A Delaware judge dismissed a lawsuit from Cigna shareholders April 7 that claimed executives with the company fumbled a $1.85 billion termination fee following the failed $54 billion merger with Anthem in 2017, according to Law360.
The lawsuit alleged that Cigna President and CEO David Cordani, six board members, Cigna's attorney and Teneo consultants spread misinformation, undermined the proposed merger and violated their fiduciary duties. Shareholders also claimed that Mr. Cordani sabotaged the proposal because he would not remain CEO of the new company.
The chancery court ruled that stockholders did not prove it would have been pointless to demand an investigation of damage claims by the payer's board.
The ruling wasn't positive for Mr. Cordani. For the lawsuit to stand, the plaintiffs needed to prove Mr. Cordani and six of the 13 board members had conflicts of interest that prohibited an investigation. The judge found only Mr. Cordani and former CEO Isaiah Harris Jr. had potential conflicts of interest that would prevent fair judgment of individual liability for losing the termination fee.
"The real concern is Cordani's preternaturally charismatic leadership and the bond he's been able to forge in the boardroom," the judge wrote. "This is really a case about structural bias, and it's really a case about the relationship between outside directors and management."
Though the judge tossed the lawsuit, he called Mr. Cordani's actions during the proposal period "inferrably problematic from a fiduciary perspective" and said that Mr. Cordani, along with the payer's attorney, "engaged in conduct that inferrably rises to the level of a fiduciary breach, as they gave testimony that I not only discredited but thought likely was false."
The judge ruled that actions from Cigna board members and the Teneo consultants were not a breach of duty: "The directors could have concluded that it was in the best interests of Cigna and its stockholders to escape from the merger agreement, even if it meant losing the termination fee or exposing themselves to damages for losing the agreement."
The consultants' job "was to try to figure out how to get out of the merger agreement and plan for that possibility. From that point on, the advisors worked covertly to undermine the merger. They had to work covertly because they were obligated contractually to support the agreement."