Blackstone, Goldman, KKR, TPG Global Beat Insider Trading Appeal

Affiliates of Blackstone Group LP, Goldman Sachs Group Inc., KKR & Co., and TPG Global LLC persuaded Delaware’s top court Thursday to reject insider trading claims over their mass sales of Zimmer Biomet Holdings Inc. shares shortly before regulatory woes send its stock price plunging.

The state’s justices upheld a ruling dismissing the pension fund lawsuit from Delaware’s Chancery Court, saying in a one-page order that the decision “should be affirmed on the basis of and for the reasons assigned by” Vice Chancellor Lori W. Will, who tossed the case last year.

Will found in August that the pension fund failed to demand an internal investigation before suing or show that Zimmer’s board members—also named as defendants—were too compromised by their own legal exposure to conduct a probe fairly.

Because pre-suit demand or a showing of demand futility is a threshold requirement in shareholder derivative cases, the failure to establish likely liability on the board’s part also doomed the claims against the four private equity giants, the judge said at the time.

The Delaware lawsuit, filed in 2019 by the Detectives Endowment Association Annuity Fund, accused Zimmer’s board of orchestrating three offerings in 2016 to help the private equity firms exit investment positions worth billions before problems at an Indiana plant tanked the medical device maker’s stock 14%.

The allegations echoed a parallel securities class action against the company’s officers and directors that settled in 2020 for $50 million.

Zimmer and most of its board are represented by Morgan, Lewis & Bockius LLP. KKR is represented by Morris, Nichols, Arsht & Tunnell LLP and Simpson Thacher & Bartlett LLP. TPG is represented by Ropes & Gray LLP. Blackstone is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP. Goldman is represented by Abrams & Bayliss LLP and Wachtell, Lipton, Rosen & Katz.

The pension fund is rerpesented by deLeeuw Law LLC; Schubert Jonckheer & Kolbe LLP; Cohen Milstein Sellers & Toll PLLC; and Shuman, Glenn & Stecker.

The case is In re Zimmer Biomet Holdings Inc. Deriv. Litig., Del., No. 304, 2021, 6/16/22.