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Case 1:10-cv-11356-JLT Document 65 Filed 09/13/11 Page 1 of 14
UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
) IN RE GENZYME CORPORATION )
SHAREHOLDER LITIGATION ) Master Docket No. 10-cv-11356
REPORT AND RECOMMENDATION ON PLAINTIFFS’ COUNSEL’S MOTION FOR AN AWARD OF ATTORNEYS’ FEES
AND REIMBURSEMENT OF LITIGATION EXPENSES AND DEFENDANTS’ CROSS-MOTION FOR AN APPROPRIATE SANCTION UNDER THE PSLRA
[Docket Nos. 46, 52]
September 13, 2011
The Plaintiffs filed a consolidated shareholder class action that alleges breaches of
fiduciary duty and federal securities laws by Genzyme Corporation (“Genzyme”) and its
directors (collectively referred to herein as “Defendants”) in relation to Genzyme’s potential
acquisition by sanofi-aventis, S.A. (“Sanofi”). Sanofi eventually completed the acquisition and
the parties agreed that the Plaintiffs’ substantive claims are now moot. See Docket No. 43.
Plaintiffs now seek fees on behalf of the six law firms that represented them. See Docket No. 46.
Claiming that Plaintiffs’ counsel have done nothing more than file multiple complaints and then
wait, Defendants oppose the motion and move for sanctions under the Private Securities
Litigation Reform Act (“PSLRA”). See Docket No. 52. For the reasons detailed below, this
Court recommends that the District Court DENY both motions.
Case 1:10-cv-11356-JLT Document 65 Filed 09/13/11 Page 2 of 14
I. Factual and Procedural History
On July 29, 2010, Sanofi made an unsolicited proposal to acquire Genzyme at $69 per
share. Amended Shareholder Class Action Complaint (“ACC”) ¶ 49, Docket No. 34. On August
10, 2010, Genzyme’s Board of Directors unanimously rejected Sanofi’s proposal. Memorandum
of Law in Opposition to Plaintiffs’ Counsel’s Motion for An Award of Attorneys’ Fees and in
Support of Defendants’ Cross-Motion (“Def.’s Opp.”), p. 4 [Docket No. 50]; Genzyme Corp.,
Schedule 14D-9 1 (Oct. 7, 2010) at 22 . 2
On August 11, 2010, the Jerry L. & Mena M. Morelos Revocable Trust filed a
shareholder class action complaint in this district against Sanofi, 3 Genzyme, and its directors,
alleging a breach of breach of fiduciary duty by the individual defendants and aiding and
abetting the breach of fiduciary duty by the corporate defendants for accepting Sanofi’s offer of
$69 per share. See Jerry L. & Mena M. Morelos Revocable Trust v. Termeer, 10-cv-11356. The
complaint sought an injunction preventing the merger or a rescission of the merger.
On August 29, 2010, Sanofi made public its offer to Genzyme. ACC, ¶50. On August
30, 2010, Genzyme again rejected the proposal. ACC, ¶51; Schedule 14D-9 at 25. In
1 The Court may take judicial notice of documents publicly filed with the United States Securities and Exchange Commission (“SEC”). See Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991).
2 The Schedule 14D-9 is available at http://www.sec.gov/Archives/edgar/data/732485/ 000104746910008489/a2200413zsc14d9.htm.
3 On October 12, 2010, the Jerry L. & Mena M. Morelos Revocable Trust filed a notice of voluntary dismissal of its claims against Sanofi pursuant to Fed. R. Civ. P. 41(a)(1). Docket No. 24.
Case 1:10-cv-11356-JLT Document 65 Filed 09/13/11 Page 3 of 14
September, three additional plaintiffs filed separate shareholder class actions in this district 4
alleging a breach of fiduciary duty by Genzyme and its directors for rejecting Sanofi’s offer and
seeking a court order that Genzyme maximize shareholder value. 5
On October 4, 2010, Sanofi presented a tender offer directly to Genzyme’s shareholders
at $69 per share. ACC, ¶¶6, 58; Oddo Decl., ¶6 [Docket No. 48]. On October 7, 2010, Genzyme
filed a Schedule 14D-9 6 with the SEC, advising shareholders not to tender their shares to Sanofi.
Schedule 14D-9; ACC, ¶¶7, 60; Oddo Decl., ¶7. As the basis for its refusal, Genzyme stated:
The Offer is based on financial terms identical to those in the two prior unsolicited proposals submitted by Sanofi, which the Company Board previously rejected. The Company Board remains unanimously resolute in its belief that the $69.00 per Share Offer Price continues to be inadequate and opportunistic, fails to recognize the Company’s plan for substantial value creation, substantially undervalues the Company relative to its intrinsic value and is not in the best
4 Specifically, on September 8, 2010, Bernard Malina filed a shareholder class action under Mass R. Civ. P. 23 seeking an injunction, damages, and attorneys’ fees. See Malina v. Genzyme Corp., 10-cv-11532. On September 9, 2010, Emaneul Resendes filed a shareholder class action seeking an injunction, damages, and attorneys’ fees. See Resendes v. Termeer, 10- cv-11536. On September 14, 2010, William S. Field, III filed a shareholder class action seeking an injunction appointing an independent special committee to review offers, compensatory damages based on dimunition in stock value, and attorneys’ fees. See Field v. Termeer, 10-cv- 11565. Because these actions are all now consolidated, the plaintiffs in these actions are collectively referred to herein as “Plaintiffs.”
5 Other plaintiffs filed four actions in Massachusetts Superior Court. See, e.g., Chester Cnty. Emps. Ret. Fund v. Genzyme Corp., No. MICV2010-03065/SUCV2010-03777, (filed in Middlesex Super. Ct. Aug. 16, 2010, transferred to Business Litigation Session in Suffolk County); Kahn v. Termeer, No. MICV2010-03067 (filed in Middlesex Super. Ct. Aug. 17, 2010); Shade v. Genzyme Corp., No. MICV2010-03276 (filed in Middlesex Super. Ct. Aug. 31, 2010); La. Mun. Police Emps.’ Ret. Sys. v. Termeer, No. MICV2010-03327 (filed in Middlesex Super. Ct. Sept. 2, 2010).
6 A Schedule 14D-9, Solicitation/Recommendation Statement, is submitted pursuant to Rule 14e-2. See 17 C.F.R. § 240.14e-2 (“[T]he subject company [of a tender offer], no later than 10 business days from the date the tender offer is first published or sent or given, shall publish, send or give to security holders a statement disclosing that the subject company . . . [r]ecommends acceptance or rejection of the bidder’s tender offer. . . .”).
Case 1:10-cv-11356-JLT Document 65 Filed 09/13/11 Page 4 of 14
interests of Genzyme or its shareholders.
ACC, ¶60; Schedule 14D-9 at 29. Genzyme also stated that the offer did not reflect the intrinsic
value of the company as represented in the financial opinions of Goldman Sachs and Credit
Suisse. Id.; Schedule 14D-9 at 32.
On December 10, 2010, Plaintiffs sent Defendants a letter, “for settlement purposes
only”7 that suggested actions that Defendants could take to resolve Plaintiffs’ claims (the
“December 2010 Letter”). Oddo Decl., ¶8; Forter Decl., Ex. A. The letter suggested that
Defendants: (1) agree to enter into a confidentiality agreement so that Sanofi could conduct due
diligence and Genzyme could engage Sanofi in meaningful negotiations; (2) conduct a “market
check” to determine whether any other parties were interested in acquiring the company at a
higher price than Sanofi; (3) disclose to shareholders all material information regarding the
company’s work and how it assessed Sanofi’s offer; and (4) confirm that Genzyme would “cease
consideration and/or implementation of any defensive measures intended to thwart or discourage
Sanofi from pursuing its offer.” Forter Decl., Ex. A.
On December 13, 2010, Sanofi amended its tender offer and extended its deadline for
tendering shares to January 21, 2011. ACC, ¶73; Sanofi-Aventis, Schedule TO/A (Dec. 13,
2010) . 8 At that time, Sanofi disclosed that less than two percent of outstanding Genzyme shares
had been tendered at the $69 per share offer price. Id. The filing also noted, however, that
“representatives of Evercore Partners and J.P. Morgan, [Sanofi’s] financial advisors, and
7 Although the letter states that it is for settlement purposes only, Plaintiffs base their fees motion in part on the effect of this letter, which was required under L.R. 16.1(C).
8 The amended tender offer is available at http://www.sec.gov/Archives/edgar/data/ 732485/000119312510278879/dsctota.htm.
Case 1:10-cv-11356-JLT Document 65 Filed 09/13/11 Page 5 of 14
representatives of Credit Suisse and Goldman Sachs, Genzyme’s financial advisors, have met to
discuss the differences between [Sanofi’s] and Genzyme’s perspectives with respect to the value
of Genzyme. These discussions have focused on using a potential contingent value right relating
to [a drug] for treatment of multiple sclerosis to be part of any potential resolution of differences
with respect to value . . .” Id.; ACC, ¶74.
On December 29, 2010, the Court consolidated the separate class actions upon Plaintiffs’
motion. Docket December 29, 2010.
On January 10, 2011, Genzyme further disclosed that discussions between the parties had
“expanded beyond the respective financial advis