A former employee of Stiefel Laboratories won a $1.5 million verdict from a Miami federal jury on Wednesday, vindicating claims that the company and its former CEO tricked him into selling his stock at an artificially low price before a $2.8 billion buyout by GlaxoSmithKline in 2009. The Glaxo unit, which is also battling Securities & Exchange Commission claims over the buyout, could face more exposure from at least three other individuals who have brought related cases.
Plaintiff Timothy Finnerty worked for 20 years as a sales representative at the then-privately-held Stiefel, which makes dermatological products. In 2008 the company changed its employee stock plan to allow workers to sell their shares back to the company for the first time, and it encouraged them to do so to diversify their portfolios. At the same time, unbeknownst to the workers, Stiefel was engaged in merger negotiations that valued the company far above the price being offered for the workers’ stock, according to an amended class action complaint that several workers filed in 2009..
In February 2009, Finnerty (who had been terminated in August 2008) sold his 28 shares of Steifel stock for $16,469 per share. The following April, GSK agreed to buy Stiefel for $65,515.29 a share, with an additional value of $7,186.01 based on certain contingencies. Finnerty sued to recoup the difference in the share values; the $1.5 million award represents the entire amount that he was seeking.
Finnerty and his former coworkers sued the company, its directors, and senior executives, including former CEO Charles Steifel, for securities law and ERISA violations. They alleged that the defendants concealed information about the merger discussions and gave them a depressed valuation of the company in order to maximize the value of their own holdings in the buyout. The defendants countered that the merger discussions were too preliminary to disclose. The workers had tried to bring their claims as a class action, but Miami U.S. District Judge James Lawrence King denied class certification last July. King also bifurcated the ERISA issues for a separate trial.
The plaintiffs are represented by Peter Prieto of Podhurst Orseck and Norman Segall of Segall Gordich. Prieto said another individual they represent is seeking roughly $40 million, and others could still come forward to file suits.
Greenberg Traurig represented Stiefel Labs and former CEO Stiefel. The trial was handled by partners Hilarie Bass, David Coulson, and Todd Wozniak. Greenberg Traurig is also defending the company in a related lawsuit filed by the Securities and Exchange Commission, which we wrote about here.
GSK sent us this comment: “We are disappointed with the jury’s verdict, and continue to believe that Stiefel Laboratories and Charlie Stiefel acted appropriately with respect to Stiefel Laboratories’ Employee Stock Bonus Plan and the treatment of Mr. Finnerty in connection with that Plan. We are reviewing all of our post-trial options, including appeal.”