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In Re Allergan

April 12, 2011


The opinion of the court was delivered by: The Honorable David O. Carter, Judge



Julie Barrera Not Present Courtroom Clerk Court Reporter




Before the Court is Nominal Defendant Allergan, Inc.'sMotion to Dismiss Plaintiffs' Consolidated Complaint ("Nominal Defendant's Motion to Dismiss") (Docket 47) and the Individual Defendants' Motion to Dismiss Plaintiff's Consolidated Complaint ("Individual Defendants' Motion to Dismiss") (Docket 51). The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. After considering the moving, opposing, and replying papers, the Court GRANTS Nominal Defendant's and Individual Defendants' Motions to Dismiss.


This is a shareholder derivative suit. Shareholder Plaintiffs ("Plaintiffs") bring this action on behalf of nominal Defendant Allergan, Inc, ("Allergan" or the "Company") against its entire Board of Directors ("Board") and its Chief Executive Officer, David E.I. Pyott ("Defendant Pyott") (Pyott and the Board collectively referred to as "Director Defendants"). Consolidated Complaint ("CC") (Docket

1. Plaintiffs allege that Director Defendants knowingly caused Allergan to engage in an illegal marketing and promotion scheme for its most important product, Botox, and certain other drugs. Id. at ¶ 2. Plaintiffs allege that Director Defendants were notified of their improper practices on several occasions, but nonetheless continued to misbrand Botox and certain other drugs for unapproved uses.

Plaintiffs aver that all of Director Defendants' conduct occurred without the shareholders'

On September 1, 2010, the U.S. Department of Justice ("DOJ") announced a $600 million sanction to resolve civil and criminal cases regarding Allergan's promotion of Botox for uses not approved by the Federal Drug Administration ("FDA"). CC ¶ 2. The DOJ subsequently pursued action against Allergan in federal court. Id. at ¶ 14. On October 5, 2010, Allergan entered a guilty plea and agreed to pay a criminal fine of $375 million for its alleged illegal marketing of Botox. Id.

Plaintiffs seek damages for this $375 million judgment due its alleged illegal marketing of Botox, as well as recovery for other damages allegedly caused by Director Defendants' actions, for a total of $600 million in damages. Plaintiffs further request that the Court order Allergan to take all necessary actions to reform and improve its corporate governance to comply with applicable laws.


A. Motion to Dismiss under Fed. R. Civ. P. 12(b)(6)

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b). Once it has adequately stated a claim, a plaintiff may support the allegations in its complaint with any set of facts consistent with those allegations. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1969 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief. Id. at 1968. In order for a complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009). A claim for relief is facially plausible when the plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id. Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief. Id. at 1950.Determining whether a complaint states a plausible claim for relief will be a context-specific task requiring the court to draw on its judicial experience and common sense. Id. Moreover, under a 12(b)(6) motion analysis, the Court must accept as true all factual allegations in the complaint and must draw all reasonable inferences from those allegations, construing the complaint in the light most favorable to the plaintiff. Guerrero v. Gates, 442 F.3d 697, 703 (9th Cir. 2006); Balistreri, 901 F.2d at 699.

B. Demand Futility Under Delaware Law

Under Fed. R. Civ. P. 23.1, a plaintiff seeking to initiate a derivative action is required to "plead with particularity either the efforts made to spur directors to take the action sought, and why these efforts were unsuccessful, or the reasons why no effort was made to demand action from the Kanter v. Barella, 489 F.3d 180, 176 (3d Cir. 2007). The pleading "must comply with stringent requirements of factual particularity that differ substantially from the permissive notice pleadings governed solely by [Fed. R. Civ. P. 8]." Brehm v. Eisner,746 A.2d 244, 254 (Del. 2000). "Rule 23.1 is not satisfied by conclusory statements or mere notice pleading. On the other hand, the pleader is not required to plead evidence. What the pleader must set forth are particularized factual statements that are essential to the claim." Id. A complaint that is full of "conclusory language . . . does not comply with these fundamental pleading mandates." Id.

"Rule 23.1 does not establish the circumstances under which demand would have been In re Silicon Graphics, Inc. Sec. Litig ., 183 F.3d 970, 989-90 (9th Cir. 1999) (citing Fed. R. abrogation recognized on other grounds by Simmonds v. Credit Suisse Securities (USA) , 2011 WL 135693, at *11 (9th Cir. 2011)). To determine demand futility standards, courts look to the law of the state of incorporation. Id. at 990. In this case, Allergan is incorporated in the State of Delaware, CC ...

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