Two Largest Post-Merger Common Fund Settlements in California State Court History Achieved

January 10, 2017

Late last year, Robbins Geller made history with the Onyx Pharmaceuticals settlement of $30 million.  At the time, it was believed to set the record for the largest post-merger common fund settlement in California state court history.  Just three weeks later, in December 2016, the Firm broke its own record by resolving the Websense, Inc. case for $40 million.

On November 18, 2016, the Honorable Marie S. Weiner of the Superior Court of the State of California, County of San Mateo, approved a $30 million settlement in In re Onyx Pharmaceuticals, Inc. Shareholder Litigation.  Plaintiffs alleged that the former Onyx Pharmaceuticals, Inc. Board of Directors breached its fiduciary duties in connection with Amgen Inc.s acquisition of Onyx for $125 per share.  Plaintiffs alleged that the Onyx Board acted disloyally and in bad faith by excluding competing bidders who offered more than $125 per share.  Robbins Geller also argued that the Onyx Board concealed material information from stockholders that indicated that Onyx was worth more than its sale price.

Over the case’s three years, Robbins Geller defeated defendants’ motions to dismiss, obtained class certification, took over 20 depositions and reviewed over one million pages of documents.  The settlement was reached just days before a hearing on defendants’ motion for summary judgment was set to take place, yielding what was believed to be, at the time, the largest post-merger common fund settlement in California state court history.

“This is not a case where it was settled early on simply after the pleading and some preliminary discovery,” stated Judge Weiner regarding the case’s complexity.  “[T]his was a very mature and hotly-contested case at the time of its resolution, and time needed to be put in to bring it to that maturity.”

On December 9, 2016, only three weeks after the Onyx settlement was approved, Robbins Geller obtained court approval of a $40 million settlement in Laborers’ Local #231 Pension Fund v. Websense, Inc.  Much like Onyx, it took Robbins Geller three years of vigorous prosecution to bring the case to a successful conclusion.

The Websense shareholder action challenged Vista Equity Partners’ May 2013 buyout of Websense for $24.75 per share, alleging breach of fiduciary duty against the former Websense board of directors and aiding and abetting against Websense’s financial advisor, Merrill Lynch, Pierce, Fenner & Smith, Inc.  Robbins Geller pursued claims in both California and the Delaware Court of Chancery.

As alleged, the merger agreement between Websense and Vista was the product of a materially conflicted process. John McCormack, Websense’s CEO, favored his own interests and those of company insiders over the interests of Websense shareholders.  By aligning himself with Vista, he negotiated and secured material benefits for himself (and his management team) at the cost of shareholder value.  As part of the merger, McCormack obtained a $10.6 million cash payout and continuing employment as CEO with Vista. In addition, as reported by Bloomberg, Robbins Geller uncovered facts in discovery indicating that Merrill Lynch bankers were simultaneously advising the buyer, Vista, on other deals while overseeing the Websense buyout.  When confronted with this evidence at deposition, John Schaefer, a Websense director, said he was unaware Merrill Lynch had conflicting interests in the buyout and added that he would have wanted to know about the bank’s dealings with Vista when considering the offer.  As also reported by Bloomberg, Schaefer testified, “I assume they’re not representing Vista on a pro-bono basis, so they’re being compensated by both sides, and it’s an intolerable situation.”

“This was a good settlement after everything was said and done,” remarked Judge Joan M. Lewis at the final approval hearing.  “So good job . . . .  It was a difficult one . . . .”

“In my view, the unprecedented rarity of these two results really speaks to the risk that we undertook when litigating these cases.  Neither Websense nor Onyx was a case with a clearly established path to liability at the outset, but we dug into the facts and found that the rose-colored descriptions in the public documents regarding both transactions omitted crucial details.  It is gratifying to know that our hard work paid dividends to stockholders, in historic fashion,” said Robbins Geller partner David A. Knotts, one of the lead attorneys prosecuting the cases.

The Onyx Pharmaceuticals and Websense cases were litigated by Robbins Geller attorneys Randall J. Baron and David A. Knotts

In re Onyx Pharmaceuticals, Inc. Shareholder Litigation, No. CIV523789 (Cal. Super. Ct., San Mateo Cnty.).

Laborers’ Local #231 Pension Fund v. Websense, Inc., et al., No. 37-2013-00050879-CU-BT-CTL (Cal. Super. Ct., San Diego Cnty.).

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