A recent Law 360 story by Katryna Perera, “Impax Investor Atty Score $9.9M Fees in Price-Fixing Suit” reports that a California federal judge on Friday granted $9.9 million in attorney fees and gave final approval to a $33 million settlement that resolves claims that generic-drug maker Impax Laboratories Inc. failed to disclose a federal investigation over possibly collusive market activity.
U.S. District Judge Haywood S. Gilliam Jr. issued an order saying that he found the settlement reasonable in light of the continued litigation risks, including a pending dismissal motion by the defendants for lack of subject-matter jurisdiction.
The settlement fund represents approximately 12.5% of the estimated damages recoverable at trial, according to the order, which Judge Gilliam said was in line with other securities class action settlements.
The judge also granted a request by class counsel for $9.9 million in attorney fees and approximately $176,000 in litigation expense reimbursement, saying that the plaintiffs' attorneys litigated the case "skillfully and professionally" and achieved significant results for the class.
"In addition to litigating multiple rounds of motions before the court, plaintiffs' counsel successfully appealed a dismissal of the entire case with prejudice," the judge said. "And plaintiffs' counsel assumed substantial risk and invested substantial time in litigating a complex securities fraud case on a contingency-fee basis and incurring costs without the guarantee of payment for its efforts."
Judge Gilliam also noted that no class member objected to the settlement, which weighs in favor of final approval and granting the requested attorney fees.
In addition to the attorney fees, class counsel had requested service awards of $9,462 for the lead plaintiff and $1,176 for the class representative, according to the order.
Judge Gilliam approved both awards, saying that the lead plaintiff and class representative — New York Hotel Trades Council and Sheet Metal Workers' Fund, respectively — added significant value to the case.
According to the order, the $33 million settlement will be distributed to class members on a pro rata basis based on the size of the members' claims. The settlement class includes all individuals who purchased or acquired Imax common stock or 2% convertible senior notes from Feb. 20, 2014, until Aug. 9, 2016.
Judge Gilliam's order said that following the initial distribution of claims and after the payment of fees and expenses, a second distribution will occur if there are remaining funds and if it is determined that another distribution will be cost-effective.
According to the order, the redistribution process will repeat until it is no longer cost-effective. If, at that point, there are remaining funds, they will be contributed to the Investor Protection Trust, a nonprofit that educates and protects investors.
The New York pension fund leading the putative class action filed a 180-page amended complaint in April 2017, arguing that Impax executives were pressured to resort to fraud after posting a loss in the third quarter of 2013.
Their solution was to suddenly and dramatically raise drug prices in unison with competitors, according to the complaint. Nothing, other than fraud, explained the price hike, as there were no shortages, increased demand, or production problems, investors said.
The company also knew that competition had cut into its market share but failed to disclose that fact to investors, the complaint alleges.
The investors had argued that they were paying artificially inflated prices for their stock because the company failed to disclose that it was the subject of a criminal U.S. Department of Justice investigation probing higher prices in the generic drug market.
Judge Gilliam dismissed the suit in September 2018 and said that the complaint merely alleged that the company's senior officials must have known or controlled the price-fixing scheme as a result of their role in the company but not that they actually did.
Although investors alleged that the company hid bad revenue reports and market shares of diclofenac, a painkiller and the company's largest product by revenue in 2015, and budesonide, used to treat bowel conditions, Judge Gilliam said the statements instead represented a "compromise" between fact and optimistic projections.
Judge Gilliam dismissed the suit again in August 2019, finding the shareholders failed to remedy the issues that got their complaint tossed the first time around.
The investors then appealed the decision, and in January 2021, the Ninth Circuit partially revived the lawsuit. After further proceedings, the parties eventually reached the deal at hand in June 2021 by way of a mediator's proposal.