Sycamore Prevails in Backdating Cases

Successfully represented Sycamore Networks, Inc. in its dismissal of a shareholder derivative lawsuit alleging stock options backdating in June 2007 before the Delaware Chancery Court. One of the first decisions in the country to address a board's responsibilities related to option backdating, Vice Chancellor Leo E. Strine granted Skadden's motion to dismiss, holding that the plaintiffs failed to prove the board acted in bad faith.

In a related case, Skadden obtained a resounding dismissal of a lawsuit brought by a former Sycamore employee and self-described "whistleblower" who also made allegations related to Sycamore’s historical stock option granting practices. Relying exclusively on what he called the "fair and comprehensive" Skadden briefing, Massachusetts Superior Court Judge Ralph Gants dismissed the litigation with prejudice, holding that plaintiff's complaint was "plainly meritless as a matter of law."

Sapient Wins Dismissal of Backdating Suit

Led a team of Skadden litigators that won the dismissal of a derivative suit related to stock options backdating for client Sapient in October 2007. Plaintiffs brought a shareholder derivative action in Superior Court in Massachusetts against current and former directors and officers of Sapient. Plaintiffs did not make the requisite pre-suit demand, instead asserting that their allegations of stock options "backdating" were sufficient to excuse demand as futile. Judge Allan van Gestel disagreed, holding that plaintiffs failed to adequately allege that a majority of the board either received or knowingly approved "backdated" stock options. The court further held that there were no particularized factual allegations sufficient to demonstrate that any director knew or should have known that any stock options were "backdated." Accordingly, the court dismissed the complaint, and without leave to further amend.

Securities Suit Against Biogen Idec Dismissed

Led team of Skadden litigators in September 2007 to secure dismissal of a putative class action alleging securities fraud filed in the District of Massachusetts against firm client Biogen Idec Inc. Immediately upon the voluntary withdrawal of Biogen Idec’s multiple sclerosis drug Tysabri® from the market, plaintiffs brought suit against Biogen Idec and certain of its current and former officers alleging violations of Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint alleged that because defendants “knew” that Tysabri® would cause a potentially fatal disease (progressive multifocal leukoencephalopathy) and other so-called “opportunistic” infections, defendants’ statements over a one-year putative class period regarding the safety and marketability potential of Tysabri® were false and misleading. Defendants moved for dismissal on the grounds that the complaint failed to plead securities fraud with particularity, and failed to raise the requisite strong inference of scienter. After reviewing the record and briefing and hearing oral arguments, U.S. District Judge William G. Young dismissed the case in its entirety. The District of Massachusetts decision followed the dismissals obtained by the Skadden team of multiple derivative actions filed in California, Massachusetts and Delaware.

Securities Class Action Against Praecis Dismissed

Led Skadden's team that secured dismissal in 2007 of a putative class action alleging securities fraud filed in the U.S. District Court for the District of Massachusetts against firm client Praecis Pharmaceuticals Inc., In re Praecis Pharmaceuticals, Inc. Sec. Litig. During the pendancy of the motion to dismiss, Praecis was acquired by, and is now a wholly owned subsidiary of, GlaxoSmithKline. Plaintiffs brought suit against Praecis and certain of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10(b)-5 promulgated thereunder. The complaint alleged that while Praecis issued optimistic forecasts and revenue projections in connection with the commercial prospects of its first marketable drug (Plenaxis®), all defendants nevertheless “knew” that Plenaxis® would fail in the marketplace and would never achieve the success being touted to investors. According to plaintiffs, defendants’ “knowledge” rendered certain statements made during an 11-month putative class period materially false and misleading. Defendants moved for dismissal on the grounds that, among other things, most of the statements were forward-looking and therefore non-actionable under at least one of the three separate statutory safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Defendants also moved for dismissal on the grounds that the complaint failed to raise a strong inference of scienter. In a 35-page opinion, Judge George A. O’Toole, Jr. granted defendants’ motion, dismissing the complaint with prejudice and without leave to replead. Drawing heavily upon the Skadden briefs, the Court held that all of defendants’ forward-looking statements were protected by the statutory safe harbor because plaintiffs did not adequately plead that any statement was made with actual knowledge of its falsity. As to those statements that were not forward-looking, the Court held that the complaint failed to raise the requisite strong inference of scienter.

Spectrum Brands Wins Securities Case

Led Skadden team in securing dismissal of a purported securities class action filed in the Northern District of Georgia against Firm client Spectrum Brands, Inc., the third-largest battery maker in the United States. In re Spectrum Brands, Inc. Securities Litigation, Civ. A. No. 05-02494-WSD (N.D. Ga.October 27, 2006)

Plaintiffs brought suit against Spectrum Brands and its current CEO and CFO, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10(b)-5 promulgated thereunder. The plaintiffs complained that defendants engaged in “channel stuffing,” thereby rendering certain statements made during an 11-month putative class period materially false and misleading. Defendants moved for dismissal on the grounds that plaintiffs’ allegations of “channel stuffing” were not stated with the requisite particularity and also because the complaint failed to raise a strong inference of scienter. In a 54-page opinion, Judge William S. Duffey granted defendants’ motion to dismiss in its entirety.