SCRANTON — Walgreens and Rite Aid Corp. will have more time to answer claims in a shareholder class action lawsuit alleging the pharmacies made false and misleading statements during a failed merger in 2016, after a federal judge refused to dismiss the case last month.
U.S. District Court Judge John E. Jones III granted motions for more time on July 19 and 20, filed by the so-called Walgreens defendants, George R. Fairweather and Stefano Pessina, and Walgreens Boots Alliance Inc.
Fairweather is executive vice president and global chief financial officer at Walgreens Boots Alliance. Pessina is executive vice chairman of the board and chief executive office at Walgreens.
U.S. District Court Judge John E. Jones III
The defendants' motion was unopposed in Pennsylvania's Middle District and came with the concurrence in-motion of Walgreens defendants.
On June 11, Jones declined a motion to dismiss by the Walgreen defendants in Jerry Hering v. Rite Aid Corp., a class action filed following allegedly false and misleading statements plaintiff shareholders claim both Walgreens and Rite Aid made during the merger attempt.
A merger deal between the two pharmacy chains failed to received regulatory approval but a revised plan was signed off on last fall.
By late last March, Rite Aid announced the transfer of "all 1,932 stores and related assets" to Walgreens Boots Alliance as part of a $4.1 billion cash deal had been completed.
Transfer of Rite Aid's three distribution centers is scheduled to begin Sept. 1, according to the announcement, though problems with the transfer have been reported.
Jones' 31-page June memorandum and order did grant the motion to dismiss filed by Rite Aid Corp. and other so-called "Rite Aid Defendants": John T. Standley, David R. Jessick, Joseph B. Anderson, Jr., Bruce G. Bodaken, Kevin E. Lofton, Myrtle S. Potter, Michael N. Regan, Frank A. Savage, and Marcy Syms.
Walgreens and Rite Aid defendants all claimed immunity to liability under the Private Securities Litigation Reform Act's "safe harbor" provision.
"With respect to false or misleading statements, the defendants suggest that the statements are opinions or expressions of optimism that are not actionable," Jones said in his memorandum and order.
"They also contend that many of the statements are protected under the PSLRA's 'safe harbor' provision for forward-looking statements."
Jones wrote that all of the contested statements to shareholders by Rite Aid and many of those made by Walgreens during the merger process did fall under the PSLRA's safe harbor provision. However, Walgreens left the safe harbor provision in October 2016 when it questioned media reports about a Federal Trade Commission Review that suggested the merger might be faltering and, instead, expressed continued confidence in the process.
"The Walgreens defendants ventured into actionable territory when they openly contradicted news reports of regulatory trouble by alluding to their non-public 'inside' knowledge of the FTC's review," Jones' memorandum and order said.
"Plaintiff alleges that Walgreens, by the time of the statements, had ample reason to understand that the merger was in trouble. Indeed, once the FTC raised concerns and the original terms of the merger needed to be revised, one would expect the Walgreens defendants to soften their aggressively confident stance. Instead, the Walgreens defendants seemed to double-down and disputed reports that the transaction may falter."