Pomerantz Resolves Opt-Out Actions with Teva Pharmaceuticals

POMERANTZ MONITOR | JANUARY FEBRUARY 2024

By the Editors

In January, Pomerantz resolved a shareholder litigation against Teva Pharmaceuticals Ltd., in which the firm represented 22 Israeli institutional investors who had opted out of a previous securities class action. The case concerned an alleged price-fixing scheme as well as Teva’s role in the devastating U.S. opioid crisis. In addition to overcoming the defendants’ motion to dismiss, during the litigation, Pomerantz convinced the court to exercise supplemental jurisdiction over the firm’s clients’ Israeli law claims, opening a new avenue for investors to pursue recovery for losses from dual-listed shares.

Headquartered in Tel Aviv, Teva is one of the world’s largest manufacturers of generic drugs. Between July 2013 and April 2016, Teva raised the prices of its generic drugs 76 times. Pomerantz’s suit alleged that Teva enacted these price increases in collusion with its competitors in the generic drug market, forming part of what Connecticut Assistant Attorney General Joseph Nielsen would later call “most likely the largest cartel in the history of the United States.” This alleged price fixing scheme led to massive profits for Teva, driving the company’s share price to an all-time high of $72 per share in 2015. In the years that followed, the generic drug industry came under increasing scrutiny, culminating in May 2019 with the attorneys general of 47 states, the District of Columbia, and Puerto Rico filing a 524-page antitrust complaint detailing Teva’s collusive activity. Pomerantz’s suit alleged that throughout the class period Teva attributed its soaring profits to good business practice, concealing from investors the price-fixing scheme that was the true driver of the company’s financial success.

Pomerantz’s suit also made claims relating to Teva’s role in the opioid crisis that has swept across the United States. Teva has faced criminal liability for its involvement in this crisis, and recently moved forward on a $4.25 billion deal to resolve a multi-district litigation that claimed Teva contributed to the opioid epidemic by misrepresenting the risks of addiction. Pomerantz’s suit was unique in addressing Teva’s role in the opioid crisis as part of its shareholder litigation, as this issue was not taken up by either the class action or any of the other opt outs.

Among Teva’s products are the drugs Actiq and Fentora, opioids used for the treatment of breakthrough cancer pain. According to the complaint filed by Pomerantz, Teva was aware that opioids are highly addictive and prone to abuse when prescribed for chronic pain and should be used only as a treatment of last resort. The suit alleges that, in spite of this knowledge, Teva engaged in a coordinated, and illegal, campaign to change the opinion of the medical community and the public at large in order to expand the use of opioids to treat common forms of pain like arthritis, lower back pain, and headaches. Teva’s efforts included disseminating materials that misrepresented the risks and benefits of opioid use, recruiting physicians as paid speakers in order to secure “brand loyalty,” and directing doctors to present scripted talks supporting opioid therapy, among other actions. According to the complaint, Teva’s campaign was part of the “aggressive marketing” that the National Institutes of Health identified as one of the key drivers of the opioid epidemic, leading to soaring profits for Teva while laying waste to communities across the United States.

Over the course of the class period, the truth about Teva’s actions eventually came to light. Approximately 3,500 lawsuits were filed against Teva and its affiliates; however the company assured investors that it had never engaged in improper marketing. In May 2019, Teva agreed to an $85 million settlement with the State of Oklahoma and the market began to reconsider the extent of Teva’s potential liability in opioid-related litigation. In response to these revelations, Teva’s share price plummeted to $8.84 on May 30, 2019, marking a 19-year low. These opioid claims were sustained by the court when Pomerantz overcame the defendants’ motion to dismiss.

Pomerantz has a strong record of expanding the rights of investors in dual-listed shares, particularly shares listed on both the New York Stock Exchange (“NYSE”) and Tel Aviv Stock Exchange (“TASE”). In a previous class action against the Israeli pharmaceutical company Perrigo plc, Pomerantz convinced the court to exercise supplemental jurisdiction over claims brought under Israeli law by investors who had purchased shares of Perrigo’s common stock on the TASE. Supplemental jurisdiction was, in securities litigation, a novel legal theory advanced by Pomerantz to vindicate its Israeli clients in the wake of the U.S. Supreme Court’s landmark ruling in Morrison v. National Australia Bank Ltd (2010), which barred foreign plaintiffs from suing foreign issuers under U.S. federal securities laws to recover losses from transactions on foreign exchanges. Morrison, on its face, would seem to prevent Pomerantz’s clients from pursuing recovery for losses related to their Perrigo common stock purchases. Notably, the court held that supplemental jurisdiction was correctly applied over the claims of the TASE purchasers as they applied the same standards as the claims brought under U.S. law by Pomerantz’s investor clients who had purchased Perrigo shares on the NYSE. Pomerantz moved the court to certify three classes of Perrigo investors: a U.S. purchaser class, a TASE purchaser class, and a class of investors who held Perrigo shares at the expiration of a hostile tender offer from Mylan N.V. Pomerantz presented expert evidence that TASE trading satisfied the criteria for market efficiency, resulting in U.S. District Court Judge Madeline Arleo certifying all three proposed classes. This marked the very first time since Morrison that a U.S. court had independently analyzed the market of a security traded on a non-U.S. exchange.

In the course of the litigation against Teva, Pomerantz built on the strategy it had successfully developed for Perrigo and convinced the court to exercise supplemental jurisdiction over Israeli law claims. Pomerantz’s clients had purchased both Teva’s American Depositary Shares, which are listed on the NYSE and Teva’s common stock listed on the TASE. In a major victory for investors, U.S. District Judge Stefan Underhill denied the motion to dismiss the Israeli law claims and exercised supplemental jurisdiction over the Israeli securities law claims, stating that Pomerantz’s clients’ “federal securities law and Israeli securities law claims seem to me, in every important respect, identical.”

“We are very proud of the Firm’s accomplishments in this action,” said Pomerantz’s Managing Partner, Jeremy Lieberman, who led the firm’s litigation team with Partner Michael Wernke. “The case included cutting-edge claims on behalf of investors of Teva on both the TASE and NYSE.  In holding that there was supplemental jurisdiction over the TASE claims, Judge Underhill conducted a thorough analysis of Israeli Supreme Court precedent and jurisprudence, finding that it was appropriate for a U.S. District Court to adjudicate the case on behalf of defrauded shareholders.”

The ruling in the Teva opt-out actions bolsters the precedent set in the case against Perrigo, providing a possible road map for future claims concerning dual-listed shares and broadening the path for global investors to pursue recovery for losses incurred through securities fraud.