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Allergan Plc now faces another lawsuit by employees who claim an ongoing investigation into generic drug pricing caused them to lose retirement savings held in the drugmaker’s stock ( Ormond v. Allergan Plc , D.N.J., No. 2:17-cv-01554, complaint filed 3/7/17 ).
The proposed class action, filed March 7 by a former Allergan employee, accuses the company of artificially inflating its stock price by failing to disclose a Department of Justice investigation into price-fixing among major pharmaceutical companies. The eventual drop in Allergan’s stock price when the investigation came to light caused employees to lose money in their retirement accounts, the lawsuit contends.
Allergan—which was first subpoenaed in connection with the DOJ probe in 2015—is the first drug company to be sued over related retirement plan losses, with this latest lawsuit following similar claims raised in February.
Other companies connected to the probe may be vulnerable to litigation over retirement plan losses if they allow employees to invest in publicly traded company stock through their retirement accounts. Mylan had about $34 million worth of company stock in its profit sharing plan as of 2015, according to government filings. Neither Teva nor Aurobindo allows employees to invest in company stock through their retirement accounts, filings indicate.
In December 2016, 20 state attorneys general filed antitrust charges against six drug companies, including Aurobindo, Heritage, Mylan and Teva, without naming Allergan. The DOJ filed its first criminal charges that same month, targeting twoformer Heritage executives.
Since then, litigation over alleged drug price fixing continues to swirl, with threenewlawsuits targeting Allergan since January. Allergan also faces multiplesecuritieslawsuits over stock losses connected to the DOJ investigation.
The lawsuits over Allergan’s retirement plan losses are likely to face obstacles in the federal courts, which have been increasingly likely to dismiss Employee Retirement Income Security Act claims involving employer stock losses since a seminal U.S. Supreme Court decision in 2014.
Since that decision, a number of companies have beaten these “stock-drop” lawsuits, with courts rejecting claims involving the company stock plans of Lehman Brothers, General Motors, RadioShack Corp., J.C. Penney, Whole Foods Corp. and Sanofi-Aventis U.S. LLC.
The latest lawsuit against Allergan was filed in the U.S. District Court for the District of New Jersey by Stull Stull & Brody and Kantrowitz Goldhamer & Graifman PC.
Allergan didn’t respond to Bloomberg BNA’s request for comment.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/ORMOND_v_ALLERGAN_PLC_et_al_Docket_No_217cv01554_DNJ_Mar_07_2017_.
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