Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 1 of 35 Page ID #:1554
1 DEBORAH D. PARKER, OFFICIAL COURT REPORTER UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION AT SANTA ANA HONORABLE DAVID O. CARTER, JUDGE PRESIDING
CERTIFIED TRANSCRIPT
ALLERGAN, INC., ET AL., ) ) PLAINTIFFS, ) ) vs. ) SACV NO. 14-1214-DOC ) VALEANT PHARMACEUTICALS ) INTERNATIONAL, INC., ET AL., ) ) DEFENDANTS. ) ___________________________________)
REPORTER'S TRANSCRIPT OF PROCEEDINGS SANTA ANA, CALIFORNIA WEDNESDAY, AUGUST 20, 2014 8:30 A.M.
DEBORAH D. PARKER, CSR 10342 OFFICIAL COURT REPORTER UNITED STATES DISTRICT COURT 411 WEST FOURTH STREET SUITE 1-053 SANTA ANA, CALIFORNIA 92701 (657) 229-4305 transcripts@ddparker.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 3 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 2 of 35 Page ID #:1555 20 DEBORAH D. PARKER, OFFICIAL COURT REPORTER that allowed Valeant to discuss its potential transaction with Allergan and with Pershing Square. At 14(a) and at 15 U.S.C. 78n(a) and Rule 14(a)-9 and 17 CFR 240, they prohibit the use of false or misleading statements or omissions in soliciting proxies. At Section 14(e), the language prohibits the making of a material false statement or omission or to engage in fraudulent practices in connection with a tender offer. Plaintiffs allege that, first, the Defendants' proxy solicitation materials and other public statements failed to fully disclose the nature of the relationship and their intentions towards Allergan; second, Defendants have been overstating the certainty that Valeant will succeed in acquiring Allergan in their press statements and third, the Defendants have made misleading statements about the anticipated cost synergies from the proposed acquisition in their press statements and the SEC filings and have failed to disclose that one of Valeant's directors, Robert Ingram, had a conflict of interest because he was also a director of Allergan in late 2012 when Valeant first began internal discussions about potentially acquiring Allergan. Section 20A of SEA creates a private right of action, of course. Now, let me turn the lectern over to each of you, and I'm going to begin with Allergan. First of all, I want 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 4 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 3 of 35 Page ID #:1556 21 DEBORAH D. PARKER, OFFICIAL COURT REPORTER you to make any presentation, Mr. Wald, that you have in the order that you would like. But just to start us off on the right footing, what's the rush? We haven't even gotten to a situation where there's 25 percent share group to call a 50 percent shareholder meeting to replace your board members. Why is this court seemingly stepping in in what may be perceived by some as to be a good-faith tactical effort as well as legal effort to nip this in the bud. MR. WALD: Thank you, your Honor. THE COURT: This court shouldn't be used that way. MR. WALD: And we agree with that, your Honor. THE COURT: Okay. Now your presentation. MR. WALD: So, your Honor, I think the flip side of the question of what's the urgency is the question of why we find ourselves here today as opposed to at some prior point in time. The timeline that we submit is relevant. It starts with the tender offer on June 18th. Statements made by Mr. Pearson, which are quoted in our complaint, the day before which acknowledge, I think, for the first time, what we had suspected all along, which was that this was part of a plan to launch a tender offer right from the very beginning. THE COURT: Instead of a merger. MR. WALD: Correct, your Honor. That is correct. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 5 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 4 of 35 Page ID #:1557 22 DEBORAH D. PARKER, OFFICIAL COURT REPORTER And that's laid out in our complaint. The tender offer itself, of course, could be launched but not closed for the reasons set forth in the Court's opening remarks; that is, a shareholder rights plan had been adopted by the board. And before the defendants could close on their tender offer, they needed to remove that rights plan. The way to do that, of course, would be to wait for the annual meeting which is in May, so just pass, or to call a special meeting at which time they could seek to remove, as the Court noted, six of the nine directors and, hopefully, replace them with directors who would be more sympathetic to the Defendants' position. The ability to call a special meeting, as your Honor pointed out, turns on the tendering or the submission of special meeting requests in the amount of 25 percent of the total outstanding shares. That has not yet occurred. The Defendants went to market, if you will, in soliciting those 25 percent requests after their final proxy went effective on July 11 of 2014. So up until July 11, there was no final set of statements, there was no final proxy on which they could go out and solicit these consents. Our lawsuit followed within three weeks, because we believed -- even though no special consents had yet been filed, we believed that with the effectiveness, if you will, of the final proxy on July 11th, there was now a real case 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 6 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 5 of 35 Page ID #:1558 27 DEBORAH D. PARKER, OFFICIAL COURT REPORTER THE COURT: Mr. Wald, a couple quick questions; and then, I'll turn to your opposition and then we'll have another round. MR. WALD: Sure. THE COURT: First of all, check with your counsel for just a moment. As a courtesy from the Court, make sure that you covered your arguments. So just have a meeting. MR. WALD: Thank you very much, your Honor. (Pause.) MR. WALD: Your Honor, Mr. Savitt wants to make sure that I have responded to the Court's question about why this Court should weigh into this dispute. I've tried to cover that, but I want to make sure that I do cover that, and I would ask that the Court tell me what you would like -- what more you would like to hear from me on that issue. THE COURT: Well, the first question I had is: Why? And I think you've attempted in good faith to answer that. But why isn't this what I call anticipated harm as an overall view and not a specific ruling the capitalist marketplace we're blessed to live in is a very dynamic and changing corporate and business engine? And not only can the facts change quickly, but when the courts get involved in what I call forward-looking decisions, there can be not only changing facts but unanticipated facts which cause the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 7 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 6 of 35 Page ID #:1559 28 DEBORAH D. PARKER, OFFICIAL COURT REPORTER judiciary to seemingly react to the changing strategies, needs of the parties. And when I'm dealing with these sections, I don't know that the judiciary should be in that position. I'm curious when we have federal agencies also and these kinds of claims are made, if the federal agencies don't end up reacting to a district court's rulings without carrying out their regulatory function because the court has acted quickly. And usually act -- we react when the harm has occurred and along the way there are so many opportunities for you to bring this matter to the court, if the 25 percent was reached, if the 50 percent was reached but within three days of filing, you're at my doorstep. And, by the way, you're very welcome to be here. But you're at my doorstep. It's reflected in the way the filings have taken place. When I start getting filings the night before -- and we've already spent the weekend -- we already have a changing scenario where the Court is going to read that, but it's not the way to conduct business. And in your arguments today, you'll notice everything is expedited. We're going to have an early summary judgment motion. We usually don't do those. We usually have complete discovery. And it's not an expedited discovery. So those are the concerns, holistically, that the judiciary as a whole gets involved in. We're supposed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 8 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 7 of 35 Page ID #:1560 29 DEBORAH D. PARKER, OFFICIAL COURT REPORTER to be the wisest branch of the government, because we're like the Monday-morning quarterback. We get to look back and tell everybody what went wrong, only because we have the facts. So those are some holistic concerns and I think that this anticipation on your part may have merit in terms of a section. But I've got the discretion, and I'm going to ask you one more time: Why now? MR. WALD: Fair enough, your Honor. Listening to the Court's questions and the explanation for the questions, I really heard two separate and very important observations. THE COURT: The role of the judiciary. MR. WALD: Yes. THE COURT: Do we intervene and why? MR. WALD: Exactly. And then also, your Honor, the second part of my remarks I would like to address to the question of: Other fail-safes built into the system so that the Court can have confidence that if it does set this on an expedited basis that if, at the end of the day, whenever the end of the day ends up being, the Court doesn't feel that it has the information it needs to make an informed judgment that will withstand the test of time, if you will, there are offramps, there are safety ramps that are built into Rule 56 that are built into Rule 57, and I'd like to address those as well. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 9 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 8 of 35 Page ID #:1561 36 DEBORAH D. PARKER, OFFICIAL COURT REPORTER weighed in. THE COURT: Not like this. I don't think that there's an analogy to this particular fact situation. I see it in ERISA cases. My colleague, Terry Hatter, one time had to decide if the Dodgers were going to play a Sunday baseball game back in the 1980s, and he had to issue an order on a Saturday. And that's serious, Counsel. Now, I'm just joking. MR. WALD: I'm a huge baseball -- THE COURT: But the precedence of this -- the way these kinds of interventions get read by the marketplace has a dynamic effect and repercussions. And, of course, you hear my concern to tread in precipitously and not to have fully developed discovery and not to see the harm that is not perceived or anticipated to occur but to actually occur. And we're not even at the 25 percent, you know, bellwether mark yet to this Court's knowledge to even call for a shareholder meeting, to even get 50 percent of the vote and the machinations of the marketplace to the offers being made are going to be dynamic, valiant. And the other entity is going to have to persuade people to, you know, buy into this. This price is going to change dynamically over a period of time in the marketplace in what's being offered. Those are my holistic concerns. They are not only concerns in statute, but how is the judiciary reacting, the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 10 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 9 of 35 Page ID #:1562 37 DEBORAH D. PARKER, OFFICIAL COURT REPORTER legislative, executive and dynamic capitalist free market society? MR. WALD: Well, your Honor, I would say just a couple of things, and I appreciate this dialogue very much. The first thing I would say is that the Exchange Act does provide a private right of action. And the purpose of that is to allow target companies, such as Allergan -- THE COURT: Regulates it and enforces that. MR. WALD: Yes. THE COURT: The courts can, usually, when the harm has occurred, 10B, class actions. Here, the harm hasn't occurred yet. It's anticipated. MR. WALD: Well, your Honor, let me ask this question. THE COURT: And aren't I giving your Board what I call guidance? In other words, what you're really saying is, that the argument, on behalf of Allergan, is: This is such a weighty responsibility for the Board. Judge, they need a ruling now so that they can conduct themselves in such and such a way. Yet, your opposition is going to argue in just a moment that the Court is being manipulated. MR. WALD: Your Honor, I don't think so, for several reasons. We're not at all asking for an advisory opinion. We're asking for declaration that they violated 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 11 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 10 of 35 Page ID #:1563 38 DEBORAH D. PARKER, OFFICIAL COURT REPORTER the insider trader laws. That will be useful in several contexts. One context is at the Board level on the bylaws. Another context, your Honor, is that if we win that issue we will be back in front of this court asking for relief that sequesters Mr. Ackman's shares, that strips them of their beneficial ownership rights and then enjoins -- very possibly that enjoins further proceedings. THE COURT: Well, explain to me the letter to the Chancery Court. Of course, I haven't reached out to the Delaware court, nor would it be appropriate. But you've notified my Delaware colleagues about the action in this court and, apparently, your position is that you believe that the Delaware court should decide any state law questions. Now, right away, since I had the Anna Nicole Smith case, I get into a whole problem concerning state and federal jurisdiction. There is the probate exception. Here I've got one court potentially making rulings that can affect this court and this court's rulings can effectively -- or can have great credence with a state court. How are we going to sort out that comity of relationship between the state and the federal courts? MR. WALD: As we tried to explain in our brief, your Honor -- and let me take another stab at it -- we think 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 12 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 11 of 35 Page ID #:1564 41 DEBORAH D. PARKER, OFFICIAL COURT REPORTER to file a suit in Delaware, I'm not sure what it's going to say, your Honor. But what I do know is that the Delaware court -- that if the Defendants are unhappy with what the directors do, based on this court's rulings, we expect that they will file a lawsuit in Delaware. And so, I see this less as -- and I spent all my time doing securities class actions -- not quite, your Honor, but lots of it. I see this less as analogous to that and more as a sequential complementary set of proceedings, one, which takes place in federal court on the federal issues and on the remedies that are available should the Court find a violation. Not simply disclosure remedies, your Honor, but the full panoply of remedies that we've set forward and armed with that information. Not only the Board, but the Delaware court can then decide whether there are live issues of Delaware law that require intervention by the Delaware court. That's not at all clear to me as I stand before you, that depending on what this court does, this is anything other than a theoretical construct that the defendants have thrown up. THE COURT: Then tell me, lastly -- and I appreciate the discussion with you -- other than this broad and heartfelt generalization that the Board needs guidance, why? In other words, you let a board that's supposedly knowledgeable in a corporate entity and as such, as board 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 13 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 12 of 35 Page ID #:1565 42 DEBORAH D. PARKER, OFFICIAL COURT REPORTER members, they are elected for a purpose. What harm or ramifications other than the guidance you've requested befall this board? Are you concerned about individual liability? I don't think so. They are acting in good faith. So what harm other than this guidance that you're seeking what I view as with somewhat anticipatory fashion befalls these board members? MR. WALD: Two things, your Honor. First of all, on the anticipatory part, I just want to ask the question, or at least make the observation that if the consents are indeed submitted on Friday, as we've been told that they will be -- THE COURT: Do I have them in front of me now? MR. WALD: No. THE COURT: Why am I acting now? MR. WALD: The question I suppose, your Honor, is whether it will -- if you were to deny the motion today, whether in the Court's view it would be open to the Plaintiffs to come back on Monday. THE COURT: And you see, there's a problem. It's a rolling stone, right now. I don't have what you anticipate even in front of me. It's this whole cascading effect of, Judge, they've told us privately that they're going do that; but from a court's perspective, they haven't 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 14 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 13 of 35 Page ID #:1566 43 DEBORAH D. PARKER, OFFICIAL COURT REPORTER done it. MR. WALD: I think it's more than private. I do think it was in their moving papers, under penalty of Rule 11 they've made this representation to the Court. But in any event, your Honor, I don't think that that makes it illusory. I don't think it makes it anticipatory in the sense of not being justiciable. I believe that there is a real case in controversy and that the declaratory judgment cases recognize that when you get to the point in litigation that we are now at where announcements have been made and this is being said to happen imminently, that real rights are at stake. And so, again, from our point of view, we moved in as quickly as possible precisely because we didn't want delay. Precisely because we did want to fit this within a time period that no one could be critical of us. So that's point one. With respect to the Board, your Honor, again, I apologize, but I resist the notion that it's advisory. What we're asking for is -- THE COURT: I'm sorry. This is bad on my part. Anticipatory. MR. WALD: Okay. THE COURT: I apologize if I used "advisory." MR. WALD: Not at all. I think what we want -- what we seek is the Court's declaration about rights and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 15 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 14 of 35 Page ID #:1567 45 DEBORAH D. PARKER, OFFICIAL COURT REPORTER Well, Counsel, I'm going to take break. I need a cup of coffee. There's a cafeteria downstairs. If you see me, don't speak to me, okay? But I'm going to go down and get a cup of coffee. Come back. We've got unlimited time also. I've got some, I think, coequally -- coequal questions for you. But before we start with the Defendant, are you presenting yourself as to two distinct and separate parties for the purposes of this argument? MR. FRAWLEY: Yes, your Honor. THE COURT: I thought you were. Are you really two separate and distinct parties, or just retained by two different entities with, let's say, a common interest, because trust me, you'll have coequal time. It's not two to one, from my perception. There may be coalition of interest here. MR. FRAWLEY: Yes, your Honor. THE COURT: Oh, I can't hear you. MR. FRAWLEY: We won't be duplicating anything, your Honor. We do have some perspectives on the issue. THE COURT: Could you go to the lectern? MR. FRAWLEY: Sorry, your Honor. It's Brian Frawley. We will not be duplicating anything. We do have some different perspectives on certain issues, and -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 16 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 15 of 35 Page ID #:1568 46 DEBORAH D. PARKER, OFFICIAL COURT REPORTER THE COURT: It's okay. Would you go to the lectern also and stand next to your -- why don't you two stand together. It's a visual. Some courts might view you as the same coalesced interest. MR. FRAWLEY: Co-authors. THE COURT: But let me treat you with great dignity and respect and give you co-equal arguments. MR. HOLSCHER: If you'll agree we're co-bidders, your Honor, it will be one argument. THE COURT: And you can duplicate, so don't worry about that. Fair enough? MR. HOLSCHER: We're going to be short. THE COURT: No, no. I don't want you to be short. I want to get it right. So there's no time constraint on you. If you want to be short, so be it. Just know on Allergan's side, you're not going to have any time constraints because maybe the interest here will coalesce, let's say. Okay. Well, about 15 minutes, would that be okay? You know, I got Standard & Poor's coming in a little later today and then some washing machine people. I forgot the name of the case. But if you can finish before noon, you're in good shape; if you can't, then I start running into some afternoon problems, but I'll try to stay 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 17 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 16 of 35 Page ID #:1569 47 DEBORAH D. PARKER, OFFICIAL COURT REPORTER with you and we'll go right through lunch. Fair enough? MR. HOLSCHER: I expect our part will be done much shorter than that, or we should be done before noon. THE COURT: Do you know how many times I've heard that, Counsel? Go get some coffee. It's fine. (Recess.) THE COURT: We're on the record. Would you reintroduce yourself to the record. MR. HOLSCHER: Yes, your Honor. Mark Holscher -- the last name is H-O-L-S-C-H-E-R -- of Kirland & Ellis for Pershing Square. THE COURT: Thank you very much. Counsel. MR. HOLSCHER: Your Honor, I think one of your comments this morning highlights the reason why declaratory relief is entirely inappropriate here. You asked if there is going to be "Carter on Corporate Governs" or "Carter on Mergers and Acquisition." Let's be clear. The answer to that would be "yes." THE COURT: Should I be a board member? I'm joking with you. MR. HOLSCHER: You would be off-quoted. Every Delaware corporation, when looking at 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 18 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 17 of 35 Page ID #:1570 56 DEBORAH D. PARKER, OFFICIAL COURT REPORTER whole time the Delaware court is supposed to tap its toes. They cannot manufacture federal jurisdiction relating to the interpretation of Delaware bylaws. That's not Holscher. That's Supreme Court, in Gunn, in 2013. You cannot create federal jurisdiction over interpretation of state instruments. You can't do it. It's not exclusive jurisdiction. In fact, your Honor, I agree 100 percent that you have exclusive jurisdiction over the Section 14e insider trading allegations. Agreed, stipulated and embraced. But, your Honor, you notice when he said that 14e-3 is the centerpiece and no one on their side has talked to you about the actual bylaws, a Delaware court is going to have to decide -- and, by the way, this concern about shareholders not having full disclosure, and you talked about harm to the market, the market has been speaking. When this proposal was announced with 50 percent premium so every owner of shares will get 6 percent more than today, the stock went up significantly. As Valeant files these sorts of lawsuits to block it, you'll see the stock go up and down. Now, I'm not here to predict stock movements, your Honor. I agree with you these are fast-moving events, but I would say to you, your Honor, the Delaware Chancery Courts and my colleague, wrestling Valeant who has litigated 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 19 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 18 of 35 Page ID #:1571 57 DEBORAH D. PARKER, OFFICIAL COURT REPORTER Delaware Chancery Courts for decades, will give more detail on this. The Delaware Chancery Courts have specific expedited rules and procedures to handle these disputes. Their local rules are diametrically opposed to the Central District, which is focused on full disclosure, notice. For example, your Honor, in this case they propose a 70-day discovery. We have 30 days to get requests for admissions. I want them to admit they have stated publicly several times that we're co-bidders. If they refuse, I don't get that before your Honor for another 38 days, under our local rules. So with two days left in discovery, I might get some motions to compel admissions. Their schedule, your Honor, doesn't allow for any expert testimony. There is no expert deposition schedule. This is not -- your Honor cited the -- I think it was the Winston case that talks about declaratory relief for simple facts, undisputed facts. These are hotly disputed. Hotly contested. And there's going to be expert testimony on the SEC's practices and procedures. In fact, we're going to be like an expert, like the Wachtell lawyer, who wrote the client a letter saying this was lawful, and the SEC should change its rules. What the SEC's practices are, not an expert on the law, but the practices. You look at this schedule, it's a schedule destined to be a starting point to delay Delaware. Let me 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 20 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 19 of 35 Page ID #:1572 58 DEBORAH D. PARKER, OFFICIAL COURT REPORTER show you something else that's kind of buried in their reply brief. Again, why these proceedings are so dangerous to insert yourself. You and your law clerks probably thought it was fairly innocuous that at Footnote 4 of the reply brief, they say for the first time: Plaintiffs have requested a trial by jury on all legal claims. Should the Court determine that any issues remaining for trial implicate such claims, Plaintiffs request a jury trial as to those claims. You hear that reaffirmed for the first time in their footnote. Well, your Honor, the Supreme Court disagrees. Either they waive the jury claims or they cannot go forward first with you deciding a declaratory relief action on the same issues of insider trading and whether disclosures were proper. It's not Holscher on the law. It's Supreme Court, Beacon case, 359 U.S. 500 (1959); Diary Queen, 369 U.S. 469 (1962). This is a law for 60 years, or 55 years. You cannot have a judge do a declaratory relief action to make fact-findings that you may have engaged insider trading -- by the way, that's centerpiece, which isn't in the actual bylaw -- and then have a jury trial later. You can't do it. It violates the Constitutional right to a jury trial. In fact, your Honor, the Beacon case was a declaratory relief case from California where the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 21 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 20 of 35 Page ID #:1573 91 DEBORAH D. PARKER, OFFICIAL COURT REPORTER percent. MR. WALD: Your Honor, what it allowed them to do was to book a profit of over a billion dollars to use as a war chest to fund this takeover attempt. It is precisely the informational imbalance that the SEC in Rule 14e-3 and the Congress in 14e sought to prevent. And unlike 10(b)(5), your Honor, with which I know the court is very familiar, scienter is not an element of 14e-3. It is a disclosed or abstained rule. Period, full stop. That's what the rule says. That's what they didn't do. They knew, but instead of disclosing, they moved forward and they moved forward rapaciously, quickly to the tune of a billion dollars or more, which they are now using, your Honor, to effectuate this bid. And if the court -- this court, which it sees the jurisdiction, feels uneasy about setting a discovery and hearing schedule that allows us to get to those facts and to have an adjudication of whether what they did is lawful -- and we understand they say what they did is lawful. That's the debate we want to have. They said they're co-bidders. Your Honor, we say co-bidders matters not at all under 14e-3. 14e-3 doesn't use the phrase "co-bidders." Mr. Holscher wants an acknowledgment about what Allergan has said on co-bidding. "Co-bidding" is a concept in 14(d) and 13(d). It is not a concept in 14e-3. And that is a problem for them. That's what they are going to need to defend. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 22 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 21 of 35 Page ID #:1574 92 DEBORAH D. PARKER, OFFICIAL COURT REPORTER So those are the critical issues of federal law which we bring before the court. And in our view, whether it's through Rule 57 or whether it's through a preliminary injunction sometime over the next, roughly, 120 days, we believe that a factual record can and should be developed that should be brought to this court in a systematic way. These arguments should be meted out. The Court should have an opportunity, obviously, to ask the questions that it wants to ask. And if at the end of that process the Court believes that there was something wrong that happened here, something fundamentally wrong -- THE COURT: Let me repeat back to you: Why isn't this coming to me by way of a more developed record and a preliminary injunction where there's much more notice to any interested entity, the last-moment filings coming as late as last night? MR. WALD: Let me apologize on behalf of my team and my client, as the other side did for the ex parte filing. I promise you that won't happen again. But putting that issue aside, there is a real need for expedition here, whether it's through a preliminary injunction or through Rule 57. We read the rules, your Honor, and what we thought was appropriate was to get a final determination of rights and responsibilities under Rule 57, as opposed to a preliminary assessment of the likelihood of success on the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 23 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 22 of 35 Page ID #:1575 93 DEBORAH D. PARKER, OFFICIAL COURT REPORTER merits. But, your Honor, again, if the court believes that that's a more appropriate rubric under which we should proceed, then if and when these consents are finally delivered, we will be back in front of you on that basis, seeking to proceed via preliminary injunction to litigate the same issues. THE COURT: And what's the harm if this goes by way of preliminary injunction? MR. WALD: I don't know that there's a harm, your Honor. The preliminary injunction inquiry is different, obviously, than the Rule 57 inquiry. THE COURT: And I would certainly have a much more complete record, wouldn't I? MR. WALD: Your Honor, if that's the Court's view -- THE COURT: I'm not casting a view. We're having a discussion. MR. WALD: I don't know that that's true, your Honor. I don't know that the record would be any more or less developed than it would be in the Rule 57 context. THE COURT: At least there would be notice to regulatory parties like the SEC. They could choose to act or not. At least my colleagues in Delaware would have some indication. At least, I wouldn't be relying upon a rule. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 24 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 23 of 35 Page ID #:1576 94 DEBORAH D. PARKER, OFFICIAL COURT REPORTER Each party would have an opportunity for a more completed hearing. MR. WALD: With respect to those issues, your Honor, in the way that we had envisioned the Rule 57 schedule unfolding, we expected that the SEC would be invited to give views to the Court's point. The SEC might or might not decide to do that, but certainly they could be invited by the Court and by us and, perhaps, by the other side as well. And we fully agree that the SEC should be in this court giving its views on 14e-3. THE COURT: Now, finally, this is only a request under Rule 57, or an expedited schedule. Even if I felt that you were wrong across the board, there's no vehicle that I know of that stops you from renewing this by way of a preliminary injunction, is there? MR. WALD: I don't believe there is, your Honor. THE COURT: So what's really being asked is that I invoke a rule without a hearing, based upon documents filed in a good-faith flurry and then pick up the pieces in a sense at a later time and see if I was right. MR. WALD: Your Honor -- THE COURT: Why am I uncomfortable? MR. WALD: So phrased, your Honor, I would be uncomfortable as well. All I can say, respectfully, we have at least a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 25 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 24 of 35 Page ID #:1577 95 DEBORAH D. PARKER, OFFICIAL COURT REPORTER different view of what we have been trying to do. THE COURT: Let's see if Mr. Holscher -- Mr. Holscher, regardless of the Court's ruling in the next few days -- no, stay together. You're a wonderful visual together at the lectern. Regardless of what the Court rules, unless -- assume from your viewpoint that you believe you've prevailed, which I don't subscribe to, by the way. So when you get up and argue, argue with fear. What stops the other side bringing this as a way of preliminary injunction, rather than Rule 57 motion? In other words, I don't know how you bar that today in the future, regardless of what the court does with Rule 57. MR. HOLSCHER: With great fear, I agree with, your Honor. THE COURT: No matter what I rule today, we're coming back. MR. HOLSCHER: I believe that's right, your Honor. And I -- we have a view as the reason why they did not seek preliminary injunction. It may be a more jaundiced view, but it's a view that if it's a preliminary injunction, they have to be more explicit and actually ask you to stop something in Delaware which then clarifies the issue. It's a Delaware law issue, and it's an improper remedy. So your view, your Honor, is that it is learned 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 26 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 25 of 35 Page ID #:1578 96 DEBORAH D. PARKER, OFFICIAL COURT REPORTER counsel on the other side. They are quite sophisticated. The complaint has tremendous time and thought to it. In the complaint, they did seek preliminary injunctive relief in two areas. They specifically said they would be seeking it. Our view, your Honor, and our preview is, yes, they can file for preliminary injunction. I'll be standing before you sometime in the next hundred days and say to, your Honor, they're seeking a remedy having stopped something in Delaware which they cannot do. THE COURT: The end result of all of this, is if I rule favorably towards Allergan today, it still sets up a whole series of expedited discovery hearing and a rather shallow record. If I rule against you. I don't know of any way that your opposition, Mr. Holscher, can stop a preliminary injunction hearing. MR. HOLSCHER: Agree. And, again, here, your Honor -- THE COURT: So -- MR. HOLSCHER: The one caveat I would make, your Honor, is: Counsel, has again said, you are the only court that can decide this issue. Respectfully, your Honor, I won't repeat the case or something on a filing, the Delaware Chancery Courts have explicitly addressed whether in a bylaw despite a party complied with the federal security laws. We cited just one example. Obviously, that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 27 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 26 of 35 Page ID #:1579 97 DEBORAH D. PARKER, OFFICIAL COURT REPORTER was in our emergency ex parte brief with, like, on 10 hours' notice. We cited the TravelCenter versus Brog where they said, The Delaware Chancery Court explicitly ruled -- THE COURT: Counsel. Counsel. You didn't get that. Cite that again. The court reporter didn't get that. MR. HOLSCHER: In our supplemental brief, we cited -- the last case was cited in the brief. It's a two-and-and-a-half-page brief. It's the last paragraph. THE COURT: She just didn't get it, because you slurred your words and dropped your voice. MR. HOLSCHER: TravelCenter versus, I think, Brog. THE COURT: Thank you. MR. HOLSCHER: And I do believe, your Honor, that the Delaware Chancery Courts have and are equipped to decide whether someone has complied with a bylaw, even if it includes the determination of whether they complied with some regulation -- federal regulation, SEC, or otherwise. I will -- THE COURT: How imminent, so I understand the harm, is the ability of the defendants to call for a general shareholder meeting? In other words, you say in good faith that you've got the 25 percent of the vote from a number of institutions but hundreds, let's say, of investors. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 28 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 27 of 35 Page ID #:1580 98 DEBORAH D. PARKER, OFFICIAL COURT REPORTER MR. HOLSCHER: Right. THE COURT: How soon can the general shareholder meeting be called? MR. HOLSCHER: It's a great issue. We submitted to Allergan. THE COURT: Just a moment. I went to law school, too. I asked you a question. How soon? MR. HOLSCHER: We don't know. THE COURT: Okay. You don't know. MR. HOLSCHER: Because -- THE COURT: A month. See, I used to practice. A month? MR. HOLSCHER: We will try for a month. THE COURT: Two months? MR. HOLSCHER: We're not certain what the Delaware court and Allergan will do. THE COURT: Three months? MR. HOLSCHER: It may be that long. We're not for sure. THE COURT: Four months? MR. HOLSCHER: May I consult? THE COURT: Why don't you step over and consult. (Pause.) MR. HOLSCHER: Our position is a reasonable time is 30 to 45 days. We do not set the meeting, your Honor. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 29 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 28 of 35 Page ID #:1581 99 DEBORAH D. PARKER, OFFICIAL COURT REPORTER THE COURT: Okay. MR. HOLSCHER: Either the Court or Allergan will set the meeting. THE COURT: And I'm sure Allergan would want that meeting as soon as possible. I'm just joking, Counsel. MR. WALD: May I address that? THE COURT: Yes. So if I was looking for a time frame to see when does this harm occur in a nonanticipatory fashion, 30 days? MR. WALD: No, your Honor. THE COURT: 40 days? MR. WALD: 120. THE COURT: 30 to 45 days to 120 days. So therefore we have -- MR. WALD: I think that's right, your Honor. The Allergan Board will set, as Mr. Holscher said, the meetings in a reasonable time and if they don't like it -- THE COURT: Just a moment. Reasonable time is your representation in good faith. You believe that it will be no longer than 120 days. MR. WALD: That is my belief, your Honor. THE COURT: Okay. So now we're tied to some time. We've got some ideas. 30 to 45 days up to 120 days. So, therefore, it takes away the fear factor that this is going to be a stall by the Allergan Board that is going to be out 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 30 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 29 of 35 Page ID #:1582 104 DEBORAH D. PARKER, OFFICIAL COURT REPORTER of that unlawful conduct are with respect to shares that were purchased on the basis of insider trading violations. So I want to be very clear. We're not seeking to enjoin Delaware. We've taken federal courts. We understand the comity issue. That's not what's at issue in this lawsuit. That's not at what issue in this courtroom. The issue in this courtroom is an issue of great importance under the Exchange Act and that, your Honor -- again, I repeat myself: But if this Court doesn't decide that issue, if this Court doesn't seize that issue and allow the parties to get to the bottom of it through discovery and through whatever hearing schedule the court believes is the appropriate hearing schedule to get to the truth, that will not be litigated. THE COURT: If this Court ruled against Allergan, hypothetically, on your Federal Rules of Civil Procedure 57 motion, how would you be any better prepared or less prepared at the time of a preliminary injunction? And second, what would it take for you to be prepared when I have these time frames of 30 to 45 days up to 120 days? Because there's no way to hold you out of court in the future. So, therefore, I expect, if I ruled against you, which I'm not saying I'm going right away. Please, understand that. MR. WALD: Understood, your Honor. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 31 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 30 of 35 Page ID #:1583 105 DEBORAH D. PARKER, OFFICIAL COURT REPORTER THE COURT: All right. But if I ruled against you at this juncture, there is no way that Valeant can stop you from bringing a preliminary injunction. And so my question is a common sense question, because what you don't want to do is bring it in a situation where the Court just puts you off. You know, you're back in a week and the Court says, Counsel, you were just here. Here you're in December of 2018. And we've got wide discretion about how we hear that. I know there's some rules. And I'm going to ask the same question of Mr. Holscher in just a moment, because if I ruled for Allergan in this motion, that's one resolution; but if I don't, the reason I'm asking these questions, is because you're going to be right back in and you're hearing that on a preliminary injunction. So I'm going to ask you to think about time frames, also, if we got to that place; otherwise I'm going to get a flurry of papers, make a guess about what's appropriate. And I need to know what time period you need to make a cogent and thoughtful presentation. Why don't you step over and ask your team. Is there any reason you can't work weekends? Counsel? MR. WALD: No, your Honor. THE COURT: Good. Excellent. Love your attitude. Counsel, I'm glad to see you volunteered also. So 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 32 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 31 of 35 Page ID #:1584 106 DEBORAH D. PARKER, OFFICIAL COURT REPORTER Saturdays and Sundays belong to me, also. All right. Thank you. MR. WALD: Your Honor, we had proposed a schedule -- and we're happy to live with that schedule. We're happy to tweak the schedule. THE COURT: Well, I don't have it in front of me. MR. WALD: Okay. 60 to 70 days for discovery, followed by the hearing. THE COURT: Well, I'm not certain that discovery is appropriate. We'll see. Just a moment. Preliminary injunctions don't necessarily have discovery. It's already conducted. Counsel. MR. HOLSCHER: Your Honor, our request would be that the Court and Defendants receive a bare-bones statement of what injunctive relief they're seeking on what claims, because they have four claims. Within 24 hours, we give your Honor an agreed-upon schedule. My concern is, I heard today they were seeking 14e-3 for declaratory relief. I don't know the parameters. This is the first we heard of the parameters. I submit to your Honor and agree that once we know what they want to seek, we are prepared to come back here in the courtroom, in the attorney room, 24 hours, give you a schedule immediately. We will move quickly, depending on 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 33 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 32 of 35 Page ID #:1585 107 DEBORAH D. PARKER, OFFICIAL COURT REPORTER what they seek. We may need discovery. I have to see if it's just a pure legal issue. I think there are factual disputes here as well as the conduct. THE COURT: It's too early. I'm raising these questions just to get the two of you starting to think about them. I don't expect answers today. Because discovery might be called for and you both may end up agreeing to it. But you're right. It needs to be better defined. As far as the Court setting a schedule, I'd rather fit into your needs and agreement, if possible, than just picking a date. Because once I pick a date, you're helpless. You're not coming back and negotiating with me over another date and say, Oh, Judge, by the way, we've just reached an agreement -- because you set it on Christmas day -- and we really want to have it a week before. I'm being facetious about that. So I'm giving you control now. Once I make a ruling, I won't back up on it. So you have all the freedom in the world to negotiate, to talk, to make it comfortable, to get a fair hearing, if we get there in time frames, as long as it fits into my calendar. But once I hand it down and you don't cooperate in that regard, then you won't see the cooperative court even by stipulation. Is that understood? MR. WALD: Understood, your Honor. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 34 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 33 of 35 Page ID #:1586 108 DEBORAH D. PARKER, OFFICIAL COURT REPORTER THE COURT: Well, I want to thank you both. I really truly have enjoyed your company and look forward to you, apparently, revisiting with me. You'll have a decision within the next day to five years. I'm just joking with you. You'll have a decision as quickly as we can get back to it with our calendar, okay? And we'll try to get that out to you just as quickly. But, right now I've got a very narrow issue, and that's the Rule 57 issue. That's really what's before me. And the discretion that the Court chooses or not to exercise at this point. If I rule in favor of Allergan, we're off to an expedited schedule and I need to get packaged. Of course, we'll talk about that a little bit more. If I rule against Allergan, it sounds to me like we're right back into a preliminary injunction that neither one of you can avoid. And the Court needs to set aside some time, and we need to talk about that time. This isn't going to be a trial. It's going to be regulated and limited in terms of time also. Okay. Anything further, Counsel? Mr. Wald, I want to truly thank you. It's been a pleasure to have you and your team here. And, Mr. Holscher, it's a pleasure seeing all of you. Counsel, we're going to go through lunch. And if you don't mind, as a courtesy to counsel who have been 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 35 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 34 of 35 Page ID #:1587 109 DEBORAH D. PARKER, OFFICIAL COURT REPORTER waiting on the Tait and BSH Home Appliances Corporation matter -- I know you were scheduled for 10:30 this morning. Why don't you come up and have a seat, and I want to say I'm truly concerned about the time you've been waiting. (At 11:30 a.m., proceedings were adjourned.)
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CERTIFICATE I hereby certify that pursuant to Section 753, Title 28, United States Code, the foregoing is a true and correct transcript of the stenographically reported proceedings held in the above-entitled matter and that the transcript page format is in conformance with the regulations of the Judicial Conference of the United States.
Date: August 21, 2014
____________________________________ Deborah D. Parker, Official Reporter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Ex. A 36 Case 8:14-cv-01214-DOC-AN Document 50-3 Filed 08/26/14 Page 35 of 35 Page ID #:1588
Judgments of the Court of Appeal of New Zealand on Proceedings to Review Aspects of the Report of the Royal Commission of Inquiry into the Mount Erebus Aircraft Disaster
C.A. 95/81