A Maryland federal judge has granted final approval to a $15 million settlement resolving a high-profile stockholder derivative lawsuit involving BioPharma Co., formerly Emergent BioSolutions Inc. The suit alleged that the company’s leadership profited from stock sales while their inadequate oversight contributed to the contamination of more than 15 million Johnson & Johnson (J&J) COVID-19 vaccine doses.
U.S. District Judge Deborah L. Boardman ruled the settlement fair and reasonable, recognizing its substantial benefits to the plaintiffs, BioPharma Co., and its current stockholders. The court also approved $4.5 million in attorney fees and $5,000 service awards for each named plaintiff.
Under the settlement terms, BioPharma Co.’s insurers will make a $15 million cash payment. Additionally, the company’s board of directors has committed to implementing a comprehensive set of corporate governance reforms aimed at addressing the oversight failures and internal control deficiencies that allegedly led to the contamination. These reforms include enhanced management-level monitoring, new reporting and escalation protocols, stricter compliance incident evaluation, and mandatory training for employees involved in manufacturing and compliance risk management.
The lawsuit, filed in 2021 by the Lincolnshire Police Pension fund, accused BioPharma Co.’s leadership of breaching their fiduciary duty by allowing substandard quality controls and insufficient staff training at the Bayview facility. This negligence reportedly caused massive financial losses after the contamination incident surfaced.
The complaint highlighted that contracts with AstraZeneca and J&J, valued at approximately $875 million each, caused the company’s stock price to soar amid undisclosed internal control failures. The lawsuit further alleged that several directors and officers misrepresented the company’s capabilities during 2020, exacerbating the company’s exposure to liability.
The contamination occurred when employees mistakenly mixed ingredients from two different vaccines, ruining millions of doses before J&J discovered the error. The fallout included a $667 million loss in market capitalization and a stock price drop of more than 13% in a single day.
The pension fund’s derivative suit also accused some directors of unjust enrichment, alleging they sold over $20 million in company stock while aware of the true state of affairs, profiting from insider knowledge.
The case, In Re Emergent Biosolutions Inc. Stockholder Derivative Litigation, case number 8:21-cv-01595, was heard in the U.S. District Court for the District of Maryland.
Plaintiffs are represented by Robbins LLP and Tydings & Rosenberg LLP. Defendants’ counsel includes Miller & Chevalier Chtd., Miles & Stockbridge PC, and WilmerHale.
