Johnson Fistel Defeats Defendants’ Motion to Dismiss in Brookdale Senior Living Inc. Shareholder Derivative Case

As court-appointed co-lead counsel representing one of two shareholder-Plaintiffs derivatively on behalf of Brookdale Senior Living, Inc. (“Brookdale”) in Anders v. Baier, et al., Case No. 3:21:cv-00373 (M.D. Tenn.), Johnson Fistel recently defeated Defendants’ motion to dismiss Plaintiffs’ operative complaint.  In seeking dismissal of the complaint, Defendants argued Plaintiffs failed to adequately plead wrongful refusal of their litigation demands.  In overcoming Defendants’ motion, Plaintiffs accomplished a feat many courts have recognized as a “high hurdle in pleading,” e.g., Drachman v. Cukier, C.A. No. 2019-0728-LWW (Del. Ch. Oct. 29, 2021), as it is widely regarded as a “steep road” to climb for plaintiffs.  City of Tamarac Firefighters’ Pension Trust Fund v. Corvi, C.A. No. 2017-0341-KSJM (Del. Ch. Feb. 12, 2019).

Specifically, on September 7, 2022, the Honorable Aleta A. Trauger, United States District Court Judge for the Middle District of Tennessee, issued an order finding that Plaintiffs had adequately pleaded that Brookdale’s Board of Directors wrongfully refused Plaintiffs’ litigation demands under the heightened pleading requirements of Federal Rule of Civil Procedure 23.1, when the Board deferred its investigation of Plaintiffs’ litigation demands first, pending resolution of a related securities class action lawsuit, and second (and after the conclusion of the securities class action), pending resolution of the issue of demand futility in a related shareholder derivative action.  The Court reasoned that the “Board’s apparent refusal to consider or take any steps in response to the demand letters—other than voting to ignore those demands for now, first for one reason and then for another—significantly undercuts the presumption that the Board was exercising ordinary business judgment, as opposed to merely seeking to frustrate shareholders’ attempts to enforce accountability on the Board’s own members and the executives who have the Board’s support,” and thus sustained Plaintiffs’ claims.

Plaintiffs allege that Brookdale, the nation’s largest senior-living community operator which controlled facility staffing levels from its central corporate headquarters, chronically understaffed its facilities through an internal software algorithm that generated staffing-level recommendations by significantly minimizing costs and underestimating patient and facility needs.  As a result of this and other related misconduct, Plaintiffs bring claims for violations of federal and state securities laws, breaches of fiduciary duty, waste of corporate assets, and unjust enrichment against certain of the company’s current and former directors and officers.

The case is captioned Anders v. Baier, et al., Case No. 3:21:cv-00373 (M.D. Tenn.), and Johnson Fistel’s litigation team prosecuting this action is Michael I. Fistel, Jr., Mary Ellen Conner, and Oliver tum Suden.