October 31, 2019

Mootness Fees: Plaintiffs Tell Court “It’s None of Your Business”

Last June, I blogged about an Illinois federal judge’s decision to strike down a “mootness fee” settlement arising out of litigation surrounding the aborted Akorn/Fresenius deal.  The judge concluded that mootness fees were a “racket” & that the case should’ve been dismissed at the outset of the litigation.  The plaintiffs have appealed that ruling – and whatever the legal merits of the appeal, you’ve got to give them credit for their chutzpah.  Why?  Check out this excerpt from a recent D&O Diary blog:

In a blistering June 2019 opinion, Northern District of Illinois Judge Thomas Durkin, exercising what he called his “inherent authority,” acted to “abrogate” the parties’ settlement in the litigation arising out of the acquisition of Akorn , Inc. by Frensenius Kabi AG, and ordered the plaintiffs’ lawyers to return to Akorn their $322,000 mootness fee, ruling that the additional disclosures to which the company agreed were “worthless to shareholders” and that the underlying lawsuits should have been “dismissed out of hand.”

Now, in the brief to the Seventh Circuit filed on their appeal of Judge Durkin’s order, the plaintiffs argue that Judge Durkin’s order was “void” because Judge Durkin lacked jurisdiction, had “no authority to continue” after the parties’ settlement, and that he “drastically overstepped the bounds of [the court’s] inherent authority.” The plaintiffs brief sets the stage for what may prove to be a very interesting appellate decision.

Judge Durkin pointed to the 7th Circuit’s 2016 Walgreen decision in support of the position that class actions that don’t provide substantive benefits to shareholders should be “dismissed out of hand.” But the plaintiffs contend that whatever Walgreen may mean for class action settlements, it doesn’t give the court the authority to poke its nose into a private business agreement binding only the defendant & the individual plaintiffs.

John Jenkins