Lawyers That Won ‘Worthless’ Proxy Concessions Must Give Up Fees

Counsel for Akorn Inc. investors must return $332,500 in attorneys’ fees for filing frivolous lawsuits against the now-defunct drugmaker seeking pre-merger disclosures, a federal court ruled.

Judge Thomas M. Durkin said he would also consider requiring the lawyers to cite the finding in future merger-related demand letters and suits, to disclose their retainer agreements, and to disclose so-called mootness fees in similar suits. Durkin, of the US District Court for the Northern District of Illinois, issued the order Monday.

Ted Frank, an attorney and frequent class action objector, sought to intervene in the six largely resolved proposed suits—five of them class actions—that had sought additional disclosures in Akorn’s proxy documents for its proposed merger with Fresenius Kabi AG. The merger fell apart before Akorn’s 2023 bankruptcy. Frank said the attorneys’ fees extracted from Akorn unjustly enriched the investors’ counsel because their claims were frivolous.

The judge cited to a prior ruling in which, he said, the court found that “the disclosures sought in the three complaints at issue were not ‘plainly material’ and were worthless to the shareholders.”

The US Court of Appeals for the Seventh Circuit approved Frank’s quest for sanctions in April 2024, describing mootness fees as occurring when a corporation quickly makes the requested proxy disclosures and pays the plaintiffs’ attorneys’ fees. The court weighed in after Frank appealed the lower court ruling denying his bid for intervention but allowing him to participate as a friend of the court. Two of the affected firms also appealed, challenging the reopening of the dismissed suit.

Back in the lower court, investor Shaun House and his law firm, Monteverde & Associates PC, opposed the sanctions, arguing that Monteverde “has recovered tens of millions of dollars for shareholders” and has never been sanctioned. There “is nothing ‘improper’ about seeking attorneys’ fees based upon improved disclosures,” House and Monteverde said.

Plaintiffs in three cases in which the attorneys disclaimed their fees after Frank initially challenged them also responded, but without specifying which firms filed suit for those investors. The attorneys who authored the briefs are with Faruqi & Faruqi LLP, Levi & Korsinsky LLP, Long Law LLC, and RM Law PC.

Durkin rejected Frank’s proposal for monetary penalties in addition to the returned fees, but ordered further briefing on the other suggested additional sanctions.

Akorn and members of its leadership were represented by Jones Walker LLP, Polsinelli PC, and Cravath, Swaine & Moore LLP. Frank was represented by the Hamilton Lincoln Law Institute, with which he is affiliated.

The case is Berg v. Akorn Inc., N.D. Ill., No. 1:17-cv-05016, 3/10/25.