February 2, 2021
A recent Law 360 story by Dean Seal “Final OK on $1.2B Valeant Deal Earns Robbins Geller $157M”, reports that a New Jersey federal judge gave final approval to a $1.2 billion settlement of an investor action against Valeant Pharmaceuticals, landing lead counsel Robbins Geller Rudman & Dowd LLP a hefty payday. U.S. District Judge Michael A. Shipp overruled objections from two investor plaintiffs when he granted a special master's recommendation to approve the deal reached in December 2019 between investors and the pharmaceutical company that became known as Bausch Health Cos. Inc. in 2018.
The nearly five-year-old lawsuit claimed Valeant used a clandestine network of pharmacies to push high-priced drug prescriptions, sending the stock plummeting once price-gouging allegations surfaced. Investor plaintiff Cathy Lochridge had lodged an objection to the 13% attorney award for Robbins Geller and local lead counsel Seeger Weiss LLP, arguing that the $157.3 million request was too high considering that the settlement "captures just 3% of class damages," but Judge Shipp said it was also the ninth-largest securities class action recovery ever.
"As Lochridge correctly notes, 'what is important is that the district court evaluate what class counsel actually did and how it benefited the class,'" the judge said. "Here, lead counsel obtained a $1.21 billion all-cash recovery for the benefit of over 400,000 members."
The stock-drop litigation represents consolidated claims by investors who saw Valeant's stock price slide from more than $250 a share in 2015 to below $10 two years later. The company has been fined by regulators and sued by investors who said it defrauded the market. Investors claimed that Valeant had employees work under aliases for a company called Philidor Rx Services LLC that used deceptive practices to block generic alternatives from competing with Valeant's branded drugs. Valeant allegedly duped insurers by changing prescription codes to ensure they were filled with Valeant-branded drugs and making claims for unrequested refills, investors said, and covered up the scheme by lying about the pharmacies' ownership and issuing a series of false statements to investors.
In December 2019, Bausch announced that it had agreed to resolve the case with a $1.21 billion settlement while admitting no liability and denying all wrongdoing. Last June, a special master issued a report recommending final approval of the settlement, plan of allocation and attorney fees and expense reward, leading to objections from two plaintiffs.
The first, from brokerage firm Timber Hill LLC, objected to the settlement itself as well as the plan of allocation, arguing against the plan's imposition of an "arbitrary" 5% recovery cap on options investors while permitting common stock and debt investors to take the remaining 95%. The cap demonstrated that options investors were not adequately represented in the settlement, Timber Hill said, asking that the cap be increased to around 9.5%.
Judge Shipp overruled the objection, saying that Timber Hill's expert had originally supported an options cap in the 5% range and that he found the plan to be "fair, reasonable and adequate." The second objector, Lochridge, had asked that the attorney fee award be reduced to 6% of the settlement fund, or around $72.6 million, arguing that "this is the lowest ever return on class damages for a billion-dollar securities settlement."
Judge Shipp disagreed, saying Lochridge's low recovery argument was based on "new and inconsistent" analysis from Timber Hill's expert and speculation that Valeant could have agreed to a higher settlement amount despite its uncertain financial position. The judge also found that the hefty settlement fund and low number of objectors and opt-outs weighed in favor of approving the award, as did the complexity and duration of the litigation and lead counsel's devotion of more than 75,000 hours to the case.