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In re Cardinal Health Derivative Litig.

In re Cardinal Health Derivative Litig.

United States District Court for the Southern District of Ohio, Eastern Division

February 8, 2021, Filed

Case No. 2:19-cv-2491

Opinion

 [*1051]  OPINION AND ORDER

This matter is before the Court for consideration of Defendants' Motion to Dismiss the Consolidated Verified Shareholder Derivative Complaint. (Mot. to Dismiss, ECF No. 43.) Plaintiffs filed their Memorandum in Opposition (Memo. in Opp'n, ECF No. 47) to which Defendants have replied (Reply, ECF No. 48). The Court heard oral argument on the Motion on January 21, 2021. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

At its heart, this case is about negative externalities. "Negative externalities" is a term of art used by economists to describe the phenomenon of a firm's operations creating societal costs that are not captured by the market price of the firm's products.1 Air pollution is a classic example. Negative externalities are generally recognized as a market failure, because the price of a product should account for the true cost of its production. When the societal costs reach a certain magnitude, the firm is often [**3]  forced—by regulation, taxation, litigation, or a combination thereof—to 'internalize' the costs. The thrust of the claims now before the Court is that the directors and officers of this firm, Nominal Defendant Cardinal Health, Inc., failed (or refused) to mitigate the societal costs of Cardinal Health's business in the face of increasing evidence that the company would be forced to bear them.

All well-pled factual allegations in the Consolidated Verified Shareholder Derivative Complaint (Consol. Compl., ECF No. 35) are considered as true for purposes of the Motion to Dismiss. See Gavitt v. Born, 835 F.3d 623, 639-40 (6th Cir. 2016). The following summary draws from the allegations in that Consolidated Complaint, the documents integral to and incorporated therein, and certain other documents which are subject to judicial notice.

A. Parties

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518 F. Supp. 3d 1046 *; 2021 U.S. Dist. LEXIS 23549 **

IN RE CARDINAL HEALTH, INC. DERIVATIVE LITIGATION

CORE TERMS

compliance, Settlement, suspicious, orders, Consolidated, allegations, Audit, controlled substance, customers, anti-diversion, opioid, books and records, pharmaceutical, red flag, futility, enhancements, Defendants', shareholder, pharmacy, distributors, monitoring, update, particularity, presentation, registration, threshold, controls, substantial likelihood, violations, oversight

Criminal Law & Procedure, Criminal Offenses, Controlled Substances, Substance Schedules, Delivery, Distribution & Sale, Penalties, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Business & Corporate Law, Actions Against Corporations, Derivative Actions, Procedural Matters, Class Actions, Ownership Requirement, Demand Futility, Demand Requirement, Standing, Demands, Futility, Governments, Courts, Judicial Precedent, Management Duties & Liabilities, Causes of Action, Misfeasance & Nonfeasance, Judicial Officers, Judges, Discretionary Powers, Fiduciary Duties, Duty of Good Faith, Preclusion of Judgments, Estoppel, Collateral Estoppel, Business Judgment Rule