Huellemeier v. Teva Pharmaceutical Industries, LTD et al
ORDER granting 13 Defendants' Motion to Transfer. The Court directs the Clerk to transfer this action to the District of Connecticut. Signed by Judge Susan J. Dlott on 11/17/17. (sct)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
Robert W. Huellemeier, derivatively on
behalf of Teva Pharmaceutical Industries
Limited Employee Stock Purchase Plan,
Teva Pharmaceutical Industries Limited,
Case No. 1:17-cv-485
Judge Susan J. Dlott
Order Granting Motion to Transfer this
Action to the District of Connecticut
This matter is before the Court on Defendants’ Motion to Transfer (Doc. 13). Plaintiff
Robert Huellemeier, derivatively on behalf of the Teva Pharmaceutical Industries Limited
Employee Stock Purchase Plan (“the ESPP”), has filed this suit pursuant to § 11 of the Securities
Act, 15 U.S.C. § 77k, against Defendants Teva Pharmaceutical Industries Limited (“Teva”) and
three corporate officers, Erez Vigodman, Eyal Desheh, and Shlomo Yanai (collectively, the
“Teva Officers”). Defendants now move the Court to transfer this action on the basis of the firstto-file rule, or alternatively, 28 U.S.C. § 1404, to the District of Connecticut where two class
action suits are pending against Teva, Vigodman, and Desheh. For the reasons that follow, the
Court will GRANT the Motion to Transfer.
The Southern District of Ohio Action
Huellemeier states the following allegations of fact against Teva and the Teva Officers in
the Complaint (Doc. 1): Teva is a global pharmaceutical company with operations in the United
States, Europe, and other markets, and with facilities in Ohio. Vigodman was a Director for
Teva at all relevant times. Desheh was the Chief Financial Officer for Teva at all relevant
times.1 Yanai was the President and Chief Executive Officer for Teva at all relevant times. (Id.
at PageID 3.) Teva registered 70,000,000 American depository shares with the SEC in July
2010, some for purchase by employees of the company through the ESPP. (Id.) Huellemeier is a
current or former Teva employee who purchased Teva shares through the ESPP between
February 9, 2015 and November 3, 2016 (“the Class Period”). (Id. at PageID 2–3.)
Defendants Vigodman and Desheh signed financial disclosure forms on behalf of Teva
during the Class Period, including the 2014 20-F and 2015 20-F forms. (Id. at PageID 5–11.)
Huellemeier alleges that Teva made a number of material misstatements and omissions in the
financial disclosure forms. He alleges that Teva failed to disclose that it was under an antitrust
investigation for price-fixing by the Department of Justice (“DOJ”) and the Attorney General’s
Office for the State of Connecticut, that it was under investigation by the DOJ for violation of the
Foreign Corrupt Practices Act, including bribery of Russian government officials, and that it
lacked effective internal controls over its financial reporting. (Id. at 11.)
Huellemeier, on behalf of the ESPP, filed the Complaint against Teva and the Teva
Officers on July 17, 2017. Huellemeir asserts the following claims for relief in the Complaint
based on alleged misrepresentations and omissions in the registration statements:
Violation of § 11 of the Securities Act, 15 U.S.C. § 77k, against all
Breach of fiduciary duties against unspecified Defendants;
Misrepresentation and non-disclosure against unspecified Defendants; and
Defendants clarify that Vigodman was the Chief Executive Officer from early 2014 to early 2017 and that Desheh
was the Chief Financial Officer from 2008 to 2017, except for a period of time in late 2013 to early 2014 when he
acted as the President and Chief Executive Officer. (Baeder Dec., Doc. 13-1 at PageID 146.) This is not material to
the pending motion.
Generally stated, Section 11 of the Securities Act provides a cause of action for a person who acquires a security
against persons who sign registration statements when any part of the registration statement contains “an untrue
statement of material fact” or omits “a material fact required to be stated therein or necessary to make the statements
therein not misleading.” 15 U.S.C. § 77k.
Breach of contract against unspecified Defendants.
(Id. at PageID 34–38.) Huellemeier purports to bring the action as a derivative action “on behalf
of all persons who purchased or otherwise acquired Teva American Depository Shares [ ]
between February 9, 2015 and November 3, 2016 . . . in the ESPP.” (Id. at PageID 1–2.)3 He
also asserts, in the alternative, a class action on behalf of individuals who purchased or otherwise
acquired the Teva shares pursuant to the ESPP during the Class Period. (Id. at PageID 32–34.)
Defendants now move the Court to transfer this action to the District of Connecticut on
the basis of the first-to-file rule or, alternatively, 28 U.S.C. § 1404. Huellemeier opposes the
transfer of this action. The matter is fully briefed and ripe for adjudication.
The District of Connecticut Actions
Defendants move to transfer this case on the grounds that it is duplicative of earlier-filed
suits now pending in the District of Connecticut. Accordingly, it is necessary to provide a brief
overview of the other pending cases. Two cases initially were filed in the Central District of
California in 2016 before being transferred to the District of Connecticut as explained below.
Galmi v. Teva Pharmaceutical Industries Limited, No. 2:16-cv-08259 (C.D. Cal.) was filed filed
on November 6, 2016 and Leone v. Teva Pharmaceutical Industries Limited, No. 2:16-cv-09545
(C.D. Cal.) was filed on December 27, 2016. Amram Galmi filed suit against Teva, Vigodman,
and Desheh, on behalf of a class of similarly-situated persons who purchased or acquired Teva
shares between February 10, 2015 and November 3, 2016.4 Galmi asserted claims for alleged
Under the Federal Rules of Civil Procedure, a derivative action is brought by a shareholder or member of a
corporation “to enforce a right that the corporation or association may properly assert but has failed to enforce.”
Fed. R. Civ. P. 23.1(a). Derivative actions have special pleading requirements, including that plaintiff verify the
complaint and state with particularity his efforts, if any, “to obtain the desired action from the directors or
comparable authority.” Fed. R. Civ. P. 23.1(b). Huellemeier did not comply with the special pleading requirements
despite labeling his Complaint as a derivative action. (Doc. 1.)
A copy of Galmi Complaint was filed in this action at Doc. 13-3.
violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15
U.S.C. §§ 78j(b)5 and 78t(a),6 and Rule 10b-5 promulgated by the SEC, 17 C.F.R. § 240.10b-5.7
The claims were based on alleged misstatements and omissions in Teva’s 2014 20-F form and
2015 20-F form, including failing to disclose the DOJ and the Connecticut Attorney General’s
investigation into price collusion.
Anthony Leone filed suit against Teva, Vigodman, Desheh, and Kobi Altman on behalf
of a class of similarly-situated persons who purchased or acquired American depository shares of
Teva between February 10, 2014 and November 3, 2016. Leone asserted claims for alleged
violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15
U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated by the SEC, 17 C.F.R. § 240.10b-5.
The claims were based on alleged misstatements and omissions in Teva’s 2013 20-F form, 2014
20-F form, 2015 20-F form, and other forms, including the failure to disclose its participation in
a price-collusion scheme.
Several entities moved to become the Lead Plaintiff in the Galmi and Leone cases,
including the Ontario Teachers’ Pension Plan Board (“Ontario Teachers”). Defendants in the
Galmi case moved on January 17, 2017 to transfer the case to the Eastern District of
Pennsylvania. On April 3, 2017, the district court consolidated Leone with Galmi, and then
transferred the consolidated Galmi case to the District of Connecticut.8
Section 10(b) of the Exchange Act generally makes it unlawful for any person to use mails or instrumentalities of
interstate commerce to use a “manipulative or deceptive device” in connection with the purchase or sale of a
security. 15 U.S.C. § 78j(b).
Section 20(a) of the Exchange Act creates joint and several liability for a person who directly or indirectly
controls another person found liable for violations of the Exchange Act. 15 U.S.C. § 78t(a).
Rule 10b-5 generally makes it unlawful for a person to use mails or instrumentalities of interstate commerce to
commit fraud in connection with the purchase or sale of a security. 17 C.F.R. § 240.10b-5.
The defendants sought to have Galmi transferred to the Eastern District of Pennsylvania because that is where
Teva’s U.S. headquarters is located. However, the court determined that the defendant’s choice of forum was
After the consolidated Galmi case was transferred, the Connecticut district court
designated Ontario Teachers as the Lead Plaintiff on July 11, 2017. The case is now captioned
Ontario Teachers’ Pension Plan Board v. Teva Pharmaceutical Industries, Limited, No. 3:17-cv00558 (D. Conn.). Ontario Teachers filed a more than 300-page Consolidated Class Action
Complaint (“Ontario Teachers Complaint”) against Teva, Vigodman, Desheh, and numerous
other individuals and entities on August 2, 2017.9 The relevant time period in the Ontario
Teachers Complaint is February 6, 2014 to August 3, 2017. Ontario Teachers asserted fraudbased claims under § 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a); nonfraud-based claims under §§ 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k,
77l(a)(2),10 and 77o;11 and violations of Israeli law. Teva, Vigodman, and Desheh are defendants
for all three sets of claims. Ontario Teachers summarized their allegations as follows:
These three sets of claims arise from a series of material misstatements and
omissions about Teva’s U.S. generic drugs business, its financial performance,
and, in particular, its participation in an anticompetitive collusive scheme to
manipulate the market for generic drugs. These material misstatements and
omissions misled the market and caused the price of Teva’s securities to be
considerably inflated. When the truth about Teva’s financial condition and its
role in the collusive scheme began to leak into the market, the price of Teva’s
securities fell significantly, causing damage to investors.
(Doc. 13-4 at PageID 183.) Stated differently, the Ontario Teachers alleged Teva, Vigodman,
and Desheh participated in a price-fixing conspiracy with other generic drug companies. Ontario
entitled to little weight, and it transferred the case to the District of Connecticut, the location of one non-party
witness and “the venue for an antitrust lawsuit apparently related to these cases.” Galmi, No. 2:16-cv-09545, Doc.
19 (C.D. Cal. Apr. 3, 2017).
A copy of the Ontario Teachers Consolidated Class Action Complaint was filed in this action at Doc. 13-4.
Section 12(a)(2) of the Securities Act generally creates a cause of action in favor of a person who purchases a
security against a person who offers or sells a security in interstate commerce or through the mails by “means of a
prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements, in the light of the circumstances under which they were made, not
misleading (the purchaser not knowing of such untruth or omission).” 15 U.S.C. § 77l(a)(2).
Section 15 of the Securities Act creates liability for a person who controls another person liable under Sections 11
and 12(a) of the Securities Act, 15 U.S.C. §§ 77k and 77l. 15 U.S.C. § 77o.
Teachers asserts there were misstatements and material omissions in the 2013 20-F form, 2014
20-F form, and the 2015 20-F form.
Finally, OZ ELS Master Fund, Ltd. v. Teva Pharmaceutical Industries Limited, No. 3:17cv-01314 (D. Conn.), was initiated on August 3, 2017.12 Teva, Vigodman, and Desheh are
among the named defendants. The plaintiffs in OZ ELS alleged that Teva participated in an
unlawful price-fixing scheme to inflate the price of generic drugs and made misstatements in its
2013 20-F, 2014 20-5, and 2015 20-F forms. On August 30, 2017, the OZ ELS case was stayed
pending resolution of the Motion to Dismiss the Consolidated Class Action Complaint in the
Ontario Teachers case.
Defendants move to transfer this action to the District of Connecticut on two alternative
grounds: (1) the first-to-file rule and (2) 28 U.S.C. § 1404. The Court will begin by analyzing
the first-to-file rule and, finding it dispositive, will not address the 28 U.S.C. § 1404 arguments.
The first-to-file rule provides “when actions involving nearly identical parties and issues
have been filed in two different district courts, the court in which the first suit was filed should
generally proceed to judgment.” Zide Sport Shop of Ohio, Inc. v. Ed Tobergte Associates, Inc.,
16 F. App’x 433, 437 (6th Cir. 2001) (internal quotation and citation omitted). It is a “prudential
doctrine” that seeks to “conserve[ ] judicial resources by minimizing duplicative or piecemeal
litigation, and protect[ ] the parties and the courts from the possibility of conflicting results.”
Baatz v. Columbia Gas Transmission, LLC, 814 F.3d 785, 789 (6th Cir. 2016). Courts generally
examine three factors in applying the first-to-file rule: “(1) the chronology of events, (2) the
similarity of the parties involved, and (3) the similarity of the issues or claims at stake.” Id. The
relevant date for purposes of determining the chronology of the suits is the date the initial
The OZ ELS Complaint is filed in this action at Doc. 13-5.
complaints were filed. Id. at 790; Zide, 16 F. App’x at 437. “Factors that weigh against
enforcement of the first-to-file rule include extraordinary circumstances, inequitable conduct,
bad faith, anticipatory suits, and forum shopping.” Zide, 16 F. App’x at 437.
There is no dispute that the Galmi consolidated case, now captioned as the Ontario
Teachers case, was filed first. Galmi and Leone were both filed in late 2016, prior to the date
this case was filed on July 17, 2017. However, Huellemeier argues that the parties and claims in
this action are dissimilar to those in the Ontario Teachers case pending in the District of
Connecticut such that this case should be considered the first filed of its kind. As to the claims,
Huellemeier focuses on his characterization of this action as a derivative action filed on behalf of
the ESPP, 13 while the other actions are class actions not filed on behalf of the ESPP. He also
points out that he filed his claims for violation of Securities Act § 11 on July 17, 2017, weeks
before the Ontario Teachers added the Securities Act § 11 claims to the Ontario Teachers case
on August 2, 2017. The original Galmi consolidated case did not include Securities Act § 11
claims, but only fraud-based claims. Huellemeier notes that only this case involves allegations
that Teva failed to disclose investigations into the bribery of foreign officials.
As to the parties, Huellemeier points out this action is the only one filed against
Defendant Yanai. He also disingenuously suggests that this action is filed on behalf of people
who are or were employed by Teva and who purchased or held shares in Teva’s ESPP between
February 9, 2015 and November 3, 2016, but that the Ontario Teachers case is filed on behalf of
people who purchased—not held— shares on the open market between February 6, 2014 and
August 3, 2017. However, Huellemeier clearly alleges in the Complaint that the claims are
asserted on behalf of persons who “purchased or otherwise acquired” Teva shares, not persons
who purchased or held the shares. (Doc. 1 at PageID 2, 32.) Likewise, the Ontario Teachers
As explained in footnote 3 supra, Huellemeier failed to meet basic pleading standards for a derivative action.
Consolidated Class Action Complaint does not explicitly limit the proposed class to those who
purchased shares on the open market.
Finally, Huellemeier relies on NanoLogix, Inc. v. Novak, No. 4:13-cv-1000, 2013 WL
6443376, at *15 (N.D. Ohio Dec. 9, 2013), to argue that equity favors moving forward with this
case here so as not to “further delay an overlong conflict.” NanoLogix is distinguishable in
material respect and does not support Huellemeier’s argument. NanoLogix involved a race to the
courthouse by two parties with the same issues pending in two cases in two jurisdictions. Id. at
*3–4. NanoLogix was the later filed case by a matter of days. Id. at *3. The Northern District
of Ohio determined not to dismiss or transfer its second-filed case, but instead to proceed with
discovery, because a motion to dismiss based on alleged lack of personal jurisdiction had stalled
the first-filed California case for multiple months. Id. at *4. Significantly, however, the
Northern District of Ohio stated that it would transfer or dismiss its case if the California court
ultimately determined it had jurisdiction and would proceed with the first-filed case. Id.
The first-to-file rule was not disregarded by the Northern District of Ohio in NanoLogix
and it should not be disregarded here. The Northern District of Ohio merely determined that
there was no reason to delay inevitable discovery between two parties with identical issues
pending in two courts while the California court determined whether it would exercise
jurisdiction over its first-filed case. At best, NanoLogix would counsel for allowing discovery to
begin in this case if Huellemeier could establish that the proceedings in the Ontario Teachers
case were stalled. Huellemeier has not made such a showing.
Despite Huellemeier’s arguments, the Court concludes that this action should be
transferred to the District of Connecticut pursuant to the first-to-file rule. The parties and claims
in this case are similar enough to those in the Ontario Teachers case to make transfer
appropriate. Three of the four Defendants in this action are defendants in the Ontario Teachers
action. The Class Period of February 9, 2015 to November 3, 2016 in this action falls within the
relevant class period of February 6, 2014 to August 2, 2017 in the Ontario Teachers action. It
would appear that Huellemeier himself falls within the class defined in the Ontario Teachers
action as a person who purchased or acquired Teva shares between February 6, 2014 and August
3, 2017. The first-to-file rule only requires that the parties in two actions substantially overlap,
not that they be identical. See Baatz, 814 F.3d at 790; Fuller v. Abercrombie & Fitch Stores,
Inc., 370 F. Supp. 2d 686, 690 (E.D. Tenn. 2005).
Also, both actions involve alleged misrepresentations and omissions in Teva’s 2014 and
2015 20-F forms. Both actions involve allegations that Teva engaged in price-fixing, with the
focus on this case being that Teva failed to disclose government investigations into price-fixing.
Both actions include claims for violation of Section 11 of the Securities Act, 15 U.S.C. § 77k.
Based on these similarities, it is highly likely that there will be a substantial overlap in discovery
and briefing in the two cases. The judicial economy factor, therefore, weighs in favor of transfer.
See Ltd. Serv. Corp. v. M/V APL PERU, No. 2:09-cv-1025, 2010 WL 2105362, at *5 (S.D. Ohio
May 25, 2010) (stating that cases need not be identical if “substantial savings of judicial time and
resources (which almost always results in savings to the parties as well) can result from the
transfer and the conduct of coordinated proceedings”). It also seems likely that the failure to
transfer this case would create the possibility of inconsistent judgments against Teva, Vigodman,
The fact that Huellemeier purports to file this action as a derivative action and the
Ontario Teachers case is a class action does not weigh heavily against transfer. It bears
repeating that Huellemeier asserts class action allegations in the alternative to his derivative
allegations. Also, courts have transferred derivative securities actions to different jurisdictions to
be adjudicated alongside pending class action securities lawsuits, and vice versa. See, e.g., City
of Pontiac Gen. Emp. Retirement Sys. v. Wal-Mart Stores, Inc., No. 3-12-0457, 2012 WL
12543462 (M.D. Tenn. July 25, 2012) (transferring securities class action to district where
derivative action was pending); Goggins v. Alliance Cap. Mgmt., L.P., 279 F. Supp. 2d 228
(S.D.N.Y. 2011) (transferring a class action to a different district where six derivative actions
were pending pursuant to 28 U.S.C. § 1404); Stein v. Immelt, No. 3:09cv808, 2010 WL 598925
(D. Conn. 2010) (transferring derivative securities action to district where similar class action
was pending). Accordingly, for all of these reasons, the Court will transfer this case to the
District of Connecticut where the first-filed action is pending.
Because transfer is appropriate under the first-to-file rule, the Court need not determine if
transfer also would be appropriate on the alternative basis of 28 U.S.C. § 1404.
For the foregoing reasons, Defendants’ Motion to Transfer (Doc. 13) is hereby
GRANTED. The Court directs the Clerk to transfer this action to the District of Connecticut.
IT IS SO ORDERED.
Dated this 17th day of November, 2017.
BY THE COURT:
S/Susan J. Dlott
Susan J. Dlott
United States District Judge
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