Huellemeier v. Teva Pharmaceutical Industries, LTD
3:17-cv-01938
D. Conn.Nov 17, 2017Background
- Plaintiff Robert Huellemeier, derivatively on behalf of the Teva Employee Stock Purchase Plan (ESPP), sued Teva and three officers under Section 11 of the Securities Act and related state-law and fiduciary claims, alleging misstatements/omissions in Teva’s 2013–2015 20-Fs and failure to disclose DOJ/Connecticut investigations and FCPA-related issues.
- Complaint filed in S.D. Ohio on July 17, 2017, covering purchases/acquisitions through the ESPP from Feb. 9, 2015 to Nov. 3, 2016; alternatively pled as a class action.
- Defendants moved to transfer to the District of Connecticut under the first-to-file rule (and alternatively § 1404), because earlier-filed related securities class actions (Galmi/Leone consolidated into Ontario Teachers) were pending in D. Conn.
- The Ontario Teachers consolidated complaint (filed after lead-plaintiff appointment) covers Feb. 6, 2014–Aug. 3, 2017 and asserts Exchange Act fraud claims and Securities Act claims (including § 11), alleging price-fixing and related nondisclosures against Teva and overlapping officers.
- Court found substantial overlap in parties, time periods, claims, and likely discovery; plaintiff’s derivative label and limited differences (e.g., inclusion of Yanai, specific FCPA allegation) did not outweigh the benefits of consolidation.
- Court granted defendants’ motion to transfer the S.D. Ohio action to the District of Connecticut under the first-to-file rule and did not reach the § 1404 argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the case should be transferred under the first-to-file rule | Huellemeier: his suit is a derivative ESPP action (distinct from class actions) and §11 claims here predated the Ontario Teachers’ addition of §11; equity favors proceeding in Ohio | Defendants: earlier-filed Galmi/Leone (consolidated as Ontario Teachers) substantially overlap in parties, claims, and timeframe; transfer avoids duplicative litigation | Transferred: first-to-file rule applies; substantial overlap exists and transfer to D. Conn. is appropriate |
| Whether parties and class periods are sufficiently similar to warrant transfer | Huellemeier: differences in class definition (ESPP employees/holders vs. market purchasers) and presence of Defendant Yanai distinguish the cases | Defendants: substantial overlap — three of four defendants are the same; Ohio class period falls within Ontario Teachers’ broader period | Held: parties/time periods substantially overlap; differences are not dispositive |
| Whether derivative labeling prevents enforcement of first-to-file rule | Huellemeier: derivative pleading and alternative class allegations justify separate Ohio adjudication | Defendants: plaintiff failed to meet derivative pleading requirements; courts routinely consolidate derivative and class securities actions | Held: derivative label carries little weight; transfer appropriate despite derivative/altn. class pleadings |
| Whether exceptional circumstances counsel against transfer (e.g., stalled proceedings, forum-shopping, bad faith) | Huellemeier: reliance on NanoLogix — where discovery proceeded because a first-filed case was stalled — argues Ohio should proceed | Defendants: no showing that Ontario Teachers proceedings are stalled or that extraordinary circumstances exist here | Held: no extraordinary circumstances shown; NanoLogix distinguishable; first-to-file rule enforced |
Key Cases Cited
- Zide Sport Shop of Ohio, Inc. v. Ed Tobergte Assocs., [citation="16 F. App'x 433"] (6th Cir. 2001) (first-to-file rule generally favors the first-filed action to avoid duplicative litigation)
- Baatz v. Columbia Gas Transmission, LLC, 814 F.3d 785 (6th Cir. 2016) (articulating three-factor test for first-to-file rule: chronology, similarity of parties, similarity of issues)
- Fuller v. Abercrombie & Fitch Stores, Inc., 370 F. Supp. 2d 686 (E.D. Tenn. 2005) (substantial overlap, not identity, of parties required for transfer under first-to-file rule)
- Goggins v. Alliance Cap. Mgmt., L.P., 279 F. Supp. 2d 228 (S.D.N.Y. 2011) (approving transfer/consolidation between class and derivative securities actions)