Cardinal Health resolves securities class action, ERISA class action and shareholder derivative actions
Clients Cardinal Health, Inc.
Jones Day represented Cardinal Health, Inc. when it announced a restatement of its previous four years of financial statements in which it reclassified over $25 billion of revenues. Thereafter, various groups of shareholders filed suit against the company and its officers and directors based on allegations relating to the restatement and other matters. The lawsuits included a putative securities class action brought on behalf of open-market purchasers of Cardinal Health stock, an ERISA class action brought on behalf of 401(k) plan participants who purchased company stock through their plan accounts, and shareholder derivative actions in state and federal courts asserting breach-of-fiduciary duty claims against officers and directors. Due to the very large size of the company and the magnitude of the drop in its stock price, together with the fact of a substantial restatement, plaintiffs' experts asserted that the class in the securities action alone suffered damages exceeding $5 billion.
After winning dismissal of one set of state-court derivative cases on a motion to dismiss, defendants vigorously defended the discovery proceedings in the securities litigation and mounted a substantial defense to class certification in the ERISA litigation. When the court ordered the parties to conduct mediation, defendants presented an expert-intensive case focusing on loss causation and damages, with other experts addressing the technical accounting and industry-specific issues relevant to the case. Despite significant challenges on the merits, and the pendency of regulatory investigations that ultimately led the company to enter into a sizeable settlement with the SEC, defendants were able to negotiate a settlement of the securities litigation for $600 million and of the ERISA litigation for $40 million. The settlements enabled the company, under a new CEO, to address existing challenges in its evolving market sector, rather than to be distracted with the significant burdens of defending numerous high-risk legal proceedings arising under the tenure of former management.
Cardinal Health, Inc. Securities, Derivative & ERISA Litigation, No. 2:04-CV-575-ALM-NMK (S.D. Ohio); Bean v. Havens, et al., No. 05-CV-13644 (C.C.P., Franklin Cty., Ohio)