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OPKO Health : Another Diversity Suit Stifled

09/13/2021 | 01:37am EDT

Last week, yet another federal court dismissed a shareholder derivative suit that claimed a company had failed to diversify its corporate leadership team. Shareholders had alleged that Opko Health Inc., a Miami-based medical company, failed to nominate or appoint minorities to the board and executive management team despite public statements celebrating the company's diverse staff.

Unlike other recent diversity-focused suits subject to similar fates, this case was not dismissed on the basis of a forum selection clause in the company's charter or corporate bylaws. Instead, the court held that the plaintiffs had failed to show that any director faced a substantial likelihood of liability on their claims. The court's thorough analysis of these claims evinces a strong sense that, absent specific allegations regarding directors' actions or knowledge regarding their company's purported diversity failures, these types of claims may continue to succumb to motions to dismiss.

The plaintiffs had brought allegations under Delaware common law and federal securities laws. The court held that the complaint was "replete with conclusory allegations" regarding Opko's board's purported lack of diversity, and that such allegations were not sufficient to support an inference directors and executives acted in bad faith, intentionally acted against the company's interest, or consciously disregarded their duties of loyalty.

The court also found deficient the plaintiffs' allegations that the defendants caused Opko to make misleading statements in corporate filings because those filings failed to disclose that the board had refused to nominate minorities to the board or executive team. The court found that, even assuming the filings were false or misleading, the complaint lacked facts suggesting that the defendants had any knowledge of as much. And the plaintiffs' claim under Section 14(a) of the Securities Exchange Act failed for similar reasons - the court held that there was nothing in the complaint sufficient to show statements in Opko's corporate filings were false and misleading.

The Opko case tends to suggest that, even assuming they can overcome jurisdictional hurdles, plaintiffs will face an uphill battle with diversity-based derivate suits. Plaintiffs may have to provide specific examples of discrimination or refusals to hire specific candidates, as well as the board's knowledge of such conduct, in order to successfully show demand futility. As noted elsewhere, many of these suits were launched by the same law firm in the summer of 2020, but the allegations have thus far failed to gain any sort of traction with judges across the country.

Continue to check back here for analysis on these types of diversity suits.

Another Diversity Suit Stifled

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Joseph Hartunian
Proskauer Rose LLP
Eleven Times Square
(Eighth Avenue & 41st Street)
New York
Tel: 2129693000
Fax: 2129692900
E-mail: gpolk@proskauer.com
URL: www.proskauer.com

© Mondaq Ltd, 2021 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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Financials (USD)
Sales 2021 1 576 M - -
Net income 2021 -10,9 M - -
Net Debt 2021 - - -
P/E ratio 2021 -205x
Yield 2021 -
Capitalization 2 513 M 2 513 M -
Capi. / Sales 2021 1,59x
Capi. / Sales 2022 2,12x
Nbr of Employees 5 269
Free-Float 59,5%
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Mean consensus BUY
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Last Close Price 3,69 $
Average target price 6,60 $
Spread / Average Target 78,9%
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Phillip Frost Chairman & Chief Executive Officer
Jon Roger Cohen Director & Senior Vice President
Adam E. Logal CFO, Treasurer, Chief Accounting Officer & SVP
Jane H. Hsaio Vice Chairman & Chief Technical Officer
Steven D. Rubin Director & Executive Vice President-Administration
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