Perrigo is a global pharmaceutical company that is headquartered in the Republic of Ireland for tax purposes, and is operationally headquartered in Allegan, Michigan. In December 2013, Perrigo acquired Irish pharmaceutical company Elan Corporation Plc (“Elan”), after Elan had sold off its sole remaining core asset – a 50% stake in its multiple sclerosis flagship drug Tysabri – for $3.25 billion plus contingent royalty payments.
The Complaint, filed by Lead Plaintiffs Boca Raton General Employees’ Pension Plan and Palm Bay Police and Firefighters’ Pension Fund, represented by Lead Counsel Saxena White, asserts claims for violations of the Securities Exchange Act of 1934 against Perrigo Company PLC (“Perrigo” or the “Company”) and certain of its senior executives. Specifically, the Complaint alleges that Perrigo’s disclosures in its November 8, 2018 Form 10-Q regarding a year-long audit conducted by the Irish Office of the Revenue Commissioners (“Irish Revenue”) were false after Defendants received an audit findings letter (“AFL”) that assessed a nearly $2 billion tax liability, and failed to disclose this amount in the filing, revealing instead only that they had received the letter and claiming that the amount could not be quantified. Then, on December 20, 2018, when Perrigo filed a Form 8-K finally disclosing the assessment, Perrigo’s stock price collapsed, falling by $15.33 per share, from a close of $52.36 on the previous trading day to a close of $37.03 – a staggering 30% drop.
On January 23, 2020, the Court denied in part the Defendants’ Motion to Dismiss. The Court first found that because the AFL quantified the price amount of tax that Irish Revenue had calculated, under ASC 450, “Perrigo had a duty to quantify its exposure after it received the Audit Findings Letter, even if it ‘disagreed’ with Irish Revenue’s position and intended to contest it.” The Court went on to find that “[o]nce in receipt of the Audit Findings Letter, the duty to disclose under ASC 450 was indeed ‘obvious’ . . . [T]he letter came after an extensive audit, set forth detailed ‘findings,’ explained Irish Revenue’s ‘position,’ and provided reasons for rejecting Perrigo’s arguments.”
The parties engaged in extensive fact discovery, including the review and analysis of key documents and depositions that spanned two continents. In a major victory, Plaintiffs obtained key evidence to support their claims by successfully moving to compel the production of thousands of documents that Defendants had improperly withheld on privilege grounds. On December 9, 2020, the Court issued an order requiring the defendants to produce these documents.
On July 11, the Court handed Lead Plaintiffs another victory that securities fraud plaintiffs rarely enjoy by granting, in its entirety, their motion to preclude Defendants’ accounting expert from testifying. Then, on July 15, the Court entered summary judgment in favor of Plaintiffs on the elements of falsity and materiality. Specifically, the Court found that Perrigo’s statement regarding the AFL in its November 8, 2018 Form 10-Q was false for two independent reasons. First, the Court again concluded that Defendants’ statement was obviously false under ASC 450, holding that “[e]ven if Perrigo could not be certain it would incur the [€1.6 billion] loss after receiving the AFL, the probability was ‘more than remote,’” and “[a]s a result, Perrigo had an obligation to disclose its loss contingency under ASC 450,” and that “[t]here is no reasonable question of fact that, after receipt of the Audit Findings Letter, an estimate of Perrigo’s ‘possible loss’ was reasonably calculable.” Second, the Court held that, even independent of GAAP, Defendants’ statement was clearly false and misleading under the federal securities laws. Specifically, Defendants’ statement that the tax liability Irish Revenue asserted was due “cannot be quantified at this stage” was affirmatively false because the AFL had quantified that amount to the penny, and “Perrigo misled investors about whether it could” be in light of the “in-depth calculations.” Additionally, the Court granted Plaintiffs’ summary judgment on the element of materiality, holding that “the sheer size of the calculated tax liability in the [AFL] demonstrates that it would be material to a reasonable investor,” and further that “Perrigo has conceded materiality” through the testimony of its own General Counsel.
Lead Plaintiffs were ready to proceed to trial with the case set on the Court’s October 2021 calendar when the parties agreed to resolve all claims for $31.9 million, which is an outstanding result for the Class.
On October 29, 2021, the Court issued an Order Preliminarily Approving Settlement and Providing Notice to the Class. The Order further provided that any objections to the Settlement must be received no later than January 26, 2022, and that all claims must be postmarked no later than March 19, 2022. On February 16, 2022, the Court issued orders approving the settlement and the plan of allocation finding them to be fair, reasonable and adequate. Then on February 18, 2022, the Court approved Lead Counsel’s request for attorney fees and expenses.