Professional Documents
Culture Documents
Before
Howard, Chief Judge,
Souter, Associate Justice,*
Lipez, Circuit Judge.
filed
suit
officers
(together
against
"ARIAD"),
the
company
alleging
and
four
securities
corporate
fraud
in
underwriters
offering
of
common
involved
stock.
in
The
the
company's
district
court
January
stopped
2013
the
Mass. 2015).
We
the
district
court's
dismissal
of
the
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I.
Facts
ARIAD
As with any
Biogen IDEC Inc., 537 F.3d 35, 39 (1st Cir. 2008) (discussing
typical three-phase trial structure).
ARIAD
"Iclusig."
markets
and
sells
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ponatinib
under
the
moniker
who
treatments.
are
resistant
to
or
intolerant
of
other
TKI
to screen subjects for its third clinical trial, "EPIC," which was
designed to compare ponatinib directly against the leading CML
drug on the market, Gleevec.
In July 2012, ARIAD began the process of submitting a
rolling application to the FDA for limited approval to market
ponatinib.
The Center
for Drug Evaluation and Research ("CDER"), located within the FDA,
subsequently analyzed the data and issued a series of reports of
its own (collectively the "CDER Report").
By October 2012, ARIAD and the FDA began corresponding
in earnest about potential approval of ponatinib for limited
applications.
label.
concerns
The
about
reductions.
however,
adverse
rejected
ARIAD's
cardiovascular
proposal,
events
and
citing
dosage
forth, ARIAD announced that the FDA had approved the marketing of
ponatinib on a limited basis.
- 5 -
But more
of
ponatinib
due
to
increased
instances
of
medical
Finally, on
lawsuit followed.
II.
Procedural History
found
that
misrepresentations
the
complaint
sufficiently
or
omissions
about
alleged
ponatinib,
but
material
that
it
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For the Securities Act claims, the district court held that the
complaint did not plausibly allege any material misrepresentations
or omissions in relation to ARIAD's January 2013 common stock
offering.
We review the grant of a motion to dismiss for failure
to state claim de novo.2
By contrast, we
need
conclusions
not
credit
characterizations."
the
plaintiffs'
"legal
or
Id.
III. Exchange Act Claims
Tellabs
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007)
(alteration in original) (quoting 15 U.S.C. 78j(b)).
The SEC
17 C.F.R. 240.10b-5.
To
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state a claim under Section 10(b) and Rule 10b-5, a plaintiff must
plead the following elements:
(1st Cir. 2008) (citing Dura Pharm., Inc. v. Broudo, 544 U.S. 336,
341-42 (2005)).
The only two elements implicated by this appeal are the
existence
of
material
misrepresentation
and
scienter.
This
Basic Inc.
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embracing
intent
to
deceive,
manipulate,
or
defraud."
The plaintiffs
correctly point out that scienter also encompasses "a high degree
of recklessness."
But, in this
Id. (citation
omitted).
At the pleading stage, the PSLRA requires plaintiffs to
"state with particularity facts giving rise to a strong inference
that
the
defendant
acted
with"
scienter.
15
U.S.C.
78u-
the
statements
claimed
to
be
misleading,
the
defendant
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Bos. Sci.,
Id. at 32.
categories in turn below, and, with the exception of one preapproval statement, we agree with the district court that the
complaint fails to give rise to the required strong inference of
scienter.
Pre-Approval
The first alleged misstatement identified during the
the
rates
thrombocytopenia,
of
dry
some
adverse
skin,
events,
abdominal
pain,
It went on to
including
headache,
rash,
and
explain "why the statement [wa]s misleading," 15 U.S.C. 78u4(b)(1), by referencing the CDER Report based on data collected
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impermissibly
seek
to
establish
fraud
by
Rather,
hindsight,
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pre-approval
period,
it
stands
for
the
unremarkable
The paragraph is
Chief
Medical
Officer,
told
investors,
"we
haven't
pattern:
statement
was
purportedly
misleading
dose
interruption
or
dose
reduction.
Subsequent
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to
conceding
as
much
by
that
the
defendants
the
analysis
could
be
different
for
time
periods after that date if the defendants were familiar with the
data that ARIAD provided to the FDA.
no such allegation.
that
Haluska
"participated
in
the
creation"
of
ARIAD's
July
A follow-up meeting
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others.
allegations
are
sufficient
to
support
strong
- 14 -
signals."
597, 610 (4th Cir. 2015) (finding "a strong inference that the
defendants either knowingly or recklessly misled investors by
failing to disclose critical information received from the FDA .
. . , while releasing less damaging information that they knew was
incomplete").
rate
of
serious
cardiovascular
events,
it
was
knowingly
or
facts
suggesting
the
statements
were
inaccurate
or
fails
to
develop
any
argument
that
these
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Post-Approval
The plaintiffs' post-approval allegations rely on the
ARIAD
disclosed
to
investors
the
8%
rate
of
serious
warning.
subsequent
The
complaint
statements
about
nonetheless
ponatinib
that
identifies
were
various
purportedly
events
after
the
July
2012
cut-off
date.
More
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fails to indicate when the adverse events occurred, let alone when
the defendants became aware of them, it fails to create a strong
inference of scienter.
Nor do the plaintiffs' allegations of access to postapproval data get them over the PSLRA's pleading hurdle.
To be
sure, these allegations are more extensive and detailed than their
pre-approval counterparts. But the plaintiffs still fail to allege
specifically when the defendants became aware of any adverse
events.
Inc., 759 F.3d 1051, 1063 (9th Cir. 2014) (affirming dismissal
despite alleged access to undisclosed data absent "allegations
linking specific reports and their contents to the executives").
And, more fundamentally, the defendants self-evidently could not
have been aware of adverse events that had not yet occurred.
The
This
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C.
Insider Trading
The plaintiffs seek to bolster their fraud claims with
As an
approval
May
trades
respectively.
on
2,
August
15,
and
October
1,
2012,
sales more than a month and a half before the October 5 high-point
of ARIAD's share price.
Id. at 206.
Fitzgerald, the
defendant who traded closest to that date, was ARIAD's CFO and the
least likely of the three to have been privy to material nonpublic information about the clinical trials.
Moreover, the
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post-approval
trades,
by
definition,
occurred
after
the
December 14, 2012 disclosure of the black box warning and the
corresponding
decline
in
share
price.
Additionally,
Berger,
these
alleged
insider
sales
are
insufficient
to
11
advances
this
goal
by
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creating
virtually
strict
15 U.S.C. 77k(a).
Id.
Union
Local
No.
12
Pension
Fund
v.
Nomura
Asset
Acceptance Corp., 632 F.3d 762, 768 n.5 (1st Cir. 2011) (citation
omitted).
Rather,
Id.
(citing
cases);
see
also,
e.g.,
Krim
v.
pcOrder.com, Inc., 402 F.3d 489, 495-96 & n.28 (5th Cir. 2005)
(citing cases).
offering
documents
for
"trust
certificates
representing
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This
"statutory
standing"7
inquiry
becomes
more
plaintiff must prove that [his or] her shares were issued under
the allegedly false or misleading registration statement, rather
than some other registration statement."
1106.
at
the
pleading
stage.
The
plaintiffs
cite
cases
for
the
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This
at
681
(holding
that
"conclusory"
parrot
the
relevant
allegations
are
"not
legal
standard
are
disregarded."
Manning v. Bos. Med. Ctr. Corp., 725 F.3d 34, 43 (1st Cir. 2013).
Moreover, "[w]here a complaint pleads facts that are 'merely
consistent with' a defendant's liability, it 'stops short of the
line
between
relief."'"
possibility
and
plausibility
of
"entitlement
to
557).
We find this binding precedent difficult to square with
the
plaintiffs'
contention
that
general
allegations
of
See,
e.g., Nomura, 632 F.3d at 768 n.5; Century, 729 F.3d at 1106.
And,
at 555.
squarely
addressed
this
issue
and
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hold
that
such
general
See
Century, 729 F.3d at 1107; see also Yates v. Mun. Mortg. & Equity,
LLC, 744 F.3d 874, 901 (4th Cir. 2014) (reaching same result under
the analogous, though not identical, Section 12(a)(2)).
The question now becomes whether the complaint sets
forth
sufficient
facts
to
plausibly
suggest
that
the
shares
they
"purchased
offering itself."
their
shares
directly
in
the
secondary
Id.
F.3d
at
900
n.13
(noting
price
difference).
See Yates,
In
these
2013
offering.
Indeed,
the
"'obvious
alternative
explanation' is that they could instead have come from the pool of
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the
foregoing
Conclusion
reasons
we
REVERSE
the
district
Similarly,
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