Friedman v. Endo International plc, 1:16-cv-03912

Background

Plaintiff Craig Friedman filed a putative securities fraud class action against Endo International PLC and three executives (De Silva, Upadhyay, Campanelli) under Section 10(b), Rule 10b-5, and Section 20(a).
Case centers on two theories: (1) a scheme to inflate sales of two migraine drugs (Sumavel DosePro and Frova) via improper sales practices and PBM discounts; and (2) material misstatements/omissions about Endo’s acquisition and integration of Par/Qualitest and the company’s prospects.
Class Period alleged: May 11, 2015–May 6, 2016; Plaintiffs point to optimistic public statements about integration and performance, followed by sharp stock drops after adverse disclosures (Feb 29, 2016; Mar 17, 2016; May 5, 2016).
Plaintiffs rely on former-employee allegations about pre-filled reimbursement forms for Sumavel (later discontinued) and alleged improper PBM discounts for Frova; DOJ civil investigative demand for Frova was later disclosed.
Court evaluated the complaint under Rule 12(b)(6), Rule 9(b), and the PSLRA scienter standards; dismissed the Third Amended Complaint in full and denied leave to amend.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Defendants engaged in a scheme to defraud by inflating Sumavel and Frova sales	Endo used improper sales practices (pre-filled forms, improper PBM discounts) to boost sales, harming investors	Alleged acts are attributed to low-level sales reps, were largely discontinued before the Class Period, and plaintiffs fail to plead scienter	Dismissed — plaintiffs fail to plead scheme with requisite particularity or strong inference of scienter
Whether public statements about Par acquisition/integration were materially false or omitted material facts	Statements touted integration progress and growth potential while concealing a purported plan to change Qualitest’s operating model and loss of customers	Statements were forward-looking/optimistic (non-actionable puffery); no allegations that defendants knew of contradictory facts or had “hyped” an exclusive plan	Dismissed — statements were opinions/forward-looking; omissions not actionable absent duty to disclose and stronger facts showing knowledge or misleading omissions
Whether plaintiffs pleaded scienter under the PSLRA for misrepresentations/omissions	Plaintiffs argue the executives’ positions and subsequent disclosures show recklessness or conscious misbehavior	Defendants argue plaintiffs rely on hindsight, organizational titles, and general allegations insufficient to raise a strong inference of intent or recklessness	Dismissed — plaintiffs did not plead motive/opportunity or strong circumstantial evidence of conscious misbehavior; corporate scienter cannot be inferred from titles alone
Whether leave to amend should be granted	Plaintiffs request leave to amend (footnote) to cure defects	Defendants oppose; argue amendment would be futile and prior opportunities were given	Denied — amendment would be futile, plaintiffs offered no specifics about new facts, and court previously warned no further amendments would be allowed

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility standard for Rule 12(b)(6))
Ashcroft v. Iqbal, 556 U.S. 662 (clarifies pleading standard and need for factual allegations showing plausibility)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (PSLRA: requirement to plead a strong inference of scienter)
Omnicare, Inc. v. Laborers District Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (opinions/omissions: must identify facts about the issuer’s inquiry or knowledge that make opinion misleading)
In re Eletrobras Sec. Litig., 245 F. Supp. 3d 450 (scheme liability requires pleading scienter under PSLRA)
Kalnit v. Eichler, 264 F.3d 131 (titles/positions alone insufficient to plead scienter)
Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190 (corporate scienter requires pleading that someone whose intent can be imputed to the corporation acted with scienter)
Tongue v. Sanofi, 816 F.3d 199 (Omnicare framework applied in Second Circuit for omissions and opinions)