WILMINGTON, Del. (Legal Newsline) – Gilead’s defense of stockholder class actions is absurd and overly aggressive, a Delaware judge has ruled.
Vice Chancellor Kathleen McCormick, of the Delaware Chancery Court, made this determination in a Nov. 24 ruling that allows class action firms like Bernstein Litowitz and Pomerantz LLP suing the company to inspect its internal records.
Gilead faces accusations in Delaware and elsewhere that it manipulated the patent system to prevent a generic version of its TDF-based medications like Truvada for HIV patients. The company is also defending itself against a 2019 lawsuit filed by the U.S. Department of Justice.
McCormick was asked by lawyers pursuing five shareholder class actions to rule there existed a credible basis to suspect wrongdoing on the part of the company, which would allow them to inspect its books and records.
Gilead cited Wilkinson v. A. Schuman, a decision that denied inspection requests on the ground that the plaintiff was part of a purely lawyer-driven inspection effort, McCormick wrote.
“As multiple subsequent decisions of this court have made clear, Wilkinson involved extreme facts, and Gilead’s argument that five separate plaintiffs represented by four separate sets of counsel committed the same blunders found in Wilkinson borders on absurd,” McCormick wrote.
McCormick rejected standing arguments and Gilead’s assertion that plaintiffs should only be given access to formal board materials.
“Regrettably, Gilead’s overly aggressive defense strategy epitomizes a trend,” McCormick wrote. “As described by recently by a group of scholars, defendants are increasingly treating Section 220 motions as ‘surrogate proceeding(s) to litigate the possible merits of the suit’ and ‘place obstacles in the plaintiffs’ way to obstruct them from employing it as a quick and easy pre-filing discovery tool.’
“Defendants like Gilead adopt this strategy with the apparent belief that there is no real downside to doing so, ignoring that this court has the power to shift fees as a tool to deter abusive litigation tactics.”
In fact, McCormick is allowing plaintiffs to ask for reimbursement for their expenses incurred as a result of Gilead’s resistance.