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August 15, 2016

Seventh Circuit Strikes Blow to Plaintiffs’ Bar, Rejects Settlement in Class Action Over Walgreens Merger

In a 2-1 decision, the Seventh Circuit struck a blow to the plaintiffs’ bar last week, rejecting a class-action settlement “that essentially extorted money from the merger between Walgreens and Swiss company Alliance Boots GmbH,” writes the Wall Street Journal editorial board.

“In a so-called strike suit, plaintiffs attorneys demanded that Walgreens provide additional disclosures to its voluminous proxy statement or face litigation,” notes the editorial. “The company quickly settled, and the lawyers took home $370,000 in fees. Shareholders got nothing.”

“The type of class action illustrated by this case—the class action that yields fees for class counsel and nothing for the class—is no better than a racket. It must end,” wrote federal Judge Richard Posner. On remand, the lower court should “give serious consideration to either appointing new class counsel, or dismissing the suit.”

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