United States District Court, D. New Jersey
T. ROWE PRICE GROWTH STOCK FUND, INC, et al. Plaintiffs,
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. et al., Defendants. EQUITY TRUSTEES LIMITED AS RESPONSIBLE ENTITY FOR T. ROWE PRICE GLOBAL EQUITY FUND, et al. Plaintiffs,
VALEANT PHARMACEUTICALS INTERNATIONAL, INC, et al. Defendants. PRINCIPAL FUNDS, LNC. and PRINCIPAL VARIABLE CONTRACTS FUNDS, PNC, Plaintiffs,
VALEANT PHARMACEUTICALS INTERNATIONAL, et al. Defendants. BLOOMBERGSEN PARTNERS FUND LP and BLOOMBERGSEN MASTER FUND LP, Plaintiffs,
VALE ANT PHARMACEUTICALS INTERNATIONAL, INC., et al, Defendants.
Michael A. Shipp United States District Judge
matter conies before the Court on twenty Motions to Dismiss
in the above matters by Defendants Tanya Cairo
("Carro"), Deborah Jorn ("Jorn"), Valeant
Pharmaceuticals International, Inc. ("Valeant"),
Robert Rosiello ("Rosiello"), Ari S. Kellen
("Kellen") (Valeant, Rosiello, and Kellen
collectively, "Valeant Defendants"), J. Michael
Pearson ("Pearson"), and Howard B. Schiller
("Schiller") (all collectively,
"Defendants"). Plaintiffs opposed the motions (ECF
No.49) and Defendants (except Pearson) replied.
(ECF Nos. 58, 59, 60, 61.)
Court has carefully considered the parties' submissions
and decides the matter without oral argument pursuant to
Local Rule 78.1. For the reasons stated below, Valeant
Defendants' Partial Motions to Dismiss are
DENIED; Schiller's Partial Motions to
Dismiss are DENIED; Pearson's Partial
Motions to Dismiss are DENIED; Carro's
Motions to Dismiss are DENIED; and
Jorn's Motions to Dismiss are DENIED;
in these matters are investment funds that purchased Valeant
securities between January 4, 2013 and August 10, 2016.
(Compl. 1, ECF No. 1.) These are direct actions arising out
of the same facts and circumstances as the class action
currently pending before the Court under docket number
15-7658 ("Class Action"). The Court assumes the
parties' familiarity with the underlying facts and
recites the facts only to the extent necessary to decide
Complaints allege that Valeant engaged in a fraudulent scheme
to artificially inflate the Company's revenues and
profits, which caused securities to trade at artificially
inflated prices and resulted in damages to the investment
funds when the truth about Valeant's business practices
was revealed. (Compl. ¶¶ 1-17.) Specifically,
Plaintiffs allege that Valeant hid the truth about practices
that carried enormous risk (id. ¶ 8), such as
the use of a secret pharmacy network (id
¶¶ 9-11, 75-126), "extraordinary price
gouging" (id. ¶ 12), fictitious and
improper accounting (see e.g., Id. ¶¶ 1,
5, 14, 125-26; 147-228), and other deceptive practices
(see e.g. Id. ¶¶ 1-12, 58-125 127-39).
to the Complaints, Defendants made false and misleading
representations about Valeant (id. ¶¶
147-326, 439), which Plaintiffs relied upon;n purchasing
Valeant securities. (Id. ¶¶ 470-91).
Plaintiffs allege that as the misconduct was revealed,
between September 28, 2015 and August 10, 2016, Valeant's
stock price fell from over $262 per share to less than $25
per share, resulting in market capitalization losses for the
Company's shareholders of over $76 billion dollars.
(Id. ¶¶I6-I7, 440-69.)
in these actions bring claims under: (i) Securities and
Exchange Act Section 10(b) and Securities and Exchange
Commission Rule 10b-5 thereunder ("Section 10(b)");
(ii) Securities and Exchange Act Section 18(a) ("Section
18"); and (ii) Securities and Exchange Act Section 20(a)
("Section 20(a)"). The Valeant Defendants, Pearson,
and Schiller move to Dismiss the Section 18 claims (Count II)
in each of the actions and to limit the Section 10(b) claims
(Count I) to purchases made before October 30, 2015. (Valeant
Defs.' Moving Br., ECF No. 36-1; Pearson Notice of Mot.,
ECF No. 38; Schiller's Moving Br., ECF No.
37-1.) Pearson also moves to limit Section 20(a)
claims (Count III) to purchases made before October 30,
2015. (Pearson Notice of Mot. 2.) Defendants
Carro and Jorn move to dismiss the claims against them in
their entirety. (Carro's Moving Br., ECF No. 34-1;
Jorn's Moving Br., ECF No. 35-1.)
analyzing a Rule 12(b)(6) motion, district courts conduct a
three-part analysis. First, the court must "tak[e] note
of the elements a plaintiff must plead to state a
claim." Ashcroft v. Iqbal, 556 U.S. 662, 675
(2009). Second, the court must accept as true all of a
plaintiffs well-pleaded factual allegations and construe the
complaint in the light most favorable to the plaintiff.
Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.
2009). The court, however, must disregard any conclusory
allegations proffered in the complaint. la. at 210-11.
Finally, the court must determine whether the "facts
alleged in the complaint are sufficient to show that the
plaintiff has a 'plausible claim for relief.'"
Id. at 211 (quoting Iqbal, 556 U.S. at
plaintiff pleads fraud, however, the plaintiff "must
meet a heightened pleading standard under Federal Rule of
Civil Procedure 9(b)." Zuniga v. Am. Home
Mortg., No 14-2973, 2016 WL 6647932, at *2 (D.N.J. Nov.
8, 2016). "In alleging fraud . . ., a party must state
with particularity the circumstances constituting fraud .. .
." Fed.R.Civ.P. 9(b). "A plaintiff alleging fraud
must therefore support its allegations 'with all of the
essential factual background that would accompany the first
paragraph of any newspaper story-that is, the who, what,
when, where and how of the events at issue.'"
U.S. ex rel. Moore & Co., P.A. v. Majestic Blue
Fisheries, LLC, 812 F.3d 294, 307 (3d Cir. 2016)
(quoting In re Rockefeller Ctr. Props., Inc. Sec.
Litig., 311 F.3d 198, 217 (3d Cir. 2002)). Additionally,
the Private Securities Litigation Reform Act
("PSLRA") requires that a securities fraud
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." OFI Asset Mgmt. v. Cooper Tire &
Rubber, 834 F.3d 481, 490 (3d Cir. 2016) (quoting In
re Suprema Specialties, Inc. Sees. Litig., 438 F.3d 256,
276 (3d Cir. 2006)).
Section 18 Claims (Count II)
18 creates a private remedy for damages resulting from the
purchase or sale of a security in reliance upon a false or
misleading statement contained in any document or report
filed with the SEC. 15 U.S.C. § 78r(a). In order to state
a claim under Section 18, Plaintiffs must plead actual
reliance on a false or misleading statement. In re
Supremo. Specialties, Inc. Sec. Litig., 438 F.3d at 283.
A Section 18 claim, however, does not require that defendants
acted with scienter or any particular state of mind. Id.;
see also In re Stone & Webster, Inc., Sec. Litig.,
414 F.3d 187, 193 (1st Cir. 2005); Magna Inv. Corp. v.
John Does One Through Two Hundred, 931 F.2d 38,
39-40(11th Cir. 1991).
Defendants argue that Plaintiffs'
claims under Section 18 fail to meet the heightened pleading
requirements for reliance because Plaintiffs did not identify
the particular transactions made in reliance on the alleged
false or misleading statements. (Valeant Defs.' Moving
Br. 7-11.) Defendants argue that the Complaints "simply
list approximately year-long periods and estimate the number
of purchases made, without specifying which purchases were
made in reliance on which statements in which filings, let
alone how many purchases were made or when." (Valeant
Defs.' Moving Br. 9.) Valeant Defendants cite two cases
from the Southern District of New York in support of their
argument that Plaintiffs must tie every purchase to a
relied-upon statement to survive a motion to dismiss.
(Id. at 9-10.) In response, Plaintiffs argue that
the cases cited by Defendants are factually distinguishable
and, in any event, "are inconsistent with the majority
view, including recent decisions from within the Second
Circuit." (Pls.' Opp'n Br. 17-18, ECF No. 49.)
Plaintiffs argue that they have sufficiently "identified
with particularity the specific false and misleading
statements and omissions that they relied upon when
purchasing the Company's common stock."
(Id. at 17.) The Court agrees. "Requiring
plaintiffs to link particular misrepresentations with
particular trades in their allegations of direct reliance
would impose 15U.S.C. §78r(a).additional burdens without
significantly improving the quality of notice to defendants
and without affording much added protection from
reputation-endangering and extortionate frivolous
suits." WM High Yield Fund v. O'Hanlon, No.
04-3423, 2005 WL 6788446 (E. D. Pa. May 16, 2015) (quoting
Argent Classic Convertible Arbitrage Fund L.P. v. Rite
Aid Corp., 315 F.Supp.2d 666, 678 (E.D. Pa. 2004));
see also In re Able Labs. Sec. Litig., No. 05-2681,
2008 WL 1967509, at *1, *10, *26 (D.N.J. Mar. 24, 2008). The
Court, therefore, is not persuaded that Plaintiffs must link
every purchase to a specific misstatement to meet Section
18's pleading requirement. Plaintiffs have identified the
statements on which they relied, in specific documents filed
with the SEC, and pled actual "eyeball" reliance on
these documents and statements in purchasing the securities
at issue. (Compl. ¶¶ 155-255; 327-56; 476-83,
494-99.) The Court, therefore, finds that Plaintiffs have
satisfied the standard for pleading actual reliance under
also argue that Plaintiffs' Section 18 claims should be
limited, specifically in BloombergSen, because
certain purchases occurred prior to February 28, 2014-the
date of the earliest SEC filing at issue in the Section 18
claims-and therefore "reliance allegations are not just
implausible-they are impossible." (Valeant Defs.'
Moving Br. 10; see also Schiller's Moving Br.
4.) Defendants further argue that Plaintiffs only allege that
the investment advisors read and relied upon Valeant's
2014 10-K, which was filed on February 25, 2015, further
supporting the argument that earlier purchases should be
excluded. (Id. at 10 n.10.) In response, Plaintiffs
state that "the BloombergSen Plaintiffs' Section 18
claim does not concern purchases of Valeant securities
before February 2015. Rather, the BloombergSen
Plaintiffs purchased the Valeant securities at issue
after Defendants' filing of their false and
misleading Form 10-K on February 25, ...