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Western District Of Pennsylvania Denies Motion For Judgment On The Pleadings In Securities Class Action Against Pharmaceutical Company
07/22/2025On July 8, 2025, Judge Nicholas Ranjan of the United States District Court for the Western District of Pennsylvania denied a motion for judgment on the pleadings, allowing a putative securities class action to proceed against a global pharmaceutical company (the “Company”) and certain of its officers (collectively, “Defendants”) that asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. In re Mylan N.V. Sec. Litig., No. 2:20-cv-955-NR (W.D. Pa. July 8, 2025). Plaintiff alleged that Defendants made false and misleading statements and engaged in a deceptive scheme regarding the Company’s quality control practices at its manufacturing facilities. In an earlier decision, the Court dismissed claims based on all but one alleged misrepresentation and allowed the scheme liability claim to proceed, and in the instant decision held that the complaint adequately alleged loss causation with respect to the remaining alleged misrepresentation and that the scheme liability claim could proceed.
The Company has numerous drug manufacturing facilities, which are periodically inspected by the U.S. Food and Drug Administration (“FDA”). Between the years 2016 and 2018, the Company received letters from the FDA documenting safety and data failures in two of its manufacturing facilities, which culminated in a warning letter from the FDA to one facility for violations of current good manufacturing practice regulations for finished pharmaceuticals and lack of adequate monitoring of process control. Plaintiff alleged that Defendants made several actionable misstatements about the Company’s quality control practices and that they engaged in a purported scheme to deceive the FDA and ignore regulatory compliance best practices to increase manufacturing output and profits. In a prior decision, the Court dismissed claims based on optimistic statements on the Company’s website, its self-congratulatory statements about its performance and business strategy, and statements regarding its regulatory compliance, holding that such statements were nonactionable corporate puffery or were not misleading in light of the total mix of information available to investors. However, the Court let proceed plaintiff’s misrepresentation claim based on a spokesperson’s statement that “[a]ny explicit or implicit suggestion that [Company] employees circumvented data and quality systems that jeopardized the quality of the medications we manufacture . . . is simply false” as well as the scheme liability claim. Defendants moved for a judgment on the pleadings to dismiss the remaining misrepresentation claim for lack of loss causation and the scheme liability claim as derivative of the misrepresentation claim.
The Court denied Defendants’ motion. First, the Court rejected Defendants’ argument that the misrepresentation claim should be dismissed for failure to plead loss causation. Defendants asserted that the alleged corrective disclosures—specifically, the Company’s Form 8-K filings and related earnings calls that reported a decline in revenue and earnings that were attributed in part to expenses for remediation and restructuring of the facility to respond to the issues identified by the FDA—did not sufficiently reveal the falsity of the spokesperson’s statement. The Court rejected this argument and found that the alleged corrective disclosures tied financial declines to restructuring and remediation efforts at the Company’s facility and plausibly revealed at least part of the falsity of the earlier public statement denying any circumvention of data and quality systems at its facilities. The Court explained that corrective disclosures “need not . . . explicitly or exhaustively reveal the fraud, so long as fair inferences of fraud that would affect investors can be drawn from the disclosures.”
Next, the Court rejected Defendants’ argument that the scheme liability claim should be dismissed as duplicative of the misrepresentation claim. According to the Court, plaintiff adequately alleged deceptive conduct beyond specific misrepresentations including, for example, that Defendants used “‘cooked’ data to ‘hasten approval of critical products,’” disguised drug impurities, ignored testing results or invalidated them for pretextual reasons, and created a “façade of documents to fend off FDA inquiry.”
Finally, the Court declined to narrow (or broaden) the scheme liability claim in response to plaintiff’s motion to clarify the scope of the claim, holding that the issue would be better addressed after discovery.
