Orange County Business Journal

Judge Allows Suit against Allergan Directors to Proceed

Vita Reed Tuesday, June 12, 2012

A Delaware state judge has ruled that directors of Irvine drug maker Allergan Inc. must face a lawsuit over a $600 million fine the company paid for misbranding its flagship Botox neurotoxin.

The suit stems from a settlement that Allergan reached with the Justice Department in 2010. The settlement followed a three-year federal investigation of the marketing of Botox for non-approved uses.

Allergan declined comment on the ruling.

The Louisiana Municipal Police Employees’ Retirement System and U.F.C.W Local 1776 pension funds—which are Allergan shareholders—sued the directors in Delaware’s Court of Chancery after Allergan settled with federal officials. So-called derivative lawsuits, such as those by the pension funds, allow shareholders to sue directors for harm, with damages to be awarded to the company rather than shareholders.

A similar case was filed in California and was dismissed, something the Allergan directors cited in asking the Delaware case should be thrown out.

Delaware Chancery Court Judge Travis Laster found that just because the California case was weak didn’t mean it should preclude the Delaware case from going forward.