United States District Court, D. Minnesota
SALLY PEMBERTON, derivatively and on behalf of Patterson Companies, Inc., Plaintiff,
SCOTT P. ANDERSON; ANN B. GUGINO; MARK S. WALCHIRK; JOHN D. BUCK; ALEX N. BLANCO; JODY H. FERAGEN; SARENA S. LIN; ELLEN A. RUDNICK; NEAL A. SCHRIMSHER; LES C. VINNEY; JAMES W. WILTZ; PAUL GUGGENHEIM; DAVID MISIAK; TIM ROGAN; Defendants, and PATTERSON COMPANIES, INC., Nominal Defendant.
Phillip Kim, THE ROSEN LAW FIRM, P.A.; Mark E. Czuchry,
CZUCHRY LAW FIRM, LLC; Timothy W. Brown, THE BROWN LAW FIRM,
P.C., for plaintiff.
Patrick S. Williams, Aaron G. Thomas, and Jordan L. Weber,
BRIGGS AND MORGAN, P.A., for defendants.
Patrick J. Schiltz United States District Judge
Sally Pemberton, on behalf of nominal defendant Patterson
Companies, Inc. (“Patterson”), brings this
shareholder-derivative action against 14 current and former
officers and directors of Patterson, alleging violations of
federal securities law, breaches of fiduciary duty, unjust
enrichment, and waste of corporate assets arising out of
Patterson's alleged participation in an antitrust
conspiracy. Defendants have moved to dismiss, arguing that
Pemberton failed to make a pre-suit demand on Patterson's
board of directors. For the reasons that follow, the Court
grants defendants' motion and dismisses the complaint
is a Minnesota corporation with its principal executive
offices in St. Paul, Minnesota. Compl. ¶ 25. Patterson
operates Patterson Dental, which sells supplies, equipment,
and services to dental practitioners. Compl. ¶ 2.
Patterson is the second-largest distributor of dental
supplies and equipment in the United States. Compl. ¶ 2.
Patterson and its chief competitors, Benco Dental Supply Co.
(“Benco”) and Henry Schein, Inc.
(“Schein”), together control about 85 percent of
the “sale of all dental products and services made
through distributors in the United States.” Compl.
alleges that Patterson, Benco, and Schein engaged in a
long-running and wide-ranging antitrust conspiracy. One
aspect of the alleged conspiracy involved a boycott of group
purchasing organizations (“GPOs”). In recent
years, independent dentists have formed GPOs to combine
purchasing power and gain leverage to negotiate lower prices
from distributors. Compl. ¶ 4. Pemberton alleges that
Patterson, Benco, and Schein conspired to refuse to offer
discounted prices or otherwise negotiate with GPOs. Compl.
¶ 5. Pemberton also alleges that these distributors
engaged in other anticompetitive conduct pursuant to the
conspiracy, including fixing margins on dental supplies and
equipment, blocking the entry of rival distributors into the
market, and agreeing not to poach one another's customers
or sales representatives. Compl. ¶ 5. Pemberton alleges
that, as a result of the individual defendants'
participation in or failure to prevent this misconduct,
Patterson has been damaged in multiple ways, including by
being exposed to investigations, legal fees, lawsuits, and
settlements. Compl. ¶¶ 214-21.
February 12, 2018, the Federal Trade Commission
(“FTC”) filed an administrative complaint against
the distributors, accusing them of antitrust violations.
Compl. ¶ 6. The FTC complaint alleges that the
distributors have conspired since at least 2013 to fix the
prices of dental-supply products and refuse to sell to GPOs.
Compl. ¶ 6.
Standard of Review
reviewing a motion to dismiss for failure to state a claim
under Fed.R.Civ.P. 12(b)(6), a court must accept as true all
of the factual allegations in the complaint and draw all
reasonable inferences in the plaintiff's favor. Aten
v. Scottsdale Ins. Co., 511 F.3d 818, 820 (8th Cir.
2008). Although the factual allegations need not be detailed,
they must be sufficient to “raise a right to relief
above the speculative level . . . .” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007). The
complaint must “state a claim to relief that is
plausible on its face.” Id. at 570.
shareholder derivative suit is a creation of equity in which
a shareholder may, in effect, ‘step into the
corporation's shoes and . . . seek in its right the
restitution he could not demand in his own.'”
In re UnitedHealth Grp. Inc. S'holder Derivative
Litig., 754 N.W.2d 544, 550 (Minn. 2008) (quoting
Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541,
548 (1949)). “A derivative action actually belongs to
the corporation, but the shareholders are permitted to bring
the action where the corporation has failed to take action
for itself.” Janssen v. Best & Flanagan,
662 N.W.2d 876, 882 (Minn. 2003).
filing a derivative suit, a shareholder must ordinarily make
a demand on the corporation's board of directors.
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