Allergan Beats Workers’ ERISA Appeal Alleging Drug Price-Fixing

Allergan PLC defeated a proposed class action by employees who said they lost retirement savings because of the company’s participation in a generic drug price-fixing scheme, when the Third Circuit ruled Friday that the employees didn’t present sufficient allegations of illegal conduct.

The employees’ claims under the Employee Retirement Income Security Act are premised on the idea that the fiduciaries of their 401(k) plan knew or should have known about the company’s illegal conduct and taken action to protect the plan from losses tied to a drop in Allergan’s stock price, the court said. But the employees didn’t allege that Allergan was charged with any criminal conduct, only that the company received inquiries from members of Congress and the Justice Department about potential price-fixing, the court said.

“Because all of the plaintiffs’ causes of action ultimately rest on the premise that the defendants knew or should have known about that supposed illegal conduct, the absence of allegations sufficient to support the existence of it is fatal to each of their claims,” the court said.

The employees argued that nothing in ERISA requires them to prove fraud. The Third Circuit disagreed, saying the employees “ignore the premise of their own complaint.”

“Regardless of whether ERISA requires proof of ‘collusive or fraudulent activity,’ the plaintiffs specifically chose a theory of liability predicated on Allergan’s participation in an unlawful price-fixing conspiracy,” the court said. “In advancing that theory, they assumed the burden of plausibly alleging both the existence of a price-fixing conspiracy and Allergan’s participation in it.”

Judge Kent A. Jordan wrote the decision. Judges Stephanos Bibas and Richard L. Nygaard joined.

The employees are represented by Zamansky LLC; Stull, Stull & Brody; Kantrowitz, Goldhamer & Graifman; Abraham, Fruchter & Twersky; and Mark Levine of Pelham, N.Y. Allergan is represented by Becker LLC and Duane Morris.

The case is In re Allergan ERISA Litig., 3d Cir., No. 18-2729, No. 18-2729 9/18/20.