United States District Court, D. Connecticut
ONTARIO TEACHERS' PENSION PLAN BOARD, Individually and as Lead Plaintiff on behalf of all others similarly situated; and ANCHORAGE POLICE & FIRE RETIREMENT SYSTEM, Individually and as Named Plaintiff on behalf of all similarly-situated bond purchasers, Plaintiffs,
TEVA PHARMACEUTICAL INDUSTRIES LTD., et al., Defendants.
R. UNDERHILL UNITED STATES DISTRICT JUDGE
Plaintiff, Ontario Teachers' Pension Plan Board
("Ontario Teachers'"), and Named Plaintiff
Anchorage Police & Fire Retirement System
("Anchorage") (together, "the
plaintiffs"), individually and on behalf of all others
similarly situated ("the Class"), filed this Second
Amended Consolidated Class Action Complaint ("the
complaint") on June 22, 2018, Doc. No. 226. Their first
set of allegations, called "'34 Act
Allegations", "34 Act Allegations", or alleged
Exchange Act violations, are asserted against the following
defendants (together '"34 Act Defendants"):
Teva Pharmaceutical Industries, Ltd. ("Teva");
Former Teva President and CEO Erez Vigodman
("Vigodman"); Former Teva CFO Eyal Desheh
("Desheh"); Former Teva America Generics President
and CEO Allan Oberman ("Oberman"); Former Teva
Global Generics President and CEO Sigurdur Olafsson
("Olafsson"); Former Teva SVP and CAO Deborah
Griffin ("Griffin"); Former Teva SVP and COO
Maureen Cavanaugh ("Cavanaugh"). Compl., Doc. No.
226 at ¶¶ 24-32. Plaintiffs also allege
"Securities Act Allegations" against the following
defendants (together "Securities Act Defendants"):
Teva; Teva Pharmaceuticals Finance Netherlands III B.V.
("Teva Finance"); Vigodman; Desheh; and Griffin.
Id. at ¶¶ 371-77.
Defendants moved to dismiss all counts of the Complaint
(see Doc. Nos. 238, 239, 240), and the parties have
fully briefed the motions. Upon a review of the
defendants' numerous motions in light of the
plaintiffs' account of facts, which I accept as true, I
conclude that some of the defendants' arguments have
merit. Thus, for the reasons stated below, the Motion to
Dismiss filed by Teva, Vigodman, Desheh, Griffin, and
Olafsson (doc. no. 238) and the Motion to Dismiss filed by
Teva Finance (doc. no. 239) are denied in substantial
part but granted with respect to
the plaintiffs' allegations stemming from the
defendants' failure to disclose subpoenas from the
Department of Justice and Connecticut Attorney General.
Further, the Motion to Dismiss filed by Cavanaugh and Oberman
(doc. no. 240) is granted.
securities class action claims "arise from the
difference between what the Defendants told investors was
driving Teva's financial success and the truth behind
Teva's performance." Compl, Doc. No. 226 at ¶
1. Plaintiffs basically allege that the defendants
implemented "a strategy to systematically raise generic
drug prices across a large swath of Teva's generic drug
portfolio, " which the plaintiffs refer to as the
"Price-Hike Strategy." Id. According to
the plaintiffs, however, the defendants failed to reveal the
actual reason for the company's financial success, and
attributed the growth to "fundamental business
strategies" such as cost-cutting and "good product
management." Id. The plaintiffs allege that the
reported profits made Teva look more successful than it was,
compelling plaintiffs, and others, to invest.
Plaintiffs and the Class
Teachers' "is the largest single-profession pension
plan in Canada, representing roughly 323, 000 active and
retired teachers in the Province of Canada." Compl.,
Doc. No. 226 at ¶ 20. Ontario Teachers' alleges that
it purchased and acquired Teva American Depository Shares
("ADS") registered on the New York Stock Exchange
("NYSE") and Preferred Shares in domestic
transactions during the class period (February 6, 2015
through August 3, 2017). Id. at ¶ 21. Anchorage
"is a public pension fund in Anchorage, Alaska that
provides pension, disability, and survivor benefits to active
and retired police officers and firefighters and their
families." Id. at ¶ 22. Anchorage alleges
that it purchased and acquired Teva Notes during the class
period. Id. at ¶ 23. The plaintiffs alleged
that they "suffered damages as a result of the
violations of the federal securities laws alleged
herein." Id. at ¶ 21, 23. Ontario
Teachers' "brings separate claims under the 34 Act
and the Securities Act on behalf of all Class Members."
Id. at ¶ 20. Anchorage "brings separate
claims under the 34 Act and the Securities Act on behalf of
Class members who purchased or otherwise acquired Teva
Notes." Id. at ¶ 22.
"the world's largest generic drug
manufacturer", is incorporated in Israel, and has a
wholly-owned subsidiary, Teva USA. Id. at ¶ 24.
Teva is named in both the '34 Act Allegations and the
Securities Act Allegations.
was Teva's President and Chief Executive Officer
("CEO") from January 11, 2014 to February 6, 2017
and a Teva Director from June 22, 2009 to February 6, 2017.
Id. at ¶ 26. The plaintiffs allege that
Vigodman's liability stems from his signing and
certifying certain forms, including Securities and Exchange
Commission ("SEC") forms 20-F and 6-K, that
included false and misleading statements, and making false
statements on conference calls and in notes documents.
Id. Vigodman is named in both the '34 Act
Allegations and the Securities Act Allegations.
was Teva's Chief Financial Officer ("CFO") from
July 2008 to June 30, 2017, except from October 30, 2013 to
February 11, 2014 when he served as Teva's interim CEO
and Interim President. Id. at ¶ 27. The
plaintiffs allege that Desheh's liability stems from his
signing and certifying certain forms, including SEC forms
20-F and 6-K, that included false and misleading statements,
and making false statements on conference calls and in notes
documents. Id. Desheh is named in both the '34
Act Allegations and the Securities Act Allegations.
was Teva Americas Generics' President and CEO from
November 5, 2012 to December 13, 2014. Id. at ¶
28. The plaintiffs allege that Oberman's liability stems
from his false and misleading statements, as well as his
approval and control of the false and misleading SEC filings.
Id. Oberman is named in both the '34 Act
Allegations and the Securities Act Allegations.
was Teva's Global Generic Medicine Group's President
and CEO from July 1, 2014 to December 5, 2016. Id.
at ¶ 29. The plaintiffs allege that Olafsson's
liability stems from his false and misleading statements, as
well as his approval and control of the false and misleading
SEC filings. Id. Olafsson is named in the '34
Act Allegations only.
is the current Teva Senior Vice President ("SVP")
and Chief Accounting Officer ("CAO"), and was an
authorized representative of both Teva and Teva Finance, who
served as Vice President and CFO of Teva USA. Id. at
¶ 30. The plaintiffs allege that Griffin's liability
stems from signing the notes and shares statements as well as
her approval and control of the false and misleading SEC
filings. Id. Griffin is named in both the '34
Act Allegations and the Securities Act Allegations.
was Teva USA's SVP and Chief Operating Officer
("COO") for North American Generics. Id.
at ¶ 31. The plaintiffs allege that Cavanaugh's
liability stems from her approval and control of the false
and misleading SEC filings. Id. Cavanaugh is named
in the '34 Act Allegations only.
Finance is Dutch company that is "a shell company that
is wholly-owned and controlled special purpose finance
subsidiary of Teva." Id. at ¶ 373.
original complaint was filed on November 6, 2016 in the
Central District of California. Compl., Doc. No. 1. It was
transferred to the District of Connecticut on April 4,
2017. Doc. No. 75. On July 11, 2017, Ontario
Teachers' Pension Plan Board was appointed as lead
plaintiff. Order, Doc. No. 124. The plaintiffs filed a Class
Action Complaint for Violation of the Securities Act of 1933
on August 2, 2017, Compl., Doc. No. 129; and an Amended Class
Action Complaint for Violation of the Securities Act of 1933
on September 5, 2017. Compl., Doc. No. 138. Plaintiffs filed
an Amended Consolidated Class Action Complaint on September
11, 2017. Compl., Doc. No. 141. The defendants filed multiple
Motions to Dismiss, which I granted without prejudice to
repleading on April 3, 2018. See Motions to Dismiss,
Doc. Nos. 187, 188, 189, 190, and 198; Order, Doc. No. 215.
Thereafter, the plaintiffs filed the operative Second Amended
Consolidated Class Action Complaint on June 22, 2018. Compl.,
Doc. No. 226.
Vigodman, Desheh, Griffin, and Olafsson filed a Motion to
Dismiss on September 14, 2018 (see '34 Act Mot.
to Dism., doc. no. 238), which the plaintiffs opposed
(see Opp. to '34 Act Mot. to Dism., doc. no.
244), and the Teva defendants filed a reply (see
Reply to '34 Act Mot. to Dism., doc. no. 254). Teva
Finance also filed a Motion to Dismiss on September 14, 2018
(see Teva Fin. Mot. to Dism., doc. no. 239), which
the plaintiffs opposed (see Opp. to Teva Fin. Mot.,
doc. no. 246), and Teva Finance filed a reply (see
Reply to Teva Fin. Mot., doc. no. 255). Lastly, Cavanaugh and
Oberman filed a Motion to Dismiss on September 14, 2018
(see C/O Mot. to Dism., doc. no. 240), which the
plaintiffs opposed (see Opp. to C/O Mot., doc. no.
247), and Cavanaugh/Oberman filed a reply (see Reply
to C/O Mot., doc. no. 256).
allegations in the Second Amended Consolidated Class Action
Complaint stem mostly from three categories of alleged
misrepresentations/omissions by Teva relative to: (1) the
source of its profit success; (2) the competitive nature of
the generics market; and (3) the investigations in which Teva
was involved. See generally, Compl, Doc. No. 226.
The plaintiffs allege that those misrepresentations/omissions
were perpetuated by Teva officials in order to inflate
profits to make Teva appear more successful and attractive in
the market and, therefore, attract more investors to raise
money to acquire a competitor company. Id. The
plaintiffs allege generally that the defendants consistently
misrepresented to investors and the market that their
financial success was due to good business decisions, and not
because of pricing, when, in fact, they were consistently
raising prices of many of their generic drugs and were
concealing information from investors, analysts, and the
public. Id. Further, the plaintiffs allege generally
that the defendants consistently misrepresented that the
generics market was highly competitive when, in fact, the
defendants and its competitors were engaged in a collusive
agreement to raise prices, further inflating Teva's
profits. Id. The plaintiffs refer to that as the
price-fixing conspiracy. The plaintiffs also allege that Teva
was the subject of numerous investigations into its pricing
and profits but concealed that information from the public
and investors. Id. The plaintiffs base their
allegations "on Lead Counsel's investigation, which
included interviews with numerous former employees of
Teva[.]" Id. at ¶ 33.
plaintiffs allege that the class period began on February 6,
2014 when Teva "announced its fourth quarter 2013 and
full year 2013 financial results in a press release",
because those reported profits resulted from the undisclosed
price-hike strategy. Id. at ¶ 46. The
plaintiffs allege that before the class period began,
"Teva's generics segment was struggling and [its]
share price had dropped from the $60s in 2010 into the $30s
by 2013." Id. at ¶ 34. Teva's then-CEO
planned to focus on branded drugs but was abruptly fired and
Desheh, then CFO, became the interim-CEO in November 2013.
Id. Desheh and then-CEO Vigodman announced that Teva
would make a "major acquisition." Id. at
¶ 35. Plaintiffs allege, though, that in early 2013 Teva
adopted the price-hike strategy, which was "a non-public
strategy to systematically increase prices across dozens of
drugs in its generic drug portfolio." Id. at
¶ 36. The plaintiffs allege that, as part of this
strategy, Teva raised the prices of 18 of its generic drugs
on July 3, 2013 and August 9, 2013, some as much as an 812%
increase, which led to $875 million in price-related profit.
Id. at ¶ 42-43. Further, the plaintiffs allege
that fifteen of those increases were "implemented
together with Teva's competitors who also made price
increases on the same drugs." Id.
allege that Teva's financial results announcement on
February 6, 2014, which started the class period, revealed a
14% increase in generics revenue for 2013 fourth quarter, and
attributed that increase to '"higher sales'
volume, reduced expenses, and 'exclusive launches' of
new generic drugs." Id. at ¶ 47. The
plaintiffs allege that the defendants omitted that, although
those reasons may have had some influence, the real
reason for the increase was the price-hike strategy.
Id. The plaintiffs allege that the defendants
perpetuated this misrepresentation/omission in calls with
investors and analysts. Id. at ¶ 48. The news
of Teva's financial success in 2013 led to increased
share prices on the stock market, and by March 2014, it was
trading at $48. Id. at ¶ 50. By April 2014, the
share price had increased to $54.06. Id. at ¶
52. The plaintiffs allege that in April 2014, as part of the
price-hike strategy, Teva increased the prices of another
twelve generic drugs, eight of which were done in
collaboration with competitors. Id. at ¶ 56. On
May 1, 2014, Teva announced that its continued financial
success was due to "lower expenses, a changed
composition of revenues, and 'new product
launches.'" Id. at ¶ 53. The
plaintiffs allege, though, that the price-hike strategy had
generated $120 million that quarter, making it the actual
cause of the financial success. Id. The success
gained Teva more positive press. Id. at ¶ 55.
31, 2014, Teva announced that it was seeing continued
financial success due to "the growth of [its] global
generic business, primarily in the U.S." Id. at
¶ 59. The plaintiffs allege that the price-hike strategy
was the actual reason for the financial success, generating
as much as $160 million in profit. Id. at ¶ 61.
On July 1 and August 28, 2014, Teva increased the prices of
another 20 drugs, twelve of which were done in collaboration
with competitors. Id. at ¶ 63. The plaintiffs
allege that those increases generated as much as $50 million
in profit. Id.
generic drug market came under scrutiny in summer of 2014 and
the Connecticut Attorney General began a "non-public
investigation into the companies that manufactured
digoxin" and issued subpoenas to many of Teva's
competitors. Id. at ¶ 58, 62. Congress also
started looking into the generic drug market and sent Teva a
letter in October 2014 seeking information on its recent
price increases, to which Teva never responded. Id.
at ¶ 62. Teva also refused to testify in a November 20,
2014 Senate Subcommittee of Primary Health and Aging hearing.
Id. at ¶ 70.
October 30, 2014, Teva again reported financial success, with
a $160 million increase in generic drug profits. Id.
at ¶ 65. The plaintiffs allege that defendants again
misrepresented and omitted the truth about the profits in
both written statements and on calls with investors and
analysts. Id. at ¶ 66-67, 72. Teva continued to
receive positive press on the basis of those financial
results. Id. at ¶ 68. Amidst public scrutiny of
the generic market as a whole, Teva again announced positive
financial results on February 5, 2015, including a $480
million generic segment profit increase from 2013 to 2014.
Id. at ¶ 74. The plaintiffs allege that Teva
reported $693 million of profit for the year 2014.
Id. at ¶ 76. The plaintiffs allege that the
defendants again misrepresented and/or omitted the real
reason for the financial success in written statements and on
calls with investors and analysts, which gained Teva positive
press. Id. at ¶ 76-77.
January 2015, Teva increased the prices of another 14 drugs,
nine of which were done in collaboration with competitors.
Id. at ¶ 79. The plaintiffs allege that this
generated as much as $48 million in profits, and the overall
price-hike strategy generating as much as $228 million in the
first quarter of 2015. Id. The plaintiffs allege
that the defendants continued to misrepresent/omit the real
reason for their financial success in written statements and
on calls with investors and analysts, gaining Teva more
positive press. Id. at ¶ 83-86. Teva shares
started trading at almost $60 per share, which led the media
to speculate about a possible acquisition. Id. at
¶ 80. Teva unsuccessfully tried to acquire Allergan and
Mylan. Id. at ¶ 81-82. Teva's shares then
increased to $72 per share. Id. at ¶ 87.
high stock prices, on July 27, 2015, Teva announced that it
would acquire Actavis, Allergan's worldwide generics
business, for $40.5 billion in cash and equity. Id.
Plaintiffs allege that the defendants now needed to raise $30
billion to complete the deal and, therefore, Teva's
motivation for raising capital shifted from acquisition to
payment. Id. at ¶ 89. Plaintiffs allege that
Teva, on July 30, 2015, again reported financial success due
to "reduced expenses and new product launches" in
the generics segment, and continued to perpetuate that
misrepresentation/omission in calls with media and investors.
Id. at ¶ 90. In July 2015, Teva implemented a
price increase of another seven drugs, four of which were
done in collaboration with competitors. Id. at
¶ 91. The plaintiffs allege that Teva again, on October
29, 2015, reported financial success and
misrepresented/omitted that the real reason was the
price-hike strategy, and falsely stated that it was due to
lower expenses, again gaining Teva continued positive press.
Id. at ¶ 92-94. Amidst growing public and
political scrutiny of the generics market, Teva denied any
exposure to legislation that would penalize manufacturers who
increased prices more than inflation and concealed the
price-hike strategy, gaining more positive press for Teva.
Id. at ¶ 95-98.
plaintiffs allege that the cash to complete the Actavis deal
would come from three offerings: (1) a $7 billion secondary
public offering of depository shares in December 2015; (2) an
initial public offering of Preferred Shares in December 2015;
and (3) a $15 billion offering of bonds in 2017. Id.
at ¶ 89. In November and December 2015, Teva filed a
registration statement with the SEC and two prospectus
supplements for the two share offerings, all of which
"included numerous false [and] misleading statements
attributing Teva's profits to sources other than the
price-hike strategy." Id. at ¶ 101. The
two shares offerings were issued and raised roughly $7.2
even more public scrutiny in the generics sector, Teva
continued to misrepresent and omit the real reasons for its
increased financial success. Id. at ¶ 103. On
February 11, 2016, Teva again reported financial success, in
which the plaintiffs allege they concealed $848 million in
profits from the price-hike strategy. Id. at ¶
105. The plaintiffs allege that Teva continued to perpetuate
the misrepresentation/omission about the reasons for their
financial success, which led to continued positive press for
Teva. Id. at ¶ 106-10. In the face of even more
public scrutiny of the sector, Teva continued to "deny
any vulnerability to pricing pressure." Id. at
¶ 113. The plaintiffs allege that the price-hike
strategy began to falter and Teva, on April 6, 2016,
increased the prices on only five generic drugs, all of which
Teva had increased before. Id. at ¶ 114. Teva
also, on May 9, 2016, reported negative financial
results-$215 million less in first quarter 2016 than in first
quarter 2015-which it attributed to "higher expenses,
lower sales, lower European profit, and fewer product
launches." Id. at ¶ 116. Teva continued to
report that pricing pressure had nothing to do with their
financial results. Id. at ¶ 117. The plaintiffs
allege that, contrary to its public statements, Teva was
indeed being substantially damaged by price deflation, and
its price increase related profit had "plummeted."
Id. at ¶ 118. Teva continued to issue
statements perpetuating the omission/misrepresentation that
it was not subject to pricing pressure, and the media
therefore continued to report as such. Id. at ¶
and July 2016, Teva received subpoenas from both the
Department of Justice ("DOJ") and the Connecticut
Attorney General, seeking information about its generics
pricing. Id. at ¶ 122. One day after receiving
the Attorney General's subpoena, on July 13, 2016, Teva
announced that its $20 billion debt offering, scheduled for
September, would be accelerated, and filed a Registration
Statement with the SEC that day. Id. at ¶ 123.
In conjunction with the offering, Teva continued to report
that it had "stable" pricing and "saw no
change" in generics pricing, which the media reported,
and Teva did not report the receipt of the subpoenas.
Id. at 124-26. Teva launched its $20 billion bond
offering on July 18, 2016 pursuant to the Notes Offering
Materials, "which incorporated several of the false and
misleading quarterly and full year financial
disclosures", and did not disclose the subpoenas from
the DOJ or Connecticut Attorney General. Id.
August 4, 2016, Teva disclosed the subpoenas and reported
negative financial results from the second quarter of
2016-$115 million less in profits than in the second quarter
of 2015-which Teva attributed to "increased expenses,
the loss of exclusivity on certain products, and lower sales
on products for which Teva had not taken price
increases." Id. at ¶ 128. The plaintiffs
allege that the defendants concealed that Teva had earned
$122 million less in price-based profit. Id. With
the negative financial results and disclosure of the
subpoenas, the price of securities declined. Id. The
plaintiffs allege that the defendants continued to perpetuate
the misrepresentations and omissions about their pricing
practices to investors, analysts, and the media. Id.
November 3, 2016, Bloomberg released an article about the DO
J and Connecticut Attorney General probes into generic drug
manufacturers, and specifically stated that Teva was being
investigated, which led to Teva securities immediately
dropping 9%. Id. at ¶ 135-36. On November 15,
Teva reported negative financial results from the third
quarter of 2016-a $277 million decline from the third quarter
of 2015-which Teva attributed to "causes such as
divestments and lost sales from certain drugs."
Id. at ¶ 137. The plaintiffs allege, though,
that the decline was "attributable to a ... decline in
inflated profit as the price-hike strategy collapsed"
but that Teva repeatedly and fraudulently disclaimed that was
the reason. Id. at ¶ 137-38. CEO Olafsson
abruptly "retired" shortly thereafter, but the
plaintiffs allege that he was actually fired. Id. at
¶ 140. Soon after that, the DOJ announced that it
charged, via an information, two executives of a Teva
competitor, Heritage, with conspiring to fix prices, rig
bids, and manipulate the market for Glyburide, for which, the
plaintiffs allege, Teva controlled 75% of the market.
Id. at ¶ 142. On December 15, the Connecticut
Attorney General announced that it, and other Attorneys
General, were charging Teva and others with antitrust
violations regarding Glyburide (more drugs have since been
added, id. at ¶ 144). Id. at ¶
143. The plaintiffs allege that the AG complaint "cited
emails, calls, and documents that evince explicit collusion
between Teva and Heritage's principals" who had been
criminally charged. Id.
January 6, 2017, Teva again reported negative financial
results and continued to falsely attribute the reasons.
Id. at ¶ 145-48. One month later, Vigodman was
terminated as President and CEO, and that news, in tandem
with the negative financial reports, caused Teva securities
to drop. Id. at ¶ 145, 149. Shortly thereafter,
Teva reported its financial results for 2016 and reported
that without Actavis, it would have had a $1.4 billion
decline, which Teva attributed to "loss of exclusivity,
lower sales of certain drugs, and then loss of revenues from
divested product." Id. at ¶ 151. On August
3, 2017, Teva "took a $6.1 billion charge against its
U.S. generics business, a permanent reduction in the entire
business's valuation and a dollar-for-dollar hit to [its]
bottom line." Id. at ¶ 153. The plaintiffs
allege that this was a "direct result of the complete
collapse of the price-hike strategy, and evaporation of the
inflated profits." Id. Credit rating agencies
downgraded Teva's debt rate to just above
"junk" and the price of Teva securities "fell
dramatically." Id. at¶ 154.
the above allegations, the plaintiffs assert that the
defendants "made four types of false and misleading
statements or omissions on conference calls with investors
and in SEC filings": (1) Item 5 non-disclosure-the
plaintiffs allege that the defendants "violated their
statutory duty to disclose material trends under Item 5 of
Form 20-F" when they "failed to disclose the
material trend of generating profit as part of the concealed
price-hike strategy" and they also "concealed the
trend of declining inflated profit, and that they could no
longer make price increases as the strategy unraveled";
(2) False statements regarding competition-the plaintiffs
allege that the defendants' statements "falsely
indicated that Teva was participating in competitive and
functioning markets for generic drugs" when, actually,
"[t]o the contrary, Teva made dozens of price increases
in tandem with its competitors" and Teva and the
cooperating companies "deliberately did not compete on
price"; (3) False and misleading pricing statements-the
plaintiffs allege that the defendants' statements
"concealed Teva's price-hike strategy and the
profits it generated" and then later "concealed
that the price-hike strategy fell apart as Teva was unable to
make more price increases or sustain inflated profit"
and the statements "were particularly misleading as the
34 Act Defendants touted, and investors were highly attuned
to, the sources of the generic segment's purported
success"; and (4) Concealed receipt of subpoenas-the
plaintiffs allege that the defendants "failed to
disclose in the Notes Offering Materials Teva's receipt
of subpoenas from the DOJ and the State Attorneys General in
connection with their antitrust investigations into the
generics industry." Id. at ¶ 155. The
plaintiffs lay out the alleged false and misleading
statements and omissions in more detail, along with their
allegations about why each statement was fraudulent.
Id. at ¶ 155-239.
'34 Act (Exchange Act) Allegations
One alleges a violation of Section 10(b) of the Exchange Act
and Rule 10b-5, promulgated thereunder, by the '34 Act
Defendants. Compl., Doc. No. 226 at ¶ 342. Plaintiffs
assert, inter alia, that the '34 Act Defendants
"made, disseminated, or approved the false and
misleading statements ... which they knew or recklessly
disregarded were false and misleading in that the statements
contained material misrepresentations and failed to disclose
material facts necessary in order to make the statements
made, in light of the circumstances under which they were
made, not misleading." Id. Plaintiffs allege
that they, and the class, "suffered damages in that, in
reliance on the integrity of the market, they paid
artificially inflated prices for Teva Securities."
Id. at ¶ 344.
Two alleges a violation of Section 20(a) of the Exchange Act
by the '34 Act Defendants. Id. at ¶ 347.
Plaintiffs assert that the defendants "had the power and
ability to control the actions of Teva and its
employees" and are therefore liable under Section 20(a).
Securities Act Allegations
Three alleges a violation of Section 11 of the Securities Act
by the Securities Act Defendants. Id. at ¶ 397.
Plaintiffs assert that this count "does not sound in
fraud" and liability is "predicated on the
participation of each defendant in the ... Offering
Materials, which contained untrue statements and omissions of
material fact." Id. Count Three is brought
against all Securities Act Defendants with respect to the
ADS/Preferred Offerings "on behalf of the class who
purchased or otherwise acquired Teva ADS or Preferred Shares
pursuant and/or traceable to the ADS/Preferred
Offerings[.]" Id. at ¶ 398. Count Three is
brought against all Securities Act Defendants, except Teva
Finance, with respect to the Notes Offerings "on behalf
of members of the class who purchased or otherwise acquired
Notes pursuant and/or traceable to the Notes
Offering[.]" Id. at ¶ 399. Plaintiffs
allege that the ADS/Preferred and Notes Offerings
"contained ... untrue statements of material fact or
omitted to state [material facts] ... required to be stated
therein or necessary to make the statements therein not
misleading." Id. at ¶ 400.
Four alleges a violation of Section 12(a)(2) of the
Securities Act by the Securities Act Defendants. Id.
at ¶ 406. Plaintiffs assert that Count Four is solely
based in negligence and not fraud. Id. Count Four is
brought "on behalf of all persons who purchased
securities in/ pursuant to, and/or traceable to the
Offerings", offered by means of prospectus or oral
communications which "included ... untrue statements of
material fact and/or omitted to state ... material facts
necessary in order to make the statements, in light of the
circumstances under which they were made, not
misleading." Id. at ¶¶ 407, 410.
Five alleges a violation of Section 15(a) of the Securities
Act by Teva, Vigodman, Desheh, and Griffin; all in connection
with the Notes Offering, and against all but Teva in
connection with the ADS and Preferred Offerings. Id.
at ¶¶ 415-16. Plaintiffs assert that Count Five is
solely based in negligence and not fraud. Id.
Plaintiffs assert that the defendants "acted negligently
in that none of them exercised reasonable care to ensure, or
had reasonable grounds to believe, that the Offering
Materials were true and not misleading as to all material
facts and did not omit to state any material fact required to
be stated therein or necessary to make ... the statements
therein not misleading." Id. at ¶ 421.
Pleading Standards: Rule 12(b)(6). Rule 8(a). Rule 9(b).
and the PLSRA
12(b)(6) permits dismissal of a complaint for "failure
to state a claim upon which relief can be granted."
Fed.R.Civ.P. 12(b)(6). A motion to dismiss for failure to
state a claim pursuant to Rule 12(b)(6) is designed
"merely to assess the legal feasibility of a complaint,
not to assay the weight of evidence which might be offered in
support thereof." Ryder Energy Distribution Corp. v.
Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d
Cir. 1984) (quoting Geisler v. Petrocelli, 616 F.2d
636, 639 (2d Cir. 1980)). When deciding a motion to dismiss
pursuant to Rule 12(b)(6), the court must accept the material
facts alleged in the complaint as true, draw all reasonable
inferences in favor of the plaintiffs, and decide whether it
is plausible that plaintiffs have a valid claim for relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009);
Bell Ail. Corp. v. Twombly, 550 U.S. 544, 555-56
(2007); Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir.
Twombly, "[f]actual allegations must be enough
to raise a right to relief above the speculative level,
" and assert a cause of action with enough heft to show
entitlement to relief and "enough facts to state a claim
to relief that is plausible on its face." 550 U.S. at
555, 570; see also Iqbal, 556 U.S. at 6 79
("While legal conclusions can provide the framework of a
complaint, they must be supported by factual
allegations."). The plausibility standard set forth in
Twombly and Iqbal obligates the plaintiff
to "provide the grounds of his entitlement to relief
through more than "labels and conclusions, and a
formulaic recitation of the elements of a cause of
action." Twombly, 550 U.S. at 555 (quotation
marks omitted). Plausibility at the pleading stage is
nonetheless distinct from probability, and "a
well-pleaded complaint may proceed even if it strikes a savvy
judge that actual proof of [the claims] is improbable, and .
. . recovery is very remote and unlikely." Id.
at 556 (quotation marks omitted). Federal Rule of Civil
Procedure 8(a) requires only a "short and plain
statement of the claim showing that the pleader is entitled
to relief." Fed.R.Civ.P. 8(a)(2).
plaintiffs claiming securities fraud under the Exchange Act
are "subject to heightened pleading requirements that
[they] must meet to survive a motion to dismiss. First, a
complaint alleging securities fraud must satisfy Rule 9(b)
... which requires that 'the circumstances constituting
fraud ... shall be stated with particularity.'"
ATSI Communications, Inc. v. ShaarFund, Ltd., 493
F.3d 87, 99 (2d Cir. 2007) (quoting Fed.R.Civ.P. 9(b)).
"Securities Acts claims that 'are premised on
allegations of fraud' also must satisfy Rule 9(b)'s
particularity requirement." In re MF Global Holdings
Limited Securities Litigation, 982 F.Supp.2d 277, 302
(S.D.N.Y. 2013) (quoting Rombach v. Chang, 355 F.3d
164, 171 (2d Cir. 2004)). The heightened pleading standard
set by Rule 9(b) "serves to provide a defendant with
fair notice of a plaintiff s claim, safeguard [its]
reputation from improvident charges of wrongdoing, and
protect [a defendant] against strike suits." ATSI
Communications, 493 F.3d at 99; Rombach, 335
F.3d at 171.
addition to the heightened requirements under Rule 9(b),
Exchange Act complaints must also meet the pleading
requirements of the Private Securities Litigation Reform Act
of 1995 ("PSLRA"). See ATSI
Communications, 492 F.3d at 99; In re MF Global
Holdings, 982 F.Supp.2d at 302. "The PSLRA requires
that a complaint 'specify each statement alleged to have
been misleading, the reason or reasons why the statement is
misleading, and, if an allegation regarding the statement or
omission is made on information and belief, the complaint
shall state with particularity all facts on which that belief
is formed.'" In re MF Global Holdings, 982
F.Supp.2d at 302 (quoting 15 U.S.C. §
Exchange Act Claims - Counts One and Two
'34 Act Defendants argue that the plaintiffs failed
"to adhere to the exacting standards" under the
PSLRA and Rule 9(b). '34 Act Mot. to Dism., Doc. No.
238-1 at 12-13. They argue that the complaint "tries to
make up for in length what it lacks in particularity"
and the plaintiffs "fail to plead with particularity
facts demonstrating that Teva engaged in ... a
'[price-hike] strategy' or that Teva's
overall pricing increased if one includes drugs for
which there were price declines." Id. at 13.
The defendants argue that the plaintiffs asserted only
"unwarranted inferences and unsupported conclusions
[that] do not constitute well-pleaded facts for purposes of a
motion to dismiss under Rule 12(b)(6), and they fall far
short of providing the particularity Rule 9(b) and the PSLRA
require." Id. (internal quotation marks
omitted). Further, the '34 Act Defendants argue that the
complaint "never states with particularity how
any specific statement was false or
misleading on its own or through the alleged omission of
information." Id. at 14 (emphasis in original).
They argue that the plaintiffs instead just "print
quotations from every quarterly and annual financial release
and then conclusorily allege that the financial disclosures
were misleading based on Plaintiffs' speculation about
supposed price increases." Id. The plaintiffs
argue that they met the required standard for pleading with
specificity to survive this threshold argument. Opp. to
'34 Act Mot. to Dism., Doc. No 244 at 12. I agree with
in this Circuit have held that the length of a complaint does
not, alone, satisfy the requirement that it be sufficiently
particular, nor is it enough for a plaintiff to assert
generic and/or identical allegations after each quotation or
section, setting forth the reasons why the statement is
allegedly false. See In re Alcatel Securities
Litigation, 382 F.Supp.2d 513, 534 (S.D.N.Y. Feb. 28,
2005); Endovasc Ltd., Inc. v. J.P. Turner & Co.,
2004 WL 634171, at *6, *9 (S.D.N.Y.Mar. 30, 2004) (dismissing
a plaintiffs complaint where the plaintiff "provided a
laundry list of alleged false statements, " but
supported the alleged misstatements "only by sweeping
conclusory allegations that lack[ed] particularity as to how
the statements were untrue"), aff'd, 169
F.App'x 655 (2d Cir. 2006). It is not up to the courts to
play "connect-the-dots in order to identify the facts
and trends upon which plaintiffs base their claim."
In re Alcatel, 382 F.Supp.2d at 534 (citing In
re PetSmart, Inc. Sec. Litig., 61 F.Supp.2d 982, 991 (D.
Alcatel, the plaintiffs asserted claims similar to
those in Count One here, violations of Section 10(b) and Rule
10b-5, in a 250-paragraph, 102-page complaint. Id.
The court dismissed those claims because the complaint,
although long, stated "very little with
particularity." Id. In addition, the court
highlighted the fact that the plaintiffs, in making
allegations under those sections, set forth lengthy
quotations made by the defendants and followed each quotation
"with a similar (in most cases identical) laundry list
of 'specific' reasons why the statements were
allegedly false." Id. The court held that the
plaintiffs neglected to "make it clear what portion of
each quotation constituted] a false representation or which
statements link up with which issues in the laundry
list." Id. The court held that was deficient
under the pleading standards for all those reasons and
because it "plac[ed] the burden on the Court to sort out
the alleged misrepresentations and match them with the
corresponding adverse facts." Id. Courts have
found, however, that a complaint meets the particularity
requirement when it "specifically identifies] the date,
publication, and speaker of each of the alleged misstatements
or omissions and contain[s] facts supporting the existence
and materiality of these problems" and highlights in
some way the "particular aspects of the statements
alleged to be misleading." In re MF Global
Holdings, 982 F.Supp.2d at 309 (internal quotation marks
omitted); see also In re NTL, Inc. Securities
Litigation, 347 F.Supp.2d 15, 22-23 (S.D.N.Y. 2004).
the plaintiffs separated into four categories the alleged
misleading statements and omissions by the defendants: (1)
pricing trends; (2) competition; (3) pricing; and (4)
subpoenas. Compl., Doc. No. 226 at pp. 45-86. With respect to
the section regarding the alleged misleading statements that
Teva operated in a competitive market regarding price, the
complaint is further separated into subsections, detailing
the false statements made on conference calls, and those made
in SEC filings. See Id . at ¶¶ 164-71.
With respect to the section regarding the alleged false and
misleading statements and omissions regarding pricing, the
complaint is further separated into subsections, detailing
the alleged false and misleading financial disclosures for
each quarter and full year throughout the class period.
See Id . at ¶¶ 172-237. In each
subsection, the plaintiffs identify the allegedly misleading
statement or omission, the date it was made, the
forum/publication in which it was made, and the speaker of
the alleged misstatements or omissions. As an example, in the
subsection regarding Third Quarter 2014 Financial Results,
the plaintiffs cite to an October 30, 2014 statement by
Vigodman on a conference call in which he stated that
Teva's revenue was because of "the new launches this
year" which have "been very significant
contributors to the year." Id. at ¶ 182.
The plaintiffs allege that the statements were "false
and misleading because, having attributed the source of the
profit increase, the 34 Act Defendants had a duty to disclose
but concealed the full truth that the price-hike strategy ...
contributed materially to the results." Id. The
plaintiffs used this layout and format throughout all of its
allegations of misleading statements and omissions, and after
each statement or omission, the plaintiffs allege why it was
false or misleading. Here, the plaintiffs provide the
required particularity for the heightened standard under Rule
9(b) and the PSLRA.
the complaint is not "so '[v]ague and
disorganized' as to fail to satisfy Rule 9(b) and the
PSLRA." In re MF Global Holdings, 982 F.Supp.2d
at 309 (quoting In re ITT Educ. Servs., Inc. Sec. &
Shareholder Derivatives litig, 859 F.Supp.2d 572, 578
(S.D.N.Y.2012)). The purpose of the heightened pleading
requirements under Rule 9(b) and the PSLRA is "to
provide a defendant with fair notice of a plaintiff s claim,
safeguard his reputation from improvident charges of
wrongdoing, and protect him against strike suits."
ATSI Communications, 493 F.3d at 99. The complaint
here sufficiently achieves those purposes. If nothing else,
the defendants' briefs, in which the defendants
thoroughly and directly rebut the allegations in the
Complaint, prove that the defendants were on notice of the
claims against them. See In re MF Global Holdings,
982 F.Supp.2d at 310 (relying on defendants' motions to
dismiss to find that the complaint put the defendants on
notice of the claims against them).
Rule 9(b) and the PSLRA place heavy requirements on
plaintiffs who bring fraud allegations, they "do not
require such an extreme level of particularity" and, in
especially complex cases, allow for some flexibility. In
re MF Global Holdings, 982 F.Supp.2d at 311.
Accordingly, the complaint satisfies the particularity
requirements of Rule 9(b) and the PSLRA with respect to the
pricing claims brought under the Exchange Act claims in
Counts One and Two.
Securities Act Claims - Counts Three, Four, and Five
Exchange Act claims require proof of fraud and must always be
pled with particularity, Securities Act claims must be pled
with particularity only where 'the gravamen of the
complaint is plainly fraud.'" In re MF Global
Holdings, 982 F.Supp.2d at 310 (quoting
Rombach, 355 F.3d at 172)). Here, the plaintiffs
distinguish their Securities Act claims, which they allege
do not sound in fraud but only negligence, from
their Exchange Act claims, which they allege do
sound in fraud. As such, the Complaint states, in each count
brought under the Securities Act, that the count does not
sound in fraud and/or that any allegations of fraud are
expressly excluded from the count. See Compl.,
¶ 397 (Count Three: "This count does not sound in
fraud."); ¶ 406 (Count Four: "Plaintiffs ...
expressly exclude from this count any ...