A federal judge has ruled against a Rite Aid shareholder in a fraudulent misrepresentation lawsuit filed in connection with the aborted merger of the Walgreens and Rite Aid pharmacy chains.
U.S. District Judge John E. Jones III of the Middle District of Pennsylvania granted Walgreens’ motion for judgment on the pleadings on plaintiff Jerry Herring’s lawsuit against the drug store company.
Walgreens claimed that Herring did not have standing to pursue the litigation because the court previously dismissed his nonactionable claims. Herring had filed a shareholder class action against the defendants.
“Notably, [Herring] does not dispute Walgreens’ contention that he lacks constitutional or statutory standing. Rather, Herring argues that the court should permit class certification to identify proper class representatives,” Jones said in his Oct. 24 opinion.
The judge added that Herring’s reliance on In re Cigna, a case in which the court permitted a litigant to serve as lead plaintiff despite not being a proper class representative, to demonstrate standing was inapt.
“The issue before the court [in Cigna] was not whether the plaintiff had standing, but whether the plaintiff could adequately plead economic loss. The difference between whether a plaintiff can ultimately succeed on a claim and whether a plaintiff has a legal right to bring or maintain a claim cannot be overstated,” Jones said.
He said that, while it appeared that Herring initially had standing to bring the case, standing must be maintained throughout the duration of the case.
“Because [Herring] purchased Rite Aid stock before the now more clearly defined actionable statements, he does not have a legal right to bring an individual Rule 10b-5 claim and, therefore, would appear to have lost his personal stake in the outcome of the dispute,” Herring said.
But it didn’t end there, Jones said.
“In the case before us, Herring’s amended complaint plainly sets forth class action allegations, and it does appear that his claims were mooted before he could reasonably seek certification of a class. However, the mooting of his claims resulted from our dismissal of the non-actionable statements, not through any conduct of Walgreens, such as ‘picking off’ named plaintiffs. His claims are not ‘inherently transitory,’ ‘capable of repetition, yet evading review,’ or ‘acutely susceptible to mootness.’ In short, none of the special class action mootness exceptions applies, and the ‘general rule’ controls here: ‘the mooting of a named plaintiff’s claims prior to class certification moots the entire case,’” Jones said.
The attorneys in the case, Benjamin Mather of Kaufman, Coren & Ress in Philadelphia for Herring and Caroline Zalka of Weil, Gotshal & Manges in New York, did not immediately respond to requests for comment.