UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

IN RE: 

MEDCO/EXPRESS SCRIPTS MERGER 

LITIGATION 

Civil Action No. 11-4211(DMC)(MF) 

______________________________________________________________________________ 

CLASS PLAINTIFFS’ MEMORANDUM IN SUPPORT OF MOTION FOR 

CERTIFICATION OF SETTLEMENT CLASS, APPROVAL OF NOTICE PLAN, AND 

PRELIMINARY APPROVAL OF PROPOSED CLASS SETTLEMENT 

______________________________________________________________________________

James E. Cecchi 

Lindsey H. Taylor 

Donald A. Ecklund 

CARELLA, BYRNE, CECCHI 

 OLSTEIN, BRODY & AGNELLO 

5 Becker Farm Road 

Roseland, New Jersey 07068 

(973) 994-1700 

Jay W. Eisenhofer 

Michael J. Barry 

Caitlin Moyna 

GRANT & EISENHOFER P.A. 

1201 N. Market Street 

Wilmington, Delaware 19801 

(302) 622-7000 

Gerald Silk 

Mark Lebovitch 

Brett M. Middleton 

Jeremy Friedman 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

1285 Avenue of the Americas 

New York, NY 10019 

(212) 554-1400 

Attorneys for Plaintiff

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 1 of 36 PageID: 3477
- i - 

TABLE OF CONTENTS 

PRELIMINARY STATEMENT 1 

STATEMENT OF THE CASE 

 A. Procedural History 3 

 B. Medco’s Business and Negotiation of the Merger 6 

 1. Announcement of the Merger 7 

 2. Lock-up Provisions in the Merger 7 

 

 C. The Settlement 10 

ARGUMENT 

I. THE SETTLEMENT CLASSHOLD SHOULD BE CERTIFIED 11 

 A. Standard of Review 11 

 B. Class Certification Should Be Granted for Settlement Purposes under Rule 23 12 

 C. The Proposed Class Satisfies the Criteria of Rule 23(a) 12 

 1. Numerosity 12 

 2. Commonality 14 

 3. Typicality 13 

 4. Adequacy 15 

 D. The Proposed Class Satisfies the Criteria of Rule 23(b) 17 

II. THE PROPOSED SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE, 

 MERITING PRELIMINARY COURT APPROVAL 20 

 A. The Preliminary Fairness Determination 20 

 B. The Girsch Factors 21 

 1. Complexity, Expense and Likely Duration of Litigation 21 

 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 2 of 36 PageID: 3478
- ii - 

 2. The Reaction of the Class to the Settlement 22 

 3. The Stage of Proceedings and the Amount of Discovery is Completed 22 

 4. Risks of Establishing Liability 23 

 5. Risks of Establishing Damages 24 

 6. Risks of Maintaining Class Action Status Through Trial 25 

 7. Ability to Withstand Greater Judgment 26 

 8/9. The Range of Reasonableness of the Settlement Fund in Light of the 

 Best Possible Recovery and All the Attendant Risks of Litigation 26 

 C. The Proposed Notice Plan Satisfies Rule 23 and Due Process 28 

CONCLUSION 30 

 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 3 of 36 PageID: 3479
- iii - 

TABLE OF AUTHORITIES 

CASES 

Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1998) 11 

Armstrong v. Bd. of Sch. Dirs. of City of Milwaukee, 616 F.2d 305 (7th Cir. 1980) 26 

Augenbuam v. Forman, 2006 WL 1716916 (Del. Ch. June 21, 2006) 27 

Baby Neal ex rel. Kanter v. Casey, 43 F.3d 48 (3d Cir. 1994) 14 

Barnes v. American Tobacco, Inc., 161 F.3d 127 (3d Cir. 1998) 15 

Danvers Motor Co., Inc. v. Ford Motor Co., 543 F.3d 141 (3d Cir. 2008) 15 

Desantis v. Snap-On Tools Co., LLC, 2006 WL 3068584 (D.N.J. 2006) 26 

Dewey v. Volkswagen of America, 728 F. Supp. 2d 546 (D.N.J. 2010) 16 

Eisenberg v. Chicago Milwaukee Corp., 1988 WL 112910 (Del. Ch. Oct. 25, 1988) 27 

Eisenberg v. Gagnon, 766 F.2d 770 (3d Cir. 1985) 15

Gen. Tel. Co. of SW v. Falcon, 457 U.S. 147 (1982) 11 

Girsch v. Jepson, 521 F.2d 153 (3d Cir. 1975) 21 

Inmates of Northumberland County Prison v. Reish, 2009 U.S. Dist. LEXIS 126479 

 (M.D.Pa. Mar. 17, 2009) 18 

In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) 21 

In re Cmty. Bank of N. Virginia, 418 F.3d 277 (3d Cir. 2005) 11 

In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 

 (3d Cir. 1995) 11 

In re Ikon Office Solutions, Inc. Securities Litigation, 191 F.R.D. 457(E.D.Pa. 2000) 17 

In re Lear Corp. Shareholder Litig., 926 A.2d 94 (Del. Ch. 2007) 28 

In re Managerial, Professional and Technical Employees Antitrust Litigation, 

 2006 WL 38937 (D.N.J. 2006) 17 

In re Netsmart Tech., Inc. Shareholder Litig., 924 A.2d 171, 207 (Del. Ch. 2007) 28 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 4 of 36 PageID: 3480
- iv - 

In re Prudential Insurance Co. of Am. Sales Practices Litig., 962 F. Supp. 450 

 (D.N.J. 1997), aff’d, 148 F.3d 283 (3d Cir. 1998) 12 

In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 317 (3d Cir. 1998) 20 

In re Sch. Asbestos Litig., 921 F.2d 1330 (3d Cir. 1986) 11 

In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004) 11 

Johnston v. HBO Film Mgmt., Inc., 265 F.3d 178 (3d Cir. 2001) 14 

Jones v. Commerce Bancorp, 2007 WL 2085357 (D.N.J. July 16, 2007) 12

Lewis v. Curtis, 671 F.2d 779 (3d Cir. 1982) 16 

Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65 (D.N.J. 1993), 

vacated and remanded, 171 F.3d 818 (3d Cir. 1999) 12 

MacAndrews & Forbes Holdings, Inc. v. Revlon, Inc., 501 A.2d 1239 (Del. Ch. 1985) 24 

Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) 28 

New Directions Treatment Serv. v. City of Reading, 490 F.3d 293 (3d Cir. 2007) 16 

Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154 (3d Cir. 2001) 15 

Serio v. Wachovia Securities, LLC, 2009 WL 900167 (D.N.J. 2009) 18 

Simon v. KPMG LLP, 2006 WL 1541048 (D.N.J. 2006) 26 

Smith v. Prof’l Billing & Mgt. Serv., Inc., 2007 WL 4191749 (D.N.J. Nov. 21, 2007) 12 

Spark v. MBNA Corp., 48 Fed. Appx. 385 (3d Cir. 2002) 26 

Stewart v. Abraham, 275 F.3d 220 (3d Cir. 2001) 13 

Tech v. United States, 271 F.R.D. 451 (M.D.Pa. 2010) 18 

Thomas v. SmithKline Beecham Corp., 201 F.R.D. 386 (E.D.Pa. 2001) 18 

Weiss v. Mercedes-Benz of North America, 899 F.Supp. 1297 (D.N.J. 1995) 23 

West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710 (S.D.N.Y. 1970), 

aff’d, 440 F.2d 1079 (2d Cir. 1971) 23 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 5 of 36 PageID: 3481
- v - 

OTHER AUTHORITIES 

Fed. R. Civ. P. 23 11 

MANUAL FOR COMPLEX LITIGATION. (SECOND), § 30.44 (1985) 21 

MANUAL FOR COMPLEX LITIGATION, § 21.633 (4th ed. 2004) 12 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 6 of 36 PageID: 3482
- 1 - 

PRELIMINARY STATEMENT

This motion is brought pursuant to Rule 23(e) seeking preliminary approval of a 

proposed settlement which will resolve the claims asserted in this litigation. This action and 

related settlement raise the bar for the benefits obtained by a shareholder plaintiff in expedited 

merger litigation. Plaintiff Louisiana Municipal Police Employees’ Retirement System 

(“LAMPERS” or “Plaintiff”), on behalf of itself and all other similarly situated public 

shareholders of Medco Health Solutions, Inc. (hereafter, “Medco” or the “Company”) and 

Plaintiff’s counsel1 caused Defendants Medco and Express Scripts, Inc. (“Express Scripts”) to 

substantially rewrite the terms and timing of their merger. Settlement of this action not only 

severely modified deal protections that virtually precluded the Medco board of directors (the 

“Medco Board” or the “Board”) from entertaining competing proposals for the Company, it also 

eliminated ambiguity and time constraints that interfered with a fully informed merger vote. 

Most notably, this action has achieved an unprecedented $300 million reduction in a merger 

termination fee that stood in the way of the Board exercising its legally prescribed fiduciary duty 

to act in the best interest of the Company’s shareholders. 

On July 21, 2011, after a series of setbacks in its business operations, the Company 

announced that the Board agreed to sell the Company to Express Scripts for roughly $71.36 per 

Medco share. The purchase price consists of $28.80 in cash and 0.81 Express Scripts shares for 

each Medco share (the “Proposed Transaction”). The Proposed Transaction values Medco at 

approximately $29 billion. 

While the Company and the Board insisted that the Company’s recent setbacks, including 

one announced the same day as the Proposed Transaction, were unrelated to the Proposed 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 7 of 36 PageID: 3483
- 2 - 

Transaction, Medco shareholders were left to believe that the Board had simply given up on 

running the apparently troubled Company. This sentiment was underscored by the humble 

premium offered in the deal. Most concerning for Medco shareholders, however, were the deal 

protections in the Agreement and plan of Merger (the “Merger Agreement”) that created 

tremendous hurdles to any potential superior offers. 

After Plaintiff filed this action on July 22, 2011, counsel for Defendants went on an overt 

campaign to shift the adjudication of the underlying claims to their preferred forum – the 

Delaware Court of Chancery. While Plaintiff and Plaintiff’s counsel were trying to effectively 

litigate the merits of this action, Defendants and their counsel were imposing an additional 

burden by way of extensive motion practice and gamesmanship undertaken for the sole purpose 

of litigating in their favored court and against the prosecution counsel of their liking. 

Nonetheless, through zealous advocacy and eventual settlement, Plaintiff and Plaintiff’s 

counsel were able to achieve remarkable relief for Medco shareholders in the form of revision of 

the Merger Agreement made in conjunction with additional disclosures and a beneficial delay in 

the merger vote date. 

 1

 Plaintiff’s counsel, as used herein, refers to Carella, Byrne, Cecchi, Olstein, Brody & 

Agnello; Bernstein Litowitz Berger & Grossmann LLP; and Grant & Eisenhofer P.A. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 8 of 36 PageID: 3484
- 3 - 

STATEMENT OF THE CASE

A. Procedural history

 This action was filed on July 22, 2011, seeking to enjoin the then-recently announced 

agreement by Defendant Express Scripts to purchase Defendant Medco. It was filed the same 

afternoon as another complaint that was filed in the Delaware Court of Chancery, which also 

challenged the Proposed Transaction. Plaintiff here alleged that the Medco Board breached its 

fiduciary duty to shareholders because the per-share stock price they negotiated was inadequate 

relative to the extraordinary deal protection provisions the Board agreed to accept in the Merger 

Agreement. In particular, Plaintiff took issue with a virtually unprecedented breakup fee of 

nearly $1 billion. See Amended Complaint, Docket Entry 10. 

As initially announced, the Proposed Transaction was scheduled to close some time in the 

first half of 2012. See Declaration of Lindsey H. Taylor, Exhibit A (“Taylor Decl. Ex. __.”). 

The Merger Agreement itself provides that the deal is to close by April 20, 2012, unless that 

deadline is extended by mutual consent. See Section 7.1(b)(ii) of the Merger Agreement, Taylor 

Decl. Ex. B. 

Plaintiff submitted an application for expedited discovery on August 1, 2011. Defendants 

did not respond to that application until shortly before a phone conference with Judge Falk on 

August 3, 2011, when they opposed expedited discovery proceeding here as part of an effort to 

litigate the allegations related to the Proposed Transaction in their preferred forum, Delaware. 

On August 8, 2011, Defendants moved to dismiss Plaintiff’s complaint for lack of subject matter 

jurisdiction. At the same time, Defendants moved to stay this action in favor of the Delaware 

action which, they argued, was more advanced than this action. 

 On August 17, 2011, the Court consolidated all of the federal actions and appointed 

Interim Lead Counsel. The following day, Plaintiff moved for class certification. Defendants 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 9 of 36 PageID: 3485
- 4 - 

then opposed the motion for class certification - notwithstanding the fact that the class 

certification issues were substantially identical to the class certification issues in Delaware – in a 

continued campaign to relocate the adjudication of this case to their favored forum. Defendants’ 

also opposed expedited briefing with respect to class certification here. 

 By way of Opinion dated September 19, 2011, the Court denied Defendants’ motion to 

dismiss and for a stay. The Court found that Plaintiff had pled sufficient facts to satisfy the 

$75,000 jurisdictional threshold and thus, subject matter jurisdiction existed. The Court further 

found that Defendants had failed to satisfy the criteria for a stay. On September 23, 2011, in an 

unending effort to delay this litigation and allow the Delaware actions a “head start” that 

Defendants could point to as a reason why these claims should be adjudicated there, Defendants 

moved to certify the Court’s order denying their motion to dismiss for appeal pursuant to 28 

U.S.C. § 1292(b), and for a stay pending appeal. Plaintiff opposed this motion, arguing that 

Defendants had failed to satisfy the requirements of § 1292(b). 

 On October 6, 2011, Aristotle Holdings, Inc., (“Aristotle”) an affiliate of Express Scripts 

formed for purposes of the merger, filed a joint preliminary proxy statement on behalf of Express 

Scripts and Medco with the Securities Exchange Commission (“SEC”).2

 The preliminary proxy 

statement had blanks for a date sometime within 2011 for the shareholder votes to approve the 

proposed merger. Similarly, in a statement filed with the SEC on Thursday, October 20, 2011, 

Express Scripts stated that it expected a shareholder vote for both companies “to happen around 

the end of the year.”3

 At a court conference in Delaware on October 21, Express Scripts’ 

counsel stated that its shareholder vote may be scheduled for December 16, 2011, far sooner than 

 

2

 See October 6, 2011, Aristotle Form S-4 Proxy Statement “Proxy,” Taylor Decl. Ex. C. 

3

 Taylor Decl. Ex. D. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 10 of 36 PageID: 3486
- 5 - 

it appeared earlier in the litigation.4 See Docket Entry 84-3, at 17-18. This ambitious schedule 

was a shock to Medco stockholders who were given the impression by the Company that the 

Proposed Transaction was not on track to close until well into 2012. It also left Medco 

stockholders at a loss as to why they would be forced to vote on the Proposed Transaction that 

was still subject to months of regulatory scrutiny that it might not survive. 

 On October 25, 2011, the Court granted Defendants’ motion to certify for appeal the 

denial of their motion to dismiss, but denied Defendants’ motion for a stay pending appeal. 

On October 27, 2011, Plaintiff filed an Order to Show Cause seeking a preliminary 

injunction to stop the scheduled shareholder vote and to enjoin enforcement of certain deal 

protection provisions in the Merger Agreement, which are described below. Express Scripts 

opposed this application, predictably arguing that any injunction application should be heard in 

Delaware, not New Jersey. 

On October 31, 2011, Express Scripts filed with the Third Circuit a petition for leave to 

appeal, a motion for a stay pending appeal, and a motion for expedited treatment of its appeal. 

Medco joined these applications. The Third Circuit directed that Plaintiff file opposition papers 

by Friday, November 4 and that Express Scripts file reply papers by Monday, November 7. 

While those applications were being briefed, counsel for the parties negotiated a 

settlement in principle, the terms of which are explained below. The settlement was approved by 

both Express Scripts and Medco’s boards of directors on Tuesday, November 8, 2011. 

 

4

 Since Express Scripts set at least a target date for a shareholder vote, the Delaware court 

directed the parties there to file both a consolidated amended complaint and an application for a 

preliminary injunction. See Docket Entry 84-3, 84-4. 

 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 11 of 36 PageID: 3487
- 6 - 

B. Medco’s Business and Negotiation of the Merger

Medco is a pharmaceutical benefits provider. A material part of its business is managing 

the pharmaceutical needs of large institutions and health insurance plans. 

In March 2011, a report by Steptoe & Johnson LLP, outside counsel to one of the largest 

health benefits providers in the world, California Public Employees Retirement System’s 

(“CalPERS”), revealed that Medco had paid a former CalPERS’ board member $4 million to 

help secure for Medco a contract with CalPERS. See Taylor Exs. E & F. Following the 

disturbing revelation of this apparent act of bribery, CalPERS dropped Medco from the list of 

potential candidates to administer prescription drug benefits for the fund’s members. Medco has 

also been subjected to several lawsuits and government investigations relating to these alleged 

improprieties. 

Just before and following disclosure of the CalPERS scandal, Medco lost several 

significant contracts. In January 2011, MemberHealth, LLC (“MemberHealth”) provided the 

Company with notice that it was terminating its Medicare Part D prescription benefits 

management agreement with Medco at the end of 2011. On May 27, 2011, Medco announced 

that the Blue Cross Blue Shield Association planned to transition its mail order and specialty 

pharmacy benefit coverage for the Federal Employee Program (“FEP”) to an alternate provider, 

effective January 1, 2012. Then on July 21, 2011, the same day Medco announced the Proposed 

Transaction, the Company revealed that UnitedHealthcare had declined to renew a contract 

worth roughly $11 billion. See Taylor Decl. Ex. G. Additionally, Medco had recently received 

a subpoena from the United States Department of Justice (“DOJ”) requesting documents related 

to the Company’s relationship with drug-maker AstraZeneca PLC. See Taylor Decl. Ex. H. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 12 of 36 PageID: 3488
- 7 - 

Despite revelation of the alleged bribery, the loss of the MemberHealth, FEP, and 

UnitedHealthcare contracts, and the DOJ subpoena, the Company’s financial performance 

remained remarkably stable. In fact, Medco has reported record revenues during the most recent 

quarters. See Taylor Decl. Ex. I. However, the burgeoning scandals threaten the continued 

tenure with the Company of Medco’s Chief Executive Officer (“CEO”), and likely a broader 

swath of its senior management. 

 1. Announcement of the Merger

On July 21, 2011, the same day Medco announced the loss of the UnitedHealthcare 

Contract, Express Scripts and Medco announced that the companies had entered into a the 

Merger Agreement whereby Express Scripts would acquire its smaller rival in a deal worth 

roughly $22 billion. In a conference call shortly thereafter, Medco admitted that losing the 

UnitedHealthcare contract was a factor in agreeing to a deal with Express Scripts, but insisted 

that the negotiations “were on completely independent tracks and came to their own independent 

conclusion.” 

Pursuant to the Merger Agreement, Express Scripts will pay $28.80 in cash and 0.81 of 

an Express Scripts share for each Medco share, valuing the Company at $71.36 per share at the 

time of the announcement. See Proxy at 3, Taylor Decl. Ex. C. Despite the size and regulatory 

complexities of the Proposed Transaction, the deal was negotiated and documented in less than 

one month. See Proxy at 79, Taylor Decl. Ex. C. 

2. Lock-Up Provisions in Merger Agreement 

While Express Scripts and Medco touted the Proposed Transaction as a significant 

benefit to Medco’s shareholders, Express Scripts effectively tied Medco’s hands against 

considering a better offer or even changing its recommendation of the Proposed Transaction to 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 13 of 36 PageID: 3489
- 8 - 

Medco shareholders. Among the “deal protection” terms of the Merger Agreement was a 

staggering $950 million Termination Fee5 (the “Termination Fee”), which would be payable by 

Medco if, among other situations, the Board terminated the Merger Agreement to accept a 

superior bid. See Section 7.3(e) of the Merger Agreement, Taylor Decl. Ex. B. 

(e) In the event that (A) this Agreement is, or, at the time of a termination of 

this Agreement, could have been, terminated pursuant to Section 7.1(b)(ii)6 or 

Section 7.1(b)(iv)7 and (B) a Takeover Proposal (substituting “40%” for “15%” in 

the definition of “Takeover Proposal”) for Plato8

 (whether or not modified after it 

was first made) is publicly disclosed, announced or otherwise made public (in 

each case, other than by Aristotle) (1) in the case of Section 7.1(b)(ii), prior to the 

date of termination and the vote seeking the Plato Stockholder Approval at the 

Plato Stockholder Meeting had not been taken prior to the seventh (7th) Business 

Day prior to the Outside Date (as the same may be extended) and (2) in the case 

of Section 7.1(b)(iv), prior to the date of the Plato Stockholder Meeting, then 

Plato shall pay to Aristotle on the date of termination, 35% of the Termination 

Fee plus the Aristotle Expenses (for purposes of this Section 7.3(e), not to exceed 

$100,000,000), payable by wire transfer of same day funds, on the date of such 

termination, and (C) if, within one (1) year following such termination, Plato 

enters into a definitive agreement providing for, or otherwise consummates, a 

Takeover Proposal (substituting “40%” for “15%” in the definition of “Takeover 

Proposal”), then Plato shall pay to Aristotle the Termination Fee less any amount 

of the Termination Fee and any Aristotle Expenses previously paid, by wire 

transfer of same day funds, by wire transfer of same day funds, upon the earlier of 

the public announcement of Plato’s entry into any such agreement or the 

consummation of any such transaction. In the event such a Takeover Proposal 

(substituting 40% for 15% in the definition of “Takeover Proposal”) is 

consummated prior to the termination of this Agreement, then Plato shall 

promptly pay to Aristotle the Termination Fee. 

See Section 7.3(e) of the Merger Agreement, Taylor Decl. Ex. B. 

 

5

 “Termination Fee”, as defined in Section 8.15 of the Merger Agreement “means an 

amount equal to $950,000,000.” 

6

 This section provides that the Agreement may be terminated if the merger has not closed 

by April 20, 2012, and the date has not been extended by mutual consent. 

7

 This section provides that the Agreement may be terminated the Medco shareholders do 

not vote in favor of the merger. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 14 of 36 PageID: 3490
- 9 - 

By agreeing to the $950 million Termination Fee, the Medco Board eliminated any 

possibility of increasing or maximizing shareholder value by essentially foreclosing the 

possibility of any competing bids. Indeed, any potential bidder would essentially need to have 

an additional $1 billion in cash on hand to proceed with an offer. The Termination Fee was also 

“single-trigger” meaning that it was payable if the Medco Board simply decided to change its 

recommendation on the Proposed Transaction, even in the absence of a competing bid. Thus, a 

change of recommendation, even if the in the best interest of the Company, was virtually barred 

by prospect of an immediate $1 billion cash divestiture. 

The Merger Agreement also did not include a “Go-Shop” provision, i.e., a provision that 

would have allowed Medco’s Board to canvas the market to determine whether potential suitors 

were interested in making a competing bid. Rather, the Merger Agreement included a “No 

Solicitation” clause (the “No-Shop”), further limiting the Board’s ability to entertain superior 

strategic alternatives. See Section 5.4(a) of the Merger Agreement, Taylor Decl. Ex. B. The NoShop provision was so restrictive that it prevented Medco from even encouraging competing bids 

for the Company. 

Finally, the Medco Board also granted Express Scripts a “Matching Right” in the Merger 

Agreement that provided Express Scripts six business days to revise its proposal or persuade the 

Medco Board not to change its recommendation on the merger in the face of a proposal from a 

third-party suitor. See Section 5.4(b) of the Merger Agreement, Taylor Decl. Ex. B. The 

Matching Right dissuaded interested parties from making an offer for the Company by providing 

Express Scripts the opportunity to make repeated matching bids to counter any competing offers. 

 8

 Presumably to keep the identities of the parties’ secret while the contract was being 

negotiated, Medco was initially defined in the Merger Agreement as “Plato” and Express Scripts 

and defined as “Aristotle.” See Merger Agreement at 1, Taylor Decl. Ex. B. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 15 of 36 PageID: 3491
- 10 - 

C. The Settlement

 While Plaintiff’s application for a preliminary injunction and Express Scripts’ petition for 

leave to appeal were pending, counsel for the parties negotiated and agreed to a preliminary 

settlement agreement that is unparalleled in nature. First, the settlement provided for substantial 

modification to the deal protection terms in the Merger Agreement. Most notably, the 

Termination Fee was reduced by an unprecedented $300 million. Unless Medco were to 

terminate the Agreement with no competing bid having been made, the Termination Fee was 

reduced from $950 million to $650 million. Further, the Matching Right was modified to allow 

Express Scripts only one opportunity, rather than unlimited opportunities, to match a competing 

bid. The settlement also provided that Express Scripts and Medco would include additional 

disclosures in the final proxy statement that was filed on November 18, 2011 and distributed to 

both companies’ shareholders in soliciting approval of the Proposed Transaction. Finally, in 

order to allow the therapeutic benefits of the reduction in the deal protections and the fulsome 

disclosures to take effect, Express Scripts and Medco agreed to postpone a shareholder vote to 

approve the merger to no earlier than December 21, 2011. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 16 of 36 PageID: 3492
- 11 - 

 ARGUMENT

I. THE SETTLEMENT CLASS SHOULD BE CERTIFIED

 Plaintiffs respectfully request that a Class be certified for settlement purposes pursuant to 

Rule 23(b)(1) and (b)(2). For the reasons set forth below, certification under these Rules is 

appropriate because Express Scripts and Medco could be subjected to differing standards of 

conduct if claims of individual class members were prosecuted on an individual basis, and 

because the relief sought in the Settlement is exclusively injunctive and declaratory.

A. Standard of Review 

“There is an overriding public interest in settling class action litigation, and it should 

therefore be encouraged.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 535 (3d Cir. 

2004); see also In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 

768, 784 (3d Cir. 1995) (“the law favors settlement, particularly in class actions and other 

complex cases where substantial judicial resources can be conserved by avoiding formal 

litigation”); In re Sch. Asbestos Litig., 921 F.2d 1330, 1333 (3d Cir. 1990) (noting Third 

Circuit’s policy of “encouraging settlement of complex litigation that otherwise could linger for 

years”); In re Cmty. Bank of N. Virginia, 418 F.3d 277, 299 (3d Cir. 2005) (“all Federal Circuits 

recognize the utility of ... ‘settlement classes’ as a means to facilitate the settlement of complex 

nationwide class actions”) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618 (1998)). 

Preliminary approval of a class action settlement involves two fundamental inquiries. 

First, the Court must determine whether a class can be certified under Rule 23. Amchem Prods., 

521 U.S. at 620. A “rigorous analysis” is applied to ensure that each requirement for class 

certification is satisfied. Gen. Tel. Co. of SW v. Falcon, 457 U.S. 147, 161 (1982). In certifying a 

class for settlement purposes, “a district court need not inquire whether the case, if tried, would 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 17 of 36 PageID: 3493
- 12 - 

present intractable management problems . . . for the proposal is that there be no trial.” Amchem, 

521 U.S. at 620. Undiluted attention to the remaining requirements is of vital importance. Id.

The second inquiry is whether the proposed settlement appears “fair, reasonable and 

adequate.” Fed. R. Civ. P. 23(e); Warfarin Sodium, 391 F.3d at 534. “Preliminary approval is 

appropriate where the proposed settlement is the result of the parties’ good faith negotiations, 

there are no obvious deficiencies and the settlement falls within the range of reason.” Smith v. 

Prof’l Billing & Mgt. Serv., Inc., 2007 WL 4191749, at *1 (D.N.J. Nov. 21, 2007); Jones v. 

Commerce Bancorp, 2007 WL 2085357, at *2 (D.N.J. July 16, 2007). 

B. Class Certification Should Be Granted For Settlement Purposes under Rule 23

 

Rule 23(a) sets forth four prerequisites to class certification applicable to all class actions, 

including classes for purposes of settlement: (1) numerosity; (2) commonality; (3) typicality; 

and (4) adequacy of representation. Fed. R. Civ. P. 23(a); see also Warfarin Sodium, 391 F.3d at 

527; see also Amchem, 521 U.S. at 613. In addition, the class must meet one of the three 

prerequisites of Rule 23(b). Fed. R. Civ. P. 23 (b); Cmty. Bank, 418 F.3d at 302; see also

Manual for Complex Litigation, § 21.633 (4th ed. 2004). 

C. The Proposed Class Satisfies the Criteria of Rule 23(a)

 1. Numerosity 

Rule 23(a)(1) requires that the class be so numerous that joinder of all class members is 

“impracticable.” Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65, 73 (D.N.J. 

1993), vacated and remanded, 171 F.3d 818 (3d Cir. 1999). For purposes of Rule 23(a)(1), 

“impracticable” does not mean impossible, “only that ‘common sense’ suggests that it would be 

difficult or inconvenient to join all class members.” See In re Prudential Insurance Co. of Am. 

Sales Practices Litig., 962 F. Supp. 450, 510 (D.N.J. 1997), aff’d, 148 F.3d 283 (3d Cir. 1998); 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 18 of 36 PageID: 3494
- 13 - 

see also Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001) (numerosity requirement 

satisfied “if the named plaintiff demonstrates that the potential number of plaintiffs exceeds 40”). 

There are many thousands of Medco shareholders across the country, owning over 387 

million shares of stock. Given the number and geographic distribution of the Class members, 

joinder of all Class members would be impracticable, and the proposed Settlement Class easily 

satisfies Rule 23’s numerosity requirement. Liberty Lincoln Mercury, Inc. 149 F.R.D. at 74. 

2. Commonality 

The Rule 23(a)(2) requirement is satisfied where, as here, there exist “questions of fact 

and law which are common to the class.” All questions of fact and law need not be common to 

satisfy the rule. Rather, the commonality requirement is easily satisfied by the existence of one 

common question of law or fact. Warfarin Sodium, 391 F.3d at 527-28; see also Baby Neal ex 

rel. Kanter v. Casey, 43 F.3d 48, 56 (3d Cir. 1994) (commonality requirement not demanding 

because it may be satisfied by a single common issue). “Because the [commonality] requirement 

may be satisfied by a single common issue, it is easily met.” Baby Neal ex rel. Kanter, 43 F.3d 

at 56. 

Here, Plaintiff is asserting claims on behalf of all Medco shareholders, alleging that the 

Defendant board members breached their fiduciary duty in agreeing to certain lock-up provisions 

in the Merger Agreement. Defendants acted on a common basis with respect to all shareholders, 

since those lock-up provisions affected all shareholders equally. The agreed changes to those 

lock-up provisions, and the additional disclosures to be added to the final proxy statement, 

likewise affect all shareholders equally. Rule 23(a)(2)’s requirement of a common question of 

law or fact is satisfied. 

 3. Typicality

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 19 of 36 PageID: 3495
- 14 - 

Rule 23(a)(3) requires that the claims or defenses of the representative parties are typical 

of the claims or defenses of the class and seeks to ensure that the interests of the named plaintiffs 

align with those of the class. Baby Neal ex rel Kanter, 43 F.3d at 57. In considering typicality 

under Rule 23(a)(3), the court must determine whether “the named plaintiffs’ individual 

circumstances are markedly different or...the legal theory upon which the claims are based 

differs from that upon which the claims of other class members will be based.” Johnston v. HBO 

Film Mgmt., Inc., 265 F.3d 178, 184 (3d Cir. 2001) (citations omitted). Typicality does not 

require that all class members share identical claims. Id. The typicality requirement is 

permissive: representative claims are “typical” if they are reasonably co-extensive with those of 

absent class members; they need not be substantially identical. See Newton v. Merrill Lynch, 

Pierce, Fenner & Smith, Inc., 259 F.3d 154, 183-84 (3d Cir. 2001); Barnes v. Am. Tobacco, Inc., 

161 F.3d 127, 141 (3d Cir. 1998). Courts have held that if the claims of the named plaintiffs and 

putative class members involve the same conduct by the defendant, typicality is established 

regardless of the factual differences. Danvers Motor Co., Inc. v. Ford Motor Co., 543 F.3d 141, 

150 (3d Cir. 2008) (“factual differences will not defeat typicality if named plaintiffs’ claims arise 

from same event or course of conduct that gives rise to claims of other class members and are 

based on same legal theory”) (citations omitted); Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d 

Cir. 1985) (typicality not defeated by investments in different limited partnerships because 

claims were based on same alleged omissions and misrepresentations). 

Typicality is readily established here. Plaintiff’s circumstances are exactly the same as 

all other Medco shareholders and the legal theory upon which its claims are based are exactly the 

same as those of other Medco shareholders. Indeed, the reason that Plaintiff’s claims are typical 

is the same reason why there are common issues. Defendants acted or failed to act in the same 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 20 of 36 PageID: 3496
- 15 - 

manner identically with respect to all shareholders. Accordingly, they suffered the same injury. 

The typicality requirement is satisfied. 

 4. Adequacy

Rule 23(a)(4) requires that class representatives “fairly and adequately protect the 

interests of the class.” Fed. R. Civ. P. 23(a)(4). The adequacy requirement is met if plaintiffs: (1) 

are represented by competent counsel; and (2) the named plaintiffs’ interests are sufficiently 

aligned with the interests of the putative class members. GM Trucks, 55 F.3d at 800. Here, the 

requirements for adequacy are satisfied. 

The first requirement, the competency of counsel, is the central focus of the “adequacy” 

inquiry for complex consumer class actions. In this case, there is no doubt that Class Counsel 

are qualified and capable of prosecuting this action. The Class is represented by law firms with 

national reputations in the class action field. This Court previously reviewed and considered, and 

is thus acquainted with, the relevant qualifications and experience of the undersigned firms 

appointed to serve in leadership roles. This Court has seen their work on behalf of the class, in 

this and other cases, as was set forth in their motion for appointment as Interim Class Counsel. 

This proven track record demonstrates their ability to prosecute this class action with vigor. New 

Directions Treatment Serv. v. City of Reading, 490 F.3d 293, 313 (3d Cir. 2007). 

The second requirement is also met because the Plaintiff’s interests are sufficiently 

comparable with the other Class members to satisfy Rule 23(a)(4). The “adequacy” requirement 

asks only whether the representative’s interests are comparable to those of the absent class 

members or conflict with those of the class. Johnston, 265 F.3d at 185. Only a conflict that goes 

to the very subject matter of the litigation will defeat a party’s claim of representative status. 

Dewey v. Volkswagen of America, 728 F. Supp. 2d 546, 567 (D.N.J. 2010); see also

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 21 of 36 PageID: 3497
- 16 - 

Lewis v. Curtis, 671 F.2d 779, 788 (3d Cir. 1982). Here, Plaintiff received the same disclosures 

and received the same consideration under the Merger as all other shareholders, would have to 

prove the same facts as any other shareholder to establish its claims, and has precisely the same 

interest and incentive as any other shareholder to pursue claims related to the Proposed 

Transaction. See Prudential, 148 F.3d at 313 (“As discussed, the crux of this class action is the 

allegation that Prudential engaged in a scheme to defraud policyholders by means of companywide deceptive sales practices. The named parties, like the members of the class, would need to 

establish this scheme in order to succeed on any of the claims in the Second Amended 

Consolidated Complaint. Even those class members with ‘other’ claims share the common task 

of demonstrating the existence and implementation of this scheme. Consequently, we believe the 

proposed class satisfies the adequacy of representation requirement of Rule 23(a).”) 

 Additionally, there is no conflict between the Plaintiff and any absent Class member that 

would interfere with their ability to serve the interests of the Class. The interests of the Plaintiff 

are coextensive with the Class, since it brings identical claims and all Class members are 

therefore fully represented. Thus, the adequacy requirement of Rule 23(a)(4) is satisfied. 

D. The Proposed Class Satisfies the Criteria of Rule 23(b)

In the present case, the Plaintiff seeks certification under Rule 23(b)(1) and (2). Rule 

23(b)(1) allows certification of a class if: a) prosecuting separate actions would create a risk of 

inconsistent judgments which would establish incompatible standards of conduct for the party 

opposing the class or b) if adjudicating the claims of individual class members would, as a 

practical matter, be dispositive of the interests of non-party class members or impede their 

abilities to protect their own interests. Rule 23(b)(1) defines two types of class actions designed 

to prevent prejudice to parties arising from multiple potential suits involving the same subject 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 22 of 36 PageID: 3498
- 17 - 

matter. In re Managerial, Prof’l & Technical Emps. Antitrust Litig., 2006 WL 38937 at *4 

(D.N.J. 2006). The difference between the two subsections sections is that Rule 23(b)(1)(A) 

focuses on possible prejudice to the defendants while Rule 23(b)(1)(B) focuses on possible 

prejudice to the plaintiffs. In re Ikon Office Solutions, Inc. Securities Litig., 191 F.R.D. 457, 466 

(E.D.Pa. 2000). Rule 23(b)(2) allows certification of a class where the party opposing the class 

has acted or refused to act in a manner generally applicable to the class, so that final injunctive or 

declaratory relief would be appropriate with respect to the class as a whole. Rule 23(b)(2) 

classes are limited to class actions seeking primarily injunctive or declaratory relief. Barnes v. 

American Tobacco, Inc., 161 F.3d 127, 142 (3d Cir. 1998). 

 Rule 23(b)(1) allows for the certification of a class if: 

the prosecution of separate actions by or against individual members of 

the class would create a risk of 

(A) inconsistent or varying adjudications with respect to individual 

members of the class which would establish incompatible standards of 

conduct for the party opposing the class, or 

(B) adjudications with respect to individual members of the class which 

would as a practical matter be dispositive of the interests of the other 

members not parties to the adjudications or substantially impair or impede 

their ability to protect their interests. 

 Rule 23(b)(2) allows for certification of a class if “the party opposing the class has acted 

or refused to act on grounds generally applicable to the class, thereby making appropriate final 

injunctive relief or corresponding declaratory relief with respect to the class as a whole.” The 

plaintiff must make two showings in order to proceed under Rule 23(b)(2). First, the complaint 

must seek relief which is predominantly injunctive or declaratory. Second, the plaintiff must 

demonstrate that defendants acted or refused to act on grounds generally applicable to the class. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 23 of 36 PageID: 3499
- 18 - 

The second requirement is shown when defendant’s conduct constitutes a pattern of activity. 

Thomas v. SmithKline Beecham Corp., 201 F.R.D. 386, 397 (E.D.Pa. 2001). 

 Both Rule 23(b)(1) and 23(b)(2) classes are mandatory classes, i.e., no opt-outs are 

allowed. See Thomas, id.; (Rule 23(b)(1)); Serio v. Wachovia Securities, LLC, 2009 WL 900167 

at *5 (D.N.J. 2009)(Rule 23(b)(2)). 

 Here, Plaintiff has satisfied the criteria of both Rule 23(b)(1) and 23(b)(2). The Class 

satisfies Rule 23(b)(1)(A) because there is a significant risk that if individual cases were brought 

on behalf of shareholders, portions of the Merger Agreement might be found to be invalid in one 

case, other portions might be invalid in another case, and all of the provisions might be held to be 

valid in still another case. This could expose Medco to different standards of conduct with 

respect to a group to which Medco has an obligation under applicable securities laws and 

regulations to treat uniformly. 

 The Class is also certifiable under Rule 23(b)(2) because the settlement relief is 

exclusively injunctive or declaratory. “Where injunctive and declaratory reliefs are sought, “the 

dictates of Rule 23(b) are ‘almost automatically satisfied’.” Tech v. United States, 271 F.R.D. 

451, 456 (M.D.Pa. 2010) (quoting Inmates of Northumberland County Prison v. Reish, 2009 

U.S. Dist. LEXIS 126479, *75 (M.D.Pa. Mar. 17, 2009)). The settlement consists of Medco and 

Express Scripts agreeing to modify certain provisions of the Merger Agreement and making 

additional disclosures set in the proxy statement and other SEC filings in advance of the 

shareholder vote on the Merger so that shareholders would have more complete information for 

voting whether to approve the merger. Further, Medco acted or refused to act, however it might 

be characterized, on grounds generally applicable to the class. The terms of the Merger 

Agreement affect all of Medco’s shareholders to the same extent. Nothing in the Merger 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 24 of 36 PageID: 3500
- 19 - 

Agreement affects different individual shareholders or different groups of shareholders 

differently. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 25 of 36 PageID: 3501
- 20 - 

II. THE PROPOSED SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE, 

MERITING PRELIMINARY COURT APPROVAL

Rule 23(e) requires a determination by the district court that the proposed settlement is 

“fair, reasonable and adequate.” GM Trucks, 55 F.3d at 785. As noted above, preliminary 

approval should be granted where “the proposed settlement appears to be the product of serious, 

informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant 

preferential treatment to class representatives or segments of the class and falls within the range 

of possible approval.” Jones, 2007 WL 2085357, at *2; see also Smith, 2007 WL 4191749, at 

*1. The proposed Settlement in this case meets that test because it provides all of the relief 

which could have reasonably been obtained in litigation. Accordingly, for the reasons set forth 

below, it should be preliminarily approved.

A. The Preliminary Fairness Determination

 Rule 23(e) requires judicial approval for a compromise of claims brought on a class basis. 

Fed. R. Civ. P. 23(e). In deciding whether to approve a settlement, the Third Circuit has a strong 

judicial policy that encourages class settlements especially those that are the product of arm’slength negotiations. See In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 317 

(3d Cir. 1998); see also In re Cmty. Bank of N. Virginia, 418 F.3d 277, 299 (3d Cir. 2005) (“all 

Federal Circuits recognize the utility of...’settlement classes’ as a means to facilitate the 

settlement of complex nationwide class actions”); In re Gen. Motors Corp. Pick-Up Truck Fuel 

Tank Prods. Liab. Litig., 55 F.3d 768, 784 (3d Cir. 1995) (“the law favors settlement, 

particularly in class actions and other complex cases where substantial judicial resources can be 

conserved by avoiding formal litigation”). Accordingly, in making its assessment pursuant to 

Rule 23(e), the Court’s intrusion upon what is otherwise a private consensual agreement 

negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 26 of 36 PageID: 3502
- 21 - 

reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion 

between, the negotiating parties, and that the settlement, taken as a whole is fair, reasonable and 

adequate to all concerned. Fed. R. Civ. P. 23(e); Warfarin Sodium, 391 F.3d at 534. “If the 

proposed settlement appears to be the product of serious, informed, non-collusive negotiations, 

has no obvious deficiencies, does not improperly grant preferential treatment to class 

representatives or segments of the class, and falls within the range of possible approval, then the 

court should direct that the notice be given to the class members of a formal fairness hearing” 

MANUAL FOR COMPLEX LITIGATION (SECOND), § 30.44 (1985). As summarized below, and as 

will be detailed further in a subsequent motion for final approval of the Settlement, a preview of 

the factors considered by courts in granting final approval of class action settlements 

demonstrates that this Settlement is well within the range of possible approval. Therefore, the 

Court should allow notice of the settlement to be disseminated to the Class. 

B. The Girsch Factors

The Third Circuit has adopted a nine-factor test to determine whether a settlement is 

“fair, reasonable, and adequate.” The elements of this test – known as the “Girsch factors” – are: 

(1) the complexity and duration of the litigation; (2) the reaction of the class to the 

settlement; (3) the stage of the proceedings; (4) the risks of establishing liability; 

(5) the risks of establishing damages; (6) the risks of maintaining a class action; 

(7) the ability of the defendants to withstand a greater judgment; (8) the range of 

reasonableness of the settlement in light of the best recovery; and (9) the range of 

reasonableness of the settlement in light of all the attendant risks of litigation. 

GM Trucks, 55 F.3d at 785 (citing Girsch v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975)). 

1. Complexity, Expense, and Likely Duration of the Litigation

The first Girsch factor “captures the probable costs, in both time and money, of continued 

litigation.” In re Cendant Corp. Litig., 264 F.3d 201, 233 (3d Cir. 2001). “By measuring the 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 27 of 36 PageID: 3503
- 22 - 

costs of continuing on the adversarial path, a court can gauge the benefit of settling the claim 

amicably.” GM Trucks, 55 F.3d at 812. 

This factor undoubtedly weighs in favor of settlement. In Warfarin Sodium, the parties 

had already litigated the case for three years. 391 F.3d at 537. Nevertheless, the court concluded 

that the first Girsch factor was satisfied: 

We agree with the District Court’s conclusion that this factor favors settlement 

because continuing litigation through trial would have required additional 

discovery, extensive pretrial motions addressing complex factual and legal 

questions, and ultimately a complicated, lengthy trial. Moreover, it was inevitable 

that post-trial motions and appeals would not only further prolong the litigation but 

also reduce the value of any recovery to the class. In a class action of this 

magnitude, which seeks to provide recovery for Coumadin consumers and TPPs 

nationwide, the time and expense leading up to trial would have been significant. 

Id. at 536. 

 This matter has already been heavily litigated and the path from this stage of the litigation 

to a final judgment would likely be much longer and significantly more expensive. This case 

involves a complex $32 billion dollar merger. Litigation of the breach of fiduciary duty claims 

to conclusion would have involved expensive economic evaluations by investment bankers and 

other experts retained by both sides, considerable additional fact and expert discovery, and a 

complex, lengthy trial. 

2. The Reaction of the Class to the Settlement

The second Girsch factor “attempts to gauge whether members of the class support the 

settlement.” Prudential, 148 F.3d at 318. Of course, at this stage, the Court cannot measure the 

number of objectors since class notice has not yet been issued. 

3. The Stage of Proceedings and the Amount of Discovery Completed

The third Girsch factor “captures the degree of case development that class counsel [had] 

accomplished prior to settlement. Through this lens, courts can determine whether counsel had 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 28 of 36 PageID: 3504
- 23 - 

an adequate appreciation of the merits of the case before negotiating.” Cendant, 264 F.3d at 235; 

(Citing GM Trucks, 55 F.3d at 813). 

This inquiry has two aspects: factual and legal. In Prudential, for example, the court 

noted that the parties had filed and argued multiple motions, including case management motions 

and the defendant’s motion to dismiss under Rule 12(b)(6). Prudential, 148 F.3d at 319. The 

factual inquiry involves “an inquiry into the type and amount of discovery the parties have 

undertaken.” Id. The discovery considered by the court includes “informal” discovery received 

from the defendant, third-parties and experts. See, e.g., GM Trucks, 55 F.3d at 813 (expert 

testimony and other evidence from parallel state court proceedings); Prudential, 148 F.3d at 319 

(witness interviews); Cendant, 264 F.3d at 235 (public filings); Warfarin Sodium, 391 F.3d at 

537 (consultation with experts). 

 Here, the Settlement reduces or removes significant portions of the lock-up provisions in 

the Merger Agreement, thus making it easier for a potential other suitor to make a competing bid 

for Medco. Further, the settlement provides for significant additional information for 

shareholders when they vote on the proposed merger. 

4. Risks of Establishing Liability

 “By evaluating the risks of establishing liability, the district court can examine what the 

potential rewards (or downside) of litigation might have been had class counsel elected to litigate 

the claims rather than settle them.” GM Trucks, 55 F.3d at 314. “The risks surrounding a trial on 

the merits are always considerable.” Weiss v. Mercedes-Benz of North America, 899 F.Supp. 

1297, 1301 (D.N.J. 1995); See also, e.g., West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710, 

743-44 (S.D.N.Y. 1970), aff’d, 440 F.2d 1079 (2d Cir. 1971) (“No matter how confident one 

may be of the outcome of litigation, such confidence is often misplaced.”) 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 29 of 36 PageID: 3505
- 24 - 

 In the merger context, directors have a duty to exercise informed business judgment. See 

MacAndrews & Forbes Holdings, Inc. v. Revlon, Inc., 501 A.2d 1239, 1247 (Del. Ch. 1985) 

(“Directors faced with the decision to accept or reject a merger agreement must exercise 

informed business judgment.”) Moreover, directors are required to “‘disclose fully and fairly all 

material information within the board’s control when it seeks shareholder action.’” MacAndrews 

& Forbes Holdings, Inc. v. Revlon, Inc., 501 A.2d 1239, 1247 (Del. Ch. 1985) (quoting cases). 

 While Plaintiff was confident that it would ultimately succeed on its claims, it was also 

aware that this action would continue to be heavily litigated by two of the largest national law 

firms on behalf of Defendants. As with any litigation, there are risks inherent in continuing to 

litigate, but considering that Plaintiff was able to obtain by settlement much of the relief it was 

seeking in the litigation, it is in the shareholders’ best interest to accept the relief provided in the 

settlement rather than to spend millions of dollars in fees and months of time in an attempt to 

obtain only a marginally better result through litigation. 

5. Risks of Establishing Damages

“Like the fourth factor, this inquiry attempts to measure the expected value of litigating 

the action rather than settling it at the current time.” Cendant, 264 F.3d at 238. The court looks 

at the potential damage award if the case were taken to trial against the benefits of immediate 

settlement. Prudential, 148 F.3d at 319. 

In this case, Plaintiffs alleged that Defendants breached their duties of loyalty, care and 

disclosure in negotiating and approving the Merger with Express Scripts. Thus, any potential 

damages award would depend on Plaintiff proving at trial that (a) Defendants breached their 

duties of care, loyalty or disclosure and (b) that any established breaches caused quantifiable 

economic harm to Plaintiffs and the putative class of Medco shareholders. Plaintiff believes that 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 30 of 36 PageID: 3506
- 25 - 

the Defendants breached their duty of care and loyalty to the shareholders, but quantifying the 

damages that were caused by the breach of duty could be difficult to quantify because of the 

actions the Board took contrary to those duties because there were no competing bids for Medco. 

The deal protection measures which were built into the Merger Agreement were intended to, and, 

at least so far, successfully, deterred any competing bids for Medco. Since the Medco Board did 

not seek other offers in advance of agreeing to merge with Express Scripts, it could be difficult to 

determine what another company might have been willing to pay for Medco had the company 

been shopped, as Plaintiff believes it should have been. Likewise, since the investment bankers 

gave no valuation of the Company in advance of merger talks with Express Scripts, so there is no 

baseline to determine whether the price Express Scripts paid was under or over an appropriate 

valuation. Without knowing whether any other companies might have been interested in 

purchasing Medco but for the deal protection measures and what those companies might have 

been willing to pay, it could be difficult to quantify the monetary damages shareholders incurred 

as a result of the deal protection measures in the Merger Agreement. 

6. Risks of Maintaining Class Action Status Through Trial

Because the prospects for obtaining certification have a great impact on the range of 

recovery one can expect to reap from the class action, GM Trucks, 55 F.3d at 817, the court must 

measure the likelihood of obtaining and maintaining a certified class if the action were to 

proceed to trial. Girsch, 521 F.2d at 157. Here, given the nature of Plaintiffs’ claims and their 

satisfaction of the requirements of Rule 23, Plaintiffs did not consider the ability to maintain a 

class action to pose a significant risk. 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 31 of 36 PageID: 3507
- 26 - 

7. Ability to Withstand Greater Judgment

The seventh Girsch factor considers “whether the defendants could withstand a judgment 

for an amount significantly greater than the [s]ettlement.” Cendant, 264 F.3d at 240. Plaintiff 

cannot assert that the Defendants could not afford to pay some amount of damages. On the other 

hand, the relief Plaintiff sought was primarily injunctive, to eliminate or reduce the break-up fee 

and to eliminate or reduce Express Scripts’ matching rights. Thus, to that extent, Defendants’ 

ability to withstand a greater judgment is an irrelevant consideration. 

8/9. The Range of Reasonableness of the Settlement Fund in Light of the 

Best Possible Recovery and All the Attendant Risks of Litigation

The last two Girsch factors are usually considered together. They ask “whether the 

settlement is reasonable in light of the best possible recovery and the risks the parties would face 

if the case went to trial.” Prudential, 148 F.3d at 322; see also Warfarin Sodium, 391 F.3d at 

538 (court should consider “whether the settlement represents a good value for a weak case or a 

poor value for a strong case”). As Judge Becker explained in GM Trucks, “[t]he evaluating court 

must ... guard against demanding too large a settlement based on its view of the merits of the 

litigation; after all, settlement is a compromise, a yielding of the highest hopes in exchange for 

certainty and resolution.” 55 F.3d at 806. 

At the preliminary approval stage, the Court need only find that the proposed settlement 

is “in the range of fair and reasonable.” See, e.g., Spark v. MBNA Corp., 48 Fed. Appx. 385, 

387-88 (3d Cir. 2002); see also Armstrong v. Bd. of Sch. Dirs. of City of Milwaukee, 616 F.2d 

305, 314 (7th Cir. 1980) (“within the range of possible approval”); Desantis v. Snap-On Tools 

Co., LLC, 2006 WL 3068584, at *5 (D.N.J. 2006) (“within the range of reasonableness”); Simon 

v. KPMG LLP, 2006 WL 1541048, at *8 (D.N.J. 2006) (same). 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 32 of 36 PageID: 3508
- 27 - 

In making its Rule 23(e) determination, the Court should apply “an initial presumption of 

fairness when ... (1) the settlement negotiations occurred at arm’s length; (2) there was sufficient 

discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only 

a small fraction of the class object[s].” Warfarin Sodium, 391 F.3d at 535; (Citing Cendant, 264 

F.3d at 232 n.18).. 

As is explained above, the significant changes in the deal protection measures are a 

significant victory for Plaintiff and the shareholders, since that relief is substantially what 

Plaintiff believes it would have been able to obtain had the case been litigated to a successful 

conclusion. Obviously, there is nothing more Plaintiff can do to induce another potential bidder 

to make a better offer for Medco. However, by reducing the break-up fee and limiting Express 

Scripts’ matching rights, Plaintiff believes that other potential suitors are far more likely to make 

a better offer for Medco. 

Further, the additional disclosures to be incorporated into the final proxy statement are an 

additional benefit to shareholders. Courts routinely recognize the benefits for shareholders when 

class representatives are successful in negotiating for supplemental disclosures in a proxy 

statement: “Where a representative shareholder succeeds in correcting invalid disclosures in 

connection with a transaction between the corporation and its stockholders, our case law 

recognizes that for fee awarding purposes, the corporation and all of its shareholders are 

benefitted.” Eisenberg v. Chicago Milwaukee Corp., 1988 WL 112910, at *3 (Del. Ch. Oct. 25, 

1988); see also Augenbuam v. Forman, 2006 WL 1716916, at *2 (Del. Ch. June 21, 2006) 

(“supplemental disclosures included useful information . . . that permitted stockholders to view 

the final price term and related information from a materially different perspective.”) As one 

court described it, disclosures “give[] stockholders the choice to think for themselves on full 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 33 of 36 PageID: 3509
- 28 - 

information, thereby vindicating their rights as stockholders to make important voting and 

remedial decisions based on their own economic self-interest.” In re Netsmart Tech., Inc. 

Shareholder Litig., 924 A.2d 171, 207 (Del. Ch. 2007). 

However, Plaintiffs also recognized the principle that “when disinterested stockholders 

make a mature decision about their economic self-interest . . . second-guessing is almost 

completely circumscribed.” See generally In re Lear Corp. Shareholder Litig., 926 A.2d 94, 

114-15 (Del. Ch. 2007). 

C. The Proposed Notice Plan Satisfies Rule 23 and Due Process

Notice of a proposed settlement must be given to class members in the most practicable 

manner under the circumstances, describing the terms of the settlement in sufficient detail to 

alert those with adverse viewpoints to investigate and to come forward and be heard. See Fed. R. 

Civ. P. 23(c)(2)(B). 

As the Supreme Court explained in Mullane v. Cent. Hanover Bank & Trust Co., 339 

U.S. 306 (1950): 

An elementary and fundamental requirement of due process in any proceeding 

which is to be accorded finality is notice reasonably calculated, under all the 

circumstances, to apprise interested parties of the pendency of the action and afford 

them an opportunity to present their objections ... The notice must be of such 

nature as reasonably to convey the required information, and it must afford a 

reasonable time for those interested to make their appearance. 

Id. at 314. The proposed Notice Program in this case more than satisfies this standard. 

Under Rule 23(c)(2)(B), “the court must direct to class members the best notice that is 

practicable under the circumstances, including individual notice to all members who can be 

identified through reasonable effort.” 

Here, if the Court grants preliminary approval of the Settlement, the proposed Notice will 

be mailed to the Class, which consists of all Medco shareholders from the date that the Merger 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 34 of 36 PageID: 3510
- 29 - 

was announced through the date that the Merger closed, will be notified of the Settlement by 

direct mail. The proposed Notice Program envisions that Class members will be identified by 

information in the possession of Medco. The proposed Notice would be sent to all Class 

members who were shareholders of record and individual notice will be mailed to all such Class 

members. The notice will also request that any such record holders who held shares of Medco 

for the benefits of others forward copies of the notice to such beneficial holders, and Medco will 

provide copies of the notice for such forwarding. Courts routinely find that comparable notice 

procedures meet the requirements of due process and Rule 23. 

The form of the class Notice is governed by Rule 23(c)(2), which provides that “[t]he 

notice must clearly and concisely state in plain, easily understood language: 

(i) the nature of the action; 

(ii) the definition of the class certified; 

(iii) the class claims, issues, or defenses; 

(iv) that a class member may enter an appearance through an attorney if the 

member so desires; 

(v) that the court will exclude from the class any member who requests 

exclusion; 

(vi) the time and manner for requesting exclusion; and 

(vii) the binding effect of a class judgment on members under Rule 23(c)(3). 

Fed. R. Civ. P. 23(c)(2)(B). The proposed Notice in this case meets all of these requirements. 

The proposed Notice sets forth all of the applicable information required by Rule 23(c)(2)(B). 

There is no information relating to exclusion from the Class because the Rules under which the 

Class is being certified to not allow opt-outs. 

 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 35 of 36 PageID: 3511
- 30 - 

CONCLUSION

 For the foregoing reasons, Class Counsel respectfully request that the Court grant the 

relief requested herein. 

 CARELLA, BYRNE, CECCHI, 

 OLSTEIN, BRODY & AGNELLO, P.C. 

 Attorneys for Plaintiff 

 By: /s/ James E. Cecchi 

 JAMES E. CECCHI 

Dated: November 25, 2011 

Of Counsel: 

Gerald Silk 

Mark Lebovitch 

Brett M. Middleton 

Jeremy Friedman 

BERNSTEIN LITOWITZ BERGER 

 & GROSSMANN LLP 

1285 Avenue of the Americas 

New York, NY 10019 

(212) 554-1400 

Jay W. Eisenhofer 

Michael J. Barry 

Caitlin Moyna 

GRANT & EISENHOFER P.A. 

1201 N. Market Street 

Wilmington, Delaware 19801 

(302) 622-7000 

Case 2:11-cv-04211-DMC -MF Document 94-1 Filed 11/25/11 Page 36 of 36 PageID: 3512