Pomerantz Settles Ground-Breaking Case Against Perrigo for $97 Million
By the Editors
Pomerantz is always willing to pursue cases as far as the law and facts permit in order to achieve a favorable recovery for investors. In the Firm’s securities litigation against the pharmaceutical company Perrigo Co. plc (“Perrigo”), this entailed nearly seven years of litigation before three different judges, over 30 depositions, and review of over half a million documents. The result was worth the wait: in April 2024, Pomerantz’s efforts culminated in a $97 million settlement on behalf of defrauded investors. In addition, the case made ground-breaking new law that expands global investors’ rights.
Perrigo is one of the largest global manufacturers of over-the-counter healthcare products and both generic and branded drugs. The case focused on Perrigo’s botched integration of its largest acquisition ever, Omega Pharmaceuticals, and of alleged anticompetitive conduct in Perrigo’s generic drugs unit. Plaintiffs alleged that Perrigo and some senior officers and directors made misrepresentations about these topics to thwart a hostile takeover attempt in 2015 by competitor Mylan, Inc., and continued to do so for a few months after the tender offer expired in November 2015. Specifically, to discourage Perrigo investors from tendering shares, defendants allegedly concealed problems with the integration and performance of Omega, as well as a price-fixing scheme that boosted the results of Perrigo’s generic drug division. The tactic worked. Only 40% of Perrigo shareholders tendered shares, below the 50% threshold needed to consummate the merger. Approximately three months later, Perrigo began to reveal the truth about problems in Omega, ultimately taking more than $2 billion in impairment charges. Perrigo also admitted that the return of competition in topical generic drugs hurt the performance of that division. Longtime Chief Executive Officer Joe Papa left Perrigo to take a position at troubled Valeant Pharmaceuticals.
The initial complaint was filed in May 2016, just after Papa fled the company. Pomerantz’s institutional investor clients Migdal Insurance Company Ltd., Migdal Makefet Pension and Provident Fund Ltd., Clal Insurance Company Ltd., Clal Pension and Provident Ltd., Atudot Pension Fund for Employees and Independent Workers Ltd., and Meitav DS Provident Funds were appointed lead plaintiffs in August 2016.
Perrigo revealed further problems in the months that followed, and in May 2017, federal officials raided the company’s Michigan headquarters to execute a search warrant related to a generic drug price-fixing investigation. In June 2017, Pomerantz filed a robust amended complaint addressing both the initial claims and new claims based on these developments. About a year later, U.S. District Judge Madeline Cox Arleo of the District of New Jersey sustained the core claims related to misrepresentations about Omega and Perrigo’s generic drug practices. Other less significant claims were dismissed.
This case set important precedents that effectively stem the fallout for investors from the Supreme Court’s 2010 ruling in Morrison v. National Australia Bank, Ltd. That decision appeared to close the door of U.S. federal courts to investors who purchased securities on foreign exchanges, reasoning that the Securities Exchange Act of 1934 was not intended to have extraterritorial effect. Morrison was particularly limiting for investors in cross-listed (also known as dual-listed) shares, a staple of most global portfolios. Cross-listed shares are traded both on U.S. and foreign exchanges, affording institutional investors the opportunity to execute trades on the venue offering the most favorable trading hours, pricing, and liquidity at any given moment. Under Morrison, two purchasers of the same cross-listed stock at the same time injured by the same fraudulent misrepresentations and omissions might have very different remedies, depending on the trading venue. U.S. purchasers could join together with other similarly situated investors to collectively seek compensation in a U.S. class action, while purchasers on the foreign exchange, under Morrison, were left to pursue claims individually in a foreign court.
The Perrigo action offered the perfect opportunity to test the bounds of Morrison. Perrigo was listed both on the New York Stock Exchange (“NYSE”) and the Tel Aviv Stock Exchange (“TASE”), and had elected under the Israel Securities Act to have its disclosure obligations in Israel governed by the standards of its country of primary listing – in this instance, the United States – rather than by Israeli standards. Because of that election, Israeli law applied the standards of Section 10(b) of the Securities Exchange Act of 1934 to assess claims of securities fraud. Accordingly, Pomerantz argued that in addition to a class of U.S. investors, a parallel class could be recognized addressing the claims of Israeli purchasers applying the same standards.
Pomerantz brought claims under Israeli law applying the Section 10(b) standard for TASE purchasers, as well as traditional claims under U.S. law for U.S. purchasers. In its opinion sustaining the core parts of the amended complaint over motions to dismiss, the Court held that supplemental jurisdiction was properly exercised over the TASE purchaser claims, noting that they applied the same standards as the claims asserted under U.S. law.
In its November 2019 decision, the Court positively affirmed Pomerantz’s groundbreaking strategy, certifying classes of NYSE and TASE purchasers. In doing so, the Court analyzed Pomerantz’s evidence regarding the efficiency of the TASE market, finding that the market for Perrigo securities on the TASE was sufficiently liquid and responsive to information to trigger the presumption of reliance under Basic Inc. v. Levinson. This marked the very first time since the Morrison decision that a U.S. Court has independently analyzed the market of a security traded on a non-U.S. exchange and found that it met the standards of market efficiency necessary to allow for class certification, and so set an important precedent for global investors. Following this pivotal ruling, the defendants attempted to unravel class certification by seeking interlocutory appeal, but the United States Court of Appeals for the Third Circuit rejected their petition.
Discovery was lengthy and challenging. Between the summer of 2018, when the discovery stay was lifted, and late 2020, Pomerantz obtained and reviewed millions of pages of documents, and took or participated in over thirty fact witness depositions. This discovery yielded solid evidence supporting plaintiffs’ Omega claims, and circumstantial evidence of anticompetitive practices in Perrigo’s generic drug division. The early 2018 death of a key witness who was a generic drug sales executive at Perrigo, and the United States Department of Justice’s intervention to halt depositions of witnesses it believed to be important to the government’s price fixing investigation, both played a role in constraining discovery.
In June 2021, just as the parties were finishing briefing defendants’ motions for summary judgment, the case was reassigned to U.S. District Judge Julien X. Neals. Judge Neals held oral argument in April 2022, which lasted for more than seven hours. However, in the fifteen months that followed, he did not issue a decision. In July 2023, Chief District Court Judge Renée Marie Bumb reassigned the case (and the long-languishing motions for summary judgment) to herself. A month later, she issued a split decision, sustaining most of the Omega claims against Perrigo and Joseph Papa, ordering further briefing and argument on the generic drug-related claims against Perrigo, and granting summary judgment dismissing other claims. Chief Judge Bumb then ordered the parties to mediate. In April 2024, after several mediation sessions, the parties agreed to resolve all claims for a cash payment of $97 million.
“We are proud to have achieved this above-average recovery despite the considerable defenses raised in this action,” Partner Joshua Silverman, who ran the action for Pomerantz along with Managing Partner Jeremy Lieberman, said. “In addition to the headline number, we were pleased to create new law that will benefit global investors in the years to come.”