Pension Fund Loses Allergan Class Status as Judge Rips Lawyers

Sept. 30, 2020, 4:38 PM

Boston Retirement System lost its bid to lead a securities class action over potential links between Allergan Plc’s breast implants and a rare blood cancer, with a Manhattan federal judge rebuking the pension fund and its attorneys for “utterly disingenuous” fee splitting arrangements that defied a previous court order.

“I gave an explicit instruction that there was to be one and only one law firm serving as lead counsel,” Judge Colleen McMahon wrote. “Either BRS did not really acquiesce in my directive, or it is incapable of controlling its lawyers when they prove unwilling to abide by rulings of the court.”

The investor lawsuit, filed in the U.S. District Court for the Southern District of New York, accuses Allergan and its executives of concealing evidence that its silicone-gel breast implants were associated with anaplastic large cell lymphoma. The company’s stock allegedly fell nearly 7% when the products were pulled from European shelves in late 2018.

After getting a green light for its shareholder claims in September 2019, the Boston pension fund asked McMahon to certify the case as a class action. Allergan opposed the request, arguing that BRS was ill-suited to lead the suit.

McMahon sided with the drugmaker Tuesday.

The judge slammed the fund and its court-approved attorneys, Pomerantz LLP, for their undisclosed side deal with Thornton Law Firm LLP, splitting fees on a 55/45 basis as a “secret workaround” less than a week after she specifically refused to appoint co-lead counsel in March 2019.

“This court is not fooled by the rebranding of Thornton as ‘additional counsel,” McMahon wrote. “I said I would not appoint co-lead counsel, so I certainly will not tolerate lead counsel’s privately appointing co-lead counsel.”

She called the fee deal “the quintessential example” of the type of “lawyer driven” arrangement, leading to potentially duplicate work and inflated fees, that judges overseeing class actions are supposed to guard against.

The argument that Thornton would play only a limited role in pretrial matters was both “a lie” and “utterly disingenuous,” given where the bulk of the action takes place in class suits, the judge found.

McMahon said she would decide “what to do next” after giving “some other putative class member” 30 days to “step up and seek to replace BRS.” She noted elsewhere in the opinion that the DeKalb County Pension Fund had run a strong second in the original contest to lead the case.

Allergan is reperesented by Cleary Gottlieb Steen & Hamilton LLP.

The case is In re Allergan Plc Sec. Litig., S.D.N.Y., No. 18-cv-12089, 9/29/20.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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