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Roofer's Pension Fund v. Papa

United States District Court, D. New Jersey

November 14, 2019

ROOFER'S PENSION FUND, et al., Plaintiffs,
PAPA, et al., Defendants.


          Hon. Madeline Cox Arleo United States District Judge.

         THIS 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 GRANTED.

         I. BACKGROUND[1]

         Lead 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.

         Defendant 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”)[2] were corporate executives at Perrigo when the relevant misrepresentations occurred. See id. ¶¶ 32, 34.

         Lead 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.

         Plaintiff's 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.

         The 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.

         Perrigo's 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.

         The 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. (“Omega”).[3]

         First, 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.

         Plaintiff 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.


         A. Class Certification Requirements

         A 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, 276 (2014).

         A 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 (2013).

         B. Elements of Substantive Claims

         The 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.

         Section 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).

         At the 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 268.

         If the 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)).

         III. ANALYSIS

         Lead 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 Class”). Id.

         Defendants 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.

         A. Rule 23(a)'s Requirements

         1. Numerosity and Commonality

         Defendants do not challenge class certification on numerosity or commonality grounds. The Court is satisfied that those requirements are met here.

         The 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).

         Perrigo 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 numerosity requirement.

         Commonality 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.


         The 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.”).

         The 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.

         At 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.”[4] Defs. Br. at 37-38.

         Defendants 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 thus satisfied.[5]

         3. Adequacy

         The 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.

         Defendants 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 ...

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