Ont. Teachers' Pension Plan Bd. v. Teva Pharm. Indus. Ltd.

• Citation: 432 F.Supp.3d 131
• Decision Date: 25 September 2019
• Docket Number: No. 3:17-cv-558 (SRU),3:17-cv-558 (SRU)
• Court: U.S. District Court — District of Connecticut
• Parties: 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, v. TEVA PHARMACEUTICAL INDUSTRIES LTD., et al., Defendants.

432 F.Supp.3d 131

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,

v.TEVA PHARMACEUTICAL INDUSTRIES LTD., et al., Defendants.

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

United States District Court, D. Connecticut.

Signed September 25, 2019

Gretchen M. Nelson, Nelson & Fraenkel LLP, Los Angeles, CA, Javier Bleichmar, Pro Hac Vice, Joseph A. Fonti, Pro Hac Vice, Wilson M. Meeks, III, Pro Hac Vice, Evan A. Kubota, Thayne Stoddard, Bleichmar Fonti and Auld LLP, New York, NY, Lesley E. Weaver, Bleichmar Fonti & Auld, LLP, Oakland, CA, J. Christopher Rooney, Carmody Torrance Sandak & Hennessey, LLP, New Haven, CT, Liam S. Burke, Marc J. Kurzman, Carmody Torrance Sandak & Hennessey, LLP, Stamford, CT, for Plaintiffs.

Blake M. Zollar, Craig Edward TenBroeck, Koji F. Fukumura, Cooley LLP, San Diego, CA, Emily E. Renshaw, Pro Hac Vice, Jason D. Frank, Pro Hac Vice, Jordan D. Hershman, Pro Hac Vice, Morgan Lewis & Bockius LLP, Boston, MA, Jill M. O'Toole, Shipman & Goodwin LLP, Michael D. Blanchard, Morgan, Lewis & Bockius LLP, Hartford, CT, for Defendants.

Stefan R. Underhill, United States District Judge

I. INTRODUCTION

Lead 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.

The 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.

II. BACKGROUND

Plaintiff's 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.

A. The Parties

1. Plaintiffs and the Class

Ontario 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.

2. Defendants

Teva, "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.

Vigodman 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.

Desheh 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.

Oberman 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.

Olafsson 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.

Griffin 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.

Cavanaugh 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.

Teva Finance is Dutch company that is "a shell company that is wholly-owned and controlled special purpose finance subsidiary of Teva." Id. at ¶ 373.

B. Procedural History

The 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, 2017.¹ 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.

Teva, 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),...