* Allergan directors must defend lawsuit
* Judge weighs in on "fast-filed" lawsuits
* Judge criticizes rush to file lawsuits
By Tom Hals
June 11 Directors of Allergan Inc must
face a lawsuit over $600 million in fines the company paid for
misbranding its Botox treatment to smooth out wrinkles, a
Delaware judge ruled, in a decision that could affect securities
litigation in that state.
The opinion by Chancery Court Judge Travis Laster could make
it easier for shareholders to bring lawsuits on behalf of
companies in Delaware, a state traditionally seen as friendly
for corporate defendants.
Allergan declined to comment.
The lawsuit stems from a $600 million settlement Allergan
reached with the U.S. Department of Justice in 2010, which
followed a three-year investigation by several government
agencies of the marketing of Botox for unapproved uses.
Following the settlement, the Louisiana Municipal Police
Employees' Retirement System and U.F.C.W. Local 1776 pension
funds brought derivative lawsuits in Delaware's Court of
Chancery and several similar lawsuits were filed in California
Derivative lawsuits allow shareholders essentially to step
into the shoes of the company and sue directors for harm. Any
recovery from individual directors or their insurers would go to
the company, rather than to shareholders.
The California lawsuit was dismissed earlier this year and
the directors argued that this meant the Delaware case should
also be dismissed.
But Laster found that just because the California federal
case was weak does not mean it should preclude the Delaware
state case from going forward.
Laster dedicated much of his 84-page opinion to what he
called the problem of "fast-filing" - the rush to the courthouse
by lawyers with inadequate lawsuits to try to seize control of
litigation before other lawyers file better lawsuits.
"Put simply, fast-filing generates dismissals," wrote
Laster, who joined the Delaware court, one of the nation's
busiest for shareholder litigation, in 2009.
Saying he would focus on the strength of lawsuits, he
rejected an earlier Delaware Chancery Court decision that he
said could preclude new lawsuits where the original plaintiff
"lacked authority to sue on behalf of the corporation."
Laster has been an outspoken critic of plaintiffs' attorneys
whom he believes have done a poor job litigating potentially
strong cases and even replaced plaintiffs' attorneys in a case
involving Revlon Inc.
"It's very significant," said Larry Hamermesh, a professor
at Widener University School of Law in Wilmington, Delaware,
said of the opinion.
"The ruling in the case is, as I see it, an effort to
discourage both plaintiffs and defendants from using 'fast
filing' in a way that squelches more effective derivative
The case is Louisiana Municipal Police Employees' Retirement
System et al v David Pyott et al, Delaware Court of Chancery,