Court Upholds Securities Law Complaint Against Mallinckrodt plc and Its Senior Executives

7/30/2019 - On July 30, 2019, United States District Judge Dabney L. Friedrich of the District of Columbia substantially denied defendants’ motions to dismiss the Consolidated Class Action Complaint in Shenk, et al. v. Mallinckrodt PLC, et al., filed by Barrack, Rodos & Bacine, on behalf of its client, the State Teachers Retirement System of Ohio (“STRS Ohio”), the sole lead plaintiff appointed by the Court.  BR&B is serving as the sole lead counsel in the case.  BR&B and its co-counsel filed the Complaint on behalf of STRS Ohio in May 2018, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  The Complaint alleged that investors who purchased or otherwise acquired common stock of Mallinckrodt plc were damaged as a result of false or misleading material misstatements and omissions that Mallinckrodt and certain senior officers made relating to the Company’s blockbuster drug, H.P. Acthar Gel (“Acthar”).

In substantially denying defendants’ motions to dismiss, the Court determined that the Complaint adequately alleged that: (1) on October 6, 2015, the Company’s CEO, Mark Trudeau, misrepresented the portion of Acthar sales attributable to Medicare and Medicaid when he said it was roughly a quarter of sales and the Complaint alleged that it was roughly double that amount; (2) the company made false statements when it stated in November 2016 that there was no pending litigation in connection with the Federal Trade Commission’s investigation into whether the company's actions relating to Acthar and a U.S. license for a synthetic version of the drug, Synacthen, violated antitrust law when, less than two months later, on January 18, 2017, the FTC filed a complaint and the company simultaneously entered into a Consent Decree with the FTC, under which the company agreed to pay a $100 million fine and sub-license to another drug company certain of its rights to manufacture and sell Synacthen; and (3) Mallinckrodt made a series of false and misleading statements in 2017 claiming that insurers were providing greater approval of Acthar when the reality was that many insurers were placing greater restrictions and limitations on approving Acthar for their insureds, and that the company gave financial and Acthar-related guidance to the market on that basis.  The Court further credited the Complaint’s claim that when the truth about each of these alleged misstatements came to light, there were substantial and immediate drops in the price of Mallinckrodt’s stock, which is the basis of the damages that the action is asserting on behalf of investors in Mallinckrodt stock.  

This important decision means that STRS Ohio can move forward with the prosecution of the case on behalf of a proposed class of investors in Mallinckrodt stock, beginning with Defendant Trudeau’s statement of October 6, 2015 and continuing through November 6, 2017.

If you have any questions about the July 30, 2019 decision, or the litigation involving Mallinckrodt, please contact BR&B partners Jeff Golan or Jeff Gittleman, at 215-963-0600, or via email at jgolan@barrack.com or jgittleman@barrack.com