aibioEmergent BioSolutions derivative lawsuit settlement gets preliminary court approval
Tickers EBS
The U.S. District Court for the District of Maryland granted preliminary approval on May 9, 2025 to a settlement of shareholder derivative suits against current and former Emergent directors and officers. The settlement provides a $15 million payment to the company from insurance and governance reforms, and final approval is set for August 6, 2025.
Key facts
- Company
- Emergent BioSolutions Inc. (NYSE: EBS)
- News type
- Legal
- Primary source
- Emergent BioSolutions Inc. Form 8-K filed May 23, 2025 (SEC EDGAR)
Emergent BioSolutions Inc. (NYSE: EBS) said the U.S. District Court for the District of Maryland issued an order on May 9, 2025 granting preliminary approval to a proposed settlement of shareholder derivative lawsuits. The company disclosed the order in a Form 8-K filed May 23, 2025. The court has set a hearing on final approval for August 6, 2025 at 10:00 a.m. Eastern Time.
The individual defendants named in the settlement are Robert G. Kramer Sr., Fuad El-Hibri, Richard S. Lindahl, Ronald B. Richard, Zsolt Harsanyi, Louis W. Sullivan, George A. Joulwan, Jerome M. Hauer, Kathryn C. Zoon, Marvin White, Syed T. Husain, Seamus Mulligan, Adam Havey, Sean Kirk, Atul Saran and Sue Bailey. Emergent is a nominal defendant. In a derivative suit, shareholders sue on the company's behalf. The settlement includes no admission of fault, liability or wrongdoing by any defendant.
The cases and the parties
The settlement covers five derivative actions: two in the U.S. District Court for the District of Maryland, one in the Circuit Court of Maryland for Montgomery County, and two in the Delaware Court of Chancery. The parties signed a stipulation of settlement dated as of February 24, 2025, subject to court approval. Lincolnshire Police Pension Fund and Pooja Sayal sued in the Maryland federal court, and North Collier Fire Control and Rescue District Firefighter Pension Plan, Chang Kyum Kim and Mark Nevins sued in Delaware. Zachary Elton, Jeffery Reynolds and Eric White sued in Maryland state court. Richard J. Levine and Christopher Seaver brought the federal demand refused action, and Christopher Andrews brought a second Delaware action.
The Maryland federal court consolidated the first two federal cases on November 16, 2021 and appointed Robbins LLP as lead counsel and Tydings & Rosenberg LLP as liaison counsel for the plaintiffs.
What the plaintiffs allege
According to the stipulation's summary of the plaintiffs' allegations, Emergent signed a $163 million contract with the Biomedical Advanced Research and Development Authority (BARDA) in 2012 that designated its Bayview, Maryland facility as a Center for Innovation in Advanced Development and Manufacturing. In 2020, the summary says, Emergent won contracts to make bulk drug substance for the Johnson & Johnson and AstraZeneca COVID-19 vaccines.
The plaintiffs allege that the individual defendants breached their fiduciary duties of care and loyalty by failing to make sure Bayview met regulatory standards. They allege that FDA inspections found inadequate quality controls, that contamination incidents led to the destruction of vaccine drug substance, that the FDA ordered vaccine manufacturing at Bayview to stop, and that BARDA later terminated the agreement. They say Emergent lost hundreds of millions of dollars in contract revenue. The stipulation also refers to a related securities class action, In re Emergent BioSolutions Inc. Securities Litigation, filed April 19, 2021. These are the plaintiffs' allegations, and the settlement admits none of them.
The company's own annual report on Form 10-K, filed March 4, 2025, says the November 2021 termination of the BARDA agreement for COVID-19 vaccine development and manufacturing caused considerable reputational and financial damage, and that it led to stockholder litigation.
The money and the governance terms
The settlement amount is $15,000,000, paid to Emergent from the proceeds of insurance policies, according to the stipulation. The defendants' insurers would pay the company that sum. The Board would also adopt, implement and maintain a package of corporate governance measures, which the stipulation attaches as Exhibit A. The stipulation sets an all-in fee and expense award of $4,500,000 for plaintiffs' counsel and a $5,000 service award to each plaintiff, subject to court approval. It says no additional payment will be made in connection with the settlement.
The stipulation describes the governance measures as conferring substantial benefits on Emergent and its stockholders, and it says the plaintiffs' litigation was a principal factor in the board's decision to adopt them. The 8-K does not describe the measures beyond that.
Who is involved
Richard S. Lindahl, executive vice president, chief financial officer and treasurer, signed the 8-K. He is also a named individual defendant. The stipulation lists Individual Defendants' counsel as Miller & Chevalier Chartered among others.