In re Cardinal Health, Inc. Erisa Litigation, No. C2-04-643.
Decision Date | 31 March 2006 |
Docket Number | No. C2-04-643. |
Parties | In re CARDINAL HEALTH, INC. ERISA LITIGATION, Plaintiff, This Document Relates to All ERISA Actions. |
Court | U.S. District Court — Southern District of Ohio |
James Edward Arnold, Clark Perdue Arnold & Scott, Columbus, OH, Robert A. Izard, Schatz & Nobel PC, Hartford, CT, for David L. McKeehan.
James Edward Arnold, Clark Perdue Arnold & Scott, Columbus, OH, Alfred G. Yates, Jr., Pittsburgh, PA, Arm Louise Lugbill, Cincinnati, OH, Arthur M. Kaufman, Stephen Eric Chappelear, Hahn Loeser & Parks LLP, Cleveland, OH, Charles Horne Cooper, Jr., Rex H. Elliott, Cooper & Elliott, David P. Meyer, David P. Meyer & Associates Co. LPA, Columbus, OH, Derek W. Loeser, Elizabeth A. Leland, Lynn Lincoln Sarko, Keller & Rohrback LLP, Seattle, WA, Douglas S. Johnston, Jr., Timothy L. Miles, Barrett Johnston & Parsley, Nashville, TN, Edwin J. Mills, Stull, Stull and Brody, New York, NY, George E. Barrett, Barrett Johnston & Parsley, Nashville, TN, Gerald Louis Rutledge, Law Office of Alfred G. Yates Jr. PC, Pittsburgh, PA, James Dollar Baskin, III, The Baskin Law Firm, Austin, TX, James G. Stranch, III, Branstetter Kilgore Stranch & Jennings, Nashville, TN, Joe R. Whatley, Jr., Whatley Drake LLC, Birmingham, AL, John A. Harris, IV, Mark Mathew Kitrick, Mark D. Lewis, Kitrick & Lewis Co. LPA, Columbus, OH, Kenneth A. Wexler, The Wexler Firm LLP, Chicago, IL, Lee Squitieri, Squitieri & Fearon LLP, New York, NY, Michael A Snyder, Shumaker Loop & Kendrick LLP, Patrick G. Warner, David P. Meyer & Associates Co. LPA, Columbus, OH, Richard Lawrence Norton, Katz Greenberger & Norton, Cincinnati, OH, Robert A. Izard, Schatz & Nobel PC, Hartford, CT, for James A. Syracuse Individually on Behalf of the Cardinal Health Profit Sharing, Retirement and Savings Plan and on Behalf of a Class of Similarly Situated Individuals.
Richard Lawrence Norton, Katz Greenberger & Norton, Cincinnati, OH, for Gint Baukus.
J. Kevin Cogan, Brian G. Selden, J. Todd Kennard, Shawn J. Organ, Jones Day, Columbus, OH, Geoffrey J. Ritts, John M. Newman, Jr., Jones Day Reavis & Pogue, Cleveland, OH, Mark Alan Johnson, Baker & Hostetler, Columbus, OH, for Cardinal Health Inc., The Plan Committee, Susan Nelson.
Roger Philip Sugarman, Kegler Brown Hill & Ritter, Columbus, OH, Arthur S. Greenspan, Richards, Spears, Kibbe & Orbe, New York, NY, Geoffrey J. Ritts, John M. Newman, Jr., Jones Day Reavis & Pogue, Cleveland, OH, Shawn J. Organ, Jones Day, Columbus, OH, for Richard Miller.
In this consolidated class action, Lead Plaintiffs, David K. McKeehan, James A. Syracuse, and Timothy E. Ferguson (collectively the "Plaintiffs") bring suit on behalf of employees of Cardinal Health, Inc. ("Cardinal" or "the Company") who invested in Cardinal stock through the Company's 401(k) plan. Plaintiffs allege that the Defendants, certain officers, directors and employees of Cardinal, as well as the Putnam Fiduciary Trust Company ("Putnam"), the former Trustee of Cardinal's 401(k) plan, violated the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001, et seq.
Plaintiffs allege that from 1998 through 2002, while Cardinal's pharmaceutical distribution unit underwent a reorganization, the corporation and those associated with it disseminated materially false and misleading information in analyst reports, press releases, public statements, and filings with the Securities and Exchange Commission ("SEC"). According to Plaintiffs, over a four-year Class Period, the Company engaged in a series of illegitimate accounting strategies in order to both hide its losses and inflate its reported revenues to meet increasingly unrealistic earnings projections during the pharmaceutical distribution market transition from a "buy and hold" (B + H) model to a "fee for service" ("FFS") model. Plaintiffs assert that Cardinal's accounting manipulations and its purported dissemination of material misrepresentations affected the price of its securities, misled investors as to the Company's "true value," and caused Plaintiffs to lose money that they had invested in Cardinal's 401(k) plan.
Cardinal, the Cardinal Employee Benefits Policy Committee (the "Committee" or "Committee Defendants"), and the Company's Board of Directors ("Director Defendants") filed a joint motion to dismiss Plaintiffs' Complaint under Federal Rules of Civil Procedure 12(b)(6), alleging that Plaintiffs failed to state a claim upon which relief can be granted. Defendants Putnam and Defendant Richard J. Miller also filed separate motions dismiss Plaintiffs' Complaint under Rules 12(b)(6).
This Court holds that: (1) Plaintiffs failed to state a claim for relief under ERISA § 502(a)(3); (2) the "prudent person" standard and the liberal notice pleading requirements apply to Plaintiffs' claims; (3) Defendant Putnam is a "directed trustee" subject to a different standard from that applied to a traditional Plan fiduciary, and Plaintiffs have failed to state a claim against Putnam under this standard; (4) the Dura loss causation requirement applicable in cases of securities fraud does not apply in the context of an ERISA claim; (5) Defendants' contention that Plaintiffs have failed to show that the Committee Defendants had any knowledge of the alleged misstatements is inappropriate for decision on a motion to dismiss; (6) without deciding whether "Fraud on the Market Theory" is applicable in the context of an ERISA claim, this Court finds that Plaintiffs have adequately pled reliance under the pleading requirements of Federal Rule of Civil Procedure 8(a); (7) Plaintiffs have sufficiently alleged that Defendant Cardinal, the Committee Defendants, and the Director Defendants...
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