Elliott Assocs. v. AbbVie, Inc.

• Citation: 2022 IL App (1st) 211318 U
• Decision Date: 23 November 2022
• Docket Number: 1-21-1318,1-21-1340,1-21-1376,1-12-1375,1-21-1374,1-21-1395
• Parties: ELLIOTT ASSOCIATES, L.P.; ELLIOTT INTERNATIONAL, L.P.; THE LIVERPOOL LIMITED PARTNERSHIP (NAMED AS "THE LIVERPOOL PARTNERSHIP"); TYRUS CAPITAL EVENT MASTER FUND LIMITED; TYRUS CAPITAL OPPORTUNITIES MASTER FUND LIMITED; PENTWATER MERGER ARBITRAGE MASTER FUND LTD.; PENTWATER EQUITY OPPORTUNITIES MASTER FUND LTD.; PWCM MASTER FUND LTD.; and OCEANA MASTER FUND LTD., Plaintiffs-Appellants, v. ABBVIE, INC., Defendant-Appellee. MASON CAPITAL L.P. and MASON CAPITAL MASTER FUND L.P., Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees. HUDSON BAY MASTER FUND LTD. and HUDSON BAY MERGER ARBITRAGE OPPORTUNITIES MASTER FUND LTD., Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees. WCM ALTERNATIVES: EVENT-DRIVEN FUND; WCM MASTER TRUST; THE MERGER FUND; and THE MERGER FUND VL Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees. ODS CAPITAL, LLC, Plaintiff-Appellant, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees. FIRST NEW YORK SECURITIES LLC, FNY MANAGED ACCOUNTS LLC; and GOOSE HILL CAPITAL LLC, Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

2022 IL App (1st) 211318-U

ELLIOTT ASSOCIATES, L.P.; ELLIOTT INTERNATIONAL, L.P.; THE LIVERPOOL LIMITED PARTNERSHIP (NAMED AS "THE LIVERPOOL PARTNERSHIP"); TYRUS CAPITAL EVENT MASTER FUND LIMITED; TYRUS CAPITAL OPPORTUNITIES MASTER FUND LIMITED; PENTWATER MERGER ARBITRAGE MASTER FUND LTD.; PENTWATER EQUITY OPPORTUNITIES MASTER FUND LTD.; PWCM MASTER FUND LTD.; and OCEANA MASTER FUND LTD., Plaintiffs-Appellants, v. ABBVIE, INC., Defendant-Appellee.

MASON CAPITAL L.P. and MASON CAPITAL MASTER FUND L.P., Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.

HUDSON BAY MASTER FUND LTD. and HUDSON BAY MERGER ARBITRAGE OPPORTUNITIES MASTER FUND LTD., Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.

WCM ALTERNATIVES: EVENT-DRIVEN FUND; WCM MASTER TRUST; THE MERGER FUND; and THE MERGER FUND VL Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.

ODS CAPITAL, LLC, Plaintiff-Appellant, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.

FIRST NEW YORK SECURITIES LLC, FNY MANAGED ACCOUNTS LLC; and GOOSE HILL CAPITAL LLC, Plaintiffs-Appellants, v. ABBVIE, INC. and RICHARD GONZALEZ, Defendants-Appellees.

Nos. 1-21-1318, 1-21-1340, 1-21-1376, 1-12-1375, 1-21-1374, 1-21-1395

Court of Appeals of Illinois, First District, Fifth Division

November 23, 2022

This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court of Cook County Nos. 16 L 6279, 17 L 10409, 17 L 10407, 17 L 10408, 17 CH 8448, 17 L 9229 Honorable Margaret A. Brennan, Judge Presiding.

JUSTICE CUNNINGHAM delivered the judgment of the court. Presiding Justice Connors and Justice Mitchell concurred in the judgment.

ORDER

CUNNINGHAM, JUSTICE

¶ 1 Held: The trial court's order granting summary judgment is affirmed.

¶ 2 The plaintiffs-appellants, Elliott Associates, L.P Elliott International, L.P., and The Liverpool Partnership Tyrus Capital Event Master Fund Limited and Tyrus Capital Opportunities Master Fund Limited; First New York Securities LLC and FNY Managed Accounts LLC; Goose Hill Capital LLC; Mason Capital L.P. and Mason Capital Master Fund L.P.; Hudson Bay Master Fund Ltd. and Hudson Bay Merger Arbitrage Opportunities Master Fund Ltd.; Pentwater Merger Arbitrage Master Fund Ltd., Pentwater Equity Opportunities Master fund Ltd., PWCM Master Fund Ltd., and Oceana MasterFund Ltd.; and WCM Alternatives: Event-Driven Fund, WCM Master Trust, The Merger Fund, and The Merger Fund VL; appeal from the circuit court of Cook County's judgment granting summary judgment in favor of the defendants-appellees, AbbVie, Inc. (AbbVie) and Richard Gonzalez on all their collective claims. For the following reasons, we affirm the judgment of the circuit court of Cook County.

¶ 3 BACKGROUND

¶ 4 The plaintiffs are all different hedge funds. AbbVie is a Delaware-incorporated pharmaceutical company with its principal place of business in North Chicago, Illinois. Mr Gonzalez is AbbVie's chief executive officer and chairman of the board.

¶ 5 On June 20, 2014, AbbVie announced that it had approached another pharmaceutical company, Shire PLC (Shire), with an acquisition proposal.^[1] Shire is organized under the laws of the island of Jersey, a self-governing dependency of the United Kingdom, and headquartered in Ireland. AbbVie disclosed that, as part of its acquisition proposal with Shire, AbbVie would reincorporate as a foreign company outside of the United States and create a tax inversion, which would significantly reduce the amount it paid in taxes in the United States.

¶ 6 On June 25, 2014, AbbVie issued a press release regarding the merger with Shire. The press release stated, in relevant part:

"The proposed combination is strategically compelling to AbbVie and Shire and would create a larger and more diversified biopharmaceutical company with multiple leading franchises and significant financial capacity for future acquisitions, investment and enhanced shareholder distributions and value creation[.]

AbbVie believes this transaction is highly executable[.]"

The press release further stated that with the merger, AbbVie would be able to avail itself of a "[g]lobally competitive tax rate" which would provide AbbVie "with flexible access to [] global cash flows."

¶ 7 On July 18, 2014, AbbVie and Shire announced they had reached agreed terms and signed a merger agreement. The merger agreement provided that AbbVie would merge with Shire, and after the merger, AbbVie would be the surviving entity. The new entity would then reincorporate in Jersey. The merger agreement projected a new, lower tax rate for the newly merged entity as a consequence of reincorporation under the laws of Jersey. The plaintiffs all purchased stock in Shire based upon the merger agreement.

¶ 8 Also on July 18, 2014, Mr. Gonzalez held an investor conference call to discuss the merger agreement. During the conference call, investment analysts asked Mr. Gonzalez about the emerging political debate in the United States regarding tax inversions and the risk of United States government action to eliminate or restrict tax inversion benefits. Mr. Gonzalez answered that AbbVie had "studied this transaction very, very carefully" and believed it was "highly executable." He stated that the tax inversion was an additional benefit but "not the primary rationale" for the proposed merger agreement.

¶ 9 On September 22, 2014, while the merger agreement was pending, the United States Treasury Department announced new federal tax regulations that would limit certain benefits of tax inversions and diminish the ability of inverted companies to pay a lower tax rate to the United States (the treasury notice).

¶ 10 On September 29, 2014, Mr. Gonzalez issued a letter to all Shire employees, which AbbVie publicized to investors and filed with the United States Securities and Exchange Commission. That letter stated that AbbVie was still planning to move forward with the merger agreement and that Mr. Gonzalez was "more energized than ever" and "confident" about the proposed merge. That same day, AbbVie also published a letter to its own employees stating that it was aiming for a fourth-quarter close of the merger agreement.

¶ 11 On October 14, 2014, AbbVie announced that it was reconsidering the merger agreement, due, in part, to the September 22, 2014, treasury notice issued by the U.S. Government. On October 15, 2014, AbbVie confirmed that it was terminating the merger agreement. AbbVie's announcement stated:

"Although the strategic rationale of combining our two companies remains strong, the agreed upon valuation is no longer supported as a result of the changes to the tax rules and we did not believe it was in the best interests of our stockholders to proceed."

Following AbbVie's announcement that it was not moving forward with the merger agreement, Shire's American depository receipts fell 30% in value in one day.^[2]

¶ 12 Beginning on June 24, 2016, the plaintiffs all filed complaints against AbbVie and Mr. Gonzalez^[3], alleging fraudulent misrepresentation and fraudulent concealment. Specifically, the plaintiffs alleged that the statements made by AbbVie and Mr. Gonzalez in June, July, and September 2014 regarding the merger agreement with Shire misrepresented and concealed the significance of the tax savings on the merger closing. The trial court subsequently consolidated all the cases since the complaints were substantially similar.

¶ 13 On April 5, 2021, AbbVie and Mr. Gonzalez moved for summary judgment. The motion argued that summary judgment was appropriate on all of the plaintiffs' claims because: (1) the statements at issue were non-actionable statements of opinion and/or of future intent; (2) there was no evidence to demonstrate that the statements were false; and (3) the bespeaks caution doctrine barred the claims.^[4] Additionally, the motion argued that summary judgment was proper "on Certain Securities Subject to the dormant Foreign Commerce Clause" since the securities purchased in Shire were foreign.

¶ 14 On September 15, 2021, following a hearing on AbbVie's and Mr. Gonzalez's motion for summary judgment, the trial court granted the motion and dismissed the plaintiffs' actions with prejudice, "for reasons stated on the record." During the hearing, the trial court first addressed the June and July statements at issue, stating, "those statements include terms such as 'beliefs' and as such are opinion statements." The court further held:

"Additionally, the Court recognizes that the bespeaks caution doctrine applies. There was ample evidence for -- you know, the plaintiffs are in a position here, they're evaluating, they're, you know, kind of rolling the dice hoping to make some money on this, and the bespeaks caution, they had to do their own analysis, they had to look, they had to be aware that there were possibilities that this may not come through, so for those reasons, the June and July statements are out."

Regarding the September statements, the trial court similarly found that those statements were not an actionable statement of fact. The trial court explained:

"Mr. Gonzalez makes a statement saying -- you know, quite frankly, I think, you know, most people reading that is the kind of fluffy statement to feel good if you're with Shire, fluffy statement to feel good if you're with AbbVie, 'I still like all of you good people, I think you're good people, and we'll all move forward together on this.' It doesn't rise to the level of being actionable, again, it is opinion, ***."

The trial court therefore granted summary judgment in favor of AbbVie and Mr. Gonzalez on the plaintiffs' fraudulent...