Valeant’s $1.2 Billion Settlement Recommended for Final Approval

The $1.2 billion proposed securities settlement to resolve allegations that Valeant Pharmaceuticals, now known as Bausch Health Companies Inc., misled shareholders about price gouging, kickbacks, and other deceptive business strategies, has received a special master’s recommendation for final approval.

Retired District Judge Dennis M. Cavanaugh’s report, issued Monday, recommended approval of the proposed settlement without modification, including a fee award of 13%, or roughly $157 million of the fund, to the class’ lead counsel, Robbins Geller Rudman & Dowd LLP. Cavanaugh also recommended approval of $1.67 million for costs.

The settlement resolves claims against all current and former defendants, with the exception of PriceWaterhouseCoopers LLP, which served as Valeant’s accounting firm. Litigation against PwC is ongoing.

Applying the factors described by the U.S. Court of Appeals for the Third Circuit in Girsh v. Jepson, Cavanaugh said the circumstances overwhelmingly supported approval.

Claims under the Private Securities Litigation Reform Act are, by design, difficult to litigate. And the case presented unique substantive challenges given Valeant’s assertion that it was the victim of a rogue employee convicted in 2018 of defrauding the company, potentially undermining one of the plaintiffs’ key theories.

In recommending final approval, Cavanaugh relied heavily on Valeant’s uncertain financial condition and inability to pay a larger judgment.

“The Settlement in this case is nearly 150% of Valeant’s cash on hand, requiring Valeant to issue additional debt to fund the Settlement, which makes it a particularly good result in light of the risks of ongoing litigation,” Cavanaugh wrote.

With respect to attorneys’ fees, Cavanaugh concluded a 13% award was reasonable for what he called an “excellent result” in complicated, high-risk litigation.

The lodestar, or fees based on hours worked, multiplied by a reasonable hourly rate, would have been about $42 million, meaning the award is the equivalent of 3.6 times the estimated billing.

“The Settlement is the ninth largest PSLRA class action settlement ever, the largest against a pharmaceutical manufacturer, and the largest in this District in almost two decades,” Cavanaugh said.

There were only two objections to the fee award, notwithstanding the well over 400,000 notices sent to potential class members, and Cavanaugh found neither persuasive, concluding the fee award was within the normal range and justified by the over 75,000 hours of work performed by class counsel to litigate and finally settle the claims.

Lead plaintiffs, the Teachers Insurance and Annuity Association of America, the International Brotherhood of Electrical Workers, and the City of Tuscon, were awarded $66,495, $3,002.75, and $3,275, respectively.

The case is In re Valeant Pharmaceuticals International, Inc. Securities Litigation, D.N.J., No. 3:15-cv-07658, 6/15/20.