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The New York law firm of Bleichmar, Fonti and Auld LLP led a class action investor lawsuit in Bridgeport against Teva Pharmaceuticals with a $420 million settlement that could affect ongoing multistate and U.S. cases accusing Teva of price-fixing. From left, Joseph Fonti, Dominic Auld and Javier Bleichmar in their Times Square office.
Taylor Hooper/Courtesy of BFALaw
The sweeping claims by 45 states and the U.S. Department of Justice into an alleged, massive price-fixing scheme by generic drug-makers, launched by the Connecticut Attorney General’s office in 2014, have gained wide notice but will likely drag on for years.
At one key point in 2019, Attorney General William Tong appeared on a CBS “60 Minutes” segment about the states’ lawsuits, holding up a bottle of his medication, which made him a victim of what he described to me this week as “the largest corporate cartel in American history.”
Barely noticed at all, oddly, was a case settled in June in U.S. District Court in Bridgeport, in which the same company accused of being the center of that alleged global fraud – Teva Pharmaceuticals – agreed to pay $420 million to investors.
The Bridgeport case, overseen by Judge Stefan R. Underhill and led by an 8-year-old New York law firm, hinged on the same accusations as the multi-state lawsuits and the same charges as a federal criminal indictment: That Teva, based in Israel, led a web of collusion causing generic drug prices to spike many times higher than their likely levels if companies had competed as the law requires.
When the settlement money fans out to the plaintiffs in a few weeks, it will amount to the second-largest investor class-action payout in Connecticut court history, and one of the largest ever in the 2nd U.S. Circuit, the federal appeals court whose jurisdiction includes New York City and of course, Wall Street.
Unlike the high-profile public consumer cases, the securities fraud case brought by investors stayed under the public’s radar. But it’s a fascinating story that played out over more than five years in Bridgeport: A recently formed law firm won the right to represent a large class of investors, risked millions of dollars in hopes of a payoff that might never come, amassed evidence parallel to the cases by the attorneys general and negotiated a settlement that helps end an ugly era of pharma profiteering.
“We didn’t have a head start. We had to basically build it from scratch,” said Joseph Fonti, the lead counsel and a partner at Bleichmar, Fonti & Auld LLC, based in Times Square.
Fonti and his colleagues didn’t have to prove collusion by Teva to win the case. Their claim was that Teva lied to its own shareholders between 2014 and 2017 by asserting that the company’s rising profits and climbing stock prices were the result of solid business fundamentals.
To get there, they showed – or rather, they were prepared to show if the case had gone to trial -- a pattern of collusion between Teva and its competitors that drove up prices of at least 12 drugs and generated profits that would never have existed otherwise.
“It required a very detailed analysis of every drug they ever made and the price history, which was not public information,” Fonti said in a recent interview along with partner Javier Bleichmar. “We had to run our own investigation, find former employees that could connect the dots.”
The Facebook connection
As it happens, Bleichmar, Fonti & Auld is also co-lead counsel in a federal case in California against Facebook, accusing the social media giant of failing to protect users’ data in the scandal over Cambridge Analytica, the firm used by then-candidate Donald Trump in his 2016 campaign for president. That case reportedly has a settlement agreement that could be announced any day now.
And in the Facebook case, as in the Teva case, the private lawsuit is unfolding parallel to an investigation by state attorneys general – led by, you guessed it, Tong and his band of antitrust busters in Hartford.
Because the private cases have tended to end sooner – Tong hasn’t even filed a lawsuit yet in the Facebook data breach inquiry and his three Teva cases are most likely years from resolution – they are a bellwether for what might happen in the public cases. The Teva investors case represents the first significant payout in what could amount to billions of dollars industry-wide.
I figured the private and public lawyers worked together. Not true.
“We never saw the subpoenas, we never saw their evidence,” Fonti said of the public cases, although of course they did have the public records.
“From where I sit, I think it’s a limited relationship,” Tong said this week. “We’re not really bringing claims and cases in the way that private plaintiffs are…States are in the law enforcement posture.”
Tong added, “If people uncover evidence in private party litigation, that’s helpful to our case broadly.”
‘The company was on the ropes’
The price-fixing cases against Teva and 19 other generic drugmakers have no direct link to the ongoing cases holding companies accountable for the opioid abuse crisis. Teva in July reached a tentative settlement totaling $4.25 billion with a multi-state group of attorneys general, led by, you guessed it again, Tong. Connecticut's share is not yet public.
No direct link, but the crush of litigation against Teva weakened the company, perhaps leading to a faster settlement -- though for significantly less than the possible harm claimed by investors of as much as $10 billion. Teva, the largest employer in Israel, saw its share prices on the New York Stock Exchange climb from under $40 in 2015 to $70 at the peak in 2015 – only to collapse after the investigations became public in late 2016.
Teva shares closed at $9.26 Wednesday, leaving the company with a value that’s still north of $10 billion – meaning investors lost billions of dollars.
“A big driver to the settlement was that the company was on the ropes financially,” Javier Bleichmar said. “If we won the $10 billion, the company would have gone bankrupt.”
Teva has admitted no wrongdoing in any of the cases and conceded no liability in the investor settlement.
77,000 hours on the job
The price-fixing investigation into Teva and the other generic drugmakers started in 2014 after a New York Times article pointed out sharp price hikes. Connecticut Attorney General George Jepsen had a 13-person antitrust unit headed by Mike Cole, who saw that story and showed it to Joe Nielsen, an attorney in that unit who’s still playing a key role in the cases.
With Jepsen’s blessing, they began the quest, a story well told in 2017 by The CT Mirror’s Mark Pazniokas.
Around the same time, Fonti and Bleichmar left their previous firms and founded their partnership with Dominic Auld.
A Bloomberg story revealed a federal criminal investigation in late 2016 -- and Bleichmar, Fonti & Auld leapt into action, representing the Ontario teachers pension fund. Other private investor lawsuits were already well underway but in July, 2017, after the combined cases had moved from California to Connecticut, Underhill awarded their firm the right to lead the class action case.
The firm, working with Carmody Torrance as its Connecticut partner, put in 77,000 hours investigating and spent $10 million on outside consultants and experts, Fonti told Underhill at the final settlement hearing.
“Judging by my experience over the last two decades, we had many ways to lose this and a very narrow path to get to victory in the form of a great result for the class, and so we think we've accomplished that,” he told the judge.
He added, “we had no shortcuts. We had no admissions. We had no whistleblower. We had no star witness, let alone a restatement [in company filings] that would admit materiality and falsity.”
Now the lawyers will realize nearly $100 million for their efforts, a sum given the nod by Christopher Droney, a former federal appeals court judge, U.S. attorney for Connecticut and West Hartford mayor.
Sheron Korpus, a lawyer for Teva from the New York firm Kasowitz Benson Torres LLP, made it clear that Teva admitted no liability – and said Teva had “superb motions” to dismiss the case. But he added, “We would rather keep our powder dry…rather than have them filed publicly.”
That’s an indication of how complex and intertwined these cases are. Underhill, who kept the case rolling through the pandemic, closed the hearing with perspective on history and the lives of the people in the room.
“I didn't think we'd ever get to this day, frankly, and that's really a credit to counsel,” the judge said. “Litigations like this can take over your lives,you know. Life doesn't stop. You know, children are born, kids go off to college, you name it, happens during these types of litigations, and that makes the handling of them more difficult but in a weird way also more memorable. And I hope this has been a memorable litigation for both of you, all of you.
"It has for me.”
And now the cases against the largest maker of generic drugs continue on an even bigger stage.
dhaar@hearstmediact.com