Opinion

HALMAN ALDUBI PROVIDENT AND PENSION FUNDS LTD. v. TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Court: District Court, E.D. Pennsylvania
Filed: Mar 26, 2021
Cited by: 0 cases
Authority: More cited than 28.9%

finding no conflict of interest where “the Court [wa]s not presented with a situation in which counsel simultaneously represents classes in parallel litigations seeking to tap the same pool of finite assets”

How later courts described this case

finding no conflict of interest where “the Court [wa]s not presented with a situation in which counsel simultaneously represents classes in parallel litigations seeking to tap the same pool of finite assets”
finding that class counsel did not have a conflict of interest where counsel’s involvement in a potentially competing securities class action was “limited” and ended quickly
“Because Jayhawk did not own any shares of ChinaCast stock during or after the initial March 26, 2012 disclosure alleged in the original Complaint . . . Jayhawk suffered no losses attributable to the ChinaCast fraud.”
identifying losses suffered as the most important factor for a court to consider when determining which lead plaintiff movant has the largest financial interest in the outcome of the case

Written by the judges who cited it.

The opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

HALMAN ALDUBI PROVIDENT AND CIVIL ACTION

PENSION FUNDS LTD.,

Plaintiff, NO. 20-4660-KSM

TEVA PHARMACEUTICAL INDUSTRIES

LIMITED, et al.,

Defendants.

MEMORANDUM

MARSTON, J. March 26, 2021

This is a putative class action in which Plaintiff Halman Aldubi Provident and Pension

Funds (“Halman Aldubi”), in its individual capacity and on behalf of others similarly situated,

alleges that Defendants Teva Pharmaceutical Industries Limited and its former officers Erez

Vigodman, Eyal Desheh, Robert Koremans, and Michael Derkacz (the “Individual

Defendants”)1 (collectively, “Teva”)2 violated securities laws by making false and misleading

statements. (Doc. No. 1.) Specifically, Halman Aldubi accuses Teva, a pharmaceutical

company, of misleading investors about the profitability of one of Teva’s drugs, Copaxone, as

Teva allegedly did not disclose that it made illegal kickback payments as part of a scheme to

inflate Copaxone sales. (Id.) Halman Aldubi claims that when Teva’s misconduct was publicly

1 The Individual Defendants served as Teva officers during the time period relevant to this case. Specifically,

Vigodman was Teva’s Chief Executive Officer, Deshesh was Teva’s Chief Financial Officer, Koremans was Teva’s

President and Chief Executive Officer of Teva’s Global Specialty Medicines division, and Derkacz was Teva’s

Senior Vice President and General Manager of Teva’s Global CNS division. (Doc. No. 1 at ¶¶ 14–17.)

2 At times in this opinion, the Court refers to claims or arguments made about the Individual Defendants and refers

to them as such. Unless otherwise indicated, references to “Teva” refer to all Defendants collectively.

disclosed on August 18, 2020, the price of Teva’s shares dropped precipitously, causing

significant losses to investors who held Teva stock at the time. (Id.)

Securities class actions are governed by the Securities Exchange Act of 1934, as modified

by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Pursuant to those Acts,

courts before which a securities class action is pending have an obligation to appoint a lead

plaintiff to represent the interests of the purported class in the litigation. 15 U.S.C. § 78u-

4(a)(3)(B)(i). Presently pending before the Court are motions from two movants—Menorah and

Clal3 and The Investor Group4—who wish to be appointed as lead plaintiff in this matter and to

have their choice of counsel approved as lead counsel for the putative class. (Doc. Nos. 8 & 9.)

For the reasons that are discussed below, the Court will appoint The Investor Group, consisting

only of Gerald Forsythe, as lead plaintiff and will approve Faruqi & Faruqi, LLP as lead counsel.

I. BACKGROUND

A. The Alleged Misconduct5

Teva is a pharmaceutical company that produces Copaxone,6 “a prescription drug that is

used to treat relapsing forms of multiple sclerosis.” (Doc. No. 1 at ¶ 3.) Throughout the class

period, which is October 29, 2015 to August 18, 2020, Teva described Copaxone as its “leading

specialty medicine” and reported consistently high sales and revenues for the drug. (Id. at ¶ 22,

23, 27–28, 31, 33, 36, 40, 42, 44, 46–48.) For instance, in the third quarter of 2015, Copaxone

3 Menorah and Clal is comprised of five entities: Menorah Mivtachim Insurance, Ltd.; Menorah Mivtachim Pension

& Gemel, Ltd.; Menorah Mivtachim and the Federation of Engineers Provident Fund Management Ltd.; Clal

Insurance Company Ltd.; and Clal Pension & Provident Ltd. (See Doc. No. 9 at p. 1.)

4 As of March 11, 2021, there are now two members of The Investor Group: Gerald Forsythe, an individual

investor, and the Dekalb County Pension Fund. (Doc. No. 8-5 at pp. 6, 8.)

5 At this stage, the Court takes as true the facts asserted in the complaint.

6 Copaxone is the drug’s trade name; its scientific name is glatiramer acetate. (See Doc. No. 1 at ¶ 3.)

accounted for 22% of Teva’s revenue. (Id. ¶ 23.) Teva explained that Copaxone performed so

well because there was a high demand for it, patients were able to get it, and it was safe and

effective. (Id. ¶ 22.) Furthermore, Teva and the Individual Defendants also consistently

represented in public statements and filings with the Securities and Exchange Commission

(“SEC”) that Copaxone would be a sustainable source of revenue for the company. (See id. at ¶¶

25–26, 30, 32, 34–35.)

Unfortunately for Teva’s shareholders, Copaxone’s success was not the unmitigated boon

it seemed. On August 18, 2020, the Department of Justice announced that it had filed a civil

action against Teva under the False Claims Act, alleging that Teva had paid illegal kickbacks to

two non-profit foundations with the understanding that the foundations would use the money to

cover patients’ Medicare copays for their Copaxone prescriptions. (Id. at ¶ 52.) When traders

learned of this news, Teva’s stock price fell $1.11, a 9.6% decrease from its price at close of

trading the previous day. (Id. at ¶ 53.) Not only did the stock price fall sharply, but trading in

Teva securities was “unusually heavy” on August 18. (Id.)

B. This Lawsuit is Filed

Halman Aldubi filed this lawsuit as a putative class action on September 23, 2020. (Doc.

No. 1.) Halman Aldubi claims that as a result of Teva’s allegedly fraudulent statements, it and

others who owned shares of Teva stock during the class period suffered damages. (Id. at ¶ 55.)

According to Halman Aldubi, this is so because Teva’s investors were deceived by Teva’s

fraudulent statements, and purchased shares of Teva stock at artificially inflated prices. (Id. at ¶

66.) When the truth came out, Teva’s investors lost money as the market value of their shares

rapidly declined. (Id. at ¶ 71.) As such, Halman Aldubi claims that it and others are entitled to

recoup their damages from Teva and the Individual Defendants. (See id. at ¶¶ 73, 79; see also id.

at p. 28 (prayer for relief).)

Pursuant to the PSLRA’s notice requirement, see 15 U.S.C. § 78u-4(a)(3)(A)(i), Halman

Aldubi published a notice of this lawsuit in PRNewswire, a nationally circulated business-

oriented publication, on September 23, 2020. (Doc. No. 8-4.)7 Under the PSLRA, class

members had 60 days from September 23 to file a motion to be appointed as lead plaintiff of the

purported class. 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). In response to the PRNewswire notice, two

movants—Menorah and Clal and The Investor Group—filed applications to be named the lead

plaintiff in this matter.8 The movants also filed replies, sur-replies, and sur-sur-replies to each

other’s filings.9

7 The Court finds that Halman Aldubi’s notice complied with PSLRA requirements because it provided enough

information for a putative class member to “(1) determine whether she is eligible for lead plaintiff status based on

the class period; (2) learn enough about the asserted claims to make an initial judgment as to whether to obtain a

copy of the Complaint . . . and (3) contact the clerk’s office to obtain a copy of the Complaint and discover the

procedures for filing a motion” to be appointed lead plaintiff. Marsden v. Select Med. Corp., No. Civ. A. 04-4020,

2005 WL 113128, at *4 (E.D. Pa. Jan. 18, 2005); see also 15 U.S.C. § 78u-4(a)(3)(B)(i) (stating that the notice

should advise members of the putative class about “the pendency of the action, the claims asserted therein, and the

purported class period; and . . . that, not later than 60 days after the date on which the notice is published, any

member of the purported class may move the court to serve as lead plaintiff”); In re Party City Sec. Litig., 189

F.R.D. 91, 105 n.10 (D.N.J. 1999) (finding that publication in PRNewswire satisfied the PSLRA’s requirements).

8 Initially, a third movant, ERJ – 145 NUA, Inc., applied to be the lead plaintiff. (Doc. No. 7.) However, ERJ

subsequently withdrew its motion. (Doc. No. 43.)

9 The relevant filings are: The Investor Group’s Motion for Appointment as Lead Plaintiff and Approval of Lead

Counsel (Doc. No. 8); Menorah and Clal’s Notice of Motion for Appointment as Lead Plaintiff and Approval of

Selection of Counsel (Doc. No. 9); Menorah and Clal’s Memorandum of Points and Authorities In Further Support

of Its Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel and in Opposition to

Competing Motions (Doc. No. 11); The Investor Group’s Memorandum of Law in Opposition to Competing

Motions for Appointment as Lead Plaintiff and Approval of Lead Counsel (Doc. No. 12); Menorah and Clal’s Reply

Memorandum of Points and Authorities in Further Support of Its Motion for Appointment as Lead Plaintiff and

Approval of Selection of Counsel and in Opposition to Competing Motions (Doc. No. 29); The Investor Group’s

Reply Memorandum of Law In Further Support of Its Motion for Appointment as Lead Plaintiff and Approval of

Lead Counsel (Doc. No. 30); Menorah and Clal’s Sur-Reply Memorandum of Points and Authorities In Further

Support of Its Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel and in Opposition to

Competing Motions (Doc. No. 34); and The Investor Group’s Sur-Reply Memorandum of Law in Response to the

Sur-Reply Filed by the Menorah & Clal Group and in Further Support of Its Motion for Appointment as Lead

Plaintiff and Approval of Lead Counsel (Doc. No. 35). Following Mr. Al Kooheji’s last-minute withdrawal from

participation in the Investor Group on March 11, 2021 (Doc. No. 48), Menorah and Clal also filed a Response to

Notice of Withdrawal (Doc. No. 49). The Investor Group then filed a motion to strike Menorah and Clal’s response,

and, in the alternative, a response to the response. (Doc. No. 50.)

The Court hopes that the cost of preparing these voluminous filings will not be passed on to the plaintiff class,

On March 1, 2021, this matter was reassigned to the Honorable Karen Spencer Marston.

(Doc. No. 37.) On March 3, 2021, the Court held a telephonic status conference with the parties

to discuss the next steps to be taken in this case. (See Doc. No. 44.) Then, on March 15, 2021,

the Court conducted oral argument on Menorah and Clal and The Investor Group’s motions to be

appointed lead counsel. (See Doc. No. 51.)

C. Potential Lead Plaintiffs

1. Menorah and Clal

Menorah and Clal is comprised of five entities: Menorah Mivtachim Insurance, Ltd.;

Menorah Mivtachim Pension & Gemel, Ltd.; Menorah Mivtachim and the Federation of

Engineers Provident Fund Management Ltd.; Clal Insurance Company Ltd.; and Clal Pension &

Provident Ltd. (See Doc. No. 9 at p. 1.) Although the Menorah entities and the Clal entities are

members of two separate corporate families, they have worked together as members of lead

plaintiff groups in another securities class action, Jansen v. International Flavors & Fragrances

Inc., No. 1:19-cv-07536 (S.D.N.Y.). (Doc. No. 9-6 at ¶ 5.) Both the Menorah and the Clal

entities have extensive experience acting as lead plaintiffs in securities class actions. In the last

three years alone, they have participated as lead plaintiffs in a combined four securities class

actions, including the Jansen matter in which they were co-lead plaintiffs. (Doc. No. 9-5 at pp.

1–2, 3, 5–6, 13, 15.)

During the class period, Menorah and Clal owned multiple types of Teva securities,

“including both . . . common stock and bonds.” (Doc. No. 9-1 at p. 18.) Menorah and Clal

should plaintiffs succeed in their claims against Teva. Cf. Tsirekidze v. Syntax-Brillian Corp., Nos. CV-07-2204-

PHX-FJM et al., 2008 WL 942273, at *3 (D. Ariz. Apr. 7, 2008) (“We have before us six inches of briefing that has

precious little to do with the merits of the claim and less to do with the fitness of any class member to steer this

litigation. What we have in abundance is unwelcome sniping among counsel.”).

suffered significant damages as a result of Teva’s allegedly fraudulent statements. Calculated on

a first-in, first-out (“FIFO”) basis, they lost $436,573,220. (Doc. No. 9-1 at p. 6.) Calculated on

a last-in, first-out (“LIFO”) basis, their damages were $372,626,348.10 (Id.)

Menorah and Clal informed the Court that they are represented by two law firms in this

matter: Pomerantz LLP and Kaskela Law LLC.11 (See id. at pp. 19–20.) Pomerantz is to serve

as lead counsel, and Kaskela is to be liaison counsel. (Id.) Both firms have extensive and

impressive experience representing plaintiff classes in securities actions. Combined, they have

represented plaintiffs in dozens of securities class actions, and have recovered billions of dollars

on behalf of their clients. (See Doc. No. 9-7 at pp. 2–6; Doc. No. 9-8 at p. 1.) Moreover, their

attorneys have extensive experience in securities fraud class actions, including in matters that

were litigated in the Eastern District of Pennsylvania. (See, e.g., Doc. No. 9-7 at p. 39; Doc. No.

9-8 at p. 1.)

The Menorah and the Clal entities have both submitted their retainer agreements with

Pomerantz to the Court in support of their motion for appointment as lead plaintiff in this

matter.12 With the exception of the names of the relevant parties, the two agreements are

identical. Both agreements provide the same fee structure Pomerantz will use in its motion for

10 First-in, first-out and last-in, first-out (also known as “FIFO” and “LIFO,” respectively) are accounting methods

which are often used to tabulate damages in securities cases. Pelletier v. Endo Int’l PLC, 316 F. Supp. 3d 846, 849

n.7 (E.D. Pa. June 19, 2018). As explained in Pelletier v. Endo International PLC:

LIFO assumes that the first stocks to be sold are the stocks purchased most recently. On the other

hand, FIFO assumes that the first stocks to be sold are the stocks that were acquired first. Using

LIFO or FIFO, each purchase of securities is matched or assigned to a specific sale of securities to

calculate the trading loss or gain on each transaction during the class period. Because FIFO and

LIFO use different sorting principles, these methods can produce significantly different results.

Id. (citations omitted).

11 As discussed in Part III.A.1.b.ii, infra, this representation proved to be false.

12 The Court notes the retainer agreement does not indicate how Kaskela Law LLC is being paid.

attorneys’ fees, should it be appointed as lead counsel in this matter and succeed in recovering

damages on behalf of the class:

a) Amounts recovered up to $100 million—19%

b) Amounts recovered between $100 million - $200 million – 18%

c) Amounts recovered from $200 million to $300 million – 17%

d) Amounts recovered from $300 million to $500 million – 15%

e) Amounts recovered above $500 million – 12.5%

In other words, Pomerantz’s proposed recovery of attorneys’ fees is on a sliding scale; the

greater the class’s ultimate damages, the lower Pomerantz’s percentage fee.

2. The Investor Group

As of March 11, 2021, there are now two members of The Investor Group: Gerald

Forsythe, an individual investor, and the Dekalb County Pension Fund (the “Pension Fund”).13

(Doc. No. 8-5 at pp. 6, 8.) During the class period, The Investor Group suffered approximately

$2,067,327.65 in losses that it says are attributable to Teva’s alleged fraud—$1,067,327.65 in

losses suffered by the Pension Fund, and “approximately $1 million in losses” suffered by Mr.

Forsythe.14 (Doc. No. 8-1 at p. 11; Doc. No. 35 at pp. 3, 5.) Although they have expressed their

willingness to work together to prosecute this action and have put procedures in place to help

facilitate that process, Mr. Forsythe and the Pension Fund do not have a pre-existing relationship.

(Doc. No. 8-3 at ¶¶ 8, 10, 13–14.) Mr. Forsythe has not served as a lead plaintiff in a securities

class action. (See Doc. No. 8-5 at p. 6.) However, the Pension Fund has extensive experience

actively participating in securities class actions, and in the last three years it has twice been

13 Originally, The Investor Group also included a third member, Faris Al Kooheji, an individual investor. (See Doc.

No. 8-5 at p. 2.) However, Mr. Kooheji subsequently filed a notice indicating that he was withdrawing from

participating in The Investor Group. (Doc. No. 48.)

14 When Mr. Kooheji was a part of The Investor Group, the Group represented that their losses were $5,160,224.38.

(Doc. No. 8-1 at p. 11.) The Investor Group has not provided the Court with an updated damages figure now that

Mr. Kooheji has left the Group. The Court bases its $2,067,327.65 figure on The Investor Group’s assertion that

Mr. Forsythe “suffered approximately $1 million in losses” and that the Pension Fund “has net losses of

$1,067,327.65 pursuant to standard LIFO calculation methodology.” (Doc. No. 35 at pp. 3, 5.)

selected to serve as a lead plaintiff in one of these actions. (See Doc. No. 8-5 at p. 8.)

The Investor Group has selected Faruqi & Faruqi, LLP as its counsel in this matter.

(Doc. No. 8-1 at pp. 13–16.) Faruqi & Faruqi is “a minority-owned and woman-owned law

firm” with extensive experience litigating securities class actions, including securities fraud

actions. (Doc. No. 8-1 at p. 13; see also Doc. No. 8-7 at p. 2.) The firm has represented

plaintiffs in dozens of such matters and has recovered hundreds of millions of dollars on behalf

of its clients in those cases. (Doc. No. 8-6 at pp. 2–7.) Faruqi & Faruqi’s attorneys also have

extensive experience litigating in the Eastern District of Pennsylvania. (See, e.g., id. at pp. 15–

16, 21, 23.)

In support of their motion for appointment as lead plaintiff, Mr. Forsythe and the Pension

Fund have submitted their retainer agreements with Faruqi & Faruqi to the Court. The

agreements are largely identical, but differ in one important respect. While Faruqi & Faruqi’s

agreement with the Pension Fund limits their attorneys’ fees to “no more than to [sic] 28% of the

gross recovery” by the class in this matter, their agreement with Mr. Forsythe provides only that

“the Firm will seek that the Court make an award of attorney’s fees and expenses to the Firm at

the successful conclusion of the case to be paid from the recovery for the Class.” In other words,

Faruqi & Faruqi’s agreement with the Pension Fund provides a maximum recovery of attorneys’

fees—28 percent of whatever damages the class is able to recover in this matter—while their

agreement with Mr. Forsythe places no limit on their maximum recovery of attorneys’ fees.15

II. STANDARD OF REVIEW

The PSLRA “establishe[s] a two-step process for appointing a lead plaintiff: the court

15 Although Mr. Forsythe’s retainer agreement did not contain the 28 percent cap on attorneys’ fees, counsel for The

Investor Group agreed at oral argument that in the event Mr. Forsythe’s retainer agreement controlled (i.e., if the

Pension Fund was severed from The Investor Group), Faruqi & Faruqi would not seek more than 28 percent of the

class’s potential recovery in attorneys’ fees. (Hr’g Tr. at 34:19–24.)

first identifies the presumptive lead plaintiff, and then determines whether any member of the

putative class has rebutted that presumption.” In re Cendant Corp. Litig., 264 F.3d 201, 262 (3d

Cir. 2001). The Act provides a “rebuttable presumption” that the “most adequate plaintiff” is the

class member or group of class members that (1) “has either filed the complaint or made a

motion in response to a notice,” (2) “has the largest financial interest in the relief sought by the

class,” and (3) “otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil

Procedure.” 15 U.S.C. § 78u-4(a)(3)(B)(iii). A fourth factor, though not explicitly identified as

such in the PSLRA, is Congress’s preference that institutional investors serve as lead plaintiffs in

securities class actions. In re Vicuron Pharms., Inc. Sec. Litig., 225 F.R.D. 508, 511 (E.D. Pa.

2004); see also In re Cendant Corp. Litig., 264 F.3d at 244.

The first and fourth elements of the PSLRA test for the appointment of a presumptive

lead plaintiff are self-explanatory. As for the second element, the Court “should consider,

among other things: (1) the number of shares that the movant purchased during the putative class

period; (2) the total net funds expended by the plaintiffs during the class period; and (3) the

approximate losses suffered by the plaintiffs.” In re Cendant Corp. Litig., 264 F.3d at 262; see

also In re Party City Sec. Litig., 189 F.R.D. 91, 105 (D.N.J. 1999) (identifying “the number of

net shares purchased by the movant during the Class Period” as an additional factor for courts to

consider (quoting Lax v. First Merchs. Acceptance Corp., Nos. 97 C 2715, et al., 1997 WL

461036, at *5 (N.D. Ill. Aug. 11, 1997)). Of these factors, courts focus most strongly on the

losses suffered. In re Vicuron Pharms., Inc. Sec. Litig., 225 F.R.D. at 511.

Last, under the third element, the Court looks to Rule 23. Rule 23(a) lists four

requirements governing whether a lawsuit should be designated as a class action:

(1) the class is so numerous that joinder of all members is impracticable, (2) there

are questions of law or fact common to the class, (3) the claims or defenses of the

representative parties are typical of the claims or defenses of the class, and (4) the

representative parties will fairly and adequately protect the interest of the class.

Fed. R. Civ. P. 23(a). At this stage, typicality and adequacy of representation are the only

requirements relevant to the lead plaintiff determination, and movants seeking to be appointed as

the lead plaintiff have to make only a prima facie showing that these requirements are satisfied.

See In re Cendant Corp. Litig., 264 F.3d at 263 (“The initial inquiry . . . should be confined to

determining whether the movant has made a prima facie showing of typicality and adequacy.”).

Under Rule 23, there is a “‘low threshold’ for typicality”: provided “the interests of the

class and the class representative are aligned,” courts will find typicality even when class

members’ claims are only legally similar, and not factually similar. In re Nat’l Football League

Players, 821 F.3d at 427–28 (quoting Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

259 F.3d 154, 182–83 (3d Cir. 2001)). In securities class actions, courts “consider whether the

circumstances of the movant with the largest losses ‘are markedly different or the legal theory

upon which the claims of that movant are based differ from that upon which the claims of other

class members will perforce be based.’” In re Cendant Corp. Litig., 264 F.3d at 265 (quoting

Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir. 1988)) (alterations adopted).

Courts considering adequacy of representation under Rule 23 examine both “the

qualifications of class counsel and the class representatives.” In re Nat’l Football League

Players, 821 F.3d at 428. Under this prong of the analysis, courts seek “to root out conflicts of

interest within the class” and to “uncover conflicts of interest between the named parties and the

class they seek to represent.” Id. at 428, 430 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S.

591, 625 (1997)). “A class representative must represent a class capably and diligently,” but this

is a low bar: “‘a minimal degree of knowledge’ about the litigation is adequate.” Id. at 430

(quoting New Directions Treatment Servs. v. City of Reading, 490 F.3d 293, 313 (3d Cir. 2007)).

“[T]he linchpin of the adequacy requirement is the alignment of interests and incentives between

the representative plaintiffs and the rest of the class.” In re Cmty. Bank of N. Va., 795 F.3d at

393 (quoting Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 183 (3d Cir. 2012)). In

securities class actions, in addition to potential conflicts of interest, courts consider a movant’s

willingness and ability to prosecute the action, obtain competent class counsel (with a reasonable

retainer), and (when the movant is a group) work together effectively with other members of the

group in representing the class’s interests. In re Cendant Corp. Litig., 264 F.3d at 265–66.

Once the presumption has been triggered, the Court’s duty is to determine whether the

presumptive lead plaintiff will be able to fairly and adequately represent the interests of the class,

or “is subject to unique defenses that render [them] incapable of adequately representing the

class.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). The Court does not ask “whether another movant

might do a better job of protecting the interests of the class than the presumptive lead plaintiff;

instead, the question is whether anyone can prove that the presumptive lead plaintiff will not do a

fair and adequate job.” In re Cendant Corp. Litig., 264 F.3d at 268 (cleaned up). “If no class

member succeeds in rebutting the presumption, then the district court should appoint the

presumptive lead plaintiff as the lead plaintiff.” Id. If the presumption has been rebutted, then

the Court restarts the process with the remaining movant who “has the highest financial interest

in the class’s recovery.” Id.

III. DISCUSSION

A. Appointing a Lead Plaintiff

1. Menorah and Clal

The Court first considers whether Menorah and Clal is the presumptive lead plaintiff.

Having determined that it is, the Court next considers whether The Investor Group has provided

sufficient evidence to rebut the presumption. The Court concludes that it has, and that Menorah

and Clal will not be named lead plaintiff in this matter.

a. Presumptive Lead Plaintiff

There is no question that, with FIFO losses of $436,573,220 and LIFO losses of

$372,626,348, Menorah and Clal have made a prima facie showing that they are the presumptive

lead plaintiff movant. Indeed, Menorah and Clal’s losses so dwarf The Investor Group’s that the

Court need not consider the other factors sometimes used to determine which lead plaintiff

movant has the strongest financial interest in this litigation. See Grodko v. Cent. Eur. Distrib.

Corp., Civil Action Nos. 12-5530 (JBS-KMW), 12-5531 (JBS-KMW), 2012 WL 6595931, at

*10 (D.N.J. Dec. 17, 2012); see also In re Vicuron Pharms., Inc. Sec. Litig., 225 F.R.D. at 511

(identifying losses suffered as the most important factor for a court to consider when determining

which lead plaintiff movant has the largest financial interest in the outcome of the case). This

conclusion is buttressed by The Investor Group’s concession that Menorah and Clal qualifies as

the presumptive lead plaintiff having shown that they have suffered the largest loss. (Hr’g Tr. at

20:15–17.)

As for the Rule 23 typicality and adequacy requirements, Menorah and Clal have made a

prima facie showing that these are satisfied. As to typicality, Menorah and Clal assert that they

have suffered damages because they purchased shares at prices artificially inflated by Teva’s

false and misleading statements, which shares lost value when Teva’s alleged misconduct was

disclosed. (Doc. No. 9-1 at pp. 13–14.) These “claims are typical, in common-sense terms, of

the class, thus suggesting that the incentives of the plaintiffs are aligned with those of the class.”

Beck v. Maximus, Inc., 457 F.3d 291, 295–96 (3d Cir. 2006) (quoting Baby Neal v. Casey, 43

F.3d 48, 55 (3d Cir. 1994)).

Adequacy, too, is met. As a starting point, a party seeking to represent others in a class

action must have standing to do so. Wood v. Saroj & Manju Invs. Phila. LLC, Civil Action No.

19-2820-KSM, 2020 WL 7711409, at *5 (E.D. Pa. Dec. 28, 2020). Here, Menorah and Clal

claim that they were harmed by Teva’s alleged misconduct and seek damages to redress their

harm. (See Doc. No. 9-1 at pp. 13–14.) This is sufficient to make a prima facie showing of

standing. Further, Menorah and Clal’s motion to be appointed lead plaintiff does not evidence a

conflict with other members of the class, as Menorah and Clal have an incentive to maximize

their recovery of damages. Further, they have selected competent and experienced class counsel,

and, as shown by their past experience working together as lead plaintiffs in securities class

actions, have the ability to work together effectively as a lead plaintiff group. (See id. at pp. 14–

18.) Thus, on their papers, Menorah and Clal made a prima facie showing that they satisfy Rule

23’s typicality and adequacy requirements.

Last, as large institutional investors, Menorah and Clal fulfill Congress’s preference,

implicit in the PSLRA, to have institutional investors serve as lead plaintiffs in securities class

actions. In re Vicuron Pharms., Inc. Sec. Litig., 225 F.R.D. at 511; see also In re Cendant Corp.

Litig., 264 F.3d at 244.

The Court therefore finds that Menorah and Clal qualify as the presumptive lead plaintiff

in this matter. See 15 U.S.C. § 78u-4(a)(3)(B)(iii); In re Cendant Corp. Litig., 264 F.3d at 244.

b. Rebutting the Presumption

The Court now turns to whether The Investor Group has rebutted the presumption that

Menorah and Clal should be appointed lead plaintiff in this action. The Investor Group raises

three arguments to rebut the presumption. First, they argue that Menorah & Clal, and their

attorneys, are pursuing a separate action against Teva in the District of Connecticut, which will

necessitate arguments which are in direct conflict with the position the lead plaintiff must take in

this case. Second, The Investor Group asserts that Menorah and Clal should be disqualified

because they failed to disclose that Pomerantz agreed to jointly prosecute this action with two

Israeli law firms. Third, the Investor Group contends that in the event Teva goes bankrupt,

Menorah and Clal, based on its District of Connecticut lawsuit, could be competing as unsecured

creditors with class members in this matter. The Court addresses each of these arguments in

turn.

i. The Connecticut Action

Courts consider potential conflicts of interest between plaintiffs when deciding who to

appoint as the lead plaintiff in a securities class action. See, e.g., In re Cendant Corp. Litig., 264

F.3d at 265 (citing Hassine, 846 F.2d at 179 ); A1 Credit Co. v. RAIT Fin. Tr., Civil Action No.

2:07-cv-03148-LDD, 2007 WL 9677273, at *3 (E.D. Pa. Oct. 25, 2007); Janovici v. DVI, Inc.,

Nos. Civ.A.2:03CV04795-LD, et al., 2003 WL 22849604, at *12 (E.D. Pa. Nov. 25, 2003);

A.F.I.K. Holding SPRL v. Fass, 216 F.R.D. 567, 574 (D.N.J. 2003); Roth v. Knight Trading Grp.,

Inc., 228 F. Supp. 2d 524, 531 (D.N.J. 2002).16 Similarly, courts handling these types of actions

keep an eye on potential conflicts of interest between class counsel and the class. See, e.g., In re

AT&T Corp., 455 F.3d 160, 168 (3d Cir. 2006); Wayne Cty. Emps.’ Ret. Sys. v. Mavenir, Inc.,

Civil Action No. 18-1229-CFC-SRF, 2019 WL 3494734, at *3–4 (D. Del. Aug. 1, 2019).17

However, the mere existence of a conflict of interest is not enough to disqualify a

presumptive lead plaintiff; rather, the conflict must be sufficiently strong that it overcomes the

16 As the Third Circuit has made clear, however, the fact that a lead plaintiff still owns a significant amount of stock

of the defendant company is not enough to create a conflict of interest between the lead plaintiff and class members

who do not own stock (or at least do not own much stock) in the defendant company. In re Cendant Corp. Litig.,

264 F.3d at 243–44.

17 For obvious reasons, this focus is particularly strong when it comes to class counsel’s request for attorneys’ fees.

presumption. A1 Credit Co., 2007 WL 9677273, at *3; Grodko v. Cent. Eur. Distrib. Corp.,

Civil Action Nos. 12-5530 (JBS-KMW), 12-5531 (JBS-KMW), 2012 WL 6595931, at *9

(D.N.J. Dec. 17, 2012). And, where the conflict is between the presumptive lead plaintiff’s

chosen counsel and the members of the class, the solution is to “advise the plaintiff about [the

issue] and ask him whether he would be willing to serve as lead, even if the court were to

disapprove his choice of counsel and he were forced to seek the services of another attorney.”

Grodko, 2012 WL 6595931, at *9 (quoting In re Cavanaugh, 306 F.3d 726, 733 n.12 (9th Cir.

2002)).

The Third Circuit has held that de minimus conflicts between a lead plaintiff and the

remainder of the class do not defeat Rule 23’s adequacy requirement. Dewey, 681 F.3d at 184.

Rather, the conflicts must be “fundamental.” Id. (collecting cases).

Here, The Investor Group argues that Menorah and Clal face such a fundamental conflict

of interest. (E.g., Doc. No. 12 at pp. 10–11.) Menorah and Clal, as part of a group of twenty-

two institutional investors, have filed a securities action against Teva in the District of

Connecticut in which they allege that Teva made fraudulent statements to disguise its violations

of antitrust laws, artificially inflating its share prices. (See D. Conn. Dkt. No. 3:17-cv-00558-

SRU, Doc. No. 391 at ¶ 1.) Among the many allegations in the complaint is that Teva made

statements partially disclosing its misconduct, which statements caused its share prices to fall.

(Id. at ¶¶ 518–24.) This direct action against Teva has been consolidated for pre-trial purposes

with a securities class action against Teva, also in the District of Connecticut. (See D. Conn.

Dkt. No. 3:17-cv-00558-SRU, Doc. No. 341.)

The Investor Group argues that Menorah and Clal’s conflict arises because certain

statements were alleged as partial disclosures with a deflationary impact in the Connecticut

action, and yet, these same statements arguably have artificially inflated Teva’s share prices in

this matter. (Doc. No. 12 at pp. 13–14.) The Investor Group argues it would be untenable for

Menorah and Clal and their counsel to argue that these certain statements were both inflationary

and deflationary. (See id.)

Unsurprisingly, Menorah and Clal see things differently. They argue that a company’s

share price can both lose value due to the disclosure of some misconduct, yet remain artificially

inflated as other misconduct remains undisclosed. (Doc. No. 29 at pp. 9–11.) A sophisticated

damages expert, they say, could convincingly disaggregate the deflationary aspect of one portion

of a statement from the inflationary aspect of another portion of the same statement. (Id. at pp.

11–12.) As such, Menorah and Clal claim there is no conflict between their position in the

Connecticut action and the position they would need to take on behalf of the class here. (Id.)

The Court disagrees. The reality is that the parties to the Connecticut actions have an

incentive to argue that Teva’s statements partially disclosing its alleged violation of antitrust

laws deflated its share prices. And, to maximize their damages, they have an incentive to argue

that the deflationary impact of those statements was as high as possible. In this matter, however,

the putative class has an incentive to argue that some of the same statements at issue in the

Connecticut actions inflated Teva’s share prices by not disclosing Teva’s alleged involvement in

a kickback scheme. Then, to maximize their damages in the instant action, they have an

incentive to argue that the inflationary impact of those statements was as high as possible. If

Menorah and Clal were appointed lead plaintiff in this matter, they would be forced to make an

argument that directly contradicts their argument in the Connecticut action.18

18 At oral argument, counsel for Menorah and Clal raised—for the first time—the argument that Menorah and Clal

may ultimately decide to forego their individual action in favor of joining the Connecticut class action. (Hr’g Tr. at

50:7–51:13.) However, this argument is unavailing. The fact is that, as of now, Menorah and Clal are actively

pursuing their individual Connecticut action against Teva, and that the arguments they make in that action

It is true, as Menorah and Clal argue, that a disinterested and sophisticated expert

economist could arguably disentangle the allegedly deflationary and inflationary aspects of the

same statement. But our adversarial judicial system is premised on the idea that justice is best

achieved when parties to a dispute raise the strongest arguments and evidence in their own favor,

which evidence and arguments are then evaluated by a neutral arbiter.

Here, the Court finds that Menorah and Clal’s (and Pomerantz’s) incentives to maximize

their damages in both the Connecticut action and this matter mean that they must make

contradictory arguments—arguments that, if made in the other action, would necessarily lead to

a smaller recovery.19 As such, the Court finds that there is a fundamental conflict between

Menorah and Clal’s interests in the Connecticut action and the class’s interests in this matter, and

that it has strong reason to question whether Menorah and Clal can fairly and adequately

represent the interests of the class in this matter. See In re Oppenheimer Rochester Funds Grp.

Sec. Litig., Master Docket No. 09-md-02063-JLK-KMT, 2009 WL 4016635, at *8 (D. Colo.

Nov. 18, 2009) (refusing to appoint a single lead plaintiff to represent two different classes in

related securities class actions due to the risk of conflicts of interest or “accusations of conflicts

of interest”); Baker v. Arnold, Case Number C 03-05641 JF, 2004 WL 7340186, at *3 (N.D. Cal.

May 17, 2004) (finding a conflict of interest between the class and class counsel where counsel

represented two classes with competing theories of the case in two related securities actions);

Krim v. pcOrder.com, Inc., 210 F.R.D. 581, 590–91 (W.D. Tex. 2002) (finding a disqualifying

conflict of interest where counsel represented shareholders in multiple class actions against the

necessarily contradict the position the putative class must take in this matter. That Menorah and Clal may, at some

hypothetical future point, not be actively pursuing a claim that contradicts the claim asserted by the putative class in

this matter does not alter the fact that as of now, they are pursuing such a claim. The Court must deal in reality, not

in hypotheticals that serve the parties’ interests.

19 The parties did not fully brief—and the Court does not address—whether collateral estoppel would prevent

Menorah and Clal from making inconsistent arguments in the Connecticut action and this matter.

same defendant because “[w]ith multiple lawsuits, more than a fair chance exist[ed] that the

shareholders represented in the various suits, and their interests [might] not always coincide”);

see also In re Turquoise Hill Res. Ltd. Sec. Litig., 20-cv-8585 (LJL), 2021 WL 148752, at *8

(S.D.N.Y. Jan. 15, 2021) (recognizing that a lead plaintiff’s maintenance of a separate suit

against a defendant for the same conduct as alleged in a securities class action could pose a

conflict of interest, and setting procedures to guide against such a possibility); cf. In re Nw. Corp.

Sec. Litig., 299 F. Supp. 997, 1007 (D.S.D. 2003) (finding that class counsel did not have a

conflict of interest where counsel’s involvement in a potentially competing securities class action

was “limited” and ended quickly).

Although there are some cases in which courts have found that there is no conflict of

interest between parties or counsel pursuing parallel securities litigations provided that “the

maintenance of parallel actions . . . does not pit one class against the other in terms of satisfying

a potential judgment,” see, e.g., Dietrich v. Bauer, 192 F.R.D. 119, 126 (S.D.N.Y. 2000),20 this

Court does not find those cases persuasive here. Many of the cases in which courts declined to

find a conflict did not involve situations where counsel or parties would be required to make

conflicting arguments in the two matters. See, e.g., id. Here, Menorah and Clal—and their

counsel, Pomerantz—would be in the position of making competing arguments in this matter and

the Connecticut action, creating a conflict of interest regardless of Teva’s ability to satisfy

potential judgments in both cases. This Court finds that these competing arguments constitute a

fundamental conflict of interest that rebuts the presumption of Menorah and Clal’s status as lead

20 Dietrich sought to distinguish a line of cases in which courts had found that there was a conflict of interest when

one group of attorneys represented two classes of plaintiffs against the same defendant in securities class actions,

because there was a possibility that the plaintiff classes would be in competition with one another to recover the

same pool of resources. See Dietrich, 192 F.R.D. at 126; see also Kuper v. Quantum Chem. Corp., 145 F.R.D. 80,

83 (S.D. Ohio 1992) (conflict of interest where “both Plaintiff classes clearly seek recovery from a common pool of

assets”); Jackshaw Pontiac v. Cleveland Press Publ’g Co., 102 F.R.D. 183, 192 (N.D. Ohio 1984) (same); Sullivan

v. Chase Inv. Servs. of Bos., 79 F.R.D. 246, 258 (N.D. Cal. 1978) (same).

plaintiff in this case.

ii. Undisclosed Counsel

Pomerantz’s retainer agreements with Menorah and Clal provide that Pomerantz will

“jointly prosecute” this matter with two Israeli law firms, Guy, Bachar & Co. and Eitan Lavie &

Co. (Ltr. from Jeremey A. Lieberman, Managing Partner, Pomerantz LLP, to Shay Kompel and

Nir Moroz, Menorah Mivtachim Ins. Ltd., Menorah Mivtachim Pensions & Gemel Ltd., and

Menorah Mivtachim & the Fed’n of Eng’rs Provident Fund Mgmt. Ltd. (Oct. 13, 2020)

[hereinafter Menorah Retainer Agreement]; Ltr. from Jeremey A. Lieberman, Managing Partner,

Pomerantz LLP, to Yossie Dori and Barak Benski, Clal Insurance Co. Ltd. and Clal Pension &

Provident Ltd. (Nov. 4, 2020) [hereinafter Clal Retainer Agreement].) As a result of these

agreements, the Israeli law firms would receive “22.5% of the net fees awarded to Pomerantz in

this action.” (Menorah Retainer Agreement; Clal Retainer Agreement.) The Court only learned

of the involvement of the two Israeli law firms after specifically requiring that the competing

lead plaintiffs provide their respective retainer agreements to the Court.21

The Investor Group argues that Menorah and Clal’s failure to disclose the involvement of

the two Israeli firms should disqualify Menorah and Clal from serving as lead plaintiff. (Doc.

No. 50-1 at pp. 11–14.) The Court agrees.

As an initial matter, even if Menorah and Clal had originally disclosed the involvement

of the Israeli firms, the Court would have been skeptical of this arrangement. At oral argument,

Menorah and Clal asserted that the involvement of Israeli counsel is necessary in this matter for

21 Again, the Court notes it is unclear from the retainer agreement what the terms of the arrangement are with

Pomerantz’s liaison counsel, Kaskela Law LLC. This is also troubling given counsel’s argument that there was “no

mechanism” to disclose the involvement of the two Israeli law firms. Even when Menorah and Clal believed a

mechanism existed for disclosing their relationship with firms other than Pomerantz—as they clearly did with

respect to Kaskela (see Doc. No. 9-1 at pp. 19–20)—they did not disclose the terms of that relationship.

two reasons: (1) to coordinate the distribution of damages to the owners of Israeli shareholders

and (2) to coordinate with the attorneys managing a securities lawsuit against Teva in Israel’s

courts. (Hr’g Tr. at 37:6–38:11.) In fact, counsel for Menorah and Clal even goes as far as to

argue that the fact The Investor Group has failed to engage Israeli counsel illustrates their

inadequacy to be lead plaintiff in this case. (Id. at 40:16–20.) The Court is not persuaded.

First, Israeli counsel would only be necessary to help distribute damages from this action

to owners of Israeli shares in Teva if the plaintiffs in this matter are successful in winning

damages for the class. Since such a result could be years in the future—if, indeed, it happens at

all—the involvement of Israeli firms now is premature. Second, coordination with the lawyers

pursuing the lawsuit against Teva in Israel’s courts is necessary only to the extent those two suits

come into conflict with one another. Since that has not happened yet, the need for coordination

with an Israeli law firm is also premature. Moreover, even if there does come a point during the

course of this litigation that coordination with an Israeli law firm is necessary, there is an

important difference between hiring a law firm to serve in that role and agreeing to “jointly

prosecute” a matter—from the outset—with that firm (or, in this case, two firms). In the latter

situation, there is a strong risk that the multiple law firms involved in a matter will duplicate one

another’s efforts, driving up costs without a corresponding benefit accruing to the class. See In

re Allergn PLC Sec. Litig., No. 18 Civ. 12089 (CM)(GWG), 2020 WL 5796763, at *8 (S.D.N.Y.

Sept. 29, 2020).

Indeed, the Court need not resort to mere speculation in concluding that the involvement

of the two Israeli firms would not benefit the class at this stage of the proceedings in this case.

At the hearing on Menorah and Clal’s and The Investor Group’s motions to be appointed lead

plaintiff, Teva’s counsel informed the Court that the lawsuit against it in Israel’s courts has “been

stayed since late December or January.” (Hr’g Tr. at 75:21–24.) Teva’s counsel made this

disclosure after Attorney Jeremy Lieberman, counsel for Menorah and Clal, had made an

extended argument about the necessity of jointly prosecuting this matter with the Israeli firms to

ensure that this litigation is coordinated with the lawsuit in Israel’s courts. (See id.) When the

Court questioned Attorney Lieberman why he apparently did not know about the stay, he

responded:

Your Honor, it very well could be that — it could be that I was told that. It could

be that, you know — I honestly — until we’re appointed lead, we haven’t been —

we haven’t been dealing with that issue. We haven’t been, you know, tracking as

much. It could be that I was informed of that, I just wasn’t dealing with it.

(Id. at 76:25–77:5.)

The Court finds this explanation disingenuous. It is hard to believe Attorney Lieberman,

who engaged these two Israeli law firms to help coordinate the parallel Israeli litigation, would

not have known that the parallel litigation has been stayed since approximately December 2020.

And although the Court would like to believe Attorney Lieberman merely “forgot” about the

stay,22 that also is extremely difficult to comprehend given Attorney Lieberman’s argument

which included his assertion that:

Often in cases where there’s a parallel US and Israeli case, the case in Israel is

often stayed. Sometimes you can get the plaintiffs to stay, to agree to let the US

case go, because a lot of times, actually often in dual-listed securities, the Israeli

court will recognize US law. The Supreme Court has recognized that US law

applies, so they’ll stay the Israeli action. You need someone to coordinate that

issue with the Israeli case.

(Id. at 40:22–41:4). Further, Attorney Lieberman suggested that The Investor Group’s failure to

engage an Israeli law firm is “a significant issue” (id. at 37:12–13), because “by definition, there

is a case in Israel, in Tel Aviv District Court, that’s either going to be stayed or that’s going to be

22 Even assuming Attorney Lieberman “forgot” the Israeli action had been stayed, this would demonstrate a lack of

diligence in this litigation.

in conflict with the case that occurs here” (id. at 44:13–15).

The Court is hesitant to impugn the character of the attorneys and litigants that appear

before it, but the Court finds Menorah and Clal and Pomerantz’s tactics and arguments related to

this aspect of the retainer agreement troubling. At oral argument, Menorah and Clal claimed that

there was “no mechanism” to disclose the involvement of the Israeli firms in this matter. (Id. at

39:18–19.) This argument is preposterous. Menorah and Clal has thus far filed multiple

pleadings in support of their bid to be appointed lead plaintiff, and this is not to mention the

myriad letters and emails they have sent to the Court. (See Doc. Nos. 9, 11, 29, 34, & 49.) Any

one of these writings could have been used to disclose the involvement of the Israeli firms—and

should have been.

Similarly unconvincing is Menorah and Clal’s and Pomerantz’s argument that the

involvement of the two Israeli firms should not come as a surprise because these same firms have

worked with Pomerantz representing Menorah and Clal in other securities class actions. (See

Hr’g Tr. at 39:10–13.) The PSLRA is clear that the appointment of lead counsel is “subject to

the approval of the court.” 15 U.S.C. § 78u-4(a)(3)(B)(v). It is incumbent upon the parties

seeking approval of their chosen counsel to provide the Court with the information necessary to

evaluate whether counsel will properly serve the interests of the class. The Court should not

have to scour the dockets of every matter a party has been involved in to determine which

attorneys may also be representing the party in the instant matter.

Nor does the Court take any consolation from Menorah and Clal’s suggestion that it has

used these two Israeli law firms in conjunction with Pomerantz in pursuing two other securities

class action matters in which they served as lead plaintiff. (See Hr’g Tr. at 38:15–17.) Menorah

and Clal acknowledged that in both those matters, they did not disclose the use of the Israeli

firms until the class certification stage. (Id.) That Menorah and Clal withheld important

information from the courts in two other matters does not dispose this Court to excuse similar

misconduct in this matter.

Menorah and Clal’s failure to disclose the involvement of two Israeli firms who have

been engaged to “jointly prosecute” and will receive “22.5% of the net fees awarded to

Pomerantz in this action” causes the Court great concern. This concern is only heightened by the

fact Pomerantz has been admonished for this kind of less-than-forthcoming behavior in the

recent past.

In Cook v. Allergn PLC, Pomerantz’s client was appointed lead plaintiff, and Pomerantz

was appointed class counsel. Nos. 18 Civ. 12089 (CM) et al., 2019 WL 1510894, at *4

(S.D.N.Y. Mar. 21, 2019). Pomerantz sought to serve as co-lead counsel, but the court, anxious

to avoid inflated legal fees, elected to appoint Pomerantz as sole lead counsel. Id. That should

have been the end of matters. It was not. When it came time to certify the class, the court

learned that Pomerantz had been prosecuting the matter with its co-counsel, despite the court’s

explicit instructions otherwise. In re Allergn PLC Sec. Litig., 2020 WL 5796763, at *6. The

only concession Pomerantz had made to the court’s explicit command was to modify its

agreement with co-counsel such that it was splitting its fees 55-45 rather than 50-50. Id.

The court excoriated Pomerantz and its client for their conduct, writing:

Full transparency required advising the Court that, despite its ruling, two law

firms intended to continue working on this matter, and had entered into a fee-

sharing arrangement. It required advising the court that lawyers from both firms

were attending conferences and reviewing pleadings (matters about which I could

not possibly know anything) — even though I specifically said there could not be

co-lead counsel and explained that duplication of effort was the reason why. It

required notifying the court that [co-counsel]’s role in the conduct of this lawsuit

had not changed one iota as a result of my order directing that there not be two

lead counsel, as [the client’s] corporate representative candidly testified. It is

undisputed that the court was not notified of any of this by [the client], or by

Pomerantz, or by co-counsel. That is unacceptable.

Id. at *8. Moreover, just as in this matter, the court in In re Allergn found Pomerantz’s

explanation for its conduct utterly unsatisfying, observing that the explanation was “a lie” and

“utterly disingenuous.” Id. at *8. As a result of Pomerantz and its client’s misconduct, the court

refused to certify the class with the client as the lead plaintiff. Id. at *9.

After such a rebuke, this Court would expect Pomerantz to understand the importance of

complete transparency and full disclosure of any and all arrangements with law firms “jointly

prosecuting” a matter. Yet, until the Court requested a copy of the retainer agreements, the

Court had no knowledge of the involvement of the two Israeli firms. There was no convincing

explanation for this failure to disclose. Even if Menorah and Clal did not have a conflict of

interest with the class, these facts, standing alone, would cause the Court to seriously question if

Menorah and Clal and Pomerantz could fairly and adequately represent the class’s interests in

this matter.

iii. Teva’s Potential Bankruptcy

Finally, the Court addresses The Investor Group’s argument that Menorah and Clal is

conflicted because Teva may go bankrupt during the course of this litigation, at which point

Menorah and Clal and Pomerantz, by virtue of their participation in the Connecticut action, could

be competing with class members in this case for a share of Teva’s dwindling resources. (E.g.,

Doc. No. 12 at p. 22.) As discussed above, courts do consider potential conflicts of interest

between lead plaintiff candidates or their counsel and the remainder of the putative class when

deciding who to appoint as lead plaintiff in securities class actions.

The concern with lawyers representing multiple clients (or, in this case, multiple classes

of client) with competing interests in a potential bankruptcy action must be in proportion to the

chances that those clients’ interests would actually be competing. Thus, a lawyer representing

two slip-and-fall clients with relatively small claims against a large and financially healthy

corporation has no ethical concerns, because the chances are very low that his clients will ever

become competing creditors of the corporation. However, in a case in which an attorney

represents two clients (or classes of client) with very large claims against a faltering company,

there are ethical concerns because there is a much higher probability that the clients will become

competing creditors if the defendant company goes bankrupt. Similar concerns necessarily apply

when a lead plaintiff has claims that could compete with the class’s against a company that is or

could soon be bankrupt. See, e.g., Kuper, 145 F.R.D. at 83; Jackshaw Pontiac, 102 F.R.D. at

192.

Nonetheless, courts in the Third Circuit, relying on the Circuit’s opinion in In re Cendant

Corp. Litigation, have been hesitant to disqualify a lead plaintiff whose interests may differ from

the class’s if the defendant is forced into bankruptcy. See Fass, 216 F.R.D. at 575. For instance,

in Fass, the District of New Jersey was confronted with a situation in which the presumptive lead

plaintiff’s grandparent company had loaned the defendant $20 million. Id. at 574. The $20

million loan dwarfed the presumptive lead plaintiff’s damages of $650,000. Id. Moreover, there

was at least some evidence that the defendant company was facing liquidity issues. See id. The

court noted that on these facts, “a nascent conflict of interest exist[ed].” Id. at 575. Nonetheless,

the Court concluded that based on the Third Circuit’s reasoning in In re Cendant Corp., the fact

that a presumptive plaintiff’s parent or grandparent company did “not necessarily own stock in

the defendant company, but nevertheless ha[d] a strong financial stake in that company’s future”

was not enough to create “an unacceptable and disqualifying conflict of interest.” Id.

In order to overcome the statutory presumption that the movant with the largest financial

interest in the litigation should be appointed lead plaintiff, a class member must provide

evidence. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II); In re Cendant Corp. Litig., 264 F.3d at 268. In

support of its contention that there is a strong possibility Teva will go bankrupt during the

pendency of this case, The Investor Group asks the Court to take judicial notice of Teva’s own

statements about its debt load and financial analysts’ statements about the likelihood that Teva

could go bankrupt in the near future. (Hr’g Tr. at 19:2–14.) Even if the Court were inclined to

take judicial notice of these unauthenticated hearsay statements, which it is not, they would be

unconvincing. The Court is unable to say with any confidence that these statements are reliable

indicators that a company may go bankrupt.23 The Court finds there is no conflict of interest

based on speculation Teva might go bankrupt at some point in the unforeseeable future.

***

The Court concludes that there is a conflict of interest between Menorah and Clal and the

members of the putative class based on Menorah and Clal’s Connecticut suit. The Court is

deeply concerned by Menorah and Clal’s failure to disclose that the two Israeli firms would be

jointly prosecuting this matter with Pomerantz and entitled to 22.5 percent of any fees awarded

to Pomerantz. For these reasons, the Court finds that The Investor Group has rebutted the

presumption and proven that Menorah and Clal “will not fairly and adequately protect the

interests of the class.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).

2. The Investor Group

The Court now turns to whether The Investor Group, with the next-largest LIFO loss,

should be appointed lead plaintiff. The Investor Group is typical of the class in that it alleges to

23 The Investor Group’s argument that the Individual Defendants may go bankrupt during the course of this action is

similarly unavailing. (See id. at 17:13–23.) This argument is even easier to dispose of, as The Investor Group has

provided no proof that the Individual Defendants are at risk of bankruptcy.

have suffered losses after it purchased shares at artificially inflated prices caused by Teva’s false

and misleading statements, and lost money when Teva’s misconduct was disclosed. (Doc. No. 8-

1 at pp. 12–13.) As for adequacy, The Investor Group alleges to have suffered damages owing to

Teva’s misconduct. (See id.) There are no apparent conflicts of interest between The Investor

Group and the class, it has hired competent counsel to represent it and the class, and it has

detailed how it will work together as a group to pursue the class’s interests. (Id. at pp. 12–16;