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Cardinal Health, Inc.

  CASE CAPTION          In re Cardinal Health, Inc. Derivative Litigation
  COURT   United States District Court for the Southern District of Ohio
  CASE NUMBER   Case No. 2:19-cv-02491
  JUDGE   Honorable Sarah D. Morrison
  PLAINTIFF   Stanley Malone and Michael Splaine
  DEFENDANTS   Current and former members of Cardinal’s board of directors

Plaintiff seeks to hold Cardinal Health’s directors and officers responsible for its role in the opioid crisis.  Plaintiff alleges that Cardinal’s board and certain officers ignored numerous “red flags” that should have alerted them to the company’s failure to abide by opioid distribution laws. 

The action began in July 2019, when Cardinal Health shareholders represented by Kessler Topaz served a demand upon Cardinal Health’s board to access the Company’s records related to its opioid distribution practices. After reviewing thousands of pages of confidential, board-level documents, plaintiffs commenced their derivative action on December 13, 2019. Defendants moved to dismiss the complaint.  After briefing and oral argument, the Court denied defendants’ motion to dismiss on February 8, 2021. 

Ohio law required plaintiff to plead that a majority of the board faced a substantial likelihood of liability that they “‘ignore[d] ‘red flags’” that Cardinal was not in compliance with laws and regulations requiring it to prevent the unlawful diversion of controlled substances.  In reaching its decision to allow the action to proceed, the court relied heavily on the board-level documents summarized in the complaint regarding the board’s reaction to mounting scrutiny by the Company’s principal regulators. Because of plaintiffs’ pre-suit investigation, the complaint described “no fewer than 53 specific instances in which the Board or one of its relevant committees met to discuss, or was otherwise notified of important information related to, compliance risks or issues in Cardinal Health’s distribution of prescription opioids.”  Even after the Company paid significant sums of money to settle multiple claims from regulators, the board members continued to sit on their hands, and essentially ignored the unlawful conduct. Crediting plaintiffs’ assertion that the board was more concerned with public relations than legal compliance, the court highlighted relatively recent board minutes that include “extensive discussion of a public relations strategy for ‘reorienting’ the narrative” without any discussion of the “track-record or effectiveness” of Cardinal Health’s internal controls.

Since defeating the motion to dismiss, Plaintiff has been engaged in document discovery. After a mediation session, on December 9, 2021, plaintiffs agreed in principle to settle the case against all of the defendants. On May 26, 2022, Plaintiff filed a motion for preliminary approval.  

Read Plaintiffs’ Consolidated Verified Shareholder Derivative Complaint Here

Read Opinion and Order on the Motion to Dismiss Here