Overview
Cohen Milstein represents The Pavers and Road Builders Benefit Funds and other stockholders in a derivative lawsuit against the Board of Directors (the “Board”) of Illumina, Inc. (Nasdaq: ILMN), a genomics biotechnology company.
This lawsuit arises from one of the most flagrant alleged breaches of fiduciary duty and positive law in recent corporate history: Illumina’s $8 billion reacquisition of GRAIL (Nasdaq: GRAL), a healthcare company (the “Merger”). The Illumina Board’s decision to close the Merger violated binding standstill obligations under Article 7(1) of the European Union Merger Regulation and flouted U.S. antitrust law.
Stockholders claim that Illumina’s officers and directors knowingly and unlawfully closed the transaction on August 18, 2021, even though the European Commission’s (“EC”) order barring the Merger was still in effect and despite receiving clear warnings about the risks and consequences breaching the order.
Stockholders allege that this brazen action exposed Illumina to regulatory scrutiny and massive fines. In the US, the Federal Trade Commission (“FTC”) successfully sought to unwind the Merger, culminating in a divestment order affirmed by the Fifth Circuit. Ultimately, Illumina divested GRAIL at a huge loss on June 24, 2024.
Stockholders further allege the Board’s priorities were self-serving. Rather than protecting the company or its stockholders, the Board shielded itself from accountability by buying additional D&O insurance because of the significant liability risks associated with closing the Merger without regulatory clearance.
Important Dates
- On December 30, 2024, The Pavers and Road Builders Benefit Funds v. Francis deSouza, et al., was filed before the Court of Chancery of the State of Delaware. Prior to filing its complaint, The Pavers and Road Builders Benefit Funds conducted a books and records investigation, which included a trial, where it successfully obtained certain documents protected by the attorney-client privilege.
- On April 17, 2025, during a teleconference, the Court indicated that it will enter an order to consolidate the pending derivative actions, and appoint The Pavers and Road Builders Benefit Funds and Cohen Milstein as co-leads for the consolidated action.
Case Background
The Pavers and Road Builders Benefit Funds seek to hold Illumina’s leadership accountable for the corporate trauma it inflicted on Illumina by its Board’s decision to close the Merger in contravention of an EC standstill order and the FTC’s assumption that Illumina would not violate the EC’s order, while the Merger remained subject to regulatory review in the U.S.
The complaint alleges that Illumina’s directors and officers failed to uphold their fiduciary duties to the Company and its stockholders by advocating for and/or voting to approve closing the Merger in knowing violation of the EU Standstill Obligations. The directors compounded their misconduct by justifying their illegal actions under a pretext of “moral obligation,” asserting that the Merger would accelerate GRAIL’s cancer detection technology and therefore would “save lives.” This emotionally compelling rhetoric was proven in court to lack any factual basis. Instead, it masked a bad faith decision to prioritize Illumina’s directors’ and officers’ personal and speculative interests over sound corporate governance.
The complaint also alleges that the Board prioritized shielding itself from liability for closing the Merger instead of protecting the Company or its stockholders. During the Audit Committee’s deliberations about closing the Merger in the summer of 2021, Illumina’s legal advisors from Covington & Burling LLP emphasized the need to protect directors and officers from claims related to the fallout that closing the Merger—as a violation of positive law—was anticipated to produce. Based on that advice, the Board decided to revamp the Company’s D&O insurance coverage by dramatically increasing its Side A coverage—which protects the Board and officers from personal liability—while eliminating Side B and C coverage, which would have protected Illumina. This new policy cost the Company tens of millions of dollars in increased premiums.
The consequences of the Merger have been devastating for Illumina and its stockholders. Illumina incurred extraordinary financial penalties and obligations, legal fees, and administrative expenses as a direct result of its decision to close the Merger in defiance of regulatory orders. Legal challenges by the EC and FTC—as well as the Board’s decision to fight those challenges—have drained Illumina’s resources, forcing it to divert critical time and capital from its core operations.
Specifically, the Board’s fiduciary breaches have already directly caused Illumina to incur at least $3,643,700,000 in monetary damages. The deal’s structure also included massive contingent obligations tied to GRAIL revenue milestones that remain Illumina’s responsibility even after divesting GRAIL, burdening Illumina’s balance sheet for more than a decade to come and, if triggered, subjecting it to billions in additional payments.
Moreover, the Board’s decision to close the Merger has irreparably harmed Illumina’s relationships with regulators, investors, and clients, severely undermined the Company’s market position, and tarnished its reputation as a leader in next generation sequencing technology.
Since the Merger’s close, GRAIL has plummeted in value, a further indicator of the extraordinary harm to Illumina flowing from the Board’s illegal actions. Illumina acquired GRAIL at a valuation of over $8 billion, but was forced to divest it earlier this year at a valuation of $2.74 billion, while more recent disclosures value GRAIL at approximately $915 million. The market responded accordingly. Illumina stock, which closed at $508.65 the day before the Merger, dropped by more than 80% when the Company finalized its divestment of GRAIL.