$60 Million Recovered for Hospira Shareholders
Robbins Geller, together with its co-lead counsel, reached a $60 million settlement to resolve claims brought on behalf of shareholders against Hospira, Inc. and several of its executives. Hospira is a global specialty pharmaceutical and medication delivery company. The securities fraud class action arose from a series of false and misleading statements made by Hospira and its executives about the manner in which Hospira was addressing ongoing issues raised by the U.S. Food and Drug Administration (“FDA”) and the supposed success of Hospira’s ongoing cost-cutting initiatives.
In early 2010, Hospira hyped its Project Fuel campaign, which was designed to optimize its operations and increase shareholder value by improving Hospira’s margins, fueling growth, and improving operational and manufacturing efficiency. As alleged in the complaint, defendants omitted and/or misrepresented that Hospira was beset by myriad manufacturing deficiencies and a host of design failures. As a result, it received warning letters from the FDA and faced an abnormal level of regulatory scrutiny that substantially threatened its current and future financial results and business prospects.
The Project Fuel “savings” (from gutting quality and kicking the can down the road on necessary remediation) were proven illusory, which Hospira and its executives acknowledged in the fall of 2011. They also informed shareholders that the cost to remediate Hospira’s largest manufacturing plant in North Carolina would be an astonishing $375 million and, worse yet, the remediation would force a production slowdown, causing them to miss financial guidance. Defendants finally admitted that, rather than working in harmony, Project Fuel was “competing with” the required remediation of the quality issues that had led to increased FDA scrutiny in the first place. Shocked by these revelations, Hospira’s stock price tumbled by 34%, and shareholders suffered millions of dollars in losses.
On February 13, 2013, the Honorable Amy J. St. Eve largely denied the motion to dismiss filed by the defendants. Having cleared that procedural hurdle, Robbins Geller and its co-lead counsel aggressively pursued discovery to obtain evidence that they intended to use against the defendants at trial. Plaintiffs, including Robbins Geller clients Heavy & General Laborers’ Locals 472 & 172 Pension & Annuity Funds and the Roofers Local No. 149 Pension Fund, also filed a motion for class certification.
The parties agreed to participate in a mediation that culminated in the settlement just months before the completion of fact discovery. On March 31, 2014, Judge St. Eve preliminarily approved the settlement and ordered that notice be sent to the class. Judge St. Eve will consider final approval of the settlement at a hearing scheduled for August 5, 2014.
Robbins Geller attorneys Jack Reise, James E. Barz and Stephen R. Astley prosecuted the action on behalf of the plaintiffs.
City of Sterling Heights General Employees’ Retirement System v. Hospira, Inc. et al., No. 1:11-cv-08332 (N.D. Ill.).
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