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Laborers Local 100 and 397 Pension Fund v. Bausch & Lomb Inc.

June 5, 2006

LABORERS LOCAL 100 AND 397 PENSION FUND, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BAUSCH & LOMB INC., RONALD L. ZARELLA, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELA J. PANZARELLA, ROBERT B. STILES, KAMAL SARBADHIKARI, GEOFFREY F. IDE, AND WILLIAM H. WALTRIP, DEFENDANTS.
JAMES BRANNON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BAUSCH & LOMB INC., RONALD L. ZARELLA, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELA J. PANZARELLA, ROBERT B. STILES, KAMAL SARBADHIKARI, GEOFFREY F. IDE, AND WILLIAM H. WALTRIP, DEFENDANTS.
FRED BADARACCO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BAUSCH & LOMB INC., RONALD L. ZARELLA, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELA J. PANZARELLA, ROBERT B. STILES, KAMAL SARBADHIKARI, GEOFFREY F. IDE, AND WILLIAM H. WALTRIP, DEFENDANTS.
DIANE JOHNSON, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BAUSCH & LOMB INC., RONALD L. ZARELLA, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELA J. PANZARELLA, ROBERT B. STILES, KAMAL SARBADHIKARI, GEOFFREY F. IDE, PAUL A. FRIEDMAN, JONATHAN S. LINEN, DAVID NACHBAR, THE BAUSCH & LOMB EMPLOYEE BENEFITS ADMINISTRATION COMMITTEE, AND JOHN DOES 1-30, DEFENDANTS.
GAETANO RAINONE, DERIVATIVELY ON BEHALF OF BAUSCH & LOMB INCORPORATED, PLAINTIFFS,
v.
RONALD L. ZARELLA, WILLIAM H. WALTRIP, WILLIAM M. CARPENTER, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELINA J. PANZARELLA, ROBERT B. STILES, KAMAL K. SARBADHIKARI,GEOFFREY F. IDE, RUTH R. MCMULLIN, KENNETH L. WOLFE, LINDA JOHNSON RICE, JONATHAN S. LINEN, DOMENICO DE SOLE, BARRY W. WILSON, PAUL A. FRIEDMAN, ALAN M. BENNETT, JOHN R. PURCELL, FRANKLIN E. AGNEW, AND ALVIN W. TRIVELPIECE, DEFENDANTS.
AND BAUSCH & LOMB INCORPORATED, A NEW YORK CORPORATION, NOMINAL DEFENDANT.
PERRY BROWN, DERIVATIVELY ON BEHALF OF BAUSCH & LOMB INCORPORATED, PLAINTIFFS,
v.
RONALD L. ZARELLA, WILLIAM H. WALTRIP, WILLIAM M. CARPENTER, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, DWAIN L. HAHS, ANGELINA J. PANZARELLA, ROBERT B. STILES, KAMAL K. SARBADHIKARI,GEOFFREY F. IDE, RUTH R. MCMULLIN, KENNETH L. WOLFE, LINDA JOHNSON RICE, JONATHAN S. LINEN, DOMENICO DE SOLE, BARRY W. WILSON, PAUL A. FRIEDMAN, ALAN M. BENNETT, JOHN R. PURCELL, FRANKLIN E. AGNEW, AND ALVIN W. TRIVELPIECE, DEFENDANTS.
AND BAUSCH & LOMB INCORPORATED, A NEW YORK CORPORATION, NOMINAL DEFENDANT.
POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BAUSCH & LOMB INC., RONALD L. ZARELLA, STEPHEN C. MCCLUSKI, JOHN M. LOUGHLIN, ROBERT B. STILES, KAMAL SARBADHIKARI, AND GEOFFREY F. IDE, DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge*fn1

OPINION & ORDER

Plaintiffs in the above captioned cases filed several class action lawsuits that allege securities laws violations against Bausch & Lomb and its corporate officers (collectively "Defendants"). Lead plaintiff motions were filed by four parties in this action on May 12, 2006. Shortly thereafter, on May 15, 2006, the Defendants moved to transfer venue, pursuant to 28 U.S.C. § 1404(a), of the above-captioned cases from this Court to the United States District Court in the Western District of New York. I stayed my decision on a lead plaintiff pending the decision on this motion to transfer venue. For the reasons below, the motion to transfer venue is GRANTED.

I. BACKGROUND

Plaintiffs' allegations, are in the main, concerned with what might be characterized as misleading press releases. The flavor of these allegations, while not pivotal to this motion, is captured by the following examples.

On January 27, 2005, Bausch & Lomb (also "Company") issued a press release that announced its financial results for 2004. This press release reported an 11 percent increase in worldwide sales to $2.23 billion and full-year earnings of $2.93 per share. The press release provided in relevant part that:

We surpassed the earnings per share expectations that we established at the beginning of the year and exited 2004 with increased momentum. We are well positioned for accelerated sales growth and continued strong financial performance in 2005.

(Brannon Compl. ¶ 27). A few months later and on April 19, 2005, the Company issued another press release entitled "Bausch & Lomb Reports Solid First Quarter." The April 19, 2005 press release reported a six percent increase in total sales, which resulted in a 47 percent increase in earnings per share to $0.63, compared to $0.43 earnings per share in the first quarter of 2004. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 27; Brannon Compl. ¶ 32). The stock price hovered between $75 and $76 per share in the days following this announcement. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 34). Again on July 27, 2005, a press release entitled "Bausch & Lomb Earns 81 Cents Per Share on Seven-Percent Sales Gain Company Increases Full-Year Guidance by five Cents" surfaced that provided in relevant part that:

We were very satisfied with our second-quarter performance . . . further share gains are expected to accelerate top-line growth in the second half of 2005.

(Id. ¶ 28) On August 1, 2005, the Defendant's stock sold at $84 a share. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 34; Brannon Compl. ¶ 53).

It was only later that year that Bausch & Lomb acknowledged internal accounting errors at two of their foreign subsidiaries. Specifically, on October 26, 2005, the Company announced that in September 2005 they had begun an internal investigation of their Brazilian subsidiary. This investigation had unearthed several accounting errors. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 29, Brannon Compl. ¶ 37). As a result of these errors, the Brazilian tax authorities claimed that Bausch & Lomb owed the Brazilian government $5 million in taxes as well as $21 million in penalties. (Brannon Compl. ¶ 37). Upon release of this news, shares of Bausch & Lomb fell $2.74 per share to close at $71.36 per share. (Id. ¶ 38). However, Plaintiffs allege that the Company's press release downplayed the seriousness of the accounting errors and as a result, Bausch & Lomb shares rebounded soon thereafter and sold at around $80 a share in December 2005. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 31).

On December 22, 2005, Defendants issued a press release that informed its stockholders of the Company's need to restate financial results for 2000 through the second quarter of 2005 in order to account for the misfeasance and mistakes of its Brazilian subsidiary. (Id. ¶ 32). This press release also announced the investigation of Bausch & Lomb's Korean subsidiary for improper sales and accounting practices. In response to these revelations, Bausch & Lomb shares fell from $79.07 to $67.20. ( Id. ¶ 33). Plaintiffs further allege that throughout this period, the individual defendants' engaged in insider trading and thus, profited enormously from the artificially inflated stock price that resulted from their previous misstatements and non-disclosures. (Laborer's Local 100 & 397 Pension Fund Am. Compl. ¶ 34; Brannon Compl. ¶ 53).

In addition, the consolidated securities class action cases, Laborers Local 100 & 397 Pension Fund v. Bausch & Lomb, the related case, Police and Fire Retirement Sys. of Detroit v. Bausch & Lomb, Inc, and the ERISA case, Johnson v. Bausch & Lomb, include allegations that the Defendants concealed reports that the Company's contact lens solution, ReNu, had been associated with a high incidence of a potentially-blinding eye infection, fusarium keratitis. According to these complaints, as early as July 2005, Defendants received at least five reports of fusarium keratitis eye infections in consumers that used their product. (Johnson Am. Compl. ¶ 98).

On Feb 21, 2006 the Singapore Ministry of Health issued a press release identifying 39 cases of fusarium keratitis eye infections, 34 of which were diagnosed in ReNu users. (Johnson Am. Compl. ¶ 101). Soon thereafter, Bausch & Lomb suspended sales of ReNu in Singapore. (Id.).

Plaintiffs allege that despite the reports from Singapore, Defendants continued to market ReNu as a safe product in the United States and deny that it was a risk factor for fusarium keratitis. (Id. ¶ 102). On March 8, 2006, the Centers for Disease Control and Prevention ("CDC") launched an investigation into fusarium keratitis cases in the United States. (Id. ¶ 103). Plaintiffs claim that the Defendants continued to downplay the seriousness of these reported eye infections and did not suspend sales of ReNu in the United States until April 10, 2006. (Id. ¶ 109). Once the Company announced that this, Bausch & Lomb's stock price fell approximately $12 a share in two days and closed, on April 12, 2006, at $45.61 per share. (Id. ¶ 110).

II. PROCEDURAL HISTORY

On March 13, 2006, Laborers Local 100 and 397 Pension Fund filed the first class action lawsuit against Bausch & Lomb pursuant to the Securities Exchange Act of 1934, §§10(b) and 20(a) as well as Rule 10b-5 in the Southern District of New York ("SDNY"). The Complaint alleged that Bausch & Lomb, along with present and former officers and directors of the Company, made materially false and misleading statements when they failed to disclose problems with the Brazilian and Korean subsidiaries, and thus, artificially inflated the stock price. The Complaint was later amended on May 5, 2006 to enlarge the relevant class period to include allegations that the Defendants failed to disclose reports that one of its contact lens products, ReNu, may cause eye infections among its users.

The class was noticed pursuant to the Private Securities Litigation Reform Act ("PSLRA") and lead plaintiff motions were due on May 12, 2006. Four lead ...


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