Class Action Complaint Alleging Securities Fraud Violations Arising from Disclosures Concerning Drug under Development Failed to State Claims under Section 10(b) of the Securities Exchange Act of 1934 or Rule 10b-5 New York Federal Court Holds
Plaintiffs filed a putative class action against French pharmaceutical company Sanofi-Aventis and certain individual defendants alleging violations of the Securities Exchange Act of 1934; specifically, the class action complaint alleged that defendants misrepresented facts concerning the company’s “research activities and attempt to market a drug called ‘rimonabant’ used to treat obesity and related illnesses.” In re Sanofi-Aventis Sec. Litig., ___ F.Supp.2d ___ (S.D.N.Y. September 25, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, during the approval process the FDA sent Sanofi an approval letter for the drug’s use in connection with obesity, but a non-approval letter with respect to the drug’s use as a smoking cessation aid.” Id., at 2-3. Additionally, the FDA expressed concern “that use of rimonabant in treating obesity might be associated with higher rates of suicidality and other mood disorders.” Id., at 3. However, defendants’ disclosures allegedly failed to disclose the scope of the FDA’s concerns. Id., at 4. Defense attorneys moved to dismiss the class action complaint. Id., at 1. The district court granted the motion and dismissed the class action complaint.
With respect to the class action’s claims under Section 10(b) and Rule 10b-5, the federal court noted that “the complaint must explain why the allegedly misleading misstatements were fraudulent in order to satisfy the pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure.” In re Sanofi-Aventis, at 5 (citation omitted). Based on the court’s analysis, the class action failed to identify any material misstatements or omissions sufficient to state a securities fraud claim. See id., at 5-10. Moreover, the class action complaint failed to satisfy the scienter requirement. See id., at 10-13. And because plaintiffs failed to “establish a primary violation of the securities laws,” the claims under Section 20(a), seeking to impose liability on the individual defendants, failed as a matter of law. Id., at 13. Accordingly, the district court granted defendants’ motion and dismissed the class action complaint without leave to amend. Id., at 14.