Lord Abbett Investment Trust – Lord Abbett Short Duration Income Fund v. Valeant Pharmaceuticals International, Inc.

On August 23, 2017, Labaton Sucharow filed a lawsuit on behalf of a group of plaintiffs consisting of investment vehicles affiliated with Lord, Abbett & Co. LLC (Lord Abbett) against Valeant Pharmaceuticals International, Inc. (Valeant), certain of Valeant’s current and former senior executives, and Valeant’s external auditor, PricewaterhouseCoopers (collectively, the defendants), in connection with alleged fraudulent activity. The action generally alleges a massive, fraudulent scheme perpetrated by the defendants to artificially inflate the price of Valeant’s securities through a covert pharmacy network, deceptive pricing and reimbursement, and improper accounting.

The plaintiffs allege violations of the federal securities laws, as well as claims under New Jersey state law. More specifically, they assert: 1) claims for violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934, 2) claims for violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act, 3) common law fraud/fraudulent inducement claims, and 4) common law negligent misrepresentations claims.  

As the plaintiffs’ complaint alleges in greater detail, pharmaceutical and medical device manufacturer giant Valeant implemented a growth by acquisition model through which it acquired from other companies already established “orphan drugs” that treat rare medical conditions and have little to no generic competition, massively increased the prices of those products, and drove sales of its products through deceptive and improper practices.

The plaintiffs allege that the defendants falsely represented to investors that Valeant’s dramatic growth in revenue and profitability was the result of the company’s marketing, sales teams, and leadership. The defendants’ alleged misrepresentations inflated the price of the debt securities in which the plaintiffs invested. Unbeknownst to investors, Valeant’s revenue growth allegedly relied on a secret network of controlled pharmacies and deceptive business practices implemented to facilitate Valeant’s extreme price hikes and shield Valeant’s products from generic competition.

When the truth was revealed through a series of disclosures that first began in late September and early October 2015, the value of Valeant securities was punished, plummeting over 90 percent, and the plaintiffs were severely harmed as a result.  

The plaintiff Lord Abbett Funds are: Lord Abbett Investment Trust – Lord Abbett Short Duration Income Fund; Lord Abbett Bond-Debenture Fund, Inc.; Lord Abbett Investment Trust – Lord Abbett High Yield Fund; Lord Abbett Series Fund – Bond Debenture Portfolio; Lord Abbett Investment Trust – Lord Abbett Inflation Focused Fund; Lord Abbett Investment Trust – Total Return Fund; Lord Abbett Investment Trust – Lord Abbett Income Fund; Lord Abbett Passport Portfolios plc – Lord Abbett Short Duration Income Fund; Lord Abbett Passport Portfolios plc – Lord Abbett High Yield Fund; Lord Abbett Series Fund, Inc. Total Return Portfolio; Lord Abbett Passport Portfolios plc – Lord Abbett Multi Sector Income Fund; Lord Abbett Short Duration Credit Trust; Lord Abbett Series Fund, Inc. – Short Duration Income Portfolio; Lord Abbett Passport Portfolios plc – Lord Abbett Strategic Income Fund; and, Lord Abbett Passport Portfolios plc – Lord Abbett Total Return Fund.

The action is Lord Abbett Investment Trust – Lord Abbett Short Duration Income Fund v. Valeant Pharmaceuticals International, Inc., No. 17-cv-06365 (D.N.J.). Labaton Sucharow represents the plaintiff Lord, Abbett & Co. LLC in this direct action. The defendants are Valeant Pharmaceuticals International, Inc., certain of Valeant’s current and former senior executives, and Valeant’s external auditor, PricewaterhouseCoopers.