Item 8.01 Other Events.
On November 2, 2021, the Special Litigation Committee ("SLC") appointed by the
Board of Directors ("Board") of Patterson Companies, Inc. ("Patterson") to
investigate claims made in shareholder demand letters against current and former
officers and directors of Patterson concluded that it would not be in the best
interests of Patterson to pursue such claims.
In October 2019, Patterson's Board received a written demand from Sally
Pemberton ("Pemberton") to initiate litigation against current and former
officers and directors based on allegations that Patterson, with Benco and Henry
Schein, "engage[d] in a conspiracy in restraint of trade, whereby the companies
agreed to refuse to offer discounted prices or otherwise negotiate with GPOs,
agreed to fix margins on dental supplies and equipment, agreed not to poach one
another's customers or sales representatives, and agreed to block the entry and
expansion of rival distributors." Pemberton further alleged that current and
former officers and directors failed to disclose Patterson's alleged "antitrust
misconduct" to the public and purportedly caused Patterson to repurchase $412.8
million of its own stock at prices that were artificially inflated. The
Pemberton demand letter followed the September 2019 dismissal of Pemberton's
shareholder derivative complaint containing the same allegations, which was
dismissed due to Pemberton's failure to make a pre-suit demand on Patterson's
Board. In March 2020, following receipt of Pemberton's demand and upon
consultation with counsel, Patterson's Board adopted a resolution appointing
Professor John Matheson, a corporate law professor at the University of
Minnesota Law School, and The Honorable George McGunnigle, retired Judge of
Hennepin County District Court, as an SLC pursuant to Minnesota law. Pursuant to
the resolution, the SLC was given complete power and authority to investigate
the demand, analyze the legal rights or remedies of Patterson, determine whether
those rights or remedies should be pursued, and respond to Pemberton on behalf
of Patterson.
In April 2020, Patterson's Board received a written demand from Kirsten Johnsen
("Johnsen") to initiate litigation against current and former officers and
directors based on allegations that Patterson "suppressed price competition and
maintained supracompetitive prices for dental supplies and equipment by entering
into agreements with Henry Schein and Benco to: (i) fix margins for dental
supplies and equipment; and (ii) block the entry and expansion of lower-margin,
lower-priced, rival dental distributors through threatened and actual group
boycotts." Johnsen further alleged that current and former officers and
directors failed to disclose Patterson's alleged "price-fixing scheme" to the
public and purportedly "caused Patterson to repurchase over $412.8 million worth
of its own stock at artificially inflated prices." The Johnsen demand letter
followed the December 2019 dismissal of Johnsen's shareholder derivative
complaint containing the same allegations, which was voluntarily dismissed in
light of the outcome in the Pemberton action. In June 2020, Patterson's Board
expanded the scope of the previously constituted SLC to include the Johnsen
demand.
In October 2020, Patterson's Board received a written demand from Matthew Davis
("Davis") to undertake an independent investigation and take action to remedy
alleged breaches of fiduciary duties by current and former officers and
directors based on allegations that Patterson (a) conspired with Henry Schein
and Benco over a multi-year period to boycott GPOs and fix dental supply prices;
and (b) issued a series of materially false and misleading statements in
connection with such scheme. In November 2020, Patterson's Board expanded the
scope of the previously constituted SLC to include the Davis demand.
Over an approximately 19-month period, the SLC, represented by independent legal
counsel of its own choosing and assisted by independent experts, conducted an
exhaustive independent investigation of the claims made in the shareholder
demand letters to decide whether the shareholder claims should be pursued. On
November 2, 2021, the SLC issued a report ("SLC Report") to Patterson's Board.
In the SLC Report, the SLC concluded that it would not be in the best interests
of Patterson to pursue the claims against current and former officers and
directors made in the Pemberton, Johnsen and Davis demand letters.
A copy of the SLC Report is attached as Exhibit 99 to this Current Report on
Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99 Report of the Special Litigation Committee of Patterson Companies, Inc.,
dated November 2, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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