Opinion ID: 4566917
Heading Depth: 3
Heading Rank: 1

Heading: Plaintiffs’ ERISA Claims9

Text: The “thrust” of the plaintiffs’ allegations in Counts One and Two of the complaint is that the “[d]efendants 7 The Supreme Court elected not to reach the merits of the dispute in Jander because the parties raised new arguments that were not presented to the Second Circuit. Ret. Plans Comm. of IBM v. Jander, 140 S. Ct. 592, 594–95 (2020). Instead, the Court vacated the Second Circuit’s opinion and remanded the matter for the Second Circuit to decide in the first instance whether it wished to consider those new arguments. Id. at 595. On remand, the Second Circuit declined to consider the new arguments and reinstated its original decision. Jander v. Ret. Plans Comm. of IBM, 962 F.3d 85, 86 (2d Cir. 2020). 8 The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. 9 “We review de novo a district court’s grant of a 9 [imprudently and disloyally] allowed the investment of the Plans’ assets in Allergan Stock throughout the Class Period despite the fact that [d]efendants knew or should have known that that investment was imprudent[.]” (App. 25.) According to the plaintiffs, Allergan stock was a poor investment during the Class Period because “Allergan and several of its pharmaceutical industry peers colluded to fix generic-drug prices in violation of federal antitrust laws, creating excess revenues as a result of anticompetitive behaviors and putting Allergan at risk of criminal prosecution and civil and criminal penalties[.]” (App. 71.) Moreover, the plaintiffs say, “[the d]efendants, as Allergan insiders, knew or should have known that the Company was conspiring to raise its profits in violation motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n.1 (3d Cir. 2014) (citation omitted). In conducting such a review, “[w]e take as true all the factual allegations of the … Complaint and the reasonable inferences that can be drawn from them, but we disregard legal conclusions and recitals of the elements of a cause of action, supported by mere conclusory statements. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010) (internal quotation marks and citations omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (internal quotation marks and citation omitted). “[W]e may affirm a judgment of a lower court for any reason supported by the record ….” In re Ross, 858 F.3d 779, 786 (3d Cir. 2017) (citation omitted). 10 of antitrust laws.” (App. 74.) Thus, the threshold issue in analyzing the ERISA claims here is whether the plaintiffs have plausibly alleged any facts to back up their assertion that Allergan participated in an unlawful price-fixing conspiracy. Absent such allegations, there was nothing that the defendants knew or should have known that ought to have prompted them to protect the putative class from acquiring Allergan stock. As the District Court correctly held, the plaintiffs’ complaint is deficient at this initial step. The factual allegations that supposedly demonstrate that Allergan was involved in such a conspiracy are scant and can be summarized as follows: (i) the market for generic drugs is highly competitive; (ii) the prices for several generic drugs increased markedly over a brief period of time; (iii) certain members of Congress sought to investigate the increases; (iv) in connection with that investigation, Allergan was asked to provide information about price increases for certain generic drugs it manufactures; (v) several months later, Allergan received a subpoena from the DOJ requesting information about the marketing and pricing of some of its generic products and communications with competitors regarding the same; and (vi) over a year after receiving the subpoena, the DOJ brought price-fixing charges against at least one unnamed party – but not Allergan – related to generic drugs, and the DOJ was “expected to remain active in pursuing generic-drug price fixing[.]” (App. 73.) Considered holistically, and taking all reasonable inferences in the plaintiffs’ favor, those allegations fail to support a plausible inference that Allergan conspired with other generic-drug manufacturers to fix prices. At most, the plaintiffs’ complaint can be described as alleging parallel price 11 increases among generic-drug manufacturers, including Allergan. But, despite the plaintiffs’ insistence to the contrary, the Supreme Court has been clear “that an allegation of parallel conduct and a bare assertion of conspiracy will not suffice.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). Rather, because “parallel conduct[, without more,] does not suggest conspiracy,” allegations of parallel conduct “must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Id. at 557; see also In re Chocolate Confectionary Antitrust Litig., 801 F.3d 383, 398 (3d Cir. 2015) (“[E]vidence of conscious parallelism cannot alone create a reasonable inference of a conspiracy. To move the ball across the goal line, a plaintiff must also show that certain plus factors are present. Plus factors are ‘proxies for direct evidence’ because they tend[ ] to ensure that courts punish concerted action—an actual agreement—instead of the unilateral, independent conduct of competitors.” (second alteration in original) (internal quotation marks and citations omitted)); Burtch v. Milberg Factors, Inc., 662 F.3d 212, 226 (3d Cir. 2011) (“The law is well-established that evidence of parallel conduct by alleged co-conspirators is not sufficient to show an agreement.” (internal quotation marks and citations omitted)). The plaintiffs have not placed their allegations in any such context. That Allergan received requests for information from Congress and the DOJ as part of broad investigations, requests the Company apparently complied with, does not on its own suggest the existence of an agreement among Allergan and its competitors. That is particularly so where, as here, there are no well-pled allegations either of communications or interactions among Allergan and its competitors, or even of 12 opportunities for such communications or interactions. Nor are there allegations that the information gathering exercises the Company was subjected to resulted in any charge of wrongdoing against either Allergan or any of its competitors with respect to a product that Allergan manufactures. 10 The plaintiffs have thus failed to plausibly allege Allergan’s participation in an illegal price-fixing conspiracy. Because the defendants could not have had insider information about a price-fixing conspiracy that did not exist, or at least the existence of which was not adequately pled, it follows that the plaintiffs’ ERISA claims, each of which is predicated on the defendants’ knowledge of that purported conspiracy, must fail.11 10 The complaint is devoid of any well-pled allegations that, during the approximately 28 months that passed between Allergan’s receipt of the DOJ’s subpoena and the filing of the operative complaint, Allergan was subject to any further scrutiny with respect to price-fixing, including further requests for information. 11 Although not directly dependent on the defendants’ knowledge of a price-fixing conspiracy, the plaintiffs’ duty to monitor claim is indirectly based on the defendants having that knowledge because “whether [p]laintiffs’ monitoring claim survives depends on whether their underlying breach of fiduciary duty [of prudence and loyalty] claims survive.” (Appellants’ Reply Br. at 27 n.18.) Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56, 68 (2d Cir. 2016) (“Plaintiffs cannot maintain a claim for breach of the duty to monitor ... absent an underlying breach of the duties imposed under ERISA[.]” (alteration in original) (citation omitted)). 13 The plaintiffs’ arguments to the contrary are not persuasive. First, they criticize the District Court’s holding that the allegations in the complaint “do not rise above the speculative level of misconduct.” (Appellants’ Opening Br. at 15 (quoting (App. 13)).) As they see it, they specifically alleged an “unconscionable increase in price [for a drug Allergan manufactures,]” and that increase “is well beyond speculation; it is fact.” (Appellants’ Opening Br. at 15.) But that criticism ignores the central thesis of their own allegations. The plaintiffs do not contend that an increase in generic-drug prices, even a dramatic one, is itself a legal wrong that should have prompted the defendants to prevent the putative class from acquiring Allergan stock. Rather, they theorize that the price increase in this case constituted misconduct because it was attributable to an unlawful price-fixing conspiracy. As already discussed, however, even parallel price increases among competitors, without more, do not by themselves indicate the existence of an illegal conspiracy. Accordingly, while the plaintiffs have alleged that the price for at least one drug that Allergan manufactured increased significantly, that fact does “not nudge[] their claims [of misconduct in the form of illegal price-fixing] across the line from conceivable to plausible[.]” Twombly, 550 U.S. at 570. The plaintiffs next argue that the District Court ignored their “well-pled and plausible allegations that ‘(i) Allergan and several of its pharmaceutical industry peers colluded to fix generic drug prices in violation of federal antitrust laws … putting Allergan at risk of criminal prosecution and civil and criminal penalties; [and] (ii) the DOJ investigation and the underlying conduct could result in criminal charges[.]’” (Appellants’ Opening Br. at 16 (quoting (App. 71)).) This argument fails because the allegations referred to are not well- 14 pled facts but are instead conclusions entitled to no deference. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”) The District Court did not err in refusing to credit such assertions absent supporting factual allegations. Third, the plaintiffs say that the District Court was wrong to dismiss their complaint on the basis that they had “not set forth sufficient facts to establish or even [imply] that [d]efendants engaged in collusive and/or fraudulent activity during the Class Period such that they could have insider information to that effect.” (App. 13.) According to the plaintiffs, “nothing in ERISA suggests that [p]laintiff[s] must prove that collusive or fraudulent activity occurred; ERISA indisputably does not require allegations of scienter.” (Appellants’ Opening Br. at 17.) But they again 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. 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. The plaintiffs identify no other insider information that the defendants should have acted on with respect to their administration of the Plans. Moreover, it is simply not accurate that the District Court either explicitly or implicitly analyzed the price-fixing allegations under some heightened pleading standard. The plaintiffs’ claims were not dismissed because of a failure to adequately 15 allege scienter. Rather, the claims were rejected as insufficient because the plaintiffs’ antitrust allegations fall far short of plausibly suggesting the existence of a price-fixing conspiracy to begin with, as judged under ordinary pleading standards. The District Court was correct in saying so. Finally, citing Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009), the plaintiffs contend that “[i]t could not be expected that at this stage [they] would have more information regarding what [d]efendants knew about Allergan’s concealed impropriety.” (Appellants’ Opening Br. at 18.) But this contention too misses the mark. The deficiency in the plaintiffs’ pleading was the lack of factual allegations plausibly suggesting Allergan actually engaged in any misdeeds (i.e., there was nothing for the defendants to know), not that the plaintiffs insufficiently alleged the defendants’ knowledge of the supposed misdeeds. In short, the District Court properly concluded that the plaintiffs failed to adequately allege the existence of the pricefixing conspiracy that underlies the complained-of breaches of fiduciary duty. That failure defeats each of the plaintiffs’ claims.12 12 Beyond that failure, the District Court also held that the plaintiffs failed to adequately allege that either Allergan or the Director Defendants were fiduciaries of the Plans, and dismissed all claims against them on that basis. The plaintiffs expressly state that they “do not contest” the Court’s dismissal of Allergan, (Appellants’ Opening Br. at 6 n.1,) but do not address the Director Defendants’ dismissal on that basis. By that omission, the plaintiffs have forfeited their right to challenge that aspect of the District Court’s decision on appeal. 16