Neither Anthem, Cigna to Receive Damages in Merger Disputes

Chancery Court Judge Travis Laster laid to rest the merger dispute between Cigna and Anthem on the last day in August 2020, a little over five years after the two payers originally announced the merger.

After over 300 pages detailing the court case, the judge’s Conclusion took on a definite tone.

“In this corporate soap opera, the members of executive teams at Anthem and Cigna played themselves. Their battle for power spanned multiple acts,” the judge wrote.

Laster found that Anthem successfully proved that Cigna had breached its obligations. However, Cigna successfully parried that the entire merger was doomed. Cigna did not convince the court that it was entitled to any reimbursement from Anthem, though.

Laster’s decision forms the final chapter in what has become a five year legal saga.

Cigna and Anthem entered into an Agreement and Plan of Merger in July 2015. As part of the agreement, Anthem would pay more than $54 billion.

However, the Department of Justice intervened in 2016, concluding that the merger would be anticompetitive. Both a district and a circuit court decided that the merger was anticompetitive and could not move forward.

Between those two decisions, Cigna tried to withdraw from the merger but Anthem sued so that it could appeal the decision. As a result, the court issued a restraining order on Cigna which stayed in place while Anthem appealed, ultimately reaching the Delaware Supreme Court.

Anthem signaled that it accepted that the merger would have to end when it terminated the agreement in May 2017. Cigna terminated the agreement the same day.

Thus, about two years after the companies began the merger process, the major payers entered into damages litigation, with Anthem seeking $21.1 billion from Cigna for breaching the contract and Cigna demanding $14.7 billion for Anthem’s contract breach in addition to $1.8 billion as a reverse termination fee.

The merger process itself was far from friendly, the court case revealed.

Both companies’ chief executive officers were grappling for the top seat in the combined company. Before the DOJ even filed its lawsuit, Cigna signaled that it was opposed to its own merger and, according to the court documents, obstructed certain divestitures intended to pacify the DOJ.

While Anthem continually pushed to successfully conclude the merger, the court found that Cigna—particularly Cigna’s chief executive officer, David Cordani—had been intentionally subverting the arrangement.

As a result, Cigna could not prove that Anthem had breached the agreement when, instead, the payer had been continually trying to close the merger against Cigna’s own efforts. Even if Cigna had proven that Anthem breached the merger, the court found that this would not have constituted a “willful breach,” the only breach that the contract defined as warranting damages.

That Cigna’s action clearly constituted a breach, the court agreed with Anthem. But Anthem’s follow-up arguments for payment fell short. Anthem would have had to prove that the merger might have been approved if Cigna had not stood in the way of it, which Laster did not deem possible.

“This outcome leaves the parties where they stand. Neither side can recover from the other. Each must deal independently with the consequences of their costly and ill-fated attempt to merge,” the decision ended.

Since then, Cigna has been involved in vertical mergers, most notably its merger with Express Scripts which is set to be finalized in 2020.

The major payer has also been partnering with Oscar Health to serve small businesses. The payers formed a new brand that aims to bring affordability and telehealth solutions to small business health plans.

Perhaps one of the more noticeable partnerships for Anthem since the deal with Cigna fell apart was its partnership with Walmart, designed to give Medicare Advantage beneficiaries better access to over-the-counter products and prescriptions.

Neither Anthem nor Cigna has released an official press release on the decision.

“Each party must bear the losses it suffered as a result of their star-crossed venture,” Laster said in the conclusion of his opinion.