This morning, the Ninth Circuit Court of Appeals released its opinion in Schueneman v. Arena Pharmaceuticals, No. 14-55633, a nine-figure securities fraud class action. A unanimous Ninth Circuit panel reversed the district court’s decision dismissing the case.
This closely-watched appeal will likely set the standard for pleading securities fraud in a wide variety of cases. Here, investors lost more than $100 million after they were misled about the prospects for regulatory approval of the weight loss drug lorcaserin. Defendants had repeatedly obtained dismissal on the theory that their misleading conduct was not actionable because they legitimately disagreed with the Food & Drug Administration about the relevant carcinogenic science, and because much later the FDA approved lorcaserin.
Leading plaintiffs’ firm Kaplan Fox & Kilsheimer LLP retained Stris & Maher to brief and argue for reversal. Dana Berkowitz took the lead in drafting our opening brief and reply brief, and Peter Stris argued the case. Click here to watch video of Mr. Stris’s oral argument.
In an opinion that borrowed heavily from our briefing, the Ninth Circuit held that Defendants’ failure to disclose the FDA’s concerns about lorcaserin while they touted the likelihood of approval gave rise to a sufficient inference of scienter to survive a motion to dismiss.
Our case study:
Arena Pharmaceuticals—Ninth Circuit
Related press coverage:
9th Circuit to corporations: Once you open your mouth, you can’t lie (Reuters, October 27, 2016)
9th Circ. Revives Shareholder Suit Over Arena’s Diet Drug (Law360, October 26, 2016) (subscription required)
Ninth Circuit Backs Shareholders in Suit Against Pharma Firm (The Recorder, October 26, 2016) (subscription required)