Lundin Law PC and six other US-based legal firms announce class action suits for misrepresentations
Los-Angeles-based law firm Lundin Law PC, along with six other US-based legal firms, has announced possible class action suits against Indian pharma major Dr Reddy’s Laboratories and investigating claims of misrepresentations of possible violations of federal securities laws. Following this, shares of Dr Reddy’s slumped by 7% to R3,138 during the day before staging a sharp recovery, to close at R3,286.80 on the BSE down 2.63%.
On November 6, DRL shares fell 15%, the most in 11 years, after the company said it had received a warning letter from the US Food and Drug Administration (FDA) over inadequate quality control procedures at three manufacturing plants in India. DRL then saw a fall of R13,900 crore (-19%) in market capitalisation, since October 20 when the stock touched a 52-week high. At its day’s low (R3,140) on Thursday, the stock showed a R20,000-crore erosion in market capitalisation but slowly recovered after the company denied the allegations.
Lundin Law PC, which specialises in securities litigations, is investigating claims against Dr Reddy’s Laboratories for possible violations of federal security laws in the US. “The investigation is related to allegations that certain statements issued by Dr Reddy’s were false and misleading concerning the company’s financial performance,” Los Angeles-based Lundin Law said in a statement. A class action lawsuit involves one or several persons suing a company on behalf of a larger group of persons.
However, Dr Reddy’s spokesperson said that it has always adhered to all disclosure requirements both of the SECs and Indian stock exchanges including IFRS and Indian accounting standards. On November 6, 2015, Dr Reddy’s disclosed that the company received a ‘warning letter’ from the US Food and Drug Administration (USFDA) over inadequate quality controls at three manufacturing plants producing drugs for cancer and other diseases and that it was undertaking an initiative to revamp the company’s quality controls.
Besides Lundin Law, there were few other law companies in the US accusing the company over false claims over financials. The other US-based global law firms including Goldberg Law PC, Rosen Law Firm, Kahn Swick & Foti, LLC, Khang and Khang LLP, Howard G Smith, Glancy Prongay & Murray LLP have also announced investigating claims of potential misrepresentations by Dr Reddy’s Laboratories of possible violations of federal securities laws.
“These are private law firms and not government law firms and warning letter has nothing to do with financials of the
company. Besides, the law firms have also not specified the nature of law suit either,” say analysts.