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Louisiana Municipal Police Employees' Retirement System,: On Behalf v. Medco Health Solutions

September 19, 2011

LOUISIANA MUNICIPAL POLICE EMPLOYEES' RETIREMENT SYSTEM,: ON BEHALF OF ITSELF AND ALL OTHER SIMILARLY SITUATED SHAREHOLDERS OF MEDCO HEALTH SOLUTIONS, INC.,
PLAINTIFF,
v.
MEDCO HEALTH SOLUTIONS, INC., HOWARD W. BAKER, JR., JOHN L. CASSIS, MICHAEL GOLDSTEIN, CHARLES M. LILLIS, MYRTLE POTTER, WILLIAM L. ROPER, DAVID B. SNOW, JR., DAVID D. STEVENS, BLENDA J. WILSON, EXPRESS SCRIPTS, INC., AND PLATO MERGER SUB, INC., DEFENDANTS



The opinion of the court was delivered by: Hon. Dennis M. Cavanaugh

NOT FOR PUBLICATION

OPINION

DENNIS M. CAVANAUGH, U.S.D.J.:

This matter comes before the Court upon two (2) motions by Defendants Express Scripts, Inc. and Plato Merger Sub, Inc. (collectively "Express Scripts" or "Defendants"). The first motion seeks dismissal of Plaintiff Louisiana Municipal Police Employees' Retirement System's ("LAMPERS" or "Plaintiff") complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The second motion asks this Court to stay the action in favor of related proceedings filed in Delaware (the "Delaware Actions"). Both motions were filed by Defendants on August 8, 2011. Pursuant to Fed. R. Civ. P. 78, no oral argument was heard. After considering the submissions of all parties, it is the decision of this Court for the reasons herein expressed that Defendant's motions to dismiss and stay the action are denied.

I. BACKGROUND*fn1

Express Scripts is a pharmacy benefit management corporation located in St. Louis, Missouri and incorporated in Delaware. (Pl.'s Compl. ¶ 22). Medco is a pharmacy benefit management corporation located in Franklin Lakes, New Jersey and incorporated in Delaware. (Pl.'s Compl. ¶ 11). On July 21, 2011, Medco and Express Scripts announced that they had reached a definitive merger agreement through which the companies would be combined (the "Proposed Transaction"). (Def.'s Mot. Dismiss 4). The Proposed Transaction is valued at approximately $29.1 billion. Id. Under the terms of the merger agreement, Medco shareholders will receive $28.80 in cash and $0.81 Express Scripts shares per Medco share, valuing Medco at $71.36 per share as of the day of announcement. Id. The merger agreement contains a provision that assesses a $950 million termination fee (the "Termination Fee") if Medco fails to fulfill its obligations. (Pl.'s Compl. ¶ 71).

Plaintiff LAMPERS asserts that Medco breached its fiduciary duty to its shareholders when it entered into the Proposed Transaction. Further, Plaintiff asserts that the Termination Fee is unreasonable and should be deemed unenforceable. Plaintiff instituted suit in this Court by filing a complaint on July 22, 2011. Plaintiff seeks a preliminary and permanent injunction against any further activity to consummate the Proposed Transaction. (Pl.'s Compl. ¶ 103).

II.LEGAL STANDARDS

A. Motion to Dismiss

Defendant moves to dismiss the action for lack of subject matter jurisdiction or alternatively for failing to state a claim. In deciding a motion to dismiss, the District Court is "required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to [the Plaintiff]." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). To dismiss for want of amount in controversy this Court must have "legal certainty that the claim is really for less than the jurisdictional amount..." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938). At the same time, if this Court determines that subject matter jurisdiction is lacking, it must dismiss the matter. Fed. R. Civ. P. 12(h)(3). It is well established that the federal courts have a virtually unflagging obligation to exercise the jurisdiction given them. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818 (1976) (citing England v. La. State Bd. of Med. Exam'rs, 375 U.S. 411, 415 (1964); McClellan v. Carland, 217 U.S. 268, 281 (1910); (citation omitted)).

The Plaintiff's "obligation to provide the 'grounds' of his 'entitle[ment] to relief'" under Federal Rule of Civil Procedure 12(b)(6), "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Indeed, those factual allegations, when their truth is assumed, "must be enough to raise a right to relief above a speculative level." Twombly, 550 U.S. at 555. In reviewing a motion to dismiss, this Court is to "consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim." M & M Stone Co. v. Pennsylvania, 388 Fed.Appx. 156, 162 (3d Cir. 2010).

B. Motion to Stay

Defendant seeks to impose a stay in this action in favor of adjudication in the Delaware state courts. It is well established in this Circuit that the Colorado River analysis governs motions to stay or dismiss on grounds of abstention.*fn2 See, e.g., McMurray v. De Vink, 27 Fed.Appx. 88, 92 (3d Cir. 2002); Ryan v. Johnson, 115 F.3d 193, 196 (3d Cir.1997); Ingersoll Rand Fin. Corp. v. Callison, 844 F.2d 133, 137 (3d Cir. 1988); Western Auto Supply Co. v. Anderson, 610 F.2d 1126, 1127 (3d Cir. 1979). Pursuant to Colorado River, abstention would be appropriate where the matter presents a difficult question of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar. Colorado ...


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