In re Teva Sec. Litig., 3:17-cv-558 (SRU)

• Decision Date: 22 January 2021
• Docket Number: No. 3:19-cv-655 (SRU), No. 3:19-cv-923 (SRU), No. 3:19-cv-1167 (SRU), No. 3:19-cv-657 (SRU), No. 3:19-cv-449 (SRU), No. 3:19-cv-192 (SRU), No. 3:20-cv-588 (SRU),No. 3:17-cv-558 (SRU), No. 3:19-cv-513 (SRU), No. 3:19-cv-543 (SRU), No. 3:20-cv-83 (SRU), No. 3:19-cv-656 (SRU), No. 3:19-cv-1173 (SRU),3:17-cv-558 (SRU)
• Citation: 512 F.Supp.3d 321
• Parties: IN RE TEVA SECURITIES LITIGATION This Document Relates to:
• Court: U.S. District Court — District of Connecticut

512 F.Supp.3d 321

IN RE TEVA SECURITIES LITIGATION

This Document Relates to:

No. 3:17-cv-558 (SRU)

No. 3:19-cv-192 (SRU)

No. 3:19-cv-449 (SRU)

No. 3:19-cv-513 (SRU)

No. 3:19-cv-543 (SRU)

No. 3:19-cv-655 (SRU)

No. 3:19-cv-656 (SRU)

No. 3:19-cv-657 (SRU)

No. 3:19-cv-923 (SRU)

No. 3:19-cv-1167 (SRU)

No. 3:19-cv-1173 (SRU)

No. 3:20-cv-83 (SRU)

No. 3:20-cv-588 (SRU)

United States District Court, D. Connecticut.

Signed January 22, 2021

ORDER

Stefan R. Underhill, United States District Judge

Numerous plaintiffs have sued Teva Pharmaceutical Industries, Ltd. ("Teva"), and several current and former employees and officers of that company. The plaintiffs allege that Teva violated federal securities laws¹ by misrepresenting the reasons for its financial success. More specifically, the plaintiffs allege that Teva publicly attributed its success to good business decisions when, in fact, Teva was thriving because it was artificially and collusively inflating the prices of certain generic drugs that it manufactured.

I have consolidated the over two-dozen cases pending before me related to the same subject matter. See Consolidation Ruling, Doc. No. 341;² Consolidation Order, Doc. No. 352. The consolidated case consists of four putative class actions³ consolidated for all purposes and twenty-one "direct" actions consolidated for all pre-trial purposes (the "Direct Actions"⁴ ), in which the plaintiffs have indicated that they will "opt out" of any class eventually certified. Although there is substantial overlap, there is not total overlap of the defendants named and claims raised in all the actions.

Defendants in twelve of the Direct Actions have made limited motions to dismiss. More specifically, the defendants in those twelve Direct Actions ask me to dismiss two groups of claims: (1) those that fall outside applicable statutes of repose, and (2) those that assert claims under Israeli law. See Mot. to Dismiss on Repose Grounds, Doc. No. 449; Mot. to Dismiss Israeli Law Claims, Doc. No. 450. For the reasons that follow, I grant the Defendants’ motion to dismiss on repose grounds and deny the Defendants’ motion to dismiss Israeli law claims.

I. Standard of Review

A. Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted

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 the complaint, not to assay the weight of evidence which might be offered in support thereof." Ryder Energy Distrib. 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. See Ashcroft v. Iqbal , 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Leeds v. Meltz , 85 F.3d 51, 53 (2d Cir. 1996).

Under 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, 127 S.Ct. 1955 ; see also Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ("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, 127 S.Ct. 1955 (cleaned up). 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, 127 S.Ct. 1955 (cleaned up).

"When reviewing a motion to dismiss, the court may consider only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken." Turner v. Boyle , 116 F. Supp. 3d 58, 68 (D. Conn. 2015) (quoting Samuels v. Air Transp. Local 504 , 992 F.2d 12, 15 (2d Cir. 1993) ) (cleaned up).

II. Background

In general,⁵ the plaintiffs claim that, beginning in 2013, Teva adopted a concerted and secret strategy of raising prices on certain drugs in its generic drug portfolio. Between July 3, 2013 and April 6, 2016, Teva raised prices for its generic drugs 76 times. See Second Am. Compl. (the "SAC"), Doc. No. 310, at ¶¶ 2, 40, 120, 128, App'x A. The plaintiffs allege that Teva undertook many of those price increases in tandem with competitors in the generic drug market. See id. at ¶¶ 46, 174–81, App'x A, App'x B. As a result of those price increases, Teva's business boomed, as reflected both in profits and in stock price. See id. at Figure 1 (inflated profit), Figure 2 (stock price). Indeed, by July 27, 2015, Teva's stock price had soared to an all-time high of $72 per share. See id. at ¶ 277. In August 2016, Teva was able to leverage its stock price to help finance a $40 billion purchase of Actavis, which was Allergan's worldwide generics business. Id. at ¶¶ 8, 93. To aid in that acquisition, Teva made a stock offering in December 2015 and a notes offering in July 2016. See id. at ¶¶ 407–08.

In the middle of 2015, the plaintiffs claim that Teva's house of cards began to come crashing down. See id. at ¶ 279. Around that time, investigations into the generic drug industry picked up pace and pressure grew on Teva to explain its financial success. See id. at ¶¶ 101–02, 105, 117. Teva's stock price sunk lower and lower. See id. at Figure 2. On May 10, 2019, the Attorneys General from 47 States, the District of Columbia, and Puerto Rico filed a 524-page antitrust complaint regarding the generic drug industry that contained detailed allegations with respect to Teva's alleged collusive conduct. See id. at ¶ 374; see also Compl., Doc. No. 1, in Connecticut, et al. v. Sandoz, Inc., et al. , No. 3:20-cv-802 (D. Conn.) (SRU). In August 2020, Teva Pharmaceuticals USA, Inc.—Teva's United States subsidiary—was charged in a criminal complaint by the United States Department of Justice's Antitrust Division for conduct relating to its alleged collusion to fix certain generic drug prices. See Press Release , U.S. DEP'T OF JUSTICE (Aug. 25, 2020), https://www.justice.gov/opa/pr/seventh-generic-drug-manufacturer-charged-ongoing-criminal-antitrust-investigation.

Throughout the purported class period in this case (February 6, 2014 through May 10, 2019), the plaintiffs claim that Teva publicly attributed its financial success to good business decisions when, in fact, that success was due to artificial (and coordinated) price increases on generic drugs. See SAC, Doc. No. 310, at ¶ 1, 165. Thus, the plaintiffs claim, in part, that Teva violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b), 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77k(a), 77l(a)(2), and 77o(a). See id. at ¶¶ 380–86 (Exchange Act); ¶¶ 438–64 (Securities Act). Regarding the Exchange Act claims, the plaintiffs allege that—between February 6, 2014 and February 19, 2019⁶ —the Defendants made a series of misstatements and omissions in (1) press releases, (2) earnings calls, (3) SEC filings, (4) guidance calls, (5) and at conferences. See id. at ¶¶ 176–267.

When I consolidated the Direct Actions into the lead action in this matter for all pre-trial purposes, see Consolidation Ruling, Doc. No. 341, at 2, I ordered the plaintiffs in each Direct Action (the "DAPs") to either designate their present complaint as operative or to file an amended complaint that complied with my ruling denying in substantial part the defendants’ motion to dismiss in the lead action in this matter, Ontario Teachers’ Pension Plan Bd., et al. v. Teva Pharm. Indus. Ltd., et al. , No. 3:17-cv-558. See Consolidation Order, Doc. No. 352, at ¶ 12; Ruling, Doc. No. 283 (regarding motion to dismiss). On May 28, the DAPs largely complied with my order.⁷

Also in compliance with my prior order, on July 8, 2020, the defendants in certain Direct Actions filed two limited motions to dismiss. See Consolidation Order, Doc. No. 352, at ¶ 13. The first, which addresses nine Direct Actions,⁸ asks me to dismiss the DAPs’ claims in those actions "to the extent they are based on alleged misstatements or omissions outside the five-year statutes of repose" applicable to claims brought pursuant to Section 10(b) of the Exchange Act and the analogous provision of the Pennsylvania Securities Act of 1972 (the "PSA"). See Mot. to Dismiss on Repose Grounds, Doc. No. 449, at 1. The second, which addresses ten Direct Actions,⁹ asks me to "decline to exercise supplemental jurisdiction over claims brought under Israeli law or, in the alternative, dismiss the Israeli law claims on forum non conveniens grounds." Mot. to Dismiss Israeli Law Claims, Doc. No. 450, at 1. On August 7, the relevant plaintiffs filed oppositions. See Israeli Law Pls.’ Opp'n, Doc. No. 498; Repose Pls.’ Opp'n, Doc. No. 501. On September 7, the defendants filed replies. See Israeli Law Defs.’ Reply, Doc. No. 539; Repose Defs.’ Reply, Doc. No. 538. On November 12, I held a Zoom hearing regarding the two motions and took them under advisement. See Min. Entry, Doc. No. 598; Hr'g Tr., Doc. No. 647.

III. Motion to Dismiss on Repose

Grounds (doc. no. 449)¹⁰

"A district court may...