly, I don’t think we need to bring the 10b claims right now. If we’re talking about how to resolve this case, which has been on the docket for nine years, expeditiously, I think that it’s appropriate to discuss exactly how we can do this.”

The company and the shareholders were “walloped” by company officials’ actions, the attorney said.

“We’re talking about hundreds of millions of dollars paid in fines and penalties, and with the investigations concluded and the class case settled with substantial money allocated out of Amgen’s pockets and the pockets of Amgen’s shareholders as a result,” he said.

In August 2015, Amgen agreed to pay $71 million to 48 state attorneys general over the claims. Last year, the company settled an investor class action for $95 million.

Durgin’s derivative complaint against Amgen’s board stated causes of action for breach of fiduciary duty and misleading investors to inflate the company’s stock price. It was stayed months after it was filed to wait for the outcome of the securities litigation and reopened on Oct. 11, 2016.

Durgin is represented by James I. Jaconette and Benny C. Goodman III of Robbins Geller Rudman & Dowd LLP, Paul Warner of The Warner Law Firm, and David M. Goldstein of the Law Offices of David M. Goldstein.

The officers and directors are represented by Steven O. Kramer and Jonathan David Moss of Sheppard Mullin Richter & Hampton LLP.

Amgen is represented by John C. Hueston, Douglas James Dixon, and Kasey L. Mitchell of Hueston Hennigan LLP. The case is Judy Durgin v. Kevin W. Sharer et al., case number 2:07-cv-03001, in the U.S. District Court for the Central District of California.

By Bonnie Eslinger