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Need-to-Know Litigation Weekly

Welcome to Shearman & Sterling LLP’s Need-To-Know Litigation Weekly, which analyzes notable U.S. decisions, orders and developments each week in areas of Securities Litigation, M&A Litigation, Government/Regulatory Enforcement, Antitrust Litigation and IP Litigation. This weekly newsletter is intended to supplement our various publications and thought leadership concerning these important substantive areas.


By clicking on the title of any case writeup, you can expand beyond the introductory paragraph to read the entire summary and analysis, and you also can access the underlying material. Clicking on the title of any case writeup also automatically will take you to our Need-To-Know Litigation Weekly microsite, which provides separate links to the four substantive areas (Securities Litigation, M&A Litigation, Government/Regulatory Enforcement, Antitrust Litigation and IP Litigation), each of which contains filters that are searchable both by substantive topic and by time period that will enable you to search and access our existing case summaries and analyses.

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SECURITIES LITIGATION


Northern District Of California Allows Securities Class Action Based On Alleged Price-Fixing To Proceed Against Pharmaceutical Wholesaler

On October 29, 2019, Judge Charles R. Breyer of the United States District Court for the Northern District of California denied a motion to dismiss a putative securities class action brought against a pharmaceutical wholesaler and two of its former executives.  Evanston Police Pension Fund v. McKesson Corp., et al., 18-cv-06525-CRB (N.D. Cal. Oct. 29, 2019).  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that defendants knew about and participated in a price-fixing conspiracy that allowed the company to profit from the inflated prices of generic drugs during the alleged class period and caused the company to suffer decreased earnings once reports revealed government investigations into alleged price-fixing and prices dropped.  The Court denied defendants’ motion to dismiss, holding that plaintiffs adequately alleged material misstatements, scienter, and loss causation at the pleading stage.
 

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Connecticut State Court Grants Motion To Strike Securities Act Claims

On October 24, 2019, Judge Charles T. Lee of the Connecticut Superior Court granted a motion to strike claims alleging violations of Sections 11, 12(a) and 15 of the Securities Act of 1933 (the “Securities Act”) in connection with an initial public offering brought against the issuer, certain of its officers, and the underwriters of the offering.  City of Livonia Retiree Health & Disability Benefits Plan v. Pitney Bowes Inc., No. X08 FST CV 18 6038160 S (Conn. Super. Ct. Oct. 24, 2019).  The Court had previously granted a protective order staying discovery pending the disposition of the motion to strike pursuant to the discovery stay provided in the Private Securities Litigation Reform Act, in one of the first state court decisions after the Supreme Court’s decision in Cyan Inc. v. Beaver Cty. Employees Ret. Fund, 138 S. Ct. 1061 (2018).  See State Court Stays Discovery Under the PSLRA During Pendency of Motion to Strike, Need to Know Litigation Newsletter (May 29, 2019), https://www.lit-sl.shearman.com/State-Court-Stays-Discovery-Under-The-PSLRA-During-Pendency.  In granting the motion to strike, the Court held that plaintiffs had failed to plead violations of the Securities Act because they did not identify any actionable misstatements or omissions from the relevant offering documents.
 

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GOVERNMENT/REGULATORY ENFORCEMENT


Issuer And CEO Charged By The SEC With Fraud And Whistleblower Protection Law Violations For Allegedly Impeding Investor Complaints

On November 4, 2019, the Securities and Exchange Commission (“SEC”) filed an amended complaint against Collectors Café, a Nevada-based company purportedly providing online auctions for collectibles (the “Company”), and its CEO, for making false and misleading statements to investors in connection with a $23 million securities offering.  SEC v. Collector’s Coffee, Inc. & Kontilai, No. 10-CV-04355 (S.D.N.Y. Nov. 4, 2019).  The amended complaint added charges against defendants for alleged violations of whistleblower protection laws by conditioning the return of investor money on investors signing agreements that included provisions prohibiting them from communicating with regulatory agencies, including the SEC, about anything related to the Company.
 

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M&A
 

Delaware Court Of Chancery Finds Certain Safe Harbor Protections Inapplicable To Approval Of Merger With General Partner’s Affiliate

On October 29, 2019, Chancellor Andre G. Bouchard of the Delaware Court of Chancery granted partial summary judgment to a common unitholder of Regency Energy Partners LP (“Regency”) challenging a merger with an affiliate of Regency’s general partner.  Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Oct. 29, 2019).  Plaintiff alleged that defendants (Regency’s general partner and its affiliates) breached the limited partnership agreement by approving the merger even though they “did not believe that the [m]erger was in the best interests of Regency.”  Defendants argued that their approval was protected under three “safe harbors” in the agreement:  (i) reasonable reliance upon the opinion of an investment banker; (ii) “special approval” by an independent conflicts committee; and (iii) a majority vote of the common unitholders unaffiliated with the general partner.  Finding a genuine issue of fact as to whether the general partner’s board actually relied on the opinion of the investment banker, the Court denied defendants’ motion for summary judgment.  The Court, however, determined plaintiff demonstrated that one of the members of the conflicts committee was not independent.  Accordingly, the Court found the “special approval” safe harbor unavailable and granted partial summary judgment to plaintiff on that point.  Because the proxy provided to common unitholders stated that the conflicts committee was independent, the Court found it misleading and granted partial summary judgment to plaintiff on the unavailability of the unitholder vote safe harbor.
 

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ANTITRUST
 

Second Circuit Affirms Dismissal Of Pharmaceutical Antitrust Action, Holding The FTAIA’s Import Exclusion Is Effects-Based, Not Intent-Based

On November 5, 2019, a three-judge panel of the U.S. Court of Appeals for the Second Circuit (Panel) affirmed the U.S. District Court for the Southern District of New York’s dismissal of antitrust claims brought against manufacturers of cancer treatment drugs. Biocad JSC v. F. Hoffmann-La Roche Ltd., No. 17-3486-cv (2d Cir. Nov. 5, 2019). Plaintiff, a private pharmaceutical company based in Russia, alleged that defendants conspired to block plaintiff from entering the U.S. market for cancer treatment drugs in violation of Sections 1 and 2 of the Sherman Act and other statutes. In affirming the district court’s dismissal, the Panel held plaintiff’s claims were barred under the Foreign Trade Antitrust Improvements Act (“FTAIA”), clarifying that, in the Second Circuit, the proper test under the FTAIA’s import exclusion is effects-based, not intent-based.

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INTELLECTUAL PROPERTY


Federal Circuit Affirms Public Availability Of Foreign Publication

On November 7, 2019, the Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion affirming a Patent Trial and Appeal Board (“PTAB”) decision finding invalidity on obviousness grounds. Telefonaktiebolaget LM Ericsson v. TCL Corp. et al., __ F.3d __ (Fed. Cir. Nov. 7, 2019). The CAFC ruled that the PTAB did not abuse its discretion in admitting late-submitted evidence regarding the public availability of a foreign publication and in finding that the foreign publication was available as prior art.
 

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