Allergan Inc et al v. Valeant Pharmaceuticals International Inc et al

REPLY in Support of MOTION for Preliminary Injunction . Motion[160]

C.D. Cal.October 23, 2014

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION LATHAM & WATKINS LLP Peter A. Wald (Bar No. 85705) peter.wald@lw.com 505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: +1.415.391.0600 Michele D. Johnson (Bar No. 198298) michele.johnson@lw.com 650 Town Center Drive, 20th Floor Costa Mesa, California 92626-1925 Telephone: +1.714.540.1235 WACHTELL, LIPTON, ROSEN & KATZ William D. Savitt (pro hac vice) wdsavitt@wlrk.com Bradley R. Wilson (pro hac vice) brwilson@wlrk.com 51 West 52nd Street New York, New York 10019 Telephone: +1.212.403.1329 Attorneys for Plaintiffs ALLERGAN, INC. and KARAH H. PARSCHAUER [Additional counsel listed on signature page] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION ALLERGAN, INC., et al., Plaintiffs, v. VALEANT PHARMACEUTICALS INTERNATIONAL, INC., et al., Defendants. CASE NO. 8:14-cv-01214-DOC (ANx) REPLY IN SUPPORT OF MOTION FOR PRELIMINARY INJUNCTION Date: October 28, 2014 Time: 8:30 a.m. Judge: Hon. David O. Carter Ctrm: 9D Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 1 of 34 Page ID #:10406 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION TABLE OF CONTENTS Page I. INTRODUCTION .......................................................................................... 1 II. PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS ......................................................................................................... 1 Plaintiffs Have Standing To Seek Injunctive Relief Under A. Section 14(e) And Rule 14e-3.............................................................. 2 Pershing Square Is Not An “Offering Person” .................................... 4 B. Valeant Had Taken “Substantial Steps” To Commence A C. Tender Offer At The Time Of Pershing Square’s Trades.................... 9 Plaintiffs Are Likely To Succeed On Their Rule 14a-9 D. Claim .................................................................................................. 14 III. ALLERGAN AND ITS STOCKHOLDERS WILL SUFFER IRREPARABLE HARM ABSENT A PRELIMINARY INJUNCTION .............................................................................................. 17 Allowing Pershing Square to Vote its Illegally Obtained A. Shares Will Cause Irreparable Harm to Allergan and its Stockholders ....................................................................................... 17 The Injunction Plaintiffs Seek Is Commonplace and B. Narrowly Tailored to Prevent Irreparable Harm Pending Final Judgment ................................................................................... 21 IV. THE BALANCE OF EQUITIES AND PUBLIC INTEREST FAVOR GRANTING A PRELIMINARY INJUNCTION ......................... 23 V. DEFENDANTS’ “UNCLEAN HANDS” AFFIRMATIVE DEFENSE IS WITHOUT MERIT ............................................................... 24 VI. CONCLUSION ............................................................................................ 25 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 2 of 34 Page ID #:10407 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 i CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION TABLE OF AUTHORITIES Page(s) CASES Am. Gen. Corp. v. Torchmark Corp., 1990 WL 595282 (S.D. Tex. April 11, 1990) .................................................. 32 Am. Pac. Corp. v. Super Foods Servs., Inc., 1982 WL 8767 (Del. Ch. Dec. 6, 1982) ........................................................... 29 Arc of California v. Douglas, 757 F.3d 975 (9th Cir. 2014) ............................................................................ 32 Bath Indus., Inc. v. Blot, 427 F.2d 97 (7th Cir. 1970) .............................................................................. 32 Bell Atlantic v. Twombly, 550 U.S. 544 (2007) ......................................................................................... 22 Bertoglio v. Texas Int’l Co., 488 F.Supp. 630 (D. Del.1980) ........................................................................ 24 Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) ........................................................................................... 6 Brody v. Transitional Hospitals Corp., 280 F.3d 997 (9th Cir. 2002) .............................................................................. 6 Burlington Indus., Inc. v. Edelman, 666 F. Supp. 799 (M.D.N.C. 1987) .................................................................... 5 Camelot Indus. Corp. v. Vista Res., Inc., 535 F. Supp. 1174 (S.D.N.Y. 1982) ................................................................. 17 Chambers v. Briggs & Stratton Corp., 863 F. Supp. 900 (E.D. Wis. 1994) .................................................................. 34 Champion Parts Rebuilders, Inc. v. Cormier Corp., 661 F. Supp. 825 (N.D. Ill. 1987) ..................................................................... 32 Chicago Stadium Corp. v. Scallen, 530 F.2d 204 (8th Cir. 1976) ............................................................................ 34 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 3 of 34 Page ID #:10408 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 ii CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Chris-Craft Indus. v. Piper Aircraft Corp., 516 F.2d 172 (2d Cir. 1975) ............................................................................. 30 Crouch v. Prior, 905 F. Supp. 248 (D.V.I. 1995) ........................................................................ 32 CSX Corp. v. Children’s Inv. Fund Mgmt. (UK) LLP, 654 F.3d 276 (2d Cir. 2011) ............................................................................. 31 EEOC v. Recruit U.S.A., Inc., 939 F.2d 746 (9th Cir. 1991) ............................................................................ 36 Elec. Specialty Co. v. International Controls Corp., 409 F.2d 937 (2d Cir. 1969) ............................................................................... 4 EMAK Worldwide, Inc. v. Kurtz, 50 A.3d 429 (Del. 2012) ................................................................................... 27 Essex Chem. Corp. v. Gurit-Heberlein AG, 1988 U.S. Dist. LEXIS 19515 (D.N.J. June 24, 1988) ...................................... 5 Fradkid v. Ernst, 571 F. Supp. 829 (N.D. Ohio 1983) ................................................................. 31 Ganino v. Citizens Utils. Co., 228 F.3d 154 (2d Cir. 2000) ............................................................................. 25 Gaspar, 1985 WL 521 ........................................................................................... 16 Gearheart Industries, Inc. v. Smith International, 741 F.2d at 715-18 ............................................................................................ 31 Gen. Aircraft Corp. v. Lampert, 556 F.2d 90 (1st Cir. 1977) .............................................................................. 22 Gen. Steel Indus. Inc. v. Walco Nat’l Corp., 1981 WL 17552 (E.D. Mo. Nov. 24, 1981) ..................................................... 26 Graphic Sciences, Inc. v. International Mogul Mines, Ltd., 397 F. Supp. 112 (D.D.C. 1974) ...................................................................... 35 Gulf & W. Indus. Inc. v. Great Atlantic & Pacific Tea Co., Inc., 476 F.2d 687 (2d Cir. 1973) ............................................................................. 31 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 4 of 34 Page ID #:10409 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 iii CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Hanna Mining Co. v. Norcen Energy Res. Ltd., 574 F. Supp. 1172 (N.D. Ohio 1982) ......................................................... 26, 31 Hollywood Casino Corp. v. Simmons, 2002 WL 1610598 (N.D. Tex. July 18, 2002) ................................................. 13 Hughes v. Dempsey-Tegeler & Co., 534 F.2d 156 (9th 1976) ................................................................................... 25 ICN Pharmaceuticals, Inc. v. Khan, 2 F.3d 484 (2d Cir. 1993) ..................................................................... 26, 27, 30 In re Apple Computer Sec. Litig., 886 F.2d 1109 (9th Cir. 1989) .......................................................................... 25 In re Western Union Sec. Litig., 120 F.R.D. 629 (D.N.J. 1988) .......................................................................... 25 Kennedy v. Applause, Inc., 90 F.3d 1477 (9th Cir. 1996) ............................................................................ 19 Kohn v. American Metal Climax, Inc., 458 F.2d 255 (3d Cir. 1972) ............................................................................. 24 Koppers Co. v. Am. Express Co., 689 F. Supp. 1371 (W.D. Pa. 1988) ............................................... 11, 27, 30, 33 Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) ....................................................................................... 5 Lone Star Steakhouse & Saloon, Inc. v. Adams, 148 F. Supp. 2d 1141 (D. Kan. 2001) .............................................................. 22 MacFadden Holdings, Inc. v. John Blair & Co., 1986 WL 1171567 (D. Del. May 5, 1986) ....................................................... 24 MAI Basic Four, Inc. v. Prime Computer, Inc., 871 F.2d 212 (1st Cir. 1989) ............................................................................ 11 Medical Imaging Centers of America, Inc. v. Lichtenstein, 1996 U.S. Dist. LEXIS 22362 (S.D. Cal. Feb. 29, 1996) ................................ 32 Missouri Portland Cement Co. v. H.K. Porter Co., Inc., 535 F.2d 388 (8th Cir. 1976 ............................................................................. 32 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 5 of 34 Page ID #:10410 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 iv CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Neubronner v. Milken, 6 F.3d 666 (1993) ............................................................................................... 5 Nowling v. Aero Services Int’l, Inc., 734 F. Supp. 733 (E.D. La. 1990) .................................................................... 36 ODS Techs., L.P. v. Marshall, 832 A.2d 1254 (Del. Ch. 2003) ........................................................................ 22 Pabst Brewing Co. v. Kalmanovitz, 551 F. Supp. 882 (D. Del. 1982) ...................................................................... 31 Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146 (C.D. Cal. 2002) ............................................................ 36 Piper v. Chris-Craft Indus., Inc., 430 U.S. 1 (1977) ......................................................................................... 4, 30 Prof’l Ins. Agents of Wash. v. CIR, 875 F.2d 870 (9th Cir. 1989) ............................................................................ 19 Ranger Oil Ltd. v. Petrobank Energy & Res. Ltd., 2000 WL 33115906 (S.D.N.Y. May 23, 2000) ...................................... 5, 31, 35 S. Cal. Darts Ass'n v. Zaffina, 762 F.3d 921 (9th Cir. 2014) ............................................................................ 35 SEC Litig. Release No. 953, 24 S.E.C. Docket 439, 1981 WL 315222 ................................................... 26, 27 SEC v. Chicago Helicopter Indus., 1980 U.S. Dist. LEXIS 17214 (N.D. Ill. Jan. 18, 1980) .................................. 23 SEC v. Ginsburg, 362 F.3d 1292 (11th Cir. 2004) .................................................................. 16, 17 SEC v. Jacobs, No. 1:13-cv-01289-SO (N.D. Ohio Aug. 15, 2014) ......................................... 17 SEC v. Maio, 51 F.3d 623 (7th Cir. 1995) .............................................................................. 17 SEC v. Mayhew, 121 F.3d 44 (2d Cir. 1997) ......................................................................... 16, 17 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 6 of 34 Page ID #:10411 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 v CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION SEC v. McCarthy, 322 F.3d 650 (9th Cir. 2003) .............................................................................. 9 SEC v. Warde, 151 F.3d 42 (2d Cir. 1998) ............................................................................... 17 S-G Secur., Inc. v. Fuqua Inv. Co., 466 F. Supp. 1114 (D. Mass. 1978) ............................................................ 31, 32 St. Louis Police Ret. Sys. v. Severson, 2012 WL 5270125 (N.D. Cal. Oct. 23, 2012) ............................................ 22, 23 Telex Corp. v. Edelman, 1987 WL 43390 (N.D. Okla. Nov. 5, 1987) ..................................................... 18 Third Point LLC v. Ruprecht, No. CIV.A. 9497-VCP, 2014 WL 1922029 (Del. Ch. May 2, 2014) ..................................................... 29 Tully v. Mott Supermarkets, Inc., 337 F. Supp. 834 (D.N.J. 1972) ........................................................................ 30 United Paperworkers Int’l Union v. International Paper Co., 985 F.2d 1190 (2d Cir. 1993) ..................................................................... 24, 25 W. Dist. Council of Lumber Prod. & Indus. Workers v. Louisiana Pac. Corp., 892 F.2d 1412 (9th Cir. 1989) .......................................................................... 30 Westlands Water Dist. v. United States, Dep’t of the Interior, Bureau of Reclamation, 1994 U.S. Dist. LEXIS 6276 (E.D. Cal. Apr. 28, 1994) .................................. 36 Wilson v. Comtech Telecommunications Corp., 648 F.2d 88 (2d Cir. 1981) ............................................................................. 5, 6 STATUTES 44 Fed. Reg. at 9976-77 ......................................................................................... 12 44 Fed. Reg. at 9987 ................................................................................................ 9 44 Fed. Reg. at 9988 .............................................................................................. 12 45 Fed. Reg. at 60 .................................................................................................. 12 Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 7 of 34 Page ID #:10412 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 vi CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION 45 Fed. Reg. at 60,412 ........................................................................................... 12 45 Fed. Reg. at 60,418 ........................................................................................... 10 15 U.S.C. §78j(b) ..................................................................................................... 5 15 U.S.C. §78m(d) ..................................................................................... 12, 27, 30 15 U.S.C. §78n(a) .................................................................................................... 4 15 U.S.C. §78n(d) .................................................................................... 8, 9, 11, 30 15 U.S.C. §78n(e) ........................................................................................... passim 17 C.F.R. § 240.10b-5 ......................................................................................... 3, 4 17 C.F.R. § 240.14a-9 .................................................................................. 1, 18, 20 17 C.F.R. § 240.14d-1(g)(2) .................................................................................... 9 17 C.F.R. § 240.14e-3 ..................................................................................... passim Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 8 of 34 Page ID #:10413 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 1 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION I. INTRODUCTION When Pershing Square publicly revealed its 9.7% ownership stake in Allergan on April 21, 2014, and the next day saw its stake shoot up by more than $1 billion when Valeant announced an unsolicited takeover bid for Allergan, many asked “How Can It Be Legal?” E.g., Ex. 132. At the time, some speculated about an untested loophole in federal securities law for trading ahead of a merger on inside information freely provided by the intended acquirer. Id. But on June 18, 2014, Valeant launched a tender offer for Allergan’s shares. There is no loophole for insider trading in advance of a tender offer; it is plainly illegal under Rule 14e- 3. Defendants admit that Valeant shared material, nonpublic information about its intent to acquire Allergan with Pershing Square but claim-as their lead argument-that an injunction should be denied because it would “substantially tilt the playing field.” Opp. 1. The playing field has already been irreparably tilted by Defendants’ insider trading. Pershing Square’s unlawful toehold in Allergan enabled Valeant to put Allergan in play, when Valeant had no hope of doing so lawfully or on its own. An injunction must issue to preserve what is left of the status quo until Defendants’ conduct can be adjudicated on the merits. II. PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS Defendants argue that Plaintiffs are not likely to prevail on their insider- trading claims under Section 14(e) and Rule 14e-3 for three reasons: (1) Plaintiffs lack standing; (2) Pershing Square is an “offering person” immune from insider- trading liability; and (3) Valeant took “substantial steps” to commence only a merger, not a tender offer, during the relevant time period. Opp. 22-37; 15 U.S.C. § 78n(e); 17 C.F.R. § 240.14e-3. Defendants also argue that Plaintiffs cannot prevail on their Section 14(a) and Rule 14a-9 disclosure claim. Opp. 37-38; 15 U.S.C. § 78n(a); 17 C.F.R. § 240.14a-9. Notably, Defendants do not even mention the Ninth Circuit’s alternative “serious questions” test-and cannot credibly dispute that serious questions plainly exist. Under both the “likelihood of success” Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 9 of 34 Page ID #:10414 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 2 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION and the “serious quetsions” standard, Defendants’ arguments are without merit. Plaintiffs Have Standing To Seek Injunctive Relief Under Section A. 14(e) And Rule 14e-3 Defendants argue that neither Allergan, as the target company, nor Parschauer, as an Allergan stockholder, has standing to seek preliminary injunctive relief to remedy an insider-trading violation under Rule 14e-3. Opp. 22-23. Defendants do not dispute that there is an implied private right of action to enforce Rule 14e-3. But, in their view, courts are powerless to remedy even the most flagrant insider-trading violation in a fight for corporate control because no private person has standing to seek injunctive relief. That is not the law. “[I]n corporate control contests[,] the stage of preliminary injunctive relief, rather than post- contest lawsuits, ‘is the time when relief can best be given.’” Piper v. Chris-Craft Indus., Inc., 430 U.S. 1, 42 (1977) (quoting Elec. Specialty Co. v. Int’l Controls Corp., 409 F.2d 937, 947 (2d Cir. 1969) (Friendly, J.)). This is the critical stage, and Plaintiffs have standing to seek the only relief that matters. Allergan Has Standing: Defendants do not contest that Allergan has Article III standing. Allergan is “imminently threatened with a concrete and particularized ‘injury in fact’ that is fairly traceable to” Defendants’ unlawful actions and is “likely to be redressed by a favorable judicial decision.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1386 (2014) (citation omitted). Defendants instead argue that only a contemporaneous trader has standing. But the contemporaneous-trading limitation on which Defendants rely has its origin in cases brought by a different entity (stockholders), interpreting different statutory and regulatory provisions (Section 10(b) and Rule 10b-5), and seeking a different remedy (damages). See Neubronner v. Milken, 6 F.3d 666, 669-70 (9th Cir. 1993); Wilson v. Comtech Telecommc’ns Corp., 648 F.2d 88, 94 (2d Cir. 1981). No court has extended a contemporaneous-trading requirement to an insider-trading suit under Section 14(e) and Rule 14e-3 brought by an issuer for Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 10 of 34 Page ID #:10415 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 3 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION injunctive relief. To the contrary, every court to consider the issue has held that a target has standing to seek injunctive relief under Rule 14e-3-regardless of whether it traded during the relevant period or, indeed, at all. See Essex Chem. Corp. v. Gurit-Heberlein AG, 1988 U.S. Dist. LEXIS 19515, at *14-15 (D.N.J. June 24, 1988); Burlington Indus., Inc. v. Edelman, 666 F. Supp. 799, 806, 813 (M.D.N.C. 1987), aff’d, [1987 Transfer Binder] Fed. Sec. L. Rep. (CCH) P 93,339 (4th Cir. 1987); cf. Ranger Oil Ltd. v. Petrobank Energy & Res. Ltd., 2000 WL 33115906, at *9 n.1 (S.D.N.Y. May 23, 2000) (assuming issuer standing).1 Defendants contend that Brody v. Transitional Hospitals Corp., 280 F.3d 997 (9th Cir. 2002), is “on-point” (Opp. 22) and dictates a different result. Not so. In Brody, the plaintiffs were stockholders, not the target corporation; the stockholders were seeking retrospective damages, not prospective equitable relief; and the plaintiffs brought an insider-trading claim under both Rule 10b-5 and Rule 14e-3. 280 F.3d at 1004-05. These three distinctions compel a different result. When the plaintiff is an issuer and the relief being sought is an injunction, there is no risk of making the insider “liable to all the world.” Wilson, 648 F.2d at 94; cf. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 740-41, 746 (1975) (discussing policy underlying purchaser-seller rule in Rule 10b-5 private damage actions). Moreover, the “duty to disclose or abstain” in Rule 14e-3 is intended to protect all stockholders in the target company, not just those who trade contemporaneously with insiders. When third-party institutions use inside information to acquire large toeholds in the target company-as Pershing Square 1 Defendants’ attempt to distinguish these cases is, at bottom, an argument that they were wrongly decided. They were not, and Defendants are unable to identify a single case holding otherwise. Defendants’ reliance on Ranger Oil’s discussion of irreparable harm (Opp. 15-16, 23 n.23) is also perplexing. The court made clear that “[t]he issue of whether [the target company] has standing to bring this action is separate from the question of whether the plaintiff has shown irreparable harm.” Ranger Oil, 2000 WL 33115906, at *9 n.1. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 11 of 34 Page ID #:10416 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 4 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION did here-they “manipulate[] the tender offer process” (Brody, 280 F.3d at 1004), inflicting harm on all stockholders by diluting their votes and forcing them to make a “distorted choice” among alternate proposals based on a rigged deck. Choi Rep. ¶¶ 38, 43, 55, 64-66. The target company is often in the best position to seek injunctive relief that will vindicate the rights of all stockholders. See Elec. Specialty Co., 409 F.2d at 944-46 (“[T]he superior resources of the corporation . . . can be vital [in the tender offer context] where remedial action must be speedy and forceful.”); see also Polaroid Corp. v. Disney, 862 F.2d 987, 1001 (3d Cir. 1988). Courts of appeals have thus uniformly held that a target company has standing to seek injunctive relief under Section 14(e). See, e.g., Polaroid Corp., 862 F.2d at 1001-03; Fla. Commercial Banks v. Culverhouse, 772 F.2d 1513, 1519 (11th Cir. 1985); Gearhart Indus. Inc. v. Smith Int’l, Inc., 741 F.2d 707, 713-14 (5th Cir. 1984); Gulf & W. Indus., Inc. v. Great Atl. & Pac. Tea Co., 476 F.2d 687, 696 n.14 (2d Cir. 1973). Nothing in Brody requires Section 14(e) insider-trading claims to stand on different footing. Parschauer Has Standing: Defendants do not dispute that Parschauer has standing under Rule 14e-3; they argue only that her remedy is limited to damages. Opp. 18 n.9, 23. That is incorrect for two reasons. First, Parschauer (as a current Allergan shareholder (Compl. ¶ 21)) will be harmed if illegally obtained shares are voted. Second, a preliminary injunction would prevent Defendants from permanently dismantling Allergan and, in turn, preserve her right to rescission after trial. See id. at 48, ¶ C. Pershing Square Is Not An “Offering Person” B. Defendants argue that Pershing Square is an “offering person” immune from insider-trading liability. Opp. 31-37. Defendants conflate different terminology meant for different purposes and describe a “joint venture” relationship that did not exist. Pershing Square did not offer Allergan stockholders anything (besides a tainted proxy contest), and can gain no benefit from that limited exception. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 12 of 34 Page ID #:10417 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 5 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION “Bidder” and “offeror” are not synonymous with “offering person”: All parties agree that Defendants qualify as “bidder[s]” under Regulation 14D. 17 C.F.R. § 240.14d-3. Defendants argue that this marks the end of the analysis. In their view, a “bidder” under Regulation 14D is, by definition, an “offering person” under Rule 14e-3. Opp. 32. That is incorrect as a matter of law. The plain text (which Defendants all but ignore) makes clear that the terms “bidder” and “offering person” are not synonymous. Regulation 14D instructs that no “bidder” shall make a tender offer without providing the necessary disclosures. 17 C.F.R. § 240.14d-3. It defines “bidder” as “any person who makes a tender offer or on whose behalf a tender offer is made.” Id. § 240.14d-1(g)(2) (emphasis added). Section 14(d), in turn, defines a “person,” “for purposes of this subsection,” to include “two or more persons” acting as, inter alia, a “group for the purpose of acquiring, holding, or disposing of securities of an issuer.” 15 U.S.C. § 78n(d)(2) (emphasis added); see 17 C.F.R. § 240.14d-1(g). Rule 14e-3 does not use the term “bidder” and does not cross-reference Regulation 14D. Similarly, Section 14(e) does not define the term “person” and does not cross-reference the broader definition of “person” in Section 14(d)(2). Instead, Rule 14e-3 introduces a new term (“offering person”) with a new definition (a person that “has taken a substantial step or steps to commence, or has commenced, a tender offer”). 17 C.F.R. § 240.14e-3(a). That Rule 14e-3 does not use the familiar term “bidder” refutes Defendants’ contention that the two terms are co-extensive. SEC v. McCarthy, 322 F.3d 650, 656 (9th Cir. 2003) (different terms “demonstrates that Congress intended to convey a different meaning ”). Defendants contend (Opp. 36) that the SEC “rejects” any distinction between a “bidder” for disclosure purposes and an “offering person” for insider- trading purposes. This argument is belied by the regulatory history, and SEC comments in this very case. When the SEC first proposed the insider-trading ban, it had used the term “bidder” to describe the entity making the tender offer and Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 13 of 34 Page ID #:10418 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 6 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION those covered by Section 14(d)’s disclosure requirements. See Ex. 128 at 9980, 9987 (Tender Offers, 44 Fed. Reg. 9956 (Feb. 15, 1979) (“Proposed Rule 14e-2”)). But when the SEC issued Final Rule 14e-3, it dropped “bidder” from the insider- trading provision and inserted the new term “offering person.” Ex. 126 at 60,418 (45 Fed. Reg. 60,410 (Sept. 12, 1980) (“Adopting Release”)). The unique contexts in which the respective terms appear further illustrate why they describe an overlapping, but distinct set of entities. Mot. 19-23. Defendants blithely dismiss this as mere “policy,” but they have no substantive response. Opp. 36. The disclosure requirements in Section 14(d) and Regulation 14D were designed to maximize stockholder information in the tender-offer context, Ex. 124 at 6-7 (H.R. REP. NO. 90-1711 (1968)), and the SEC and courts have quite reasonably read the term “bidder” broadly to include participants other than the person making the tender offer (i.e., those “on whose behalf a tender offer is made”). Ex. 149; see MAI Basic Four, Inc. v. Prime Computer, Inc., 871 F.2d 212, 221 (1st Cir. 1989); Koppers Co. v. Am. Express Co., 689 F. Supp. 1371, 1388-93 (W.D. Pa. 1988). The insider-trading restrictions in Rule 14e-3, by contrast, reflect a purposefully broad prohibition with only one narrow exception: an “offering person” can trade based on material, non-public information about its own forthcoming tender offer. Insider trading results in net wealth transfers from ordinary investors to third-party insiders, without any corresponding improvement in societal welfare. See Mot. 19-23; Ex. 126 at 60,412; Ex. 128 at 9976-77; Choi Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 14 of 34 Page ID #:10419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 7 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Rep. ¶¶ 36-40, 67-72. By expanding the class of persons obligated to make disclosures, the SEC did not also (and, rather indirectly) expand the class of persons free to commit insider trading. Ex. 114. Yet, that is the logic (and consequence) of Defendants’ position. Id. Similarly, Defendants repeatedly conflate the term “offeror” and “offering person,” and describe themselves as “co-offerors.” Opp. 31. But “offeror” has the same definition as “bidder.” Compare Regulation M-A, Ex. 147 (“Offeror means any person who makes a tender offer or on whose behalf a tender offer is made.”), with 17 C.F.R. § 240.14d-1(g)(2) (“The term bidder means any person who makes a tender offer or on whose behalf a tender offer is made.”). The term “offeror” appears in Regulation M-A and, like “bidder,” operates in the context of disclosure requirements under, inter alia, Regulation 14D. See, e.g., id. § 240.14d-100K. Whether Defendants are “co-offerors” for the purposes of Section 14(d) has no bearing on the meaning of “offering person” under Rule 14e-3-a Rule promulgated under a different statutory section, using a different term and serving a different purpose. Accordingly, Plaintiffs’ “concessions” that Pershing Square is a “co-bidder” or “co-offeror,” Pershing Square’s designation as a “co-offeror” in the offering materials, and SEC statements and cases interpreting the terms “bidder” and “offeror” are simply irrelevant. Opp. 31-32, 34 & n.17.2 Pershing Square is not an “offering person”: Stripped of that syllogism 2 The only “case law” purportedly supporting Defendants claim is an out-of-circuit, unpublished district court case. Opp. 33-34. In Hollywood Casino Corp. v. Simmons, 2002 WL 1610598 (N.D. Tex. July 18, 2002), the plaintiff alleged that all of the defendants had “commenced a ‘creeping’ tender offer” and were “working as a group to take over” the target company. Id. at *3. The court suggested that, under the plaintiff’s “group theory, [the defendants] together would be the ‘offering person’ . . . and, thus, would be immune from” liability under Rule 14e-3. Id. The court did not hold that any “bidder” under Regulation 14D is automatically exempt from liability under Rule 14e-3. Nor did the court consider any of the arguments set forth above. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 15 of 34 Page ID #:10420 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 8 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION (i.e., Pershing Square is a co-bidder, all co-bidders are offering persons, therefore Pershing Square is an offering person), Defendants’ argument falls apart. An “offering person” is the person who is actually offering to acquire the target’s securities and “commenc[ing]” the tender offer. Pershing Square did not make the tender offer; Valeant did. Accordingly, Pershing Square is an “other person” subject to the insider-trading restrictions. Defendants begin with a strawman: they argue that the offering person can be more than one person. Opp. 35. That is, of course, true. If multiple entities were to propose an exchange of consideration with the target’s stockholders and to seek management of the resulting company, they would each be an “offering person” under Rule 14e-3. Cf. Hollywood Casino Corp., 2002 WL 1610598, at *3. But that is not what occurred here. Pershing Square did not offer to purchase shares of Allergan’s stock as part of the proposed tender offer, did not control the terms of the tender offer, and would have no control over the resulting company. Valeant is the only entity offering to purchase Allergan shares. See Ex. 3 at 1 (“Who is Offering to Acquire My Shares of Allergan Common Stock? A: The offer is being made by Valeant through Purchaser, a wholly owned subsidiary of Valeant[.]”). Only Valeant secured financing for the tender offer and only Valeant will be liable to its financiers. Ex. 139 at 7-10, 33. Valeant retained final discretion to make the bid and set its terms, Ex. 34 at § 1(d), control critical milestones in Pershing Square’s trading that could affect the timing of any exchange offer, see id. at § 1(a), and control Pershing Square’s contribution of financing towards the tender offer, see id. at § 2(a). And only Valeant will control the resulting entity if a tender offer is successful. Pershing Square will become a stockholder, not management or a controlling party. Defendants point to other terms in the Pershing Agreement which, they Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 16 of 34 Page ID #:10421 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 9 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION argue, demonstrate that their interests are aligned. Opp. 33; Ex. 34 at §§ 1(e), 2(b)- (c). But shared interests do not transform Pershing Square into an “offering person”-if that were the rule, lenders or any other party that wanted to see the deal close would be free to trade on inside information. In any event, the purported alignment of interests is more elusive than real. Pershing Square retains the right to support a competing offer that is not matched by Valeant. Ex. 34 at § 5(d)-(e). And while Defendants argue that they are “jointly and severally liable” (Opp. 4), they fail to mention that Valeant has fully indemnified Pershing Square for any such liability. See Ex. 136 § 2. Valeant Had Taken “Substantial Steps” To Commence A Tender C. Offer At The Time Of Pershing Square’s Trades Defendants contend that Valeant did not take any “substantial steps” to commence a tender until late May, when Allergan stockholders suggested that an “exchange offer” might be a good idea. Opp. 24-30. That argument rests on a mischaracterization of the governing law and a selective and wholly incredible recitation of the facts. The Law. Defendants contend that Rule 14e-3’s restriction on insider trading does not apply until the offeror makes an “actual decision” to commence a tender offer. Opp. 24. The minimal authority Defendants cite for this proposition does not support their claim, and the argument is easily dismissed. As a matter of ordinary usage, one can take a “substantial step” towards doing something without having already made the decision to do that thing (i.e., without having decided to take the final step). The Adopting Release (on which Defendants’ selectively rely) makes that distinction clear: “Unlike the November proposal, which was triggered by the determination by the bidder to make a tender offer, Rule 14e-3 is triggered by any person taking a substantial step or steps to Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 17 of 34 Page ID #:10422 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 10 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION commence a tender offer.” Ex. 126 at 60,413 n.33 (emphasis added). Accordingly, “the prohibition of Rule 14e-3(a) . . . applies to the period from the accomplishment by the offering person of a substantial step or steps to commence a tender offer to the termination of the tender offer.” Id. (activities which “substantially facilitate the tender offer” are “substantial steps”); see also Ex. 127 at 70,353 (44 Fed. Reg. 70,349 (Dec. 6, 1979)). Defendants also argue that the “substantial steps” must be “related or connected with a tender offer.” Opp. 25. That is true as far as it goes, but it does not go very far. Steps to adopt a new employee manual do not count. Steps taken towards acquiring Company A may bear no relation to a tender offer commenced for shares of Company B. And so on. But when substantial steps have been taken to acquire a target company (through whatever means), when those steps would equally “facilitate” a tender offer, and when a tender offer occurs in short order, the necessary nexus can be presumed. That is not reasoning from “hindsight” (id. at 28); it is applying common sense, and taking the SEC at its word that the standard is primarily “objective.” Ex. 126 at 60, 413 n.33. The case law overwhelmingly supports this approach.3 Mot. 25-27 & n.38. Defendants’ cursory attempt to distinguish three of the cited cases on their facts is unavailing. Neither SEC v. Maio, 51 F.3d 623 (7th Cir. 1995), nor SEC v. Warde, 151 F.3d 42 (2d Cir. 1998), requires an “actual decision” to make a tender offer. Both cases focused on whether a pre-decision “meeting” was “substantial,” not whether it related to a tender offer. Warde, 151 F.3d at 49; Maio, 51 F.3d at 636. SEC v. Ginsburg, 362 F.3d 1292, 1303 (11th Cir. 2004), in contrast, did 3 As Pershing Square’s own in-house counsel explained, “substantial steps” is a “relatively low threshold” that is “quite easy” to meet. Federal Regulation of Shareholder Activism (audio), AMERICAN BAR ASSOCIATION, BUSINESS LAW SECTION (2014 Annual Meeting), at approximately 1:10:00. http://apps.americanbar.org/buslaw/apps/updatedsearch/results.cfm?s=61&np=14& st=&sc=&sp=&sm=AM&sy=2014&ss=10. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 18 of 34 Page ID #:10423 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 11 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION specifically address that issue and held that a company can take “substantial steps” towards a tender offer months before it “settle[s] on a tender offer as the form of the transaction.”4 See Ex. 78 at *12 (Order, SEC v. Jacobs, No. 1:13-cv-01289-SO (N.D. Ohio Aug. 15, 2014), ECF No. 112); Camelot Indus. Corp. v. Vista Res., Inc., 535 F. Supp. 1174, 1183 (S.D.N.Y. 1982).5 The Facts. Defendants’ recitation of the events leading up to the June 2014 tender offer is, to put it charitably, more fiction than fact. Defendants do not dispute that Valeant took “substantial steps” before February 25 and throughout the trading period by holding numerous meetings with Pershing Square executives, retaining legal counsel, negotiating and entering into the Pershing Agreement, signing confidentiality agreements, and engaging in due diligence. Instead, they argue that each step related only to the proposal of a friendly merger and that none had any relation to the tender offer commenced only two months later. That assertion is not credible. 4 Defendants’ only response is to draw a tenuous factual distinction (that fails on its face), and to suggest the court misread SEC v. Mayhew, 121 F.3d 44 (2d Cir. 1997). It did not. In Mayhew, the substantial steps related to acquisition of the target company (i.e., “talks with a potential merger candidate or candidates”), id. at 48, 53, not a tender offer per se. 5 Defendants point only to an out-of-circuit, unpublished district court decision to support their argument to the contrary. Opp. 28 (citing Telex Corp. v. Edelman, 1987 WL 43390 (N.D. Okla. Nov. 5, 1987)). In Telex, plaintiffs apparently agreed that intent was required and “ask[ed] the Court to draw” an “inference[] of intent from [the tender offeror’s] conduct.” 1987 WL 43390, at *5. There, the only “substantial step” identified was the initial purchase of stock in the target company. Id. Telex (which is devoid of legal analysis) does not controvert the weight of authority, on which it too relied. Id. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 19 of 34 Page ID #:10424 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 12 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Defendants contend that no steps could possibly have been taken towards a tender offer because the parties had “contractually agreed not to pursue a tender offer,” because the board had not yet authorized a tender offer, and because Defendants’ fact witnesses said so. Opp. 25-29. In fact, Valeant only agreed not to “launch[]” a tender offer unilaterally. Ex. 34 at § 1(d). The absence of board approval to “commence” a tender offer says nothing about whether substantial steps were taken to facilitate that end. And self-serving testimony (that rests on facially dubious reasoning) is entitled to little weight. Cf. Kennedy v. Applause, Inc., 90 F.3d 1477, 1481 (9th Cir. 1996) (rejecting self-serving deposition testimony). The substantial steps admittedly taken by Valeant may well have been in furtherance of a hoped-for friendly “merger” with Allergan, which Defendants knew had no realistic probability of succeeding and which (of course) never happened. Exs. 2, 4, 24, 85; Ex. 1 (Pearson Dep.) at 27:13-16, 97:22-23; Ex. 7 (Ackman Dep.) at 32:16-33:23, 41:17-42:7, 143:16-144:1; Ex. 6 (Doyle Dep.) at Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 20 of 34 Page ID #:10425 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 13 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION 164:22-165:7, 189:15-190:4; see Mills Rep. ¶¶ 19, 30. But that does not mean they weren’t also in furtherance of the tender offer that Valeant, in fact, commenced shortly thereafter. Valeant did not start from scratch in May 2014 when, according to Defendants, Allergan stockholders came up with the purportedly radical and “crazy” idea to pursue a tender offer. Opp. 25-26. Defendants’ assertion that highly sophisticated parties concocted, planned, and executed a more than $45 billion tender offer in a matter of weeks reaches beyond the ridiculous to the sublime. See Ex. 121 at 185; Ex. 77; Choi Rep. ¶ 77; Ex. 140 (Mills Dep.) at 24:1-6; That is particularly true because any reasonable company in Valeant’s position would have contemplated the possibility of a tender offer. As Plaintiffs’ expert Joseph Mills explains, in 91 percent of the hostile acquisitions involving proxy battles waged since 2006, a tender offer was planned, threatened, or made. Mills Rep. ¶ 8. Tender offers are powerful tools for hostile acquirers, and so any “reasonable acquirer planning to run a proxy contest in support of its hostile bid would understand that it would likely need to launch (or at the very least threaten) a tender offer in conjunction with a proxy contest.” Id. at ¶¶ 9, 15-16. Defendants’ own experts have conceded as much. Ex. 141 (Daines Dep.) at 28:3-15, 64:22- 65:4, 113:24-114:10; Ex. 151 at 920-21. Defendants nevertheless argue that no sane company would even consider making a tender offer because the target company would “put in place a poison pill preventing additional stock purchases.” Opp. 25-26. There are at least three problems with this argument. First, it skips a step. A poison pill forecloses a tender offer only while the current board remains in place. A critical part of any Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 21 of 34 Page ID #:10426 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 14 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION hostile takeover strategy, including Defendants’ here, is to replace the board of the target company and then remove the poison pill. Mills Rep. ¶¶ 25-27. That is not news to Defendants. Second, Valeant’s own acquisition history demonstrates that even they do not believe what they say in their brief. Choi Rep. ¶¶ 78, 88.6 Third, that is precisely what happened here. It is hard to take seriously Defendants’ argument that a tender offer would not have been “viable” (Opp. 25) in February, or March, or April, when Valeant itself commenced a tender offer in June. Def. Ex. 15 (Schiller Dep.) at 233:24-234:1, 248:24-249:9; Def. Ex. 1 (Ackman Dep.) at 140:18-19, 271:9-274:14; Ex. 7 (Ackman Dep.) at 164:7-165:4. Plaintiffs Are Likely To Succeed On Their Rule 14a-9 Claim D. Defendants contend that (i) Plaintiffs did not plead a disclosure claim with respect to the September 2014 proxy solicitation (“September Statement”), (ii) Defendants’ duty to disclose was satisfied when they told stockholders this lawsuit had been filed, and (iii) information about this case is already public. Defendants do not address any of Plaintiffs’ cases. Mot. 32. They do not seriously dispute that the preliminary injunctive relief sought is an appropriate and 6 In its attempted hostile takeover of Cephalon, Inc., Valeant informed stockholders that it was prepared to make a tender offer even though a poison pill was in place. Ex. 142 at 17-18. Pearson provided a roadmap: after obtaining the stockholder consents, Cephalon would set a date for the stockholder vote, Valeant would launch the tender offer, and then Valeant would replace the board with directors that would “remove the poison pill and other impediments to a tender offer.” Ex. 143 at 6, 10. Aside from procuring financing and voting power through insider trading, Valeant’s hostile takeover plan to acquire Allergan is virtually indistinguishable from its attempt to acquire Cephalon. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 22 of 34 Page ID #:10427 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 15 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION commonplace remedy for similar disclosure violations.7 To the extent Defendants engage at all, their arguments miss the mark. As an initial matter, Plaintiffs’ Rule 14a-9 claim is properly pleaded. Compl. ¶¶ 135-167. The Complaint is more than sufficient to satisfy the liberal notice pleading standard of Federal Rule of Civil Procedure 8(a). Fed. R. Civ. P. 8(a); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Complaint specifically refers to all “Special Meeting proxy materials,” as well as “subsequent . . . statements regarding the proposed takeover.” Compl. ¶ 135. The September Statement relates to the Special Meeting and is a “subsequent” statement about the proposed takeover. It is also an outgrowth of the July 2014 proxy statement, is closely related to the pleaded claim, and requests identical relief. Both proxy solicitations relate to the Special Meeting, lay out the proposals to be voted on at the Special Meeting, contain a largely identical “Background of the Offer” section, and are subject to the same regulatory scheme. The cases on which Defendants rely, in contrast, decline to consider “new” claims, or new requests for relief, entirely different from those pleaded. Opp. 37-38 (citing cases). Defendants are also wrong when they contend that their disclosure duty is satisfied by saying “Allergan filed this lawsuit.” Id. at 38. Defendants must disclose material information, and the Solicitation Material8 fails to do so in two 7 It is well-settled that there is no adequate remedy at law when stockholders are forced to participate in an uninformed vote, especially one that bears on the future independent existence of a corporation. Gen. Aircraft Corp. v. Lampert, 556 F.2d 90, 97 (1st Cir. 1977). And, in circumstances where stockholder action is being solicited on the basis of inadequate disclosures, courts consistently enjoin shareholder meetings or the voting of proxies until corrective disclosures are made. See, e.g., St. Louis Police Ret. Sys. v. Severson, 2012 WL 5270125, at *6-7 (N.D. Cal. Oct. 23, 2012); Lone Star Steakhouse & Saloon, Inc. v. Adams, 148 F. Supp. 2d 1141, 1152 (D. Kan. 2001); ODS Techs., L.P. v. Marshall, 832 A.2d 1254, 1261 (Del. Ch. 2003). 8 The Solicitation Material includes the September Statement (Ex. 138) and the Form S-4 most recently amended on September 22, 2014 (Ex. 155). Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 23 of 34 Page ID #:10428 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 16 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION important respects. First, it does not inform Allergan stockholders why Valeant and Pershing Square collaborated to facilitate Pershing Square’s rapid acquisition of a large block of Allergan shares. Not only does this information raise serious questions about Valeant’s financial stability, it also sheds light on Valeant’s motivation for acquiring Allergan: to remedy Valeant’s ailing balance sheet. See St. Louis Police Ret. Sys., 2012 WL 5270125, at *5; SEC v. Chicago Helicopter Indus., 1980 U.S. Dist. LEXIS 17214, at *7 (N.D. Ill. Jan. 18, 1980) (noting “conduct which affects the profitability or future of a particular corporation is substantially likely to be important in investment decisions”). Second, the Solicitation Material does not inform Allergan’s stockholders that Valeant and Pershing Square embarked on their hostile takeover scheme knowing that their conduct might violate federal securities law. See, e.g., Exs. 2, 83; Ex. 34 at § 1(d); Ex. 131 at 53. This information is undoubtedly material. See United Paperworkers Int’l Union v. Int’l Paper Co., 985 F.2d 1190, 1200 (2d Cir. 1993) (proxy statement violated Rule 14a-9 when it omitted risk of environmental law liability); Mot. 32 (citing cases). And, contrary to Defendants’ suggestion, corrective disclosures do not become unnecessary simply because Plaintiffs have made public statements bearing on the necessary disclosures. See Kohn v. Am. Metal Climax, Inc., 458 F.2d 255, 265 (3d Cir. 1972); MacFadden Holdings, Inc. v. John Blair & Co., 1986 WL 1171567, at *8 (D. Del. May 5, 1986) (“A material omission in one party’s proxy materials cannot be excused by relying on a disclosure of that information by the opposing party.”); Bertoglio v. Texas Int’l Co., 488 F. Supp. 630, 642 (D. Del. 1980). That is particularly true where (as here) Defendants have repeatedly disclaimed any possible insider-trading liability, calling Allergan’s Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 24 of 34 Page ID #:10429 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 17 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION claims “spurious” and characterizing the Complaint as nothing more than a “public relations document” aimed at delaying the Special Meeting. Ex. 143; Valeant Answer (Dkt. 40) at 1; see Ganino v. Citizens Utils. Co., 228 F.3d 154, 168 (2d Cir. 2000); In re Apple Computer Sec. Litig., 886 F.2d 1109, 1116 (9th Cir. 1989) (“unqualified exuberance” refuting claims ordinarily renders “scrutiny by the press” inadequate to cure disclosure violations); Hughes v. Dempsey-Tegeler & Co., 534 F.2d 156, 176 (9th Cir. 1976); In re W. Union Sec. Litig., 120 F.R.D. 629, 638 (D.N.J. 1988); cf. United Paperworkers, 985 F.2d at 1200 (noting that it likely would not have considered the disclosures materially incomplete “had the Company’s misleadingly self-laudatory statements not been made”). III. ALLERGAN AND ITS STOCKHOLDERS WILL SUFFER IRREPARABLE HARM ABSENT A PRELIMINARY INJUNCTION The narrowly tailored injunction Plaintiffs seek is appropriate and necessary to preserve the status quo pending final judgment. Defendants’ arguments to the contrary are without merit. Allowing Pershing Square to Vote its Illegally Obtained Shares A. Will Cause Irreparable Harm to Allergan and its Stockholders Defendants contend that even if the Court finds they likely violated the federal securities laws, Pershing Square should nonetheless be allowed to vote the shares it obtained unlawfully. They claim that the voting of unlawfully obtained shares is not a “cognizable harm”; that Pershing Square’s proposals might succeed or fail even without Pershing Square’s illegally obtained votes; and that, even if successful, Pershing Square’s proposals, designed specifically to maximize the possibility of a Valeant takeover on terms favorable to Defendants, cannot possibly cause irreparable harm to Allergan and its shareholders. Opp. 13-16. None of Defendants’ arguments withstands scrutiny. First and foremost, voting shares that have been acquired unlawfully is irreparable harm. See ICN Pharms., Inc. v. Khan, 2 F.3d 484, 491 (2d Cir. 1993) Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 25 of 34 Page ID #:10430 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 18 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION (“it would certainly fall within the parameters of traditional injunctive relief” to prevent insider trading defendant “from voting any illegally acquired stock in a contest for control of [the company]”). If Defendants had complied with the law, Pershing Square would not own those shares today: it would have been forced either to abstain from trading, or to disclose the inside information it had obtained-both of which would have defeated Defendants’ scheme. Instead, Pershing Square used its inside knowledge to obtain billions of dollars’ worth of Allergan stock from sellers who were unaware of the impending proposal. From an equity perspective, it is no different than if Pershing Square had simply stolen the shares: it does not legitimately own them, and it should not be permitted to take advantage of its wrongdoing by voting them. The Special Meeting is a critical moment for Allergan: one of the proposals seeks to remove a majority of the board, and others seek to amend the bylaws. These are significant decisions, and they should be made by the legitimate stockholders who bought shares based on publicly available information. Further, allowing Pershing Square to vote its illegally acquired bloc would let Defendants retain an unwarranted advantage in the corporate control battle. As Professor Choi explained, “the presence of a toehold that’s acquired surreptitiously changes the nature of the playing field that this takeover contest will take place on.” Ex. 152 (Choi Dep.) at 99:3-101:14; see id. at 103:4-18. Ex ante, alternate bidders who might have emerged to the benefit of Allergan stockholders are deterred. See Hanna Mining Co. v. Norcen Energy Res. Ltd., 574 F. Supp. 1172, 1202 (N.D. Ohio 1982) (equitable relief necessary where, “by reason of the large block of stock acquired by [the defendant,] . . . [it] has an advantage over any other potential offeror”); Gen. Steel Indus. Inc. v. Walco Nat’l Corp., 1981 WL 17552, at *6 (E.D. Mo. Nov. 24, 1981); Ex. 153 at *2. Ex post, stockholders who might otherwise be inclined to side with management may instead align with Pershing Square out of concern that the bloc will be used to hinder management’s efforts to Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 26 of 34 Page ID #:10431 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 19 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION implement its long-term strategic plan to improve the Company’s value. Choi Rep. ¶¶ 56-63. Permitting Defendants to benefit from this improperly obtained advantage is unquestionably a “cognizable harm” under the federal securities laws. Were it not, what purpose do those laws serve? Second, Defendants do not (and cannot) dispute that Pershing Square’s substantial position in Allergan-9.7% of the outstanding shares-might well be outcome-determinative at the Special Meeting. Allowing Pershing Square’s illegally obtained votes to provide the potential margin of victory would be inconsistent with the remedial purposes of the Williams Act, and would do nothing to deter others from following Valeant’s playbook in the future. See Ex. 153 at *2 (equitable relief warranted in cases of deliberate Williams Act violations, because “absent [a] . . . remedy removing the wrongfully obtained blocking position, stockholders could be irreparably harmed and the defendant would be permitted to benefit from its wrongful conduct”). Third, Defendants are wrong that “an affirmative vote of stockholders in accordance with governing corporate law” either to remove directors, recommend the nomination of new ones, or clear the way for a merger, are ipso facto non- harmful acts that do not justify an injunction. Opp. 13-15. A stockholder’s right to “vote for the directors [it] wants to oversee the firm” is indeed “sacrosanct,” EMAK Worldwide, Inc. v. Kurtz, 50 A.3d 429, 433 (Del. 2012)-but that right presumes a playing field that has not been tilted through violations of federal securities law. The entire point of Defendants’ arrangement was to do exactly that-obtain a toehold in Allergan, call for a special meeting, use their position of leverage to maximize Valeant’s chance of success in a proxy context, and thereby facilitate Valeant’s takeover. See supra at 11-15; Mot. 9-11.9 9 Defendants’ assertion that this relief would “tilt the playing field” misses the mark. Opp. 1. As an initial matter, Defendants are simply wrong as to Proposals 2-8. PS Fund 1’s 9.7% block would not be included in the figure used to tabulate Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 27 of 34 Page ID #:10432 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 20 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Relatedly, Defendants’ claim that their proposal to remove six Allergan directors and recommend replacements “does not actually put any new member on the Board” is disingenuous. Opp. 14. A vote to remove incumbent directors would obviously be a significant event in the overall takeover battle; otherwise, Defendants would not be working so hard to accomplish just that.10 More fundamentally, it would serve as the predicate for an election that would “actually put . . . new member[s] on the Board.” Id. Defendants fail to mention that under Delaware law, holders of 10% of a corporation’s outstanding stock can call for an election when the directors remaining in office are less than a majority of the full board. DEL. CODE ANN. tit. 8, § 223(c). Pershing Square has publicly stated that it will use its 9.7% stake to call for such an election and thus override any decision by the remaining directors. See Ex. 154 at 26. If Valeant is permitted to accomplish these steps at the Special Meeting on shareholder support or outstanding shares. DEL. CODE ANN. tit. 8, § 216(2) (requiring “the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote”); Ex. 134, Art. 7 (requiring “the affirmative vote of at least a majority of the outstanding shares of stock of the Corporation entitled to vote”). In any event, absent a contrary charter provision, directors may be removed without cause by “a majority of the shares then entitled to vote.” DEL. CODE ANN. tit. 8, § 141(k) (2014). If Pershing Square’s shares are not counted toward that total as a result of this Court’s order, that is merely the consequence of Defendants’ decision to violate the federal securities laws. 10 To the Delaware court, Defendants repeatedly averred that the meeting was “critically important” to their takeover efforts. See Ex. 112 at 1; Ex. 150 at 15. To the press and the analyst community, Defendants claimed that the Special Meeting would set up “the execution of the transaction without the [Allergan] board,” and create a situation in which “the board has less leverage to negotiate” on behalf of Allergan’s stockholders. Ex. 73 at 12. Yet, in this court, Defendants downplay the importance of the meeting and treat each of the eight proposals in piecemeal fashion. Opp. 12-14. The entire point of Defendants’ “toehold” has always been to maximize their chances of success in a unitary proxy contest that will be the critical turning point in the Valeant takeover plan. It is far too late for Defendants to disclaim their own strategy. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 28 of 34 Page ID #:10433 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 21 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION the strength of Pershing Square’s unlawfully obtained shares, the harm to Allergan and its stockholders cannot be unwound after the fact. Defendants do not (and cannot) dispute this. See Mot. 34-35 (citing cases).11 The Injunction Plaintiffs Seek Is Commonplace and Narrowly B. Tailored to Prevent Irreparable Harm Pending Final Judgment Plaintiffs seek a preliminary injunction prohibiting Defendants (i) from voting the unlawfully acquired shares, and (ii) from voting proxies they solicited absent supplemental corrective disclosures. Defendants contend that such an injunction is unprecedented and unnecessary, and would amount to “effectively permanent” relief rather than a preservation of the status quo. Opp. 19. Aside from the fact that Defendants’ multi-billion-dollar insider-trading scheme is itself “unprecedented,” Defendants are wrong. Enjoining a stockholder from exercising rights attendant to shares acquired through a violation of the Williams Act is a common remedy. See, e.g., ICN Pharms., 2 F.3d at 491 (“It would certainly fall within the parameters of traditional injunctive relief to preclude Khan from voting any illegally acquired stock in a contest for control of ICN.”); Chicago Stadium Corp. v. Scallen, 530 F.2d 204, 206 (8th Cir. 1976); Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 516 F.2d 172, 181, 192-95 (2d Cir. 1975), rev’d on other grounds sub nom. Piper v. Chris-Craft Indus., Inc., 430 U.S. 1 (1977); Tully v. Mott Supermarkets, Inc., 337 F. Supp. 834, 852 (D.N.J. 1972), rev’d on other grounds, 540 F.2d 187 (3d Cir. 1976); Buckhorn, Inc. v. Ropak Corp., 656 F. Supp. 209, 237 (S.D. Ohio 1987); Mot. 38. Tellingly, Defendants do not discuss any of these on-point cases. Instead, 11 Defendants’ scattershot complaints about the special-meeting bylaws are also immaterial. Ex. 156 (Subramanian Dep.) at 63:3-64:6, 126:13-128:24, 165:19- 166:15. Allergan has committed to hold a special meeting on December 18 and, at that meeting, the Company’s legitimate stockholders can decide for themselves whether to amend those bylaws or keep them in force. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 29 of 34 Page ID #:10434 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 22 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION they point to several cases where courts have denied the “sterilization” of shares for reasons (disclosure violations) that do not apply here. In CSX Corp. v. Children’s Investment Fund Management (UK) LLP, 654 F.3d 276, 287 (2d Cir. 2011), a Section 13(d) case, the court held that sterilizing the defendant’s disputed shares was “inappropriate” because “the required disclosures were made in sufficient time for shareholders to cast informed votes.” Similarly, in Gearheart Industries, the court held that permanently enjoining a tender offer or “sterilizing voting rights” of the tender offeror, when he had since “cured any previous violation of Section 13(d),” was an “overdrastic course of action.” 741 F.2d at 715-18. And in Ranger Oil, the court merely held that there was no need to enjoin the tender offer itself based on insider trading under Rule 14e-3, because the harm resulting from the tender offer could be redressed by damages; the case had nothing to do with whether the improperly obtained shares could be voted, an entirely different sort of harm. 2000 WL 33115906, at *8-9. None of those cases stand for the proposition that retrospective damages to contemporaneous traders is the only appropriate remedy for violations of the Williams Act. Opp. 17; see supra § II.A.12 In the end, Defendants’ claim that enjoining their illegally obtained would “stack the deck” is the proverbial pot calling the kettle black. Opp. 19. The deck has already been stacked by Defendants’ unlawful conduct. The playing field is already unlawfully tilted toward Valeant. The stockholder base has already substantially changed, and the momentum towards the inside-trader’s preferred acquirer has already been created. Choi Rep. ¶¶ 26-31. Preventing Pershing Square from voting its unlawfully acquired shares is the closest to preserving the 12 Indeed, the preliminary injunctive relief sought here is quite modest relative to other interim remedies courts have imposed for Section 14(e) violations. See Mot. 39 & n.45. It would allow the special meeting to go forward; it would simply quarantine Defendants’ illegally acquired shares. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 30 of 34 Page ID #:10435 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 23 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION status quo that is now possible, and is narrowly tailored to the harm. IV. THE BALANCE OF EQUITIES AND PUBLIC INTEREST FAVOR GRANTING A PRELIMINARY INJUNCTION Balance of the Equities. The parties agree on the standard: whether the plaintiff would face more serious harm without an injunction than the defendant would if one were granted. Arc of Cal. v. Douglas, 757 F.3d 975, 991-92 (9th Cir. 2014); Opp. 18. If a preliminary injunction is denied, Allergan and its stockholders will suffer irreparable harm, see supra § III, and Defendants will reap the benefits of their illicit scheme. That is the very definition of “warehousing” (Mot. 22-25), and its sole purpose was to give Valeant an unfair advantage in the proxy contest. In contrast, if a preliminary injunction is granted, any harm to Defendants would be minimal. The Special Meeting will occur. And the proxies of Allergan stockholders can be voted, as long as the necessary corrective disclosures are made.13 For these reasons, courts have routinely concluded that the balance of equities favors Plaintiffs in similar circumstances. See Chicago Stadium, 530 F.2d at 208; Koppers, 689 F. Supp. at 1407; Chambers v. Briggs & Stratton Corp., 863 F. Supp. 900, 906-08 (E.D. Wis. 1994). Public Interest. Defendants strangely accuse Plaintiffs of “ignor[ing]” this 13 Defendants’ claim that a preliminary injunction is tantamount to “disenfranchisement for the purposes of the December 18 Special Meeting” (Opp. 19-20), proves how little they have at stake. Their entire harm is confined to the events of a single meeting, and there are myriad other ways that Defendants can pursue their takeover plans. If nothing else, there will be a statutorily required annual meeting by approximately May, should Defendants prevail at trial. Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 31 of 34 Page ID #:10436 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 24 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION consideration. But see Mot. 37-40. Meanwhile, their arguments about the public interest are duplicative of their arguments on irreparable harm and balance of the equities, and fail for the same reasons. Opp. 20-21. Pershing Square is not an innocent stockholder. And Defendants have not explained how the public interest is served when an insider trader is allowed to vote its unlawfully acquired shares and further tilt the playing field in favor of the tender offeror. V. Defendants’ “Unclean Hands” Affirmative Defense is Without Merit As an afterthought, Defendants argue that even if they likely violated the federal securities laws, even if there is irreparable harm, and even if the balance of equities and public interest weigh in favor of a preliminary injunction, the Court should nevertheless deny relief because Plaintiffs too acted “inequitab[ly].” Opp. 38-40. Defendants argue that Allergan publicly raised questions about the value of the Valeant stock being offered to Allergan’s stockholders. As will be discussed in Plaintiffs’ response to Defendants’ motion to amend their counterclaims, that is simply not true. Allergan has not misled the market by expressing the views of its management about Valeant’s business model. Graphic Scis., Inc. v. Int’l Mogul Mines, Ltd., 397 F. Supp. 112, 127 (D.D.C. 1974) (rejecting unclean hands defense in hostile takeover case where disclosures were “no more than the views of . . . management” and were “not expressed in an inflammatory or misleading way”). And Allergan was far from alone in expressing concerns about Valeant’s business. See, e.g., Plaintiffs’ Answer (Dkt. 71) at 4; Moreover, even Defendants acknowledge that the inequitable conduct alleged must actually be “related” to the relief requested. Opp. 39. In fact, it must bear an “immediate and necessary relation to the equity that [he] seeks in respect of the matter in litigation.” S. Cal. Darts Ass’n v. Zaffina, 762 F.3d 921, at *25-26 (9th Cir. 2014) (citation omitted). Here, there is no such relationship. Defendants claim that Allergan made intentionally misleading statements about Valeant to drive down the value of its stock. But the remedy Plaintiffs seek is to prevent Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 32 of 34 Page ID #:10437 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 25 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION Defendants from voting its unlawfully acquired shares at the upcoming Special Meeting and to compel Defendants to make required disclosures before being permitted to vote their proxies. There is no nexus between the alleged misconduct and the relief sought, and courts have readily rejected an unclean hands defense in analogous circumstances. See, e.g., Ranger Oil, 2000 WL 33115906, at *12; Nowling v. Aero Servs. Int’l, Inc., 734 F. Supp. 733, 743-44 (E.D. La. 1990). As Judge Friendly once observed, “the innocent stockholder would find cold comfort in a result that because both the offeror and the management had violated the statute all relief should be denied.” Elec. Specialty Co., 409 F.2d at 948 n.7.14 Defendants misappropriated over a billion dollars from Allergan’s former stockholders by trading on inside information, and left Allergan’s remaining stockholders with a distorted (and uniformed) choice. If Defendants are permitted to see its plan to fruition, others will be encouraged to do the same. Untold wealth will be diverted from ordinary stockholders and investor confidence in the market will be undermined-exactly what the Williams Act was meant to prevent. VI. CONCLUSION For all of the foregoing reasons, Plaintiffs respectfully request that the Court grant Plaintiffs’ motion and issue the preliminary injunction reflected in Plaintiffs’ revised proposed order filed concurrently herewith. Dated: October 23, 2014 LATHAM & WATKINS LLP By: /s/ Peter A. Wald Peter A. Wald 14 District courts in the Ninth Circuit have accordingly refused to apply the unclean hands doctrine when the relief sought is in the public interest. EEOC v. Recruit U.S.A., Inc., 939 F.2d 746, 753 (9th Cir. 1991); Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F. Supp. 2d 1146, 1189-90 (C.D. Cal. 2002); Westlands Water Dist. v. U.S. Dep’t of the Interior, Bureau of Reclamation, 1994 U.S. Dist. LEXIS 6276, at *62 (E.D. Cal. Apr. 28, 1994). Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 33 of 34 Page ID #:10438 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AT T ORNEYS AT LAW ORANGE COUNT Y SF\5868614 26 CASE NO. 8:14-CV-01214-DOC (ANx) PLAINTIFFS’ REPLY ISO MOTION FOR PRELIMINARY INJUNCTION LATHAM & WATKINS LLP Peter A. Wald (Bar No. 85705) peter.wald@lw.com 505 Montgomery Street, Suite 2000 San Francisco, CA 94111-6538 LATHAM & WATKINS LLP Michele D. Johnson (Bar No. 198298) michele.johnson@lw.com 650 Town Center Drive, 20th Fl. Costa Mesa, California 92626 LATHAM & WATKINS LLP Colleen C. Smith (Bar No. 231216) colleen.smith@lw.com 12670 High Bluff Drive San Diego, California 92130 Telephone: +1.858.523.5400 LATHAM & WATKINS LLP Blair Connelly (Bar No. 174460) blair.connelly@lw.com 885 Third Avenue New York, NY 10022-4834 Telephone: +1.212.906.1658 WACHTELL LIPTON ROSEN & KATZ William D. Savitt (pro hac vice) Bradley R. Wilson (pro hac vice) 51 W. 52nd Street New York, NY 10019 Attorneys for Plaintiffs ALLERGAN, INC. and KARAH PARSCHAUER Case 8:14-cv-01214-DOC-AN Document 206 Filed 10/23/14 Page 34 of 34 Page ID #:10439