Cardinal Health wins dismissal in state court, and affirmance in Sixth Circuit of dismissal in federal court, of shareholder derivative lawsuits

Client(s) Cardinal Health, Inc.

Jones Day represented directors and officers of Cardinal Health, Inc. in shareholder derivative litigation in state and federal courts arising from the company’s interactions with the DEA. After the DEA pursued enforcement actions against the company based on alleged violations of the Controlled Substances Act, the plaintiff filed a derivative suit, claiming that the defendants had breached their fiduciary duties to Cardinal Health by failing to provide adequate oversight of the company's compliance with regulations relating to the distribution of controlled substances. Jones Day moved to dismiss the complaint on the ground that the plaintiff had not made a pre-suit demand on the company's board of directors, and had failed to show that a demand would have been futile. The U.S. District Court for the Southern District of Ohio granted our motion to dismiss, finding the complaint lacked allegations showing that Cardinal Health's directors were involved in or aware of the transactions that were challenged by the DEA. Demand thus was not excused as futile because the directors were not substantially likely to be personally liable. The plaintiff appealed that dismissal to the U.S. Court of Appeals for the Sixth Circuit. On August 14, 2013, the Sixth Circuit affirmed dismissal, agreeing that the plaintiff's failure to make a pre-suit demand was not excused.

Stanley v. Arnold, et al., No. 12-4444 (6th Cir.)