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Engineers union files class action against Impax Laboratories

By Legal News Line | Nov 19, 2014

SAN FRANCISCO (Legal Newsline) - A local chapter of an engineers union has filed a verified shareholder derivative complaint for breach of fiduciary duty against Impax Laboratories Inc., its board of directors and current and former members of its executive team.

The Connecticut-based International Union of Operating Engineers Local 478 represents heavy equipment operators, mechanics and support personnel. It has been an Impax shareholder since September 2012 for its pension plan and annuity fund.

Its lawsuit was filed in U.S. District Court for the Northern District of California, claiming officials of the pharmaceutical drug manufacturer made false and misleading statements regarding quality control matters at the company’s production facilities in Hayward, Calif., and Taiwan.

Named in the lawsuit are Impax Board of Directors members Larry Hsu, Leslie Benet, Robert Burr, Allen Chao, Nigel Fleming, Michael Markbreiter, Mary Pendergast and Peter Terreri; Impax President and CEO G. Frederick Wilkinson; former CFO Arthur Koch; current CFO Bryan Reasons; and Division President Michael Nestor.

Impax was issued a “Form 483” from the Food and Drug Administration each year since 2009 indicating serious manufacturing issues at its Hayward facility and a warning letter in 2011 that documented significant, recurring problems, the complaint says.

The lawsuit claims Impax senior management knew of the problems and the consequences of continued violations, but “allowed those violations to fester” while assuring shareholders that the company was addressing the issues.

Because of the recurring violations, Impax announced in January 2013 that the FDA did not approve a new drug application for the manufacturing of Rytary, an extended release capsule for the treatment of Parkinson’s disease. As a result, commercial partner GlaxoSmithKline withdrew from an agreement with Impax to develop and commercialize Rytary globally, the complaint says.

Impax settled a federal securities class action case in 2013, the complaint says.

Still, the IUOC Local 478 court filings claim Impax did not take adequate corrective actions. As a result, in July, the FDA issued a Form 483 for violations at the company’s manufacturing facility in Taiwan, where it planned to manufacture Rytary, the complaint says.

“Impax has suffered and continues to suffer substantial harm directly flowing from defendants’ breaches of fiduciary duty, which this action seeks to redress,” the lawsuit said.

The union is represented by attorneys in Bernstein Litowitz Berger & Grossman's San Diego office, with Brett Middleton signing the complaint. Frank R. Schirripa of Hach Rose Schirripa & Cheverie in New York is also representing the union.

U.S. District Court for the Northern District of California case number 3:14-cv-04980.

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