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From Securities Regulation Daily, September 20, 2016

$486M settlement approved in decade-long Celebrex suit

By John M. Jascob, J.D., LL.M.

A federal court in Manhattan has preliminarily approved a $486 million settlement to end more than 11 years of litigation against Pfizer, Inc. for alleged misrepresentations concerning the company’s anti-inflammatory drugs, Celebrex and Bextra. Judge Laura Taylor Swain of the Southern District of New York signed off on the settlement, which represents one of the largest securities class action recoveries against a pharmaceutical company in the history of the Exchange Act (In re Pfizer Inc. Securities Litigation, September 14, 2016, Swain, L.).

Dismissal and resurrection. The plaintiffs argued that the settlement represents a significant recovery for the class—especially since they were able to obtain the settlement only after resurrecting their case on appeal. The plaintiffs had filed their suit against Pfizer in 2004, claiming that the company and certain officers and directors had violated the anti-fraud provisions of the Exchange Act by misrepresenting the cardiovascular risks associated with Celebrex and Bextra.

Although the district court granted summary judgment for Pfizer, the Second Circuit reversed, holding that testimony by the plaintiffs’ expert Daniel Fischel concerning loss causation and damages should not have been entirely excluded on the grounds that Fischel failed to disaggregate the impact of Pfizer’s misrepresentations from those of two other companies. In addition, Fischel’s failure to account for his methodology in making offsetting adjustments for two disclosure events previously excluded by the court did not render the remainder of his testimony unreliable, the Second Circuit ruled.

Although their damages expert estimated the likely recoverable damages in the case to be $5.37 billion, the plaintiffs noted that the estimate did not take into account any of Pfizer’s arguments regarding disaggregation, loss causation, scienter, damages or proportionate fault. In addition, for the years 2006-2015, median securities class action settlements as a percentage of estimated damages were only 0.8 percent to 1 percent for cases with estimated damages of over $5 billion. Accordingly, the plaintiffs argued that an immediate and certain cash payment of $486 million represented a significant recovery.

The final approval hearing has been scheduled for December 21.

The case is No. 04-cv-09866.

Attorneys: Brenda F. Szydlo (Grant & Eisenhofer P.A.) for Teachers' Retirement System of Louisiana. George S. Wang (Simpson Thacher & Bartlett LLP) and Gregory Arthur Markel (Cadwalader, Wickersham & Taft LLP) for Pfizer, Inc.

Companies: Teachers' Retirement System of Louisiana; Pfizer, Inc.

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