Cases & Deals

Cardinal Health secures dismissals of multiple shareholder derivative lawsuits in state and federal courts, and affirmance of dismissal by Sixth Circuit

Client(s) Cardinal Health, Inc.

Jones Day represented directors and officers of Cardinal Health, Inc. in multiple shareholder derivative actions (dismissed and affirmed on appeal), books-and-records requests, and shareholder demands arising from enforcement actions taken against the company by the Drug Enforcement Administration.

After the DEA pursued enforcement actions against the company based on alleged violations of the Controlled Substances Act, plaintiffs filed derivative actions in state and federal courts, claiming that the defendants breached their fiduciary duties to Cardinal Health by failing to provide adequate oversight of the company's compliance with regulations intended to prevent the diversion of controlled substances. Jones Day moved to dismiss the complaints on the ground that the plaintiffs 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. Both courts granted our motions to dismiss, finding the complaints lacked allegations showing that Cardinal Health's directors were involved in or aware of the transactions that were challenged by the DEA. On appeal, the Sixth Circuit affirmed dismissal, agreeing that the plaintiff's failure to make a pre-suit demand was not excused.

After Jones Day secured dismissals of those derivative actions, shareholders made demands that the board institute litigation relating to the DEA activity. After the board declined the demands, one shareholder filed a derivative suit, claiming the defendants breached their fiduciary duties to Cardinal Health by failing to initiate litigation on behalf of the company and by failing to provide adequate compliance oversight. In the face of a motion to dismiss filed by Jones Day, the plaintiff ultimately opted to voluntarily dismiss its lawsuit in July 2015. The voluntary dismissal marked the end of a multi-year series of books-and-records requests, shareholder demands, and derivative lawsuits relating to the DEA activity in federal and state court.

Stanley v. Arnold, et al., No. 1:12-cv-00482, 2012 WL 5269147 (S.D. Ohio 2012), aff'd 531 F. App'x 695 (6th Cir. 2013); Himmel v. Barrett, et al., No. 12-CVA-060663 (C.C.P. Delaware Cty., Ohio); Erste-Sparinvest Kapitalanlagegesellschaft m.b.H. v. Anderson, et al., No. 2:15-cv-320 (S.D. Ohio)