Chabot v. Walgreens Boots Alliance, Inc.
Case Summary
Largest Securities Class Action Recovery in the Middle District of Pennsylvania
Just months before a jury trial was scheduled to begin, Walgreens Boots Alliance, Inc. and certain of its executives, including Stefano Pessina, agreed to pay $192.5 million to a class of Rite Aid investors led by individual investors in the Middle District of Pennsylvania. This record-breaking result is the largest securities recovery paid by one company to the shareholders of a different company over misleading statements in connection with the antitrust review of a merger. It is also the largest securities class action recovery in the Middle District of Pennsylvania and second-largest such recovery in any Pennsylvania federal court.
“We were really honored to come up with this result,” partner Randall J. Baron told Law360. “It took a long time. This was not a simple case. . . . Getting a settlement like this, it’s a phenomenal result.”
In October 2015, Walgreens and Rite Aid announced Walgreens would acquire Rite Aid in a merger and then began seeking approval from the FTC. Their attempts hit several roadblocks, including Walgreens’ struggles to find a suitable buyer for the Rite Aid stores the FTC required it to divest of as a condition of approval. Ultimately, in June 2017, Walgreens announced the deal was off but that it would purchase over 2,100 Rite Aid stores (later reduced to 1,932) and pay Rite Aid a breakup fee. In October 2023, Rite Aid filed for bankruptcy, partly as a result of its role in the national opioid epidemic.
“This was a hard-fought case with an excellent outcome for investors,” said partner David A. Knotts. “Our clients and team persevered for several years to secure victory in a unique, and highly contentious, class action case.”
Lead plaintiffs allege Walgreens executives misled investors by materially misrepresenting the risk involved in an ongoing FTC review of the merger. When the truth was revealed, stock prices fell and investors suffered. According to Judge Christopher C. Conner’s motion for summary judgment ruling, statements from Stefano Pessina, former CEO and current Executive Chairman of Walgreens, “convey[ed] the merger was proceeding largely as expected and Pessina had inside knowledge contradicting negative media reports regarding Walgreens’ early difficulties in securing a viable divestiture buyer. The record, however, contains evidence suggesting the FTC approval process was not going as smoothly as anticipated, and that Pessina knew it.” Judge Conner continued: “Discovery also has produced substantial evidence that by April 5, 2017, Walgreens and Pessina had reason to doubt the FTC would ever sign off on Fred’s as the divestiture buyer.”
Robbins Geller attorneys Randall J. Baron, David A. Knotts, and A. Rick Atwood, Jr. represent the class.
Chabot v. Walgreens Boots Alliance, Inc., No. 1:18-cv-02118-JPW (M.D. Pa.).