Shareholder Class Action Alleging Lannett Company (LCI) Made Materially False and Misleading Statements Survives Motion to Dismiss, Lannett’s Motion for Reconsideration Denied
Investors filed a class action complaint against Lannett Company (LCI) for alleged violations of the Securities Exchange Act of 1934. According to the complaint, since 2013, Lannett’s business strategy has been to collusively enter into industry-wide anti-competitive agreements with other generic drug manufacturers. Regulatory investigations revealed that Lannett was involved in an industry-wide conspiracy to fix prices and allocate territories for the sale of at least 18 different generic medications. Nevertheless, Lannett insiders misled investors by stating that price increases were the result of legitimate and competitive market forces contrary to their knowledge that the market was being driven by antitrust violations. The complaint further alleges that Lannett insiders misrepresented the scope of their investigations into potential antitrust violations and the likelihood that Lannett would be implicated in the broader price-fixing prosecutions. Capitalizing on Lannett’s artificially inflated stock prices, certain executives made nearly $10 million in insider sales. As a result of its price-fixing, Lannett is now defending itself against regulatory inquiries and investigations and private lawsuits alleging securities fraud, consumer deception, and violations of state and federal antitrust laws. On May 15, 2019, U.S. District Court Judge Wendy Beetlestone denied Lannett’s motion to dismiss plaintiffs’ complaint. After this denial, Lannett filed a motion for reconsideration. The motion was denied by Judge Beetlestone on July 22, 2019, paving the way for litigation to proceed.