Willkie Obtains Dismissal of Claims Against Warburg Pincus Entities in Bridgepoint Education Shareholder Derivative Lawsuit

October 21, 2014

U.S. District Court for the Southern District of California grants defendants’ motions to dismiss in In re Bridgepoint Education, Inc. Shareholder Derivative Litigation.

On October 17, Judge Jeffrey T. Miller of the U.S. District Court for the Southern District of California granted defendants’ motions to dismiss in In re Bridgepoint Education, Inc. Shareholder Derivative Litigation, a shareholder derivative lawsuit commenced by purported shareholders of Bridgepoint Education, Inc. relating to Bridgepoint’s November 2013 offer to purchase up to 10,250,000 shares of its common stock pursuant to a tender offer. Willkie represented defendants Warburg Pincus LLC and certain affiliated parties, Bridgepoint’s majority stockholder.

Plaintiffs in the lawsuit alleged that the defendants, which included Bridgepoint’s directors, breached their fiduciary duties, were unjustly enriched, and wasted corporate assets in connection with the tender offer.  Plaintiffs also asserted that they were excused from making a pre-suit demand on Bridgepoint’s board of directors because the directors were not independent or disinterested with respect to the plaintiffs’ tender offer claims.

Defendants moved to dismiss the lawsuit arguing, among other things, that plaintiffs failed to plead facts adequate to establish that a demand on Bridgepoint’s board of directors would have been futile.  The court agreed, holding that plaintiffs’ bare allegation that the directors participated in the tender offer, on the same terms as all other Bridgepoint stockholders, was insufficient to show that the directors “either stood on both sides of” the tender offer or were otherwise “interested in the transaction by virtue of receiving a special benefit unshared with the other shareholders.”  Nor had plaintiffs, the court ruled, sufficiently demonstrated that the directors “faced a substantial likelihood of future liability regarding the [tender offer].” Finally, the court held that plaintiffs did not allege “facts suggesting the presumptive protection of the business judgment rule should not apply” to the board’s decision to approve the tender offer.

The case was handled by partners Tariq Mundiya and Sameer Advani, and associate Jennifer Greene.