In Re Allergan PLC Securities Litigation

Background

Boston Retirement System (BRS), the lead plaintiff, brought a securities-fraud lawsuit against Allergan PLC and certain executives. BRS alleged that the defendants made materially false or misleading statements, and omitted information, about the alleged connection between Allergan’s textured breast implants and breast implant-associated anaplastic large cell lymphoma. BRS sought to represent people and entities that purchased or acquired Allergan preferred or common stock from January 30, 2017, through December 19, 2018, and were damaged by the alleged misconduct.

The complaint alleged that studies and reports showed a disproportionate number of the reported cancer cases involved Allergan’s textured implants. It also alleged that the defendants downplayed the relative risk associated with Allergan’s implants and failed to disclose the risk of a product recall. After European regulators declined to re-certify Allergan’s breast implant portfolio and France ordered a recall of Allergan’s textured implants, BRS alleged that Allergan’s stock price fell $10.20, or nearly 7%, on December 19, 2018.

The court had previously granted in part and denied in part the defendants’ motion to dismiss. The surviving claim alleged that the defendants’ disclosures gave investors a false impression that Allergan’s implants were no more closely linked to the cancer than implants made by other manufacturers.

Class-Certification Standard

Class certification was governed by Federal Rule of Civil Procedure 23. The court explained that a proposed class must satisfy requirements including sufficient size, common legal or factual questions, typical claims by the proposed representative, and adequate representation of the class. For the type of class sought here, the plaintiff also had to show that common questions predominated over individual questions and that a class action was the superior way to resolve the dispute. The court also recognized an additional requirement that the class be sufficiently identifiable.

Class Certification

The court denied BRS’s motion for class certification. Allergan did not dispute that the proposed class satisfied the requirements concerning size and common questions. The court instead ruled that BRS and its lawyers had not shown that they would adequately represent the class.

When the court appointed BRS as lead plaintiff, it directed BRS to select one law firm as lead counsel rather than appointing both Pomerantz LLP and the Thornton Law Firm as co-lead counsel. BRS selected Pomerantz. The court later found that Thornton remained fully involved in the case and effectively acted as co-lead counsel. The opinion states that Thornton worked on the amended complaint, motions to dismiss and for class certification, conferences with defense counsel, depositions, and correspondence.

The court also found that Pomerantz and Thornton had entered an agreement under which fees would be split 55% to Pomerantz and 45% to Thornton. The court viewed that arrangement as nearly equivalent to the firms’ earlier 50–50 agreement and as a substitute for the prohibited co-lead-counsel arrangement. The court stated that BRS and its lawyers had not informed the court about the arrangement or Thornton’s continued role.

The court concluded that the arrangement placed counsel’s interests ahead of the class’s interests and violated both the wording and purpose of the court’s earlier order. It further concluded that BRS was inadequate because either BRS had not genuinely accepted the court’s instruction or BRS could not control its lawyers when they failed to follow it. The court therefore denied certification without deciding the defendants’ other arguments concerning BRS’s adequacy or the typicality of BRS’s claims.

The court stated that BRS could continue to pursue its claim individually and that another proposed class member could seek to replace BRS as lead plaintiff. The court left that possibility open for 30 days.

Motions to Seal

The court held that materials submitted in connection with the class-certification motion were generally judicial documents, meaning documents connected to the court’s decision and therefore subject to a presumption of public access. The court then balanced that presumption against any specific privacy, proprietary, or trade-secret interests.

The court granted in part and denied in part the parties’ respective motions to file materials under seal. It ordered that documents describing the fee arrangements between Pomerantz and Thornton could not be filed under seal. It also ordered public filing of documents concerning the longer-term relationship and fee arrangements between BRS and Pomerantz, including portfolio-monitoring and engagement materials. The court likewise required public filing of most of the cited testimony concerning BRS’s lead-plaintiff appointment, counsel’s roles, the fee arrangement, and BRS’s involvement in the litigation.

The court allowed BRS to keep details of its investment adviser’s algorithm under seal, but required redacted public versions and limited the redactions to the algorithm’s details. The court also directed that the expert rebuttal report of Dr. Zachary Nye be filed publicly.

As to Allergan’s requests, the court denied the request to seal six lines describing the European regulator’s reasons for not re-certifying Allergan’s implants unless Allergan could identify, within five days, a law requiring secrecy. The court denied the request to seal portions of a confidential witness’s declaration concerning Allergan’s “New Texture” project. It directed that certain Allergan exhibits be filed under seal temporarily and gave Allergan ten days to identify, line by line, information in other documents that it claimed was proprietary. The court also rejected Allergan’s request to strike certain exhibits under a rule that applies to pleadings rather than materials submitted with a motion.

Disposition

Chief Judge Colleen McMahon denied Plaintiff’s motion to certify a class. She granted in part and denied in part Plaintiff’s motion to seal and Defendants’ motion to seal, as stated in the opinion, and directed the clerk to close the related docket entries.