Harvey M. Jasper Retirement Trust v. Ivax Corp.

• Decision Date: 17 November 1995
• Docket Number: No. 94-865-CIV.,94-865-CIV.
• Citation: 920 F. Supp. 1260
• Parties: HARVEY M. JASPER RETIREMENT TRUST and Harvey M. Jasper Individual Retirement Account, Plaintiffs, v. IVAX CORPORATION and Phillip Frost, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

920 F. Supp. 1260

HARVEY M. JASPER RETIREMENT TRUST and Harvey M. Jasper Individual Retirement Account, Plaintiffs, v. IVAX CORPORATION and Phillip Frost, et al., Defendants.

No. 94-865-CIV.

United States District Court, S.D. Florida.

November 17, 1995.

COPYRIGHT MATERIAL OMITTED

Atlee W. Wampler, III, Wampler, Buchanan & Breen P.A., Miami, Florida, William S. Lerach, Milberg Weiss Bershad Hynes & Lerach, San Diego, CA, for plaintiffs Harvey M. Jasper Individual Retirement Account and Jerry H. Boron.

James Frederick Jorden, Jorden, Burt & Berenson, Miami, FL, for consolidated plaintiff, James M. Sweeney.

Michael J. Pucillo, Burt & Pucillo, West Palm Beach, FL, for plaintiffs Mark Nagelsen, Steven Samuels, Madeline Bicking and Stanley Dick.

Hugh F. Culverhouse, Jr., Miami, FL, for plaintiff William Miller.

Alan Harold Fein, Stearns Weaver Miller Weissier Alhadeff & Sitterson P.A., Miami, FL, for defendants.

ORDER ADOPTING REPORT AND RECOMMENDATION

ATKINS, Senior District Judge.

THIS CAUSE comes before the court on the Honorable Magistrate Judge Ted Bandstra's Report and Recommendation (R & R) (D.E. 111) on plaintiffs' Motion for Class Certification (D.E. 25) and defendants Ivax Corporation, Phillip Frost, Richard Pfenniger and Andrew Zinzi's Motion to Dismiss Consolidated Amended Complaint (D.E. 44). In his R & R, the magistrate judge recommends granting the motion for class certification but providing defendants with leave to challenge the certification later if it is determined that the requirements have not been met and denying defendants' motion to dismiss. Plaintiffs did not file any objections. Defendants filed objections only to that portion of the R & R recommending denial of their motion to dismiss. The parties have fully briefed the issue for the court.

While neither party objected to the magistrate judge's recommendation to grant the motion for class certification, the court, nevertheless, is under an obligation to review that recommendation based on the record before it. The court has done this and agrees with the magistrate judge that, at the present time, it appears that plaintiffs have met the requirements of Rule 23 of the Federal Rules of Civil Procedure. Accordingly, the court adopts that recommendation with the condition set forth by the magistrate judge on page 1267 of his R & R.

Upon careful consideration of the record, the court also adopts the magistrate judge's recommendation to deny defendants' motion to dismiss. Since the court is in complete agreement with the magistrate judge's determination, it does not find it necessary to readdress and reiterate all the points made by the magistrate judge. Suffice to say that the R & R is adopted in full. However, the court would like to address one or two points raised in defendants' objections.

Defendants claim that the magistrate judge "improperly relied `solely on the pleadings' and apparently failed to consider the full contents of the exhibits attached to the Complaint as well as all other documents filed by IVAX with the SEC." See Defendants' Objections at 5. First, as far as the court can tell from the record, there are no exhibits attached to plaintiffs' Consolidated Amended and Supplemental Class Action Complaint (D.E. 21). Therefore, there were no exhibits for the magistrate judge to `fail' to consider. Second, this Circuit has made it clear that, generally, "consideration of matters beyond the complaint is improper in the context of a motion to dismiss...." Milburn v. United States, 734 F.2d 762, 765 (11th Cir.1984). Similarly, "in securities litigations such as this where a motion to dismiss is grounded on Rule 12(b)(6), it is improper for a Court to consider such a factual challenge to the plaintiffs' complaint ... and the fact that a plaintiff might quote from a corporate document in its pleading without appending such document to the pleading does not permit the defendants to introduce such document where a dismissal is sought pursuant to Rule 12(b)(6)." Seidel v. Public Service Co. of New Hampshire, 616 F.Supp. 1342, 1353 (D.C.N.H.1985) (citations omitted). Therefore, the magistrate judge was correct in not addressing factual arguments of materiality and arguments concerning the truthfulness of plaintiffs' allegations. See id. at 1354 (arguments regarding materiality of allegedly undisclosed information in federal securities litigation are inappropriate on a 12(b)(6) motion); Kennedy v. Tallant, 710 F.2d 711, 718 n. 6 (11th Cir.1983) (argument that allegedly omitted facts where actually not omitted is inappropriate on 12(b)(6) motion because this challenges the truth of allegations and goes beyond examination of matters in the pleadings).

Additionally, in their introduction to the objections, and throughout their memorandum, defendants' argue that the "Magistrate inexplicably ignored many of plaintiffs' allegations and failed to address most of the legal arguments made and authorities presented by defendants...." See Defendants' Objections at 1. The court would note that it is the practice of this Court to consider all matters raised in pleadings prior to ruling on a motion, and the mere fact that certain arguments are summarily dismissed does not lead to the conclusion that a judge shirked his or her responsibility and failed to consider the arguments. Additionally, upon reviewing the record, this Court agrees with the magistrate judge's determination of those arguments and, while the court does not find it necessary to address them, it assures defendants that the arguments have been considered.

Having said that, and upon independent review of the record and being fully advised of its premises, it is

ORDERED AND ADJUDGED that the R & R (D.E. 111) is hereby ADOPTED IN FULL and made an Order of this Court. Accordingly, it is

ORDERED AND ADJUDGED that Plaintiffs' Motion for Class Certification (D.E. 25) is hereby GRANTED as set forth in the R & R and defendants' Motion to Dismiss (D.E. 44) is hereby DENIED.

DONE AND ORDERED.

REPORT AND RECOMMENDATION

BANDSTRA, United States Magistrate Judge.

THIS CAUSE came before the Court on (a) Plaintiffs' Motion for Class Certification (D.E. 25) filed on October 4, 1995; and (b) Defendants, Ivax Corporation, Phillip Frost, Richard Pfenniger and Andrew Zinz's, Motion to Dismiss Consolidated Amended Complaint (D.E. 44) filed on January 10, 1995. Previously, this cause was referred to the undersigned by the Honorable C. Clyde Atkins for all necessary and proper action on all pretrial motions pursuant to 28 U.S.C. sec. 636. Accordingly, the undersigned conducted a hearing on these motions on August 15, 1995. Having carefully considered these motions, all responses and replies thereto, oral argument of the parties, the court file and applicable law, the undersigned recommends that Plaintiffs' Motion for Class Certification be GRANTED, and that Defendants Motion to Dismiss be DENIED.

INTRODUCTION

This case involves a class action suit brought on behalf of all persons who purchased the common stock of Ivax Corporation ("Ivax") between January 14, 1994 and May 2, 1994, or who exchanged their shares of McGaw, Inc. ("McGaw") for shares of Ivax pursuant to a merger between the two companies and, as a result, were damaged. The complaint alleges that Ivax and the individual defendants, who were officers and control persons of Ivax, violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated thereunder, as well as the common law of negligent misrepresentation. The complaint further alleges that, with respect to those who exchanged their McGaw shares for Ivax shares pursuant to the merger, Ivax and various individual defendants violated Sections 11, 12(2) and 15 of the Securities Act of 1933 and Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder.

Ivax is a company whose primary focus is its pharmaceutical products which account for about 85-95% of its revenues and earnings. Since the second half of its 1992, Ivax's revenue and earnings growth has been largely fueled by sales of Verapamil, the generic form of a calcium channel blocker used for reduction of hypertension and angina attacks. In 1992, Ivax became the first and only supplier of the generic form of this drug. By 1993, Verapamil was generating at least 50% of the company's profits. As such, Ivax's success in selling Verapamil was a key determinant of the value of Ivax stock.

On January 5, 1994, Ivax and McGaw announced that Ivax planned to acquire McGaw. Pursuant to the terms of the merger, the higher Ivax's stock price was, the fewer Ivax shares would have to be issued to McGaw shareholders. Plaintiffs allege that from the time that defendants' preliminary proxy statement with respect to the merger was filed with the SEC on January 14, 1994, until May 2, 1994, when defendants announced Ivax's poor first quarter 1994 earning results, defendants engaged in a consistent course of fraudulent conduct, the purpose and effect of which was to misrepresent material facts.

Specifically, the complaint alleges that Ivax and other individual defendants knowingly or recklessly, and with compelling motives, engaged in a fraudulent course of conduct whereby they made affirmative statements or omissions directly and via unsuspecting analysts which misled the market as to (a) the impact of Zenith's entry into the generic Verapamil market; (b) the "channel stuffing" which Ivax engaged in during the fourth quarter of 1993 which temporarily inflated Verapamil sales; and (c) as to Ivax's financial performance in the first quarter of 1994. Plaintiff further alleges that when the truth regarding these matters became known to the public on May 2, 1994, Ivax's stock price fell immediately in response to this information.

Plaintiffs allege that defendants fraud is evidenced by the Registration Statement and Proxy Prospectus filed with the SEC wherein Ivax asserted that...