United States District Court, D. New Jersey
Madeline Cox Arleo United States District Judge.
MATTER comes before the Court by way of Lead
Plaintiff Perrigo Institutional Investor Group's
(“Lead Plaintiff”) Motion for Class
Certification. ECF No. 163. Defendants Perrigo Company plc
(“Perrigo” or the “Company”), Joseph
C. Papa, and Judy Brown (collectively,
“Defendants”) oppose the Motion. ECF No. 189. For
the reasons set forth herein, Lead Plaintiff's Motion is
Plaintiff filed this putative securities class action on
behalf of investors who purchased Perrigo common stock
between April 21, 2015 and May 3, 2017, both dates inclusive
(the “Class Period”). The claims arise from
alleged misrepresentations Defendants made to investors to
falsely inflate Perrigo's stock value in the face of a
hostile tender offer from a competitor. Plaintiff seeks to
certify the following three classes: (1) investors who
purchased Perrigo stock during the Class Period on the New
York Stock Exchange (“NYSE”); (2) investors who
purchased Perrigo stock during the Class Period on the Tel
Aviv Stock Exchange (“TASE”); and (3) investors
who owned Perrigo stock as of November 12, 2015 until the
time a tender offer expired.
Perrigo is a publicly-traded pharmaceutical company. Am.
Compl. ¶ 30. Perrigo's common stock is dual listed
on the NYSE and the TASE. Id. ¶ 31. Joseph Papa
and Judy Brown (collectively, the “Individual
Defendants”) were corporate executives at Perrigo when
the relevant misrepresentations occurred. See id.
¶¶ 32, 34.
Plaintiff Perrigo Institutional Investor Group is a group of
investors comprised of the following corporate entities:
Migdal Insurance Company Ltd. (“Migdal
Insurance”), Migdal Makefet Pension and Provident Fund
Ltd. (“Migdal Makefet” and, with Migdal
Insurance, “Migdal”), Clal Insurance Company Ltd.
(“Clal Insurance”), Clal Pension and Provident
Ltd. (“Clal Pension”), Atudot Pension Fund for
Employees and Independent Workers Ltd. (“Atudot”
and, with Clal Insurance and Clal Pension,
“Canaf-Clal”), and Meitav DS Provident Funds and
Pension Ltd. (“Meitav”). ECF No. 64. Migdal is
one of the largest insurance and pension managers in Israel,
and each of the Migdal entities purchased Perrigo stock
during the Class Period, including on the TASE. Id.
¶ 27. Canaf-Clal comprises Israeli investment entities,
each of which purchased Perrigo shares during the Class
Period, including on the TASE. Id. ¶ 28. Meitav
is an affiliate of a leading Israel investment firm and
purchased Perrigo shares during the Class Period, including
on the TASE. Id. ¶ 29.
Amended Complaint alleges violations of Section 10(b) of the
Exchange Act of 1934 (the “Exchange Act”), 15
U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. §
240.10b-5(b), and Section 14(e) of the Exchange Act, 15
U.S.C. § 78n(e), against all Defendants, and violations
of Section 20(a) of the Exchange Act, id. §
78t(a), against the Individual Defendants. The TASE Investors
further allege violations of the Israel Securities Law, 1968
against all Defendants.
Class Period begins on April 21, 2015, approximately two
weeks after pharmaceutical conglomerate Mylan-a Perrigo
competitor-made an unsolicited bid to purchase Perrigo for
approximately $205 per share. Am. Compl. ¶¶ 1, 92.
Perrigo's Board of Directors rejected Mylan's offer
and announced that the bid “substantially undervalue[d]
the Company and its future growth prospects.” See
id. ¶ 96. Mylan twice increased its bid proposal to
Perrigo, but the Board rejected both revised offers.
Id. ¶¶ 103-04. Mylan thereafter proceeded
with a formal tender offer to Perrigo's shareholders.
Id. ¶ 107.
shareholders ultimately rejected Mylan's tender offer on
November 13, 2015. See id. ¶¶ 107, 111.
Approximately two months after the tender offer failed,
Defendants announced Perrigo's fourth quarter and 2015
calendar year financial results, which were lower than
projected. See id. ¶¶ 9, 225-26. Perrigo
stock continued to fall over the course of the next few
months. See id. ¶¶ 10-11, 227-29. By
December 2016, Perrigo stock values declined significantly to
$81.94 per share. Id. ¶¶ 17, 238.
class action claims stem from alleged material
misrepresentations and omissions that Defendants made to
overvalue Perrigo and prevent its shareholders from accepting
Mylan's offer. Defendants filed a Motion to Dismiss,
which this Court granted in part and denied in part in a
written opinion issued on July 27, 2018. ECF Nos. 114,
136-37. The surviving claims are premised upon
misrepresentations and omissions relating to two key areas:
(1) collusive pricing for generic drugs; and (2) the
integration of Omega Pharma, N.V.
Lead Plaintiff alleges that Perrigo engaged in a price-fixing
scheme with other generic drug manufacturers and that
Defendants made material misrepresentations that omitted
their price-collusion practices. The second set of
misstatements relates to the integration of an acquired
company. Shortly before the Class Period commenced in 2015,
Perrigo acquired Omega-one of the largest over-the-counter
healthcare companies in Europe. Am. Compl. ¶ 53.
Plaintiff alleges that Defendants misrepresented the success
of Omega's integration and inflated Omega's growth
prospects while omitting numerous known impediments. The
Court dismissed certain Omega claims predicated upon alleged
misrepresentations that included puffery and forward-looking
statements but sustained the claims based upon
misrepresentations relating to the past and present success
of the integration. ECF No. 136.
filed this action on May 18, 2016. ECF No. 1. The Court
appointed Lead Plaintiff and its counsel on April 27, 2017.
ECF No. 85. Plaintiff filed an Amended Complaint on June 21,
2017. ECF No. 89. On July 27, 2018, this Court issued an
Opinion and Order granting in part and denying in part
Defendants' Motion to Dismiss the Amended Complaint, as
set forth above. ECF Nos. 136, 137. Plaintiff now seeks to
certify three separate classes of Perrigo investors under
Federal Rule of Civil Procedure 23(b)(3): (1) investors who
suffered damages resulting from the purchase of Perrigo stock
on the NYSE during the Class Period; (2) investors who
suffered damages resulting from the purchase of Perrigo stock
on the TASE during the Class Period; and (3) investors who
held Perrigo stock as of November 12, 2015 until Mylan's
tender offer expired.
Class Certification Requirements
plaintiff seeking class certification must show that the
class meets the requirements of Federal Rule of Civil
Procedure 23. Rule 23(a) sets forth four basic prerequisites
for class certification: (1) numerosity; (2) commonality; (3)
typicality; and (4) adequacy. See Fed.R.Civ.P.
23(a); In re Constar Int'l Inc. Sec. Litig., 585
F.3d 774, 780 (3d Cir. 2009). If the plaintiff meets those
requirements, the Court must then decide whether the class
action is maintainable under Rule 23(b). Rule 23(b)(3)
authorizes certification when “questions of law or fact
common to class members predominate over any questions
affecting only individual members, ” and “a class
action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” See
Fed. R. Civ. P. 23(b). The predominance requirement is
generally the most crucial requirement in class actions
involving securities violations. See Halliburton Co. v.
Erica P. John Fund, Inc. (Halliburton II), 573 U.S. 258,
plaintiff “must affirmatively demonstrate” that
the Rule 23's requirements are satisfied, Wal-Mart
Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011), by a
preponderance of the evidence, In re Blood Reagents
Antitrust Litig., 783 F.3d 183, 187 (3d Cir. 2015). In
deciding whether to grant a class certification motion, the
Court's analysis frequently overlaps with “the
merits of the plaintiff's underlying claim, ”
Dukes, 564 U.S. at 351, but the Court may consider
the merits “only to the extent . . . that they are
relevant to determining whether the Rule 23 prerequisites for
class certification are satisfied, ” Amgen Inc. v.
Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 466
Elements of Substantive Claims
Amended Complaint alleges violations of Sections 10(b),
14(e), and 20(a) of the Exchange Act, 15 U.S.C. § 78a et
seq. Section 14(e) is modeled after Section 10(b),
Schreiber v. Burlington N., Inc., 472 U.S. 1, 10
(1985), and Section 20(a) is a derivative claim predicated on
finding Section 10(b) liability, see Rahman v. Kid
Brands, Inc., 736 F.3d 237, 247 (3d Cir. 2013). Thus, an
analysis of Lead Plaintiff's Section 10(b) claims will
determine the viability of its Section 20(a) claim and will
inform the viability of its Section 14(e) claim.
10(b) and Rule 10b-5 prohibit deception in connection with
the sale or purchase of securities. To recover damages for
securities fraud, a plaintiff must prove the following
elements: “(1) a material misrepresentation or
omission, (2) scienter, (3) a connection between the
misrepresentation or omission and the purchase or sale of a
security, (4) reliance upon the misrepresentation or
omission, (5) economic loss, and (6) loss causation.”
City of Edinburgh Council v. Pfizer, Inc., 754 F.3d
159, 167 (3d Cir. 2014).
class certification stage, the Court need not consider
materiality and loss causation but must consider reliance.
See Amgen, 568 U.S. at 473 (materiality); Erica
P. John Fund, Inc. v. Halliburton Co. (Halliburton I),
563 U.S. 804, 812-13 (2011) (loss causation); Halliburton
II, 573 U.S. at 266-68 (reliance). To establish
reliance, a plaintiff may invoke the rebuttable presumption
set forth in Basic, Inc. v. Levinson, that all
investors rely on the integrity of the market price when
deciding whether to buy or sell stock. 485 U.S. 224, 246-47
(1988). The Basic presumption of reliance is based
on the “fraud-on-the-market” theory, which
provides that where a company's stock trades on an
efficient market, its stock price incorporates all material
public information, including misrepresentations. See
id. at 246-47 (internal quotation marks and citations
omitted). A plaintiff bears the burden to invoke the
Basic presumption by showing: “(1) that the
alleged misrepresentations were publicly known, (2) that they
were material, (3) that the stock traded in an efficient
market, and (4) that the plaintiff traded the stock between
the time the misrepresentations were made and when the truth
was revealed.” Halliburton II, 573 U.S. at
plaintiff meets that initial burden, the defendant may rebut
the presumption by making “[a]ny showing that severs
the link between the alleged misrepresentation and either the
price received (or paid) by the plaintiff, or his decision to
trade at a fair market price.” Basic, 485 U.S.
at 248. To satisfy this standard, the defendant must produce
“enough evidence ‘to withstand a motion for
summary judgment or judgment as a matter of law on the
issue.'” Bing Li v. Aeterna Zenataris,
Inc., 324 F.R.D. 331, 344 (D.N.J. 2018) (quoting
Lupyan v. Corinthian Colleges, Inc., 761 F.3d 314,
320 (3d Cir. 2014)).
Plaintiff moves to certify three separate classes. First,
Lead Plaintiff seeks to certify a class consisting of
“[a]ll persons who purchased Perrigo's publicly
traded common stock between April 21, 2015 and May 2, 2017,
both dates inclusive . . . on the . . . NYSE . . . or any
other trading center within the United States, and were
damaged thereby” (the “U.S. Purchaser
Class”). ECF No. 163.1 at 2. Second, Plaintiff seeks to
certify a class consisting of “[a]ll persons who
purchased Perrigo's publicly traded common stock during
the Class Period on the . . . TASE . . . and were damaged
thereby” (the “TASE Purchaser Class”).
Id. Finally, Plaintiff seeks to certify a class
consisting of “[a]ll persons who owned Perrigo common
stock as of November 12, 2015 and held such stock through at
least 8:00 a.m. on November 13, 2015, when the tender offer
of [Mylan] expired unsuccessfully (whether or not a person
tendered their shares)” (the “Tender Offer
assert a single challenge to Rule 23(a)'s requirements
against all proposed classes. In each instance, Defendants
challenge only Rule 23(a)'s typicality and adequacy
requirements. Under Rule 23(b), Defendants argue that
predominance is lacking for reasons specific to each proposed
class. Defendants do not challenge Rule 23(b)'s
superiority requirement for any class. Accordingly, the Court
will address whether the proposed classes together meet Rule
23(a) and then separately consider whether each proposed
class satisfies Rule 23(b)'s requirements.
Rule 23(a)'s Requirements
Numerosity and Commonality
do not challenge class certification on numerosity or
commonality grounds. The Court is satisfied that those
requirements are met here.
numerosity requirement is satisfied when “the class is
so numerous that joinder of all members is
impracticable.” In re Modafinil Antitrust
Litig., 837 F.3d 238, 249 (3d Cir. 2016) (quoting
Fed.R.Civ.P. 23(a)(1)). Joinder is often impractical in
securities fraud cases involving publicly-owned and
nationally-listed corporations that had a large amount of
outstanding and traded shares during the relevant class
period. See In re Vivendi Universal, S.A. Sec.
Litig., 242 F.R.D. 76, 84 (S.D.N.Y. 2007). In addition,
the numerosity requirement “is readily met in
securities cases involving an issuer whose stock trades
publicly on the NYSE.” City of Sterling Heights
Gen. Emps.' Ret. Sys. v. Prudential Fin., No.
12-5275, 2015 WL 5097883, at *8 (D.N.J. Aug. 31, 2015).
is a publicly traded company with more than 100 million
shares outstanding and an average weekly trading volume of
approximately 9.5 million shares on the NYSE during the Class
Period. See Expert Report of Zachary Nye, Ph.D.
(Nov. 30, 2018) (“Nye Report”), ECF No. 163.2, at
¶ 20. Perrigo stock also traded on the TASE during the
same period. Compare id. at Ex. 4A with id.
at Ex. 4B. In addition, more than 100 million shares were
outstanding as of November 2, 2015, shortly before
Mylan's tender offer expired on November 13, 2015.
Id. Ex. 4A. Defendants do not contest the relative
size of the putative classes. The Court is satisfied that
joinder is impracticable, and Lead Plaintiff meets the
requires Lead Plaintiff to “share at least one question
of fact or law with the grievances of the prospective
class.” Rodriguez v. Nat'l City Bank, 726
F.3d 372, 382 (3d Cir. 2013); see Fed.R.Civ.P.
23(a)(2). “[C]ourts in this [C]ircuit . . . have
recognized that securities fraud cases often present a
paradigmatic common question of law or fact of whether a
company omitted material information or made
misrepresentations that inflated the price of its
stock.” Bing Li, 324 F.R.D. at 339 (internal
quotation marks and citation omitted). The Court concludes
that this standard is easily met in this case. The class
claims are predicated upon the same underlying
misrepresentations and omissions by Defendants, presenting
common issues of both fact and law arising thereunder.
typicality requirement “centers on whether the
interests of the named plaintiffs align with the interests of
the absent members.” Stewart v. Abraham, 275
F.3d 220, 227 (3d Cir. 2001). The standard for demonstrating
typicality is undemanding and requires that “the claims
of the named plaintiffs and putative class members involve
the same conduct by the defendant.” Newton v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 259
F.3d 154, 183-84 (3d Cir. 2001). It does not require that the
putative class members all share identical claims. In re
Warfarin Sodium Anitrust Litig., 391 F.3d 516, 531-32
(3d Cir. 2004). Rather, so long as the named plaintiffs and
putative class challenge “the same unlawful
conduct” the typicality requirement is “usually
satisf[ied] . . . irrespective of the varying fact patterns
underlying the individual claims.” Stewart,
275 F.3d at 227 (citation omitted); see also In re
Schering Plough Corp. ERISA Litig., 589 F.3d 585, 598
(3d Cir. 2009) (“Complete factual similarity is not
required; just enough factual similarity so that maintaining
the class action is reasonably economical and the interests
of the other class members will be fairly and adequately
protected in their absence.”).
named plaintiff, however, “must not be subject to a
defense that is both inapplicable to many members of the
class and likely to become a major focus of the
litigation.” Id. at 599. Defendant bears the
burden to “show some degree of likelihood a unique
defense will play a significant role at trial.”
Beck v. Maximus, Inc., 457 F.3d 291, 300 (3d Cir.
2006). Speculative defenses will not suffice. See
id. at 301. Defendants do not contest that Lead
Plaintiff challenges the same unlawful conduct affecting the
putative class members. Defendants instead assert that Lead
Plaintiff is subject to an atypical defense, namely that Lead
Plaintiff “potentially relied on information other than
the misrepresentations alleged in the Amended Complaint in
deciding to not tender in response to Mylan's
offer.” Defendant's Memorandum of Law in Opposition
to Motion for Class Certification (“Defs. Br.”),
ECF No. 189, at 35. As support, Defendants cite to testimony
of plaintiff members, admitting to “closed-door
meetings” with at least two Mylan corporate officers.
Id. at 36.
their depositions, three plaintiff members testified to
attending one or more meetings wherein Mylan officers
discussed the Company's tender offer. See, e.g.,
ECF No. 189.37 at 112:13-23 (Canaf-Clal-one meeting); ECF No.
189.39 at 73:3-11, 76:17-77:11 (Meitav-two meetings); ECF No.
189.41 at 53:4-17 (Migdal-one meeting). Without further
describing the substance of their conversations, two of those
members testified that Mylan tried to convince them to
tender. See ECF No. 189.37 at 113:19-24; ECF No.
189.41 at 53:18-22. One merely stated that the meetings'
purpose was to “understand the Mylan view.” ECF
No. 189.39 at 73:3-11. Defendants contend that Lead Plaintiff
is subject to a unique defense based on those statements
because the Mylan meetings “raise serious
questions” about whether Lead Plaintiff “relied
on information unavailable to other members of the proposed
classes” and claim this issue “will become a
major focus of litigation.” Defs. Br. at 37-38.
unique-defense argument is speculative and therefore will not
bar a finding of typicality. See Beck, 457 F.3d at
301. Courts in this District have held that evidence of
private communications with corporate officers does not
disqualify a named plaintiff from serving as a class
representative; rather, there must be evidence that the named
plaintiff received non-public information during those
communications. See A.F.I.K. Holding SPRL v. Fass,
216 F.R.D. 567, 576 (D.N.J. 2003) (explaining that direct and
personal contacts with corporate insiders is generally not a
disqualifying unique defense “in the absence of
evidence that the named plaintiff received non-public
information from a corporate officer”); In re DVI
Inc. Sec. Litig., 249 F.R.D. 196, 202-03 (E.D. Pa. 2008)
(adopting the “majority view” that “mere
communication with corporate insiders will not render a class
representative atypical for class certification purposes
absent the exchange of non-public information”). Here,
general statements about Mylan encouraging Lead Plaintiff to
tender is not alone sufficient to establish a disqualifying
unique defense. Defendants have not proffered any non-public
information Mylan disclosed to Lead Plaintiff on which Lead
Plaintiff may have potentially relied in deciding whether to
tender. Without any evidence indicating that Lead Plaintiff
received non-public information during its meetings with
Mylan, the Court cannot find that Lead Plaintiff's
potential reliance on non-public information is a unique
defense that will likely “play a significant role at
trial.” Beck, 457 F.3d at 300. Typicality is
adequacy requirement requires a showing that a named
plaintiff “will fairly and adequately protect the
interests of the class.” Fed.R.Civ.P. 23(a)(4).
“Class representatives must be part of the class and
possess the same interest and suffer the same injury as the
class members.” Beneli v. BCA Fin. Servs.,
Inc., 324 F.R.D. 89, 98 (D.N.J. 2018) (citation
omitted). Determining adequacy involves a two-part inquiry:
(1) “the named plaintiff's interests must be
sufficiently aligned with the interests of the
absentees;” and (2) “the plaintiff's counsel
must be qualified to represent the class.” Id.
at 98. A named plaintiff is adequate if their interests do
not conflict with those of the class members. Id.
Here, Defendants challenge the adequacy of Lead Plaintiff but
not the adequacy of counsel. Upon review of the exhibits
demonstrating counsel's credentials, the Court is
satisfied that counsel is qualified to represent the Classes.
challenge Lead Plaintiff's adequacy on multiple grounds.
First, Defendants argue that Lead Plaintiff is inadequate
because members of the group purchased Perrigo stock after
the fraud was revealed. See Defs. Br. at 30. Citing
only two out-of-District cases, Defendants submit that
“[c]ourts have held that lead plaintiffs who have
increased their holdings after disclosure of the
alleged fraud fail to meet Rule 23(a)(4)'s adequacy
requirement.” Defs. Br. at 29-30 (citing In re
Safeguard Scientifics, 216 F.R.D. 577 (E.D. Pa. 2003)
and Rocco v. Nam Tai Elecs., Inc., 245 F.R.D. 131,
134-36 (S.D.N.Y. 2007)). However, at least one court in this
District has ruled that post-disclosure purchases need not
preclude class certification where the purchases had
“no bearing on whether or not ...