|In re Lebanon County Employees’ Retirement Fund, et al. v. Collis, et al.
|Court of Chancery of the State of Delaware
|C.A. No. 2021-1118-JTL
|Vice Chancellor Travis Laster
|Lebanon County Employees’ Retirement Fund, et al.
|Steven H. Collis, Richard W. Gochnauer, Lon R. Greenberg, Jane E. Henney, Kathleen W. Hyle, Michael J. Long, Henry W. McGee, Ornella Barra, D. Mark Durcan, Chris Zimmerman, and Nominal Defendant AmerisourceBergen Corporation
On December 18, 2023, the Delaware Supreme Court reversed the dismissal of a 2021 shareholder derivative action against AmerisourceBergen Corporation (now known as Cencora, Inc.) (the “Company”) and the Company’s directors and officers for their role in the United States’ opioid epidemic.
The shareholders’ action seeks billions of dollars in damages for allegations that the Company’s directors and officers caused or permitted the Company to abandon its opioid anti-diversion obligations and violate laws regulating distribution of controlled substances. Plaintiffs’ complaint was supported by thousands of pages of internal corporate documents that plaintiffs were awarded in 2020 after litigating a 8 Del. C. § 220 books and records demand through trial.
On December 22, 2022, the Delaware Chancery Court granted defendants’ motion to dismiss plaintiffs’ complaint, despite finding that plaintiffs had pled viable claims against the Company’s directors for breaching their corporate oversight duties, and observing that the Company’s directors “did not just see red flags; they were wrapped in them.” Notwithstanding these findings, the Chancery Court dismissed plaintiffs’ claims based on a federal court decision that found that certain of the Company’s actions did not rise to the level of a public nuisance in West Virginia. Plaintiffs subsequently appealed, arguing, inter alia, that the Chancery Court took improper judicial notice of the West Virginia decision to dismiss plaintiffs’ otherwise well-pled derivative claims.
The Delaware Supreme Court agreed with plaintiffs. In reversing, the Delaware Supreme Court found that the Chancery Court’s dismissal represented a “departure from the principles” of judicial notice. The Supreme Court also recognized that “the inference drawn by the Court of Chancery that the defendants were aware for years of the deficiencies in the Company’s controls but consciously chose not to address them, was, if not the only inference, at least a reasonable one.”
KTMC’s appeal team included Eric Zagar and Lauren Lummus. Since their case was remanded, plaintiff shareholders are now pursuing discovery from defendants and third parties.
Read December 18, 2023 Supreme Court of the State of Delaware Opinion Here
Read December 22, 2022 Court of Chancery of the State of Delaware Memorandum Opinion Here
Read December 30, 2021 Verified Stockholder Derivative Complaint [Public Version] Here