This Must be a First! - A law firm is proposing a class action because an activist filed a 13D just before a merger was announced.

On August 13th a class action law firm issued an advertisement encouraging people who own Longs Drug Stores' stock to consider their legal options concerning the boards possible breach of fiduciary duty surrounding the proposed merger with CVS Caremark Corp.

In the complaint (click here to download the complaint) the law firm is suggesting that Longs' board of directors may have breached their fiduciary duty by entering into a merger agreement with CVS just days after activist investor Pershing Square Capital filed a 13D disclosing a 21.5% economic stake in the Company. (Pershing owns 8.8% of the stock and the balance in cash-settled swaps)

The complaint alleges that Pershing's announcement effectively made Longs susceptible to offers from potentially interested bidders because Pershing stated in their 13D filing that they they "may engage Longs in strategic discussions". -- Language that is fairly boilerplate in all of Pershing's 13D filings.

Following the announcement earlier this week Longs stock gained 31% and hit a record high of $70.94 - closing the gap between the previous days close of $54.56 and the cash offer of $71.50.

It is estimated that Pershing Square will realize a gain north of $500M on their investment.