Perrigo Company PLC

Case Details

Class Period: March 1, 2018 - December 20, 2018
Date Filed: January 03, 2019
Case Number: 1:19-cv-00070
Jurisdiction: Southern District of New York

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against Perrigo Company PLC (“Perrigo” or the “Company”) and certain of its senior executives.  The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Perrigo common stock during the Class Period.

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”).   Just prior to Perrigo’s acquisition of Elan, 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.   This case concerns Perrigo’s willful failure to timely disclose its exposure to a staggering $2 billion tax liability connected to the sale transaction.

Specifically, the Complaint alleges that: (1) Perrigo did not disclose the existence of an audit conducted by the Irish Office of the Revenue Commissioners (“Irish Revenue”), which began in November 2017, until March 1, 2018, and only did so in passing, in a single sentence disclosing only that it was auditing years ended December 31, 2012 and December 31, 2013;  and  (2) Perrigo, in its November 8, 2018 Form 10-Q,  only disclosed the existence of Irish Revenue’s audit finding letter, received on October 30, 2018, and falsely claimed that, because Perrigo disagreed with Irish Revenue’s determination, any resulting tax assessment could not be quantified at this stage.  Then, on December 20, 2018, Perrigo issued a Form 8-K disclosing that the audit finding letter asserted that Perrigo’s intellectual property sales transactions, including the sale of Tysabri, “were not part of the trade of Elan Pharma and therefore should have been treated as chargeable gains subject to an effective 33% tax rate, rather than the 12.5% tax rate applicable to trading income.” Following the publication of the December 20, 2018 8-K, 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 that wiped out nearly $2.1 billion in market capitalization in just one day.

On Friday, March 22, 2019, the Court appointed Boca Raton General Employees’ Pension Plan (“Boca Raton GE”) and Palm Bay Police and Firefighters’ Pension Fund (“Palm Bay P&F”) as Co-Lead Plaintiffs and Saxena White as Lead Counsel.

Lead Plaintiffs filed the Amended Complaint on April 12, 2019.  Lead Plaintiffs filed the Second Amended Complaint shortly thereafter on May 31, 2019, which includes allegations that Perrigo violated generally accepted accounting principles (GAAP) by failing to disclose the reasonable possibility of a nearly $2 billion tax liability after Irish Revenue commenced the in-depth audit of Perrigo’s tax treatment of the Tysabri transactions.  On May 31, 2019, Defendants filed their Motion to Dismiss the Second Amended Complaint, Lead Plaintiffs filed their Opposition on July 26, 2019, and Defendants filed their Reply on August 16, 2019.

On January 23, 2020, the Court denied in part the Defendants’ Motion to Dismiss. The Court  rejected Defendants’ argument that because the tax liability was not yet “final” they did not have to disclose it under ASC 450, reasoning that “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.”  On scienter, the Court was equally strong, determining 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,”  in concluding that Lead Plaintiffs may proceed on their claims that Perrigo’s November, 2018 10-Q was misleading.  Defendants filed their Answers to the Second Amended Complaint on February 13, 2020.

On June 26, 2020, Lead Plaintiffs filed a Motion for Issuance of Letters Rogatory for discoverable information and to take depositions of third-party entities and individuals located in Ireland. Lead  On July 16, 2020, the Court ordered Plaintiffs to “file a revised version of the proposed letters rogatory that does not seek discovery from Irish Revenue or its employees.”  On July 21, 2020, Plaintiffs filed a Letter Motion pursuant to the Court’s order.

Plaintiffs filed their Motion for Class Certification on July 10, 2020.   Defendants filed their Opposition to Plaintiffs’ motion on August 14, 2020.   Plaintiffs filed their Reply on September 4, 2020.  Discovery is to be completed by January 29, 2021.