379 F. Supp. 3d 198
S.D. Ill.2019Background
- Putative securities class action by purchasers of Mylan N.V. stock (class period Feb 21, 2012–Oct 30, 2017) alleging: EpiPen Medicaid misclassification, an anticompetitive EpiPen rebate scheme excluding Auvi-Q, and price-fixing/market-allocation for multiple generic drugs.
- Court previously dismissed certain theories (pay-for-delay with Teva, school agreements, some Doxy DR scienter allegations) but allowed claims based on EpiPen misclassification and several generic-drug antitrust allegations to proceed.
- Plaintiffs filed a Second Amended Complaint adding new allegations: (i) EpiPen rebate scheme that allegedly foreclosed Auvi-Q; (ii) price-fixing allegations as to three additional generics (Doxy Mono, glipizide‑metformin, verapamil); (iii) new corrective-disclosure allegation (Oct 31, 2017 state AG press release/amended complaint); and (iv) Rajiv Malik as an individually named defendant with new alleged statements and stock sales.
- Defendants moved to partially dismiss the amended complaint, challenging (inter alia) actionability of statements, sufficiency of pleaded antitrust misconduct, loss causation, Malik’s scienter and control-person liability, and scienter for Doxy DR market-allocation claims.
- Court ruled: motion granted in part and denied in part — dismissed some categories of statements and the price‑fixing allegations for three generics, but allowed claims to proceed as to EpiPen misclassification, the EpiPen rebate scheme, Doxy DR market allocation (with newly pleaded scienter), certain generic‑pricing allegations that previously survived, and limited claims against Malik.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether certain financial and risk statements are actionable | Plaintiffs: statements about sources of income and related disclosures were misleading by omission of unlawful conduct and regulatory exposure | Mylan: historical earnings and statements about future regulatory scrutiny are non‑actionable; some repackaged allegations already dismissed | Court: quantitative historical earnings statements from 10‑K/10‑Q are not actionable; statements are actionable only to the extent they put sources of income at issue (not merely failure to disclose future regulatory risk) |
| Whether EpiPen rebate scheme was pleaded as unlawful antitrust conduct | Plaintiffs: rebate condition foreclosed Auvi‑Q, harmed competition and raised prices — unlawful under Sherman Act §2 | Mylan: exclusive rebates presumptively legal; plaintiffs’ allegations about harm to competition and predominance of anticompetitive effects are conclusory | Court: allegations sufficiently plead adverse effect on competition and net anticompetitive effects to survive motion to dismiss |
| Whether price‑fixing of Doxy Mono, glipizide‑metformin, verapamil was adequately pleaded | Plaintiffs: direct evidence (an April 23, 2014 call) plus circumstantial contacts show agreement | Mylan: single, vague call allegation lacks speakers, detail and is insufficient direct evidence; circumstantial proof is also insufficient | Court: dismissed these three price‑fixing allegations for failure to plead agreement with required particularity |
| Whether Oct 31, 2017 State AG announcement is a corrective disclosure for loss causation | Plaintiffs: announcement revealed previously undisclosed facts (Malik’s involvement, investigation findings), market reacted negatively | Mylan: announcement did not disclose new material information tied to alleged misstatements | Court: the announcement disclosed new facts about Malik’s role and investigation findings as to Doxy DR (where pleaded) — sufficient at pleading stage for loss causation limited to those disclosures; unrelated price‑fixing claims that were dismissed cannot rely on it |
| Whether scienter is adequately pleaded as to Rajiv Malik (individual liability) | Plaintiffs: Malik, as President, had access to core information and was involved in Doxy DR allocation (borrowed allegations from State AG complaint) | Mylan: no particularized allegations tying Malik to EpiPen or generic pricing decisions; relies on unadjudicated State AG allegations which should be disregarded | Court: scienter not adequately pleaded as to EpiPen and the three dismissed price‑fixing claims; scienter adequately pleaded as to Doxy DR allocation based on State AG allegations which the court permitted to be considered; Malik survives to that limited extent |
| Whether control‑person liability under §20(a) against Malik survives | Plaintiffs: Malik controlled the company and personally made the challenged statements; scienter supports culpable participation | Mylan: absent primary violation and Malik culpable participation, control claim fails | Court: control liability pleaded only insofar as primary violation and scienter survive (i.e., statements tied to Doxy DR allocation and those six Malik statements); control claims tied to dismissed theories fail |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal‑conclusion pleading rule)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (limits on duty to disclose under §10(b))
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (strong‑inference standard for scienter)
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (loss‑causation principle)
- Menaldi v. Och‑Ziff Capital Mgmt. Grp. LLC, 164 F. Supp. 3d 568 (S.D.N.Y.) (discussing duty to disclose and pleading underlying unlawful conduct)
- E & L Consulting, Ltd. v. Doman Indus. Ltd., 472 F.3d 23 (2d Cir.) (weighing anticompetitive vs. procompetitive effects in exclusive dealing challenges)
- Wilson v. Merrill Lynch & Co., 671 F.3d 120 (2d Cir.) (reliance and pleading standards in securities cases)