Case: 15-3799 Document: 12 Filed: 03/11/2016 Pages: 95 No. 15‑3799 IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT IN RE: WALGREEN CO. STOCKHOLDER LITIGATION On Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 1:14‑cv‑9786, Judge Joan B. Gottschall Opening Brief and Required Short Appendix of Appellant John Berlau COMPETITIVE ENTERPRISE INSTITUTE CENTER FOR CLASS ACTION FAIRNESS Theodore H. Frank Melissa A. Holyoak 1899 L Street NW, 12th Floor Washington, DC 20036 (202) 331‑2263 Attorneys for Objector-Appellant John Berlau 15-3799 In re: Walgreen Co. Stockholder Litigation Case:Case: 15-379915-3799 Document:Document: 123-1 Filed: Filed: 03/11/2016 12/24/2015 Pages: Pages: 95 1 APPEARANCE & CIRCUIT RULE 26.1 DISCLOSURE STATEMENT Appellate Court No: 15-3799 Short Caption: In re: Walgreen Co. Stockholder Litigation To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1. The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to complete the entire statement and to use N/A for any information that is not applicable if this form is used. [ ✔ ] PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR REVISED AND INDICATE WHICH INFORMATION IS NEW OR REVISED. (1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3): John Berlau (2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court: Competitive Enterprise Institute, Center for Class Action Fairness Williams, Montgomery & John (3) If the party or amicus is a corporation: i) Identify all its parent corporations, if any; and N/A ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock: N/A Attorney's Signature: s/ Melissa A. Holyoak Date: 12/24/2015 Attorney's Printed Name: Melissa A. Holyoak Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d). Yes No Address: 1899 L Street, NW 12th Floor Washington, D.C. 20036 Phone Number: 573-823-5377 Fax Number: E-Mail Address: [email protected] i rev. 01/15 GA 15-3799 In re: Walgreen Co. Stockholder Litigation Case:Case: 15-379915-3799 Document:Document: 125-1 Filed: Filed: 03/11/2016 12/24/2015 Pages: Pages: 95 1 APPEARANCE & CIRCUIT RULE 26.1 DISCLOSURE STATEMENT Appellate Court No: 15-3799 Short Caption: In re: Walgreen Co. Stockholder Litigation To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1. The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to complete the entire statement and to use N/A for any information that is not applicable if this form is used. [ ✔ ] PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR REVISED AND INDICATE WHICH INFORMATION IS NEW OR REVISED. (1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3): John Berlau (2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court: Competitive Enterprise Institute, Center for Class Action Fairness Williams, Montgomery & John (3) If the party or amicus is a corporation: i) Identify all its parent corporations, if any; and N/A ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock: N/A Attorney's Signature: s/ Theodore H. Frank Date: 12/24/2015 Attorney's Printed Name: Theodore H. Frank Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d). Yes No Address: 1899 L Street, NW 12th Floor Washington, D.C. 20036 Phone Number: (703) 203-3848 Fax Number: E-Mail Address: [email protected] ii rev. 01/15 GA Case: 15-3799 Document: 12 Filed: 03/11/2016 Pages: 95 Table of Contents Circuit Rule 26.1 Disclosure ........................................................................................................ i Table of Contents ........................................................................................................................ iii Table of Authorities ..................................................................................................................... v Statutes, Regulations, and Rules .............................................................................................. xii Jurisdictional Statement .............................................................................................................. 1 Statement of the Issues ................................................................................................................ 1 Statement of the Case .................................................................................................................. 2 A. Deal litigation is filed in over 97.5% of mergers. ................................................. 2 B. Walgreens announces merger with Boots Alliance. ............................................ 3 C. Plaintiffs sue and settle a couple weeks later for Supplemental Disclosures. ........................................................................................................... 4 1. Rosenstein’s Nomination and Support Agreement. .................................. 5 2. SP Investors’ and KKR Investors’ post‑merger stock ownership. ........... 6 3. Miquelon’s defamation lawsuit. .................................................................... 9 4. Risk factors of the merger. ........................................................................... 10 5. Pessina and Murphy’s recusal from the Board’s vote on the merger. ... 12 6. Pessina’s experience and expertise. ............................................................ 13 D. 97% of shareholders approve the merger. .......................................................... 13 E. Plaintiffs seek preliminary approval. .................................................................. 14 F. Berlau objects to the settlement. ........................................................................... 15 G. The fairness hearing, settlement approval, and fee award. ............................. 15 Summary of the Argument ....................................................................................................... 18 Standard of Review.................................................................................................................... 21 Argument .................................................................................................................................... 22 I. Aqua Dots and Crowley require reversal because this class action settlement leaves shareholder class members worse off: shareholders are paying for class counsel’s attorneys’ fees in exchange for immaterial supplemental disclosures. ...................................................................................................................... 22 iii Case: 15-3799 Document: 12 Filed: 03/11/2016 Pages: 95 A. The district court erred in approving the Settlement based on four of the Supplemental Disclosures because those disclosures were immaterial as a matter of law. .......................................................................... 25 1. Disclosure of the SP Investors’ and KKR Investors’ post‑merger ownership was immaterial because shareholders could calculate the ownership from information already in the Proxy. ........................... 27 2. Supplemental disclosure of Pessina’s recusal was redundant because it was already disclosed in two other places in the Proxy. ...... 29 3. Disclosure that Walgreens entered into a confidentiality agreement with JANA when negotiating the Nomination and Support Agreement is an insignificant and obvious consequence