Compass Lexecon Client Anthem Successfully Avoids $1.85 Billion Breakup Fee
This multi-year litigation stemmed from the failure of the $54 billion Anthem-Cigna merger in 2017. Anthem argued that Cigna breached its obligations under the merger agreement’s efforts covenants, which required the parties to try to close the merger, and sought expectation damages of $21.1 billion. Cigna argued that that Anthem breached its obligation under the merger agreement’s regulatory efforts covenant, which required the parties to take any and all actions necessary to avoid any legal impediment to the merger that a governmental entity might raise, and sought expectation damages of $14.7 billion. Cigna separately sought to recover a reverse termination fee in the amount of $1.85 billion.
Following a 10-day trial in late February and early March 2019, Vice Chancellor J. Travis Laster ruled that Anthem proved that Cigna breached its obligations under the efforts covenants, opining that “[rather] than seeking to complete the Merger, Cigna sought to derail it.” However, the Vice Chancellor also ruled that Anthem failed to prove that Cigna’s breaches led to causally related damages, noting in his opinion that causation analysis is “difficult to conduct in such a complex and multi-faceted case.” Vice Chancellor Laster also ruled that Cigna failed to prove that Anthem breached its obligations under the regulatory efforts covenants, opining that “Anthem sought at all times to complete the Merger.” Lastly, Vice Chancellor Laster ruled that Anthem had validly terminated the merger agreement and was therefore not liable for the $1.85 billion reverse termination fee.
Compass Lexecon and Professor Daniel R. Fischel were retained by counsel for Anthem to analyze the complex damage issues in the case. At trial, Professor Fischel testified about the economic harm suffered by Anthem resulting from the failure of the merger and responded to Cigna’s expert’s damages calculation. Professor Fischel was supported by a team in Compass Lexecon’s Chicago and Pasadena offices that included Rajiv Gokhale, Gerald Lumer, Constance Kelly, Kevin Hartt, Robin Stahl, Nabila Lotayef, James Tam, Shawn Chen, Eugenia Vinogradsky and Yili Wang. Professor Fischel and Compass Lexecon worked closely with attorneys at White & Case LLP, including Glenn M. Kurtz and Andrew W. Hammond, who successfully represented Anthem.