In re Baxter International, Inc. Securities Litigation

Court: United States District Court for the Northern District of Illinois
Case Number: 19-cv-7786
Class Period: 02/21/2019 - 10/23/2019
Case Leaders: James A. Harrod, Adam Hollander
Case Team: Alexander T. Payne

This is a securities fraud class action on behalf of a class of persons and entities who purchased common stock of Baxter International, Inc. (“Baxter” or the “Company”) from February 21, 2019 through October 23, 2019, inclusive.

Lead Plaintiffs Have Settled the Action for $16 Million

The Court-appointed Lead Plaintiffs, Louisiana Municipal Police Employees’ Retirement System and Varma Mutual Pension Insurance Company (“Lead Plaintiffs”), on behalf of themselves and the Settlement Class, have reached a settlement of the Action for $16,000,000 in cash that resolves the Action (the “Settlement”).

On August 10, 2021, the Court held a hearing to consider final approval of the Settlement and related matters.  On August 13, 2021, the Court entered a final Judgment approving the Settlement, an Order approving the Plan of Allocation for the proceeds of the Settlement, and an Order awarding attorney's fees and litigation expenses to Lead Counsel.

If you are a member of the Settlement Class, your rights will be affected and you may be eligible for a payment from the Settlement.  The Settlement Class consists of:

All persons and entities who purchased or otherwise acquired Baxter common stock during the period from February 21, 2019 through October 23, 2019, inclusive, and were damaged thereby.

Certain persons and entities are excluded from the Settlement Class by definition (see paragraph 22 of the Notice) or by request.

Please read the Notice to fully understand your rights and options.  Copies of the Notice and Claim Form can be found on the Case Documents page.  You may also visit the Settlement website, BaxterSecuritiesLitigation.com, for more information about the Settlement. 

If you are a member of the Settlement Class, you must submit a Claim Form online or postmarked (if mailed) no later than September 16, 2021 to be eligible to receive a payment under the Settlement.

Payments to eligible claimants will be made only after any appeals are resolved, and after the completion of all claims processing.  Please be patient, as this process will take some time to complete.

IMPORTANT DATES AND DEADLINES

September 16, 2021

Claim Filing Deadline. Claim Forms must be postmarked no later than September 16, 2021 to be eligible for a payment from the Settlement.


The Litigation

On January 31, 2020, the Honorable Sara L. Ellis appointed Louisiana Municipal Police Employees Retirement System as co-Lead Plaintiff and BLB&G as co-Lead Counsel for the Class. Lead Plaintiffs filed a Class Action Complaint on June 25, 2020.  Defendants moved to dismiss the Class Action Complaint on August 24, 2020, and Lead Plaintiffs submitted an Opposition to this motion on October 8, 2020.  On January 12, 2021, Judge Ellis granted Defendants’ motion to dismiss and granted leave to file an amended Class Action Complaint to cure the pleading deficiencies.  The deadline for Lead Plaintiffs to file the amendment  was set by the Court for February 26, 2021. 

Both before and after the Court’s order dismissing the Complaint, the parties discussed mediating the action.  On February 17, 2021, the parties held a mediation session before Greg Lindstrom of Phillips ADR.  The mediation was successful, and at the conclusion of the mediation session, the parties agreed to settle the claims alleged in this action for $16,000,000.  The parties further agreed that Defendants would produce certain relevant documents for Lead Plaintiffs to review, and produce a witness with knowledge of the underlying facts giving rise to the action for Lead Plaintiffs to interview, in order to confirm the fairness of the settlement.  On April 1, 2021, the parties executed a stipulation of settlement, and Lead Plaintiffs filed a motion for preliminary approval of the settlement and to send notice of the settlement to members of the settlement class. On April 20, 2021, the Court entered a Minute Order approving Lead Plaintiffs’ motion for preliminary approval of the Settlement and scheduling a final Settlement Hearing for August 10, 2021.

Following the final approval hearing, on August 13, 2021, the Court entered a final Judgment approving the Settlement, an Order approving the Plan of Allocation for the proceeds of the Settlement, and an Order awarding attorney's fees and litigation expenses to Lead Counsel.

Background

Baxter, a Delaware corporation headquartered in Deerfield, Illinois, provides a broad portfolio of essential healthcare products, including acute and chronic dialysis therapies, sterile intravenous (IV) solutions, infusion systems and devices, parenteral nutrition therapies, inhaled anesthetics, generic injectable pharmaceuticals, and surgical hemostat and sealant products. The Complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts, about the Company’s business and operations.

Specifically Lead Plaintiffs allege that, Defendants misrepresented and/or failed to disclose that: (1) the Company entered certain intra-Company transactions solely for the purpose of generating foreign exchange gains or avoiding foreign exchange losses after the related exchange rates were already known; (2) the Company used a foreign exchange rate convention for the measurement and subsequent remeasurement of foreign exchange transactions and foreign currency denominated money assets that was not in accordance with U.S. Generally Accepted Accounting Principles; (3) the Company lacked effective internal control over financial reporting; (4) as a result, the Company’s financial statements were misstated and would likely require correction or amendment; (5) due to the Company’s internal investigation, Baxter would not be able to file its quarterly report for the period ending September 30, 2019, with the SEC on Form 10-Q in a timely manner; and (6) as a result of the foregoing, Defendants’ statements about the Company’s business and operations lacked a reasonable basis.

Investors began to learn the truth of Baxter’s alleged misleading statements about its accounting of foreign exchange transactions on October 24, 2019 when the Company disclosed that it was commencing an internal investigation into “certain intra-Company transactions undertaken for the purpose of generating foreign exchange gains or losses.” The Company also notified investors that it would not be filing its Form 10-Q for the quarter ending September 30, 2019 on time. On the same day as this announcement, the market price of Baxter common stock fell sharply by over 10%.

On February 13, 2020, Baxter filed a Form 8-K with the SEC apprising the market of the results of its internal investigation into its accounting practices. As a result of the investigation, Baxter admitted, “[t]he Company previously had applied a longstanding convention for the initial measurement of foreign exchange transactions and the subsequent remeasurement of foreign currency denominated monetary assets and liabilities that was not consistent with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Beginning years after the adoption of that convention, certain intra-Company transactions were undertaken, after the related exchange rates were already known, solely for the purpose of generating non-operating foreign exchange gains or avoiding foreign exchange losses.”

Further, in the February 13, 2020 Form 8-K, Baxter disclosed that in consultation with its independent auditor, PricewaterhouseCoopers LLP, the Company determined that the Company’s consolidated financial statements should not be relied upon “because of misstatements to the Company’s previously reported foreign exchange gains and losses” for the statements as of December 31, 2018 and 2017, for the years ended December 31, 2018, 2017 and 2016, as of and for the interim periods within the years ended December 31, 2018 and 2017 and the interim periods ended June 30 and March 31, 2019.  

On March 17, 2020, Baxter filed an amended Form 10-Q for the period ending September 30, 2019 and an amended Form 10-K for the fiscal year ending December 31, 2019 which restated its previously issued consolidated financial statements. In these filings, Baxter disclosed “[u]nder our historical exchange rate convention, all foreign currency transactions in a given month were initially measured using exchange rates from a specified date near the middle of the previous month. Additionally, all foreign currency denominated monetary assets and liabilities were subsequently remeasured at the end of each month using exchange rates from a specified date near the middle of the then current month.” As Baxter acknowledged, this convention did not comply with U.S. GAAP. The Company reiterated its finding that “[b]eginning years after the adoption of our historical exchange rate convention, certain intra-company transactions were undertaken, after the related exchange rates were already known, solely for the purpose of generating non-operating foreign exchange gains or avoiding foreign exchange losses.” The amended Form 10-K also disclosed that, as a result of the wrongful practices, income was “overstated by $59 million and $113 million, respectively, for the years ended December 31, 2018 and 2017.”