On October 29, 2020, the Delaware Supreme Court affirmed dismissal of a derivative lawsuit against several current and former directors and officers of Goodwin Life Sciences client Esperion Therapeutics, Inc., a commercial-stage pharmaceutical company that obtained FDA approval of LDL-cholesterol lowering drug Nexletol® in February 2020.
The plaintiff alleged that the defendants breached their fiduciary duties by contributing to and failing to correct purportedly misleading disclosures in an August 2015 press release, which Esperion issued following a meeting with the FDA about its clinical development pathway and forthcoming Phase 3 clinical trials.
Because the plaintiff did not submit a demand to Esperion’s board to pursue the derivative litigation, he was required to plead demand “futility”—that is, to allege with particularity that a majority of Esperion’s board could not impartially and independently consider a demand.
The Delaware Court of Chancery dismissed the complaint, finding that the plaintiff failed to plead demand futility for two reasons. First, the court concluded that the complaint contained “not one particularized allegation of intentional misconduct” by Esperion’s directors and did not support a reasonable inference that any defendants “knew that anything in the press release was false.” Second, the court found that the plaintiff’s allegations created “no reasonable doubts” about the independence of any of Esperion’s outside directors.
Following the plaintiff’s appeal and substantial briefing and oral argument, the Delaware Supreme Court affirmed the Court of Chancery’s decision affirming dismissal of the complaint, finding it “evident” that the plaintiff failed to plead demand futility for the reasons explained in the Court of Chancery’s decision.
The Goodwin Securities + Shareholder Litigation team representing Esperion’s directors and officers was led by Deborah Birnbach, Adam Slutsky (who argued the appeal) and David Zimmer.
The plaintiff alleged that the defendants breached their fiduciary duties by contributing to and failing to correct purportedly misleading disclosures in an August 2015 press release, which Esperion issued following a meeting with the FDA about its clinical development pathway and forthcoming Phase 3 clinical trials.
Because the plaintiff did not submit a demand to Esperion’s board to pursue the derivative litigation, he was required to plead demand “futility”—that is, to allege with particularity that a majority of Esperion’s board could not impartially and independently consider a demand.
The Delaware Court of Chancery dismissed the complaint, finding that the plaintiff failed to plead demand futility for two reasons. First, the court concluded that the complaint contained “not one particularized allegation of intentional misconduct” by Esperion’s directors and did not support a reasonable inference that any defendants “knew that anything in the press release was false.” Second, the court found that the plaintiff’s allegations created “no reasonable doubts” about the independence of any of Esperion’s outside directors.
Following the plaintiff’s appeal and substantial briefing and oral argument, the Delaware Supreme Court affirmed the Court of Chancery’s decision affirming dismissal of the complaint, finding it “evident” that the plaintiff failed to plead demand futility for the reasons explained in the Court of Chancery’s decision.
The Goodwin Securities + Shareholder Litigation team representing Esperion’s directors and officers was led by Deborah Birnbach, Adam Slutsky (who argued the appeal) and David Zimmer.