Law 480
Capstone Legal Analysis Paper
Objective: This assignment asks you to objectively evaluate two sides of an argument and apply the law. This paper includes a research component. The ability to set forth facts on multiple sides of an argument (objectivity) and then make a persuasive case in support of one position (subjectivity) using the law is a skill you’re likely to use whether you pursue a career in law (think about a lawyer advocating for a client or a judge writing a legal opinion to decide a legal dispute) or a career in business (think about a business person urging the adoption of a new company policy or advocating for the development of new product or service line).
Assignment: Draft a paper between 8-10 pages (plus citations), typed, 12-point Times New Roman, double-spaced. You must cite external resources and reference materials used. Your citation pages do not count toward the page minimum. You must address Parts 1, 2, and 3 found in the “Format and Paper Components” below. To help you with this assignment, please review the Background before moving on.
Background:
On Monday, April 21, 2014 David Pyott, then president and CEO of Allergan, saw Bill Ackman, billionaire hedge fund manager and activist investor of Pershing Square, on CNBC. Bill Ackman stated he used the fund he founded, Pershing Square Capital Management, to quietly acquire 9.7 percent of Allergan’s shares. As a result, Ackman had become the company’s single largest shareholder. And now he was on TV explaining why Allergan should welcome being acquired by Valeant Pharmaceuticals International (NYSE: VRX). It was the beginning of what the CEO of Allergan, Pyott, would later would refer to as “seven-and-a-half months of total war.”
Founded in 1950 to sell eye care products, Allergan later expanded its pharmaceutical offering of Botox in 2002. In 2013, Botox represented $1.8 billion of Allergan’s $6.3 billion sales total. Allergan’s second most important product, generating $940 million in 2013 was Restasis eye drops, the world’s leading therapy for chronic eye dryness.
Valeant rose to prominence in the 1990s selling antiviral and antibacterial drugs to some 100 countries. Rather than developing new products internally like Allergan, Valeant focused on buying other firms for established products and then cutting the firms’ administrative and R&D functions. By mid-2014, Valeant’s annual revenues had risen to $5.8 billion.
Pershing Square Capital Management was founded in 2004 by William Ackman with $50 million in seed capital. By 2014, Pershing Square managed nearly $12 million dollars of investor money, including some 70 pension funds, endowments, foundations, and family offices.
The alliance between Valeant and Pershing Square was developed during a January 2014 meeting between the CEO of Valeant and an employee of Pershing Square Bill Doyle.
Subsequently, on February 6, Valeant and Pershing Square discussed by phone a novel arrangement by which Pershing Square could develop a strategy for purchasing equity in companies that Valeant wished to acquire and for which it wanted Pershing Square’s collaboration. Hedge fund share purchases made explicitly supporting an operating company’s acquisition program were previously unknown. The two companies signed a confidentiality agreement, after which Pershing Square told Ackman or Allergan of its interest in buying Allergan. Valeant and Pershing Square agreed that Valeant and Pershing Square would buy Allergan shares and vote all its shares in support of Valeant’s effort to buy Allergan. On April 11, after purchasing shares under the name PS Fund, Pershing Square’s holding exceeded 5% of Allegan’s shares. By April 21, when Valeant reaches out to Allergan to discuss a possible purchase of Allergan, Pershing Square had acquired control of 9.7% of Allergan stock for about $3.6 billion.
Format and Paper Components:
Part 1- Background (1-2 pages): Research and summarize the events that occurred between January 2014 and August 1, 2014 that led to Allergan suing Valeant and Pershing Square. There is a lot of media coverage available, feel free to utilize this coverage to inform your summary. Make sure you cite all sources used!
Part 2- Legal Argument (4-6 pages): Using the Complaint found on Canvas, review Allergan’s allegations and Section 14e of the Securities and Exchange Act, specifically Rule 14e-3(d). Using the allegations in the Complaint, the Background above, and your research in Part 1, analyze ONLY whether Pershing Square violated 14e–3(a) and whether Valeant violated Rule 14e-3(d). You do not need to address any other claims raised in this case or in the Complaint.
For your analysis, I recommend using an IRAC format. IRAC analyzes issues using an issue, rule, analysis format. This video helps explain what that looks like: https://youtu.be/A2DJFcIE4HM?feature=shared
Here, for example, the first issue is whether Pershing Square violated 14e–3(a). Start by stating the issue, then summarize 14e–3(a) and its elements, then apply the rule to the relevant facts, and reach a conclusion. Remember that arguing both sides of the issue question is necessary in order to have a thorough analysis. Support your arguments with specific facts from prior cases, and address policy considerations when relevant.
help with the law at issue here is some additional information: Section 14(e) prohibits “fraudulent, deceptive, or manipulative acts or practices in connection with any tender offer.” Under Rule 14e–3(a), once an “offering person” “has taken a substantial step or steps to commence … a tender offer,” “any other person who is in possession of material information relating to such tender offer” that he knows or has reason to know is nonpublic and that he received directly or indirectly from the offering person must either abstain from trading or disclose the information to the public before trading. 17 C.F.R. §
14e–3(a). Relatedly, Rule 14e–3(d) makes it unlawful for an “offering person” to communicate “material, nonpublic information relating to a tender offer to any other person under circumstances in which it is reasonably foreseeable that such communication is likely to result in a violation of this section.” 17 C.F.R. 240.14e–3(d). You can find the statute here:https://www.ecfr.gov/current/title-17/chapter-II/part-240/subpart-A/subject-group-ECFR465b90927e2fdb3/section-240.14e-3.
Part 3- Evaluation (1-2 pages): What do you think of Valeant’s business tactics here and Allergan’s response? Did Allergan make a good strategic business decision in pursuing this lawsuit? Were Valeant’s actions just good business? What were the risks each side took, and what was the outcome?
NOTE:
This is your capstone paper. You should observe and put into practice basic writing skills: spelling, punctuation, grammar, and formatting.
Citations: At the end of the paper, include your table of cited references and resources. Your citation pages do not count toward your minimum page requirement. WIKIPEDIA is not an acceptable citation. Your arguments are only as strong as the veracity and credibility of your source material. Resource materials can include, among other materials, court cases, media coverage citing court cases, media articles, scholarly articles, materials from trade and industry associations, and interviews. Use a standard citation format that you are comfortable with, including for sources from the internet, and apply your chosen format consistently.