Komlossy Law, P.A. is one of plaintiffs’ counsel for Medtronic stockholders in a class action challenging Medtronic’s merger with Covidien. The merger was structured as a reverse merger tax inversion, whereby Medtronic would emerge as a new entity incorporated in Ireland to avoid paying U.S. corporate income taxes.
The case alleges that the merger harmed Medtronic stockholders who were forced to pay capital gains and other taxes on the merger and suffered equity dilution when Medtronic paid a windfall for the Covidien assets.
Defendants argued that the claims were derivative claims and that all stockholders lost standing to assert any derivative claims once the merger was completed in January 2015. The District Court agreed, and dismissed the case in March 2015.
The dismissal was appealed to the Minnesota Court of Appeals and then the Minnesota Supreme Court, arguing the stockholders’ claims were direct claims, not derivative claims, and that District Court wrongly dismissed the case.
On August 16, 2017, the Minnesota Supreme Court found that the District Court had erred in holding that the claims were derivative claims. In a landmark decision, the Minnesota Supreme Court set new standards for determining whether stockholder claims are direct or derivative, and found that the stockholders had properly pleaded direct claims for breach of fiduciary and other misconduct by Medtronic’s board of directors.
The decision is In re Medtronic, Inc. Shareholder Litigation, A15-0858 (2017), in the Minnesota Supreme Court.