The Dr. Reddy's matter was a Securities Fraud Class Action under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, in which the central economic issues were Price Impact and Price Maintenance. Dr. Reddy's Laboratories Limited (“Dr. Reddy's” or the “Company”)—a pharmaceutical manufacturer whose American Depositary Shares (“ADS”) traded on the New York Stock Exchange—was alleged to have made materially false and misleading statements concerning current-good-manufacturing-practice deficiencies that the U.S. Food and Drug Administration identified at three of its manufacturing facilities, the significance of a subsequent FDA warning letter, and the progress of the Company's remediation efforts and production. Lead Plaintiff, the Public Employees' Retirement System of Mississippi, brought claims on behalf of purchasers of Dr. Reddy's ADS during a class period from November 6, 2015 through September 15, 2017.
Following a dismissal order that eliminated most of the originally alleged misstatements, the surviving claims concerned five alleged misstatements made on three dates. At class certification, the Lead Plaintiff's expert supported the fraud-on-the-market presumption and proposed a framework for estimating class-wide damages, relying on the theory that the alleged misstatements had a Price Impact—either by moving the ADS price when made or by maintaining it at an artificially high level.
On behalf of the defendants, Mark E. Zmijewski—Professor Emeritus at The University of Chicago Booth School of Business—was retained to respond to the Lead Plaintiff's expert. He was supported by Keith Bockus, Erik Himan, and Pavel Nikolov. Professor Zmijewski was asked to: (i) analyze whether the alleged misstatements had any price impact on Dr. Reddy's ADS price on the three dates on which they were made; (ii) analyze whether any of the alleged misstatements maintained the ADS price at an artificially high level; and (iii) analyze whether the proposed framework of the Lead Plaintiff’s expert could reasonably estimate class-wide damages attributable to the surviving allegations.