Fire and Police Pension Assoc v. Abiomed, Inc., 1st Cir. (2015)

7/26/2019 Fire and Police Pension Assoc v. Abiomed, Inc., 1st Cir. (2015)

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United States Court of AppealsFor the First Circuit

No. 14- 1502

FI RE AND POLI CE PENSI ON ASSOCI ATI ON OF COLORADO;CI TY OF AUSTI N POLI CE RETI REMENT SYSTEM,

Pl ai nt i f f s , Appel l ant s,

and

KARSE SI MON, i ndi vi dual l y and on behal f of al l ot her ssi mi l ar l y si t uat ed; ARLENE SI MON, i ndi vi dual l y and

on behal f of al l ot her s si mi l ar l y si t uat ed; OKLAHOMAPOLI CE PENSI ON AND RETI REMENT SYSTEM; CI TY OF HOLLYWOOD( FL) EMPLOYEES' RETI REMENT FUND; TULARE COUNTY EMPLOYEES'

RETI REMENT ASSOCI ATI ON; ORLANDO POLI CE PENSI ON FUND,

Pl ai nt i f f s,

v.

ABI OMED, I NC. ; MI CHAEL R. MI NOGUE; ROBERT L. BOWEN,

Def endant s, Appel l ees.

APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. F. Denni s Sayl or , I V, U. S. Di st r i ct J udge]

Bef or eLynch, Chi ef J udge,

Sout er , * Associ at e J ust i ce,

and Sel ya, Ci r cui t J udge.

*Hon. David H. Souter, Associate Justice (Ret.) of the

Supreme Court of the United States, sitting by designation.



Pat r i ck T. Egan, wi t h whom Kr i st i n J . Moody, Dar yl DeVal er i oAndr ews, Berman DeVal er i o, Robert D. Kl ausner , and Kl ausner ,Kauf man, J ensen & Levi nson wer e on br i ef , f or appel l ant s.

J ohn D. Donovan, J r . , wi t h whom Dani el V. War d, Mat t hewMazzot t a, El i zabet h D. J ohnst on, Dara A. Reppucci , and Ropes & Gr ayLLP wer e on br i ef , f or appel l ees.

Febr uary 6, 2015



LYNCH, Chief Judge. Not al l cl ai ms of wr ongdoi ng by a

company make out a vi abl e cl ai m t hat t he company has commi t t ed

secur i t i es f r aud. Thi s case i s an exampl e.

I nst i t ut i onal i nvest or s, asser t i ng cl ai ms on behal f of a

put at i ve cl ass of pur chaser s of t he st ock of def endant Abi omed,

I nc. , 1 br ought sui t agai nst Abi omed and t wo of i t s of f i cer s,

Mi chael Mi nogue and Rober t Bowen, al l egi ng t hat al l def endant s

commi t t ed secur i t i es f r aud i n vi ol at i on of sect i on 10( b) of t he

Secur i t i es Exchange Act of 1934, 15 U. S. C. § 78j ( b) , and SEC Rul e

10b- 5; and t hat t he i ndi vi dual def endant s vi ol at ed sect i on 20( a) of

t he Act , 15 U. S. C. § 78t ( a) . The al l eged mi sl eadi ng st at ement s and

omi ss i ons concerned Abi omed' s f l agshi p pr oduct , a mi cr o hear t pump

cal l ed t he I mpel l a Recover LP 2. 5. The compl ai nt al l eges t hat

def endant s t ol d i nvest or s t hat i t s pol i cy was t o avoi d of f - l abel

market i ng of t he I mpel l a 2. 5, when i n f act def endant s "wer e

orchest r at i ng and engaged i n wi despread of f - l abel market

promot i on. " And when t he Food and Dr ug Admi ni st r at i on ( FDA)

i ni t i at ed i nqui r i es i nt o t he company' s mar ket i ng t act i cs,

def endant s t ol d i nvest or s t hat i t was " cooper at i ng" wi t h the agency

and "wor ki ng t o r esol ve [ a] f ew di scr et e i ssues, " when i n f act t he

1The named plaintiffs are Fire and Police Pension

Association of Colorado, City of Austin Police Retirement System,Oklahoma Police Pension and Retirement System, City of Hollywood(FL) Employees' Retirement Fund, Tulare County Employees'Retirement Association, Orlando Police Pension Fund, and individualinvestors Karse and Arlene Simon.

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company was " t r i vi al i zi ng t he concer ns" and "cont i nui ng t o of f -

l abel mar ket . "

The di st r i ct cour t di smi ssed t he compl ai nt on t he ground

t hat pl ai nt i f f s had not pl eaded f act s gi vi ng r i se t o a "' cogent and

compel l i ng' " i nf er ence of sci ent er , as i s r equi r ed under t he

Pr i vat e Secur i t i es Li t i gat i on Ref or mAct of 1995 ( "PSLRA") , Pub. L.

No. 104- 67, 109. St at . 737. Si mon v. Abi omed, I nc. , No. 12- 12137-

FDS, 2014 WL 1413638 ( D. Mass. Apr . 10, 2014) ( ci t at i on omi t t ed) .

We af f i r m. The di st r i ct cour t cor r ect l y hel d t hat t he

pl eadi ngs ar e i nsuf f i ci ent t o est abl i sh t he r equi si t e i nf er ence of

sci ent er . Even assumi ng t hat pl ai nt i f f s pl ausi bl y al l eged t hat

def endant s made f al se or mi sl eadi ng st at ement s whi ch had a mat er i al

ef f ect on Abi omed' s st ock pr i ce - - a mat t er t hat i s f ar f r om

cl ear - - pl ai nt i f f s have not suf f i ci ent l y al l eged t hat def endant s

made t hose st atement s wi t h t he "consci ous i nt ent t o def r aud or ' a

hi gh degr ee of r eckl essness. ' " ACA Fi n. Guar . Cor p. v. Advest ,

I nc. , 512 F. 3d 46, 58 ( 1st Ci r . 2008) ( quot i ng Al dr i dge v. A. T.

Cr oss Cor p. , 284 F. 3d 72, 82 ( 1st Ci r . 2002) ) .

I . Fact ual Backgr ound

We dr aw t he f ol l owi ng st at ement of f act s f r ompl ai nt i f f s'

Amended Cl ass Act i on Compl ai nt and f r ommater i al s def endant s f i l ed

i n t he di st r i ct cour t i n suppor t of t hei r mot i on t o di smi ss. 2

2These materials consist of correspondence between the FDA

and Abiomed and public records, such as Abiomed's filings with theSEC. Neither party disputes that the court may properly consider

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A. The Par t i es

Def endant Abi omed i s a Massachuset t s- based company

empl oyi ng approxi mat el y 150 peopl e whi ch devel ops, manuf act ures,

mar ket s and sel l s medi cal devi ces desi gned f or ci r cul at or y suppor t .

Mi nogue i s Abi omed' s CEO, and Bowen i s i t s CFO. Pl ai nt i f f s ar e a

cl ass of ent i t i es and i ndi vi dual s who pur chased Abi omed st ock f r om

August 4, 2011, t o Oct ober 31, 2012 ( t he "Cl ass Per i od" ) .

The al l egat i ons i n t he compl ai nt ar e based i n par t on

i nt er vi ews wi t h conf i dent i al wi t nesses who are f ormer empl oyees of

Abi omed. Conf i dent i al Wi t ness 1 ( "CW1") "worked i n a

cl i nci al / sur gi cal suppor t posi t i on as a cl i ni cal r epr esent at i ve

f r om March 2011 unt i l Apr i l 2012. " Accordi ng t o CW1, Abi omed

empl oyees were i n cl ose pr oxi mi t y t o one anot her , and Mi nogue and

Bowen were ver y "hands- on" l eaders.

The I mpel l a 2. 5, "a percut aneous mi cr o hear t pump wi t h an

i nt egr ated motor and sensor s" t hat "can pump up t o 2. 5 l i t ers of

bl ood per mi nut e, " i s Abi omed' s most i mpor t ant pr oduct . I n f i scal

year ( FY) 2012, 85% of Abi omed' s r evenues came f r om sal es of

I mpel l a pr oduct s, and "most " of t hat r evenue came f r omt he sal es of

t he I mpel l a 2. 5. The I mpel l a 2. 5' s mai n compet i t or i s t he

these materials. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993) (noting that, in ruling on a motion to dismiss, court mayconsider "documents the authenticity of which are not disputed bythe parties; [] official public records; [] documents central toplaintiffs' claim; or [] documents sufficiently referred to in thecomplaint").

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i nt r a- aor t i c bal l oon pump ( I ABP) , whi ch i s much cheaper and more

wi del y used t han t he I mpel l a 2. 5.

B. The FDA' s Regul at i on of Medi cal Devi ces

The FDA r egul at es t he l abel i ng and mar ket i ng of medi cal

devi ces pur suant t o t he Food, Dr ug, and Cosmet i cs Act ( FDCA) .

Under sect i on 510( k) of t he FDCA, t he agency can "cl ear" a devi ce

t hat i s subst ant i al l y equi val ent i n saf et y and ef f ect i veness t o an

exi st i ng appr oved devi ce and ther eby al l ow t he devi ce to be used

f or t he same i ntended pur poses. The FDA may al so grant an

i nvest i gat i onal devi ce exempt i on ( " I DE") t o a company t o al l ow i t

t o use a devi ce i n a cl i ni cal st udy t o t est i t s saf et y and

ef f i cacy.

Under FDA r egul at i ons, a company i s not al l owed t o market

a devi ce f or a use f or whi ch i t has not been appr oved - - t hat i s,

an "of f - l abel " use. However , t he FDA does not pr ohi bi t physi ci ans

and hospi t al s f r om of f - l abel use of medi cal devi ces, and a medi cal

devi ce company i s al l owed t o respond t o unsol i ci t ed r equest s f r om

physi ci ans f or i nf or mat i on r egar di ng of f - l abel uses of t he

company' s pr oduct s. FDA r egul at i ons al so pr ohi bi t a company wi t h

an I DE f r om r epr esent i ng t hat t he devi ce i s saf e and ef f ect i ve f or

t he pur pose f or whi ch i t i s bei ng t est ed.

C. The Pr ot ect I I and Recover I I St udi es

I n August 2007, Abi omed r ecei ved an I DE f r omt he FDA t hat

al l owed i t t o begi n a cl i ni cal t r i al compar i ng t he per f or mance of

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t he I mpel l a 2. 5 t o t hat of t he I ABP dur i ng hi gh- r i sk per cut aneous

cor onar y i nt er vent i ons ( "PCI s" ) , commonl y known as angi opl ast i es

( t he "Pr ot ect I I St udy") . The st udy' s pur pose was t o measur e maj or

adver se event s suf f er ed by pat i ent s 30 days af t er t he PCI

pr ocedur e.

On December 6, 2010, Abi omed t ermi nat ed t he Prot ect I I

St udy af t er f i ndi ng t hat t he I mpel l a 2. 5 di d not achi eve super i or

out comes compar ed wi t h t he I ABP at t he 30- day endpoi nt . However ,

Abi omed cont i nued t o col l ect and anal yze dat a f r om t he st udy, and

t he st udy event ual l y yi el ded "expl or at or y" r esul t s " suggest i ng a

possi bl e benef i t f or t he devi ce at 90 days. " The st udy was

publ i shed i n Sept ember 2012 i n Ci r cul at i on, a peer - r evi ewed medi cal

j ournal .

I n March 2008, Abi omed r ecei ved an I DE f or a second st udy

( t he "Recover I I St udy") desi gned t o compar e the I mpel l a 2. 5 t o the

I ABP i n hemodynami cal l y unst abl e pat i ent s under goi ng a PCI due t o

an acut e myocar di al i nf arct i on ( "AMI " ) , more commonl y known as a

hear t at t ack. The Recover I I St udy was suspended i n Sept ember 2009

and event ual l y ter mi nat ed due t o i nsuf f i ci ent enr ol l ment .

D. 510( k) Cl ear ance f or t he I mpel l a 2. 5, t he Al l eged"Per vasi ve" Scheme of Of f - Label Market i ng, and t he FDA' sResponse

I n J une 2008, pur suant t o t he 510( k) pr ocess, Abi omed

r ecei ved cl ear ance f r om t he FDA t o mar ket and commer ci al l y

di st r i but e t he I mpel l a 2. 5 f or par t i al ci r cul at or y suppor t f or up

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t o si x hour s. Under FDA r egul at i ons, t o r epeat , Abi omed was not

per mi t t ed t o market or pr omot e t he I mpel l a 2. 5 f or any ot her use.

Pl ai nt i f f s al l ege t hat def endant s f l out ed t hese r egul at i ons and

"engage[d] i n wi despr ead i mpr oper pr omot i on and market i ng of t he

I mpel l a 2. 5. " They make t he f ol l owi ng speci f i c al l egat i ons i n

suppor t of t hat cl ai m.

1. The J anuary 2010 Unt i t l ed Let t er

On J anuar y 28, 2010, t he FDA sent Abi omed an Unt i t l ed

Let t er obj ect i ng t o cer t ai n of Abi omed' s act i vi t i es pr omot i ng t he

I mpel l a 2. 5. Unt i t l ed Let t er s ar e i nt ended t o addr ess al l eged

r egul at or y vi ol at i ons t hat do not meet t he thr eshol d f or r egul at or y

si gni f i cance war r ant i ng a War ni ng Let t er . They "do[ ] not i ncl ude

a war ni ng t hat a company' s f ai l ur e to t ake pr ompt cor r ect i ve st eps

coul d l ead t o an enf orcement act i on. " Si mon, 2014 WL 1413638, at

*3 n. 2 ( ci t i ng U. S. Food & Dr ug Admi n. , Regul at ory Procedur es

Manual : Advi sor y Act i ons, 2004 WL 3363386, at *24 ( 2010) ) .

The FDA st at ed t hat Abi omed had i mproper l y "promot [ ed]

t he I mpel l a 2. 5 f or hi gh r i sk PCI and AMI " and r epr esent ed t hat t he

I mpel l a 2. 5 was super i or t o t he I ABP i n t hose uses. Essent i al l y,

i n t he FDA' s vi ew, Abi omed' s pr omot i onal mater i al s r epr esent ed t hat

t he devi ce was ef f ect i ve f or uses f or whi ch i t was bei ng t est ed

under t he Pr ot ect I I and Recover I I I DEs, whi ch const i t ut ed a

vi ol at i on of FDA r egul at i ons.

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Abi omed r esponded t o t he FDA l et t er on March 4, 2010,

st at i ng t hat i t "now r ecogni ze[ d] " t hat t he chal l enged pr omot i ons

had made i mpr oper ef f i cacy cl ai ms and t hat i t woul d r evi se i t s

market i ng mater i al s i n order t o r emove t he of f endi ng st atement s.

Abi omed al so repr esent ed t hat i t had "st r engt hened i t s r evi ew

pr ocess" f or pr omot i onal mat er i al s.

The FDA vi ewed t hi s r esponse as i nadequat e, however , and

Abi omed made f ur t her changes t o i t s adver t i sement s and revi ewed i t s

market i ng mater i al s and websi t e t o ensure t hat " t her e wer e no ot her

mat er i al s" beyond t hose i dent i f i ed by t he FDA t hat made i mpr oper

saf et y or ef f i cacy cl ai ms. On Apr i l 20, 2010, t he FDA wr ot e

Abi omed st at i ng t hat i t s " r esponse appear[ ed] adequate" and t hat no

f ur t her act i on was necessary. Abi omed di d not publ i cl y di scl ose

t hi s cor r espondence wi t h t he FDA at t hat t i me.

2. The J une 2011 Warni ng Let t er

Over a year l ater , on J une 10, 2011, t he FDA i ssued an

of f i ci al War ni ng Let t er t o Abi omed st at i ng t hat t he company' s

"market i ng mater i al s cont i nued t o i mpr oper l y compare t he I mpel l a

2. 5 t o t he I ABP and pr omote t he devi ce f or non- cl eared uses. " A

War ni ng Let t er i s a st ep above an Unt i t l ed Let t er i n t he FDA' s

enf orcement hi er archy. I t communi cates t hat t he FDA bel i eves t he

r egul at ed ent i t y has commi t t ed a vi ol at i on of r egul at or y

si gni f i cance but does not commi t t he FDA t o t aki ng enf orcement

act i on. Si mon, 2014 WL 1413638, at *3 n. 2 ( ci t i ng U. S. Food & Dr ug

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Admi n. , Regul at ory Pr ocedur es Manual : Advi sor y Act i ons, 2004 WL

3363386, at *1- 2 (2010) ) .

The War ni ng Let t er cr i t i ci zed an Abi omed magazi ne

adver t i sement t hat pi ct ur ed a hand punct ur i ng a red bal l oon and

suggest ed t hat t he I mpel l a 2. 5 was super i or t o the I ABP " f or

ci r cul at or y suppor t i n t he Cat h l ab. " The FDA' s l et t er al so

compl ai ned about t he Abi omed sl ogan, "Recover i ng Hear t s, Savi ng

Li ves, " whi ch t he FDA st ated woul d r equi r e a st udy under an I DE " t o

eval uate whet her t he devi ce coul d sal vage heart t i ssue and

muscl e. " 3 Fi nal l y, t he agency t ook i ssue wi t h a cl ai m at a

conf er ence of car di ovascul ar physi ci ans t hat t he I mpel l a coul d

i mprove hemodynami cs and car di ac out put i n AMI Shock pat i ent s,

si nce t hose i ndi cat i ons al so needed t o be suppor t ed wi t h a st udy

per f or med under an I DE.

The War ni ng Let t er was post ed on t he FDA' s websi t e. An

Abi omed spokeswoman st ated publ i cl y t hat t he "l et t er addr esses

speci f i c pr omot i onal i t ems f r om 2010. . . . We ar e wor ki ng wi t h

t he FDA t o ensur e al l of our pr omot i onal mat er i al s compl y wi t h t he

agency movi ng f orward. " Accor di ng t o CW1, however , Abi omed seni or

management di d not t ake t he warni ng l et t er ser i ousl y and

"t r i vi al i zed t he FDA concer ns. " CW2, "a seni or qual i t y compl i ance

3The FDA subsequently revised its position on the slogan,

"stat[ing] that [it] had decided to leave the tagline issue alone"and asking only that the company not claim that the Impella 2.5could "Recover Heart Muscle."

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and val i dat i on engi neer at Abi omed f r om Apr i l 2008 t hr ough March

2011, " l i kewi se sai d t hat "Abi omed ' di dn' t change anyt hi ng' af t er

bei ng not i f i ed by t he FDA. "

I n J ul y 2011, at Abi omed' s r equest , t he FDA hel d a

"cl ar i f i cat i on cal l " wi t h Abi omed t o di scuss t he War ni ng Let t er .

The FDA r emi nded Abi omed of t he I mpel l a 2. 5' s ver y l i mi t ed

cl ear ance and t ol d t hemt o ref r ai n f r omcompar i ng t he devi ce t o the

I ABP. One agency member not ed t hat Abi omed "shoul d have had some

awar eness of t he i ssues gi ven" t he J anuar y 2010 Unt i t l ed Let t er .

I n August 2011, Abi omed sent a f ormal r esponse l et t er t o

t he FDA di scussi ng t he act i ons i t had t aken t o addr ess t he FDA' s

concerns. The company st ated t hat i t woul d not r un t he bal l oon

adver t i sement agai n and woul d ensur e that t he adver t i sement di d not

exi st on Abi omed' s websi t e, and t hat i t had r emoved mater i al s

r el at ed t o t he car di ovascul ar conf er ence f r om t he websi t e. The

l et t er al so st at ed t hat Abi omed woul d put i nt o pl ace a pl an t o

pr event f ut ur e vi ol at i ons. Abi omed di d not r ecei ve any f ol l ow- up

corr espondence f r om t he FDA f or sever al mont hs.

3. The Of f - Label Market i ng Al l egedl y Cont i nues

Pl ai nt i f f s al l ege t hat , even i n t he wake of t he J une 2011

Warni ng Let t er , Abi omed cont i nued t o "engage[ ] i n per vasi ve

of f - l abel mar ket i ng of t he I mpel l a 2. 5 beyond i t s FDA cl ear ed

i ndi cat i ons. " For exampl e, dur i ng a Febr uar y 2012 epi sode of t he

CNBC progr am "Mad Money, " Mi nogue suggest ed t hat t he I mpel l a 2. 5

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coul d be used i n pat i ent s exper i enci ng hear t at t acks, and he hel d

up an I ABP and an I mpel l a 2. 5 si de by si de and st ated t hat t he

l at t er was "cost ef f ect i ve. " Al so, Abi omed made r epeat ed cl ai ms i n

SEC f i l i ngs and conf er ence cal l s r egar di ng t he ef f i cacy of t he

I mpel l a 2. 5 based on t he r esul t s of t he Pr ot ect I I St udy.

Pl ai nt i f f s al so al l ege t hat Abi omed t r ai ned i t s sal es and

cl i ni cal st af f t o compar e t he I mpel l a 2. 5 t o t he I ABP and t o

"pr ompt and st eer physi ci ans t o ask about of f - l abel uses of t he

I mpel l a 2. 5. " CW1 and CW5, a "cl i ni cal r epr esent at i ve at Abi omed

f r om Febr uar y 2012 unt i l Febr uar y 2013, " sai d t hey wer e pr ovi ded

wi t h " t al ki ng poi nt s" about t he Pr ot ect I I St udy and encour aged t o

"di scuss t he super i or i t y of t he I mpel l a 2. 5 over t he I ABP. " CW2

st at ed t hat Abi omed seni or management "knew Abi omed di d not have

t he cl i ni cal st udi es t o suppor t t he cl ai ms t hey wer e maki ng. " CW3,

"an account manager at Abi omed f r omSept ember 2008 unt i l t he end of

March 2011, " r el ayed si mi l ar concer ns t o seni or management and was

"bl own of f . " CW7, " a di r ect or of cl i ni cal oper at i ons f or

Abi omed . . . f r omFebr uary 2009 unt i l November 2011, " st ated t hat

Abi omed pr omot ed t he I mpel l a 2. 5 f or use i n pr ocedur es t hat t ake

l onger t han si x hour s. CW4, " a cl i ni cal r epr esent at i ve i n

cardi ol ogy at Abi omed . . . f r omAugust 2007 unt i l Sept ember 2010, "

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st at ed that Abi omed "hel p[ ed] doct or s i dent i f y candi dat es t o use

t he I mpel l a 2. 5 on, i ncl udi ng hi gh- r i sk PCI pat i ent s. " 4

On Febr uary 24, 2012, Abi omed and the FDA "had a meet i ng,

i n par t t o di scuss Abi omed' s i mpr oper market i ng pr act i ces. "

Pl ai nt i f f s al l ege t hat Abi omed "never di scl osed t he t r ue pur pose of

t hi s meet i ng, " i nst ead st at i ng i n a l at er f i l i ng wi t h t he SEC t hat

t he meet i ng was hel d t o "pr esent t he f i nal r esul t s of t he Pr ot ect

I I St udy" and t o di scuss ot her unr el at ed mat t er s.

4. The Apr i l 2012 Let t er

I n Apr i l 2012, t he FDA sent anot her l et t er t o Abi omed

asser t i ng t hat i t s pr omot i onal mat er i al s wer e st i l l i mpr oper l y

market i ng t he I mpel l a 2. 5. The FDA not ed t hat t he "Abi omedI mpel l a"

YouTube channel i ncl uded several vi deos di scussi ng unappr oved uses

of t he I mpel l a 2. 5, and t hat t he company' s websi t e cont ai ned a l i nk

t o "Pat i ent St or i es" descr i bi ng unappr oved uses of t he devi ce. The

agency al so obj ect ed t o Mi nogue' s st at ement s on t he "Mad Money"

epi sode. The l et t er st at ed t hat t hese exampl es " r epr esent [ ed] a

f r act i on of t he obj ect i onabl e cl ai ms r egar di ng t he I mpel l a, " and

t he agency t hreat ened enf orcement act i on "absent prompt and

ef f ect i ve cor r ect i ons. "

4Plaintiffs include these allegations in the section of

the complaint detailing Abiomed's allegedly improper marketingafter the Warning Letter was issued, but they do not provide anyindication of the specific time period to which the confidentialwitnesses' observations correspond.

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Abi omed di scl osed t hi s FDA l et t er i n i t s 2012 10- K, f i l ed

wi t h t he SEC on J une 4, 2012. The company announced t hat i t had

"r ecei ved a f ol l ow up l et t er f r om t he FDA st at i ng t hat some of our

pr omot i onal mater i al s cont i nued t o market t he I mpel l a 2. 5 i n ways

t hat ar e not compl i ant wi t h FDA r egul at i ons" and t hat i t was

"cooper at i ng wi t h t he FDA i n addr essi ng i t s concer ns. "

5. The August 2012 Meet i ng wi t h t he FDA andSubsequent Compl i ance Audi t s

On August 7, 2012, t he FDA and Abi omed met agai n, agai n

at Abi omed' s request . " [ T]he pr i mary obj ect i ve of t he meet i ng was

t o pr esent Abi omed' s act i ons t o cl ose- out t he War ni ng Let t er and

mai nt ai n compl i ance and t hen have a di scussi on as t o whether

Abi omed was meet i ng FDA r equi r ement s. " Af t er Abi omed det ai l ed t he

measur es i t was t aki ng t o ensure compl i ance wi t h t he r egul at i ons,

an FDA r epr esent at i ve "suggest ed t hat Abi omed ' t ake a st ep back' "

because "[ h] e saw t he cor r ect i ve act i ons as t oo t ar get ed, and not

addr essi ng t he whol e l abel i ng pr ogr am. " Anot her r epr esent at i ve

comment ed t hat t he FDA di d "not t hi nk of t he cl earances of t he

product i n t he same way Abi omed does. " The FDA was "f r ust r at ed"

because i t f el t t hat r egul at or y vi ol at i ons wer e "happen[ i ng]

r epeat edl y. " Mi nogue r esponded t hat "Abi omed had t o compl y, and

wi l l compl y, " but t hat , because Abi omed was such a smal l company,

i t was "cr i t i cal t o mar ket t he devi ce. " An FDA r epr esent at i ve

opi ned t hat "i t woul d i nvol ve ' wal ki ng a f i ne l i ne' t o st ay i n

compl i ance whi l e market i ng. " The meet i ng cl osed wi t h t he FDA

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admoni shi ng Abi omed t hat i t t ook t he mat t er "ver y ser i ousl y, " " t hat

a War ni ng Let t er i s t he l ast communi cat i on gi ven, [ and] t hat

Abi omed needed t o do a syst emi c r evi ew of i t s pr ocedur es i n order

t o gi ve t he [ agency] a syst emi c r esponse f or compl i ance. "

I n t he l at e summer of 2012, t he FDA conduct ed a

compl i ance audi t of Abi omed, and Abi omed si mul t aneousl y conduct ed

i t s own i nt er nal audi t . Af t er t hose audi t s, Abi omed pul l ed i t s

mar ket i ng and t r ai ni ng mat er i al s " f or compl i ance r easons" and di d

not put up r epl acement mater i al s f or sever al mont hs. The

r epl acement mater i al s, accor di ng t o CW5, wer e "ext r emel y l i mi t ed

compared t o what t hey had pr evi ousl y" - - f or exampl e, t hey no

l onger i ncl uded sl i des about t he Pr ot ect I I St udy. Abi omed

conf i r med i n a l et t er t o the FDA dat ed August 20, 2012, t hat i t

under st ood i t s pr i or appr oach t o compl i ance was "t oo narr ow i n

f ocus" and so was "adopt i ng a br oad, syst emi c approach t o addr ess

t he i ssues r ai sed by FDA. " Thi s appr oach i ncl uded "dest r oy[ i ng]

t he I mpel l a market i ng br ochur es ci t ed by FDA, st opp[ i ng]

di st r i but i on of al l mar ket i ng l abel i ng, r ecal l [ i ng] al l mar ket i ng

l abel i ng hel d by Abi omed f i el d per sonnel , and st opp[ i ng] any

pl anned updat es t o al l l abel i ng and t he [ Abi omed] websi t e. "

6. The U. S. At t or ney' s Of f i ce I nvest i gat i on

On November 1, 2012, Abi omed di scl osed t hat t he U. S.

At t or ney' s Of f i ce f or t he Di st r i ct of Col umbi a had begun an

i nvest i gat i on i nt o i t s mar ket i ng and pr omot i onal pr act i ces

-15-



r egar di ng t he I mpel l a 2. 5. "Abi omed al so mai nt ai ned i t s I mpel l a

r evenue gui dance at appr oxi mat el y 30% f or t he f i scal year , despi t e

45% gr owt h t hr ough t he f i r st hal f of t he year , i mpl yi ng a mar ked

sl owdown dur i ng t he second hal f of t he year . . . . " Mi nogue

di scl osed t he FDA' s compl i ance audi t i n a conf er ence cal l conduct ed

t he same day and st at ed t hat Abi omed "ha[ d] t aken ext ensi ve act i ons

t o cor r ect [ i t s] not ed compl i ance i ssues i dent i f i ed i n [ i t s] annual

r epor t . " Abi omed' s st ock pr i ce f el l f r om $19. 82 per shar e t o

$13. 61 per shar e on November 1, a dr op of approxi mat el y 32%.

7. The Febr uar y 2013 FDA Cl ose- Out Let t er

On Febr uary 19, 2013, t he FDA i ssued a "Cl ose- Out Let t er"

t o Abi omed st at i ng t hat t he agency had compl et ed i t s eval uat i on of

Abi omed' s cor r ect i ve act i ons t aken i n response t o t he War ni ng

Let t er and had det ermi ned that Abi omed had adequat el y addressed

t hose vi ol at i ons. Abi omed' s st ock pr i ce r ecover ed f r om t he

November 2012 f al l . As of May 20, 2013, t he st ock was t r adi ng at

$23. 11 per share.

E. Def endants ' Al l egedl y Fal se and Mi sl eadi ng Statements

Pl ai nt i f f s al l ege t hat , bet ween August 4, 2011, and

Oct ober 31, 2012, def endant s made speci f i c f al se and mi sl eadi ng

st at ement s t hat "decei ved the i nvest i ng publ i c" and caused t he

pl ai nt i f f s to pur chase Abi omed st ock at ar t i f i ci al l y i nf l at ed

pr i ces. These st at ement s f al l i nt o t hr ee pr i nci pal cat egor i es.

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Fi r st , pl ai nt i f f s al l ege t hat sever al of def endant s'

st atement s about t he gr owt h of I mpel l a pr oduct r evenues wer e f al se

and mi sl eadi ng because Abi omed "f ai l ed to di scl ose t hat t he

r epor t ed r evenue gr owt h was subst ant i al l y t he r esul t of of f - l abel

mar ket i ng. " Def endant s ei t her pr ovi ded no expl anat i on f or t he

gr owt h or at t r i but ed t he r evenues t o sour ces such as " i ncr eased

I mpel l a 2. 5 ut i l i zat i on i n t he cat h l ab. " Pl ai nt i f f s al l ege t hese

st at ement s wer e mi sl eadi ng because "t hey f ai l ed t o di scl ose t hat

Abi omed' s cont i nued r evenue . . . was at r i sk shoul d t he Company be

f or ced t o di scont i nue [ i t s mar ket i ng] pr act i ces. " Def endant s

al l egedl y made t hese st at ement s i n an August 2011 pr ess r el ease and

conf er ence cal l announci ng Abi omed' s f i r st quart er 2012 ( "Q1 2012")

earni ngs; i n Abi omed' s Q1 2012 10- Q; i n a November 2011 press

r el ease and conf erence cal l announci ng Abi omed' s Q2 2012 earni ngs;

i n Abi omed' s Q2 2012 10- Q; i n a Februar y 2012 press r el ease and

conf erence cal l announci ng Abi omed' s Q3 2012 ear ni ngs; i n Abi omed' s

Q3 2012 10- Q; i n a May 2012 pr ess r el ease and conf erence cal l

announci ng Abi omed' s Q4 2012 ear ni ngs; i n Abi omed' s 2012 For m10- K;

and i n an August 2012 pr ess r el ease and conf erence cal l announci ng

Abi omed' s Q1 2013 ear ni ngs.

Second, def endant s al l egedl y cont i nued to compare t he

I mpel l a 2. 5 t o t he I ABP based on t he r esul t s of t he Pr ot ect I I

St udy, even t hough FDA r egul at i ons prohi bi t ed Abi omed f r om doi ng

so. For exampl e, pl ai nt i f f s ci t e Mi nogue' s st at ement s i n an August

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2011 conf er ence cal l t hat , accor di ng t o t he st udy, I mpel l a pat i ent s

"had si gni f i cant l y bet t er out comes at 90 days" r el at i ve t o I ABP

pat i ent s. Def endant s al l egedl y made si mi l ar st at ement s i n

Abi omed' s Q1 2012 10- Q; i n Abi omed' s Q2 2012 10- Q; i n a Febr uary

2012 pr ess r el ease and conf erence cal l concerni ng Abi omed' s Q3 2012

r esul t s; on t he Febr uary 7, 2012, epi sode of Mad Money; i n

Abi omed' s 2012 For m 10- K; and i n an August 2012 conf er ence cal l .

Pl ai nt i f f s al so al l ege t hat Abi omed' s May 2012 di scl osur e of t he

Febr uary 24, 2012, meet i ng wi t h the FDA was f al se and mi sl eadi ng

because i t " f ai l ed t o di scl ose that t he pur pose of t he meet i ng was

t o di scuss Abi omed' s i mpr oper mar ket i ng of t he I mpel l a 2. 5 . . .

and t he FDA' s saf et y concer ns wi t h t he devi ce r el at ed t o the

Pr ot ect I I St udy. "

Thi r d, pl ai nt i f f s al l ege t hat many of def endant s'

st at ement s concerni ng t he r egul at ory back- and- f or t h between Abi omed

and t he FDA were f al se and mi sl eadi ng. Def endant s cl ai med t hat

Abi omed pol i cy was t o r ef r ai n f r om of f - l abel mar ket i ng and t hat

Abi omed was t aki ng st eps t o r esol ve t he FDA' s concerns, but i n f act

Abi omed was " engaged i n wi despr ead management - di r ect ed of f - l abel

market i ng and pr omot i on of t he I mpel l a 2. 5 . . . and was not

pr oper l y addr essi ng t he FDA' s i ssues. " I n par t i cul ar , pl ai nt i f f s

ci t e t he f ol l owi ng st at ement , some ver si on of whi ch was cont ai ned

i n Abi omed' s Q1 2012 10- Q, Q2 2012 10- Q, and Q3 2012 10- Q:

Al t hough our pol i cy i s t o r ef r ai n f r omst at ement s t hat coul d be consi der ed of f - l abel

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pr omot i on of our pr oduct s, t he FDA or anot herr egul atory agency coul d di sagr ee and concl udet hat we have engaged i n of f - l abel pr omot i on.I n J une 2011, we r ecei ved a warni ng l et t erf r om t he FDA st at i ng t hat some of ourpr omot i onal mater i al s market ed t he I mpel l a 2. 5

f or uses t hat had not been appr oved by t heFDA. We have cooper at ed wi t h t he FDA i naddr essi ng i t s concer ns and bel i eve t hat wehave r esol ved t he mat t er wi t hout anypenal t i es. Al t hough we bel i eve t hat t hi si ssue has been r esol ved, i f si mi l ar mat t er scome up i n the f uture, we may not be abl e t or esol ve t hem wi t hout f aci ng si gni f i cantconsequences.

Abi omed' s 2012 For m 10- K, f i l ed on J une 4, 2012, used si mi l ar

l anguage, and added:

[ I ] n Apr i l 2012, we r ecei ved a f ol l ow upl et t er f r om t he FDA st at i ng t hat some of ourpr omot i onal mater i al s cont i nued t o market t heI mpel l a 2. 5 i n ways t hat are not compl i antwi t h FDA r egul at i ons. We are cooper at i ng wi t ht he FDA i n addr essi ng i t s concer ns. Whi l e wehope t o be abl e to resol ve t hi s mat t er wi t houti ncur r i ng penal t i es, we may not be abl e t or esol ve i t , or any si mi l ar mat t er s t hat maycome up i n t he f ut ur e wi t hout f aci ngsi gni f i cant consequences. Such mat t er s coul dr esul t i n reduced demand f or our pr oduct s andwoul d have a mat er i al adver se ef f ect on ouroper at i ons and pr ospect s.

Fi nal l y, t he compl ai nt al l eges t hat t he cer t i f i cat i ons of

Mi nogue and Bowen cont ai ned i n t he For m 10- Qs and t he For m 10- K

wer e f al se and mi sl eadi ng because t he f or ms di d not " f ai r l y pr esent

i n al l mat er i al r espect s t he f i nanci al condi t i on [ of Abi omed] ,

i ncl udi ng t he r el i ance on of f - l abel mar ket i ng, and t hat t he r evenue

and gr owt h r epor t ed t her ei n was t he r esul t of undi scl osed, i l l i ci t

and unsust ai nabl e of f - l abel mar ket i ng. "

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Pl ai nt i f f s make addi t i onal al l egat i ons t hat t hey ar gue

bol st er t he i nf er ence t hat def endant s had t he r equi si t e sci ent er

( t hat i s, t hat t hey had t he consci ous i nt ent t o def r aud i nvest or s

or act ed wi t h a hi gh degr ee of r eckl essness) . Fi r st , t hey cont end

t hat Mi nogue, Bowen, and ot her seni or Abi omed execut i ves sol d an

unchar act er i st i cal l y l ar ge amount of st ock dur i ng t he Cl ass Per i od.

Mi nogue al l egedl y sol d 586, 149 shar es of Abi omed st ock,

r epr esent i ng 48% of hi s hol di ngs, f or a t ot al of $9, 636, 124 f r om

J anuar y 2010 t hrough t he end of t he Cl ass Per i od. Bowen sol d

57, 919 shar es, r epr esent i ng 6. 5% of hi s hol di ngs, f or $1, 302, 878

dur i ng t hat per i od, af t er havi ng sol d no st ock bef or e J anuar y 2010.

Pl ai nt i f f s ci t e si mi l ar f i gur es f or f i ve ot her non- def endant

Abi omed execut i ves, who col l ect i vel y earned appr oxi matel y $5. 6

mi l l i on by sel l i ng st ock dur i ng t hi s per i od.

Def endant s count er t hat many of t he t r ades ci t ed by

pl ai nt i f f s wer e made pur suant t o 10b5- 1 pl ans whi ch wer e ent er ed

i nt o bef or e the Cl ass Per i od ( August 4, 2011, t o Oct ober 31, 2012)

and Mi nogue i n f act i ncr eased hi s hol di ngs of Abi omed st ock dur i ng

t he Cl ass Per i od. Def endant s al so count er t hat t he r eason Bowen

made no t r ades pr i or t o t he ci t ed per i od was because he onl y became

el i gi bl e t o t r ade Abi omed st ock dur i ng t hat per i od.

Pl ai nt i f f s al so al l ege t hat , because t he I mpel l a 2. 5 was

par t of Abi omed' s "cor e busi ness , " Mi nogue and Bowen must have been

aware of t he f act t hat Abi omed was unl awf ul l y pr omot i ng t he devi ce,

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and t hat "t he per vasi veness of t he i l l i ci t and of f - l abel mar ket i ng

and pr omot i on of t he I mpel l a 2. 5 . . . f ur t her suppor t s a st r ong

i nf er ence of sci ent er . "

F. Summar y

Di st i l l ed t o i t s essence, pl ai nt i f f s ' compl ai nt t el l s the

f ol l owi ng st or y: For a 38- mont h per i od, begi nni ng wi t h t he FDA' s

Unt i t l ed Let t er i n J anuar y 2010 and endi ng wi t h t he FDA' s Cl ose- Out

Let t er i n Febr uary 2013, t he FDA r epeatedl y r ai sed concer ns t hat

Abi omed' s market i ng of t he I mpel l a 2. 5 di d not compl y wi t h

appl i cabl e r egul at i ons. Abi omed r esponded t o t hese concer ns by

maki ng l i mi t ed changes t o i t s promot i onal t act i cs, but t he FDA was

not sat i sf i ed unt i l t he summer of 2012, when Abi omed conduct ed an

i nt er nal compl i ance audi t and pul l ed al l of i t s mar ket i ng and

t r ai ni ng mat er i al s, t o be r epl aced wi t h ent i r el y new ones.

Conf i dent i al wi t nesses ci t ed i n t he compl ai nt st at e t hat Abi omed' s

seni or management was aware t hat i t s promot i onal pr act i ces bef ore

t hat audi t wer e i n vi ol at i on of FDA r egul at i ons and wi l l f ul l y chose

not t o al t er t hem. We not e t hat mi ght r ai se i ssues under FDA

r egul at i ons.

What r ai ses secur i t i es l aw concer ns, accor di ng t o

pl ai nt i f f s, i s t hat management al l egedl y mi sl ed i nvest or s dur i ng

t hi s per i od by ( 1) f ai l i ng t o at t r i but e t he gr owt h i n I mpel l a

r evenues t o unl awf ul of f - l abel mar ket i ng pr act i ces; ( 2) i mpr oper l y

compar i ng t he I mpel l a 2. 5 t o t he I ABP by t out i ng t he r esul t s of t he

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Pr ot ect I I St udy; ( 3) st at i ng t hat i t had a pol i cy of not engagi ng

i n of f - l abel mar ket i ng; and ( 4) st at i ng t hat Abi omed was t aki ng

st eps t o addr ess t he agency' s concerns, when i n f act t he company

was engaged i n i nt ent i onal and per vasi ve of f - l abel mar ket i ng,

cont r ar y to i t s st at ed pol i cy.

I I . Li t i gat i on Pr ocedur al Hi stor y

On November 16, 2012, t wo i ndi vi dual s f i l ed a compl ai nt

on behal f of al l pur chasers of Abi omed st ock dur i ng t he Cl ass

Per i od. Si mon, 2014 WL 1413638, at *10. I n Febr uar y 2013, t he

di st r i ct cour t appoi nt ed t he t wo appeal i ng i nst i t ut i onal i nvest or s

as l ead pl ai nt i f f s, and t he l ead pl ai nt i f f s f i l ed an amended

compl ai nt on May 20, 2013. I d.

On Apr i l 10, 2014, t he di st r i ct cour t , i n a t hor ough

opi ni on, gr ant ed def endant s' mot i on t o di smi ss. The cour t f ound

t hat pl ai nt i f f s had pl ausi bl y al l eged t hat Abi omed engaged i n

of f - l abel mar ket i ng pr act i ces and t hat t hose pr act i ces mat er i al l y

af f ect ed t he st ock pr i ce. I d. at *12- 16. I t al so hel d t hat t he

pl ai nt i f f s had pl ausi bl y al l eged sever al act i onabl e

mi sr epr esent at i ons: ( 1) Abi omed' s st at ement s t hat i t s pol i cy was t o

r ef r ai n f r om of f - l abel mar ket i ng; ( 2) Abi omed' s st at ement s t hat

I mpel l a revenue gr owt h was at t r i but abl e t o "par t i cul ar pr i mar y

sour ce[ s] " ot her t han of f - l abel uses; and ( 3) Abi omed' s s t at ement s

about t he Pr ot ect I I St udy "[ t ] o t he ext ent [ t hey wer e made] t o

pr omot e of f - l abel mar ket i ng. " I d. at *16- 20. However , t he cour t

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f ound t hat t he compl ai nt ' s al l egat i ons of sci ent er wer e not "cogent

and compel l i ng, " as i s r equi r ed f or pl eadi ngs i n secur i t i es f r aud

cases. I d. at *20- 23. The cour t al so di smi ssed pl ai nt i f f s'

§ 20( a) cl ai ms because such a vi ol at i on "depend[ s] on an under l yi ng

vi ol at i on of t he Exchange Act . " I d. at *23.

Thi s appeal f ol l owed. Pl ai nt i f f s ar gue t hat t he di st r i ct

cour t er r ed i n hol di ng t hat t hey f ai l ed t o adequat el y pl ead

sci ent er and t hat t he cour t shoul d have gr ant ed t hem l eave t o f i l e

an amended compl ai nt .

I I I . Sect i on 10 and Rul e 10b- 5 Cl ai m

A. Legal St andar d

"Sect i on 10( b) of t he Secur i t i es Exchange Act of 1934

f or bi ds t he ' use or empl oy, i n connect i on wi t h t he pur chase or sal e

of any secur i t y . . . , [ of ] any mani pul at i ve or decept i ve

devi ce . . . . " Tel l abs, I nc. v. Makor I sssues & Ri ght s, Ltd. , 551

U. S. 308, 318 ( 2007) ( f i r st and second al t er at i ons i n or i gi nal )

( quot i ng 15 U. S. C. § 78j ( b) ) . SEC Rul e 10b- 5 i mpl ement s t hat

st at ut e by maki ng i t unl awf ul , i nt er al i a,

[ t ] o make any unt r ue st at ement of a mat er i alf act or t o omi t t o st at e a mat er i al f actnecessary i n or der t o make the st at ement s made. . . not mi sl eadi ng, or . . . [ t ] o engage i nany act , pr act i ce, or cour se of busi ness whi ch

oper ates or woul d oper ate as a f r aud or decei tupon any per son, i n connect i on wi t h t hepur chase or sal e of any secur i t y.

I d. ( second al t er at i on i n or i gi nal ) ( quot i ng 17 C. F. R. § 240. 10b- 5)

( i nt er nal quot at i on mar ks omi t t ed) .

-23-



"To st at e a cl ai m f or secur i t i es f r aud under Secti on

10( b) , a pl ai nt i f f must al l ege: ( 1) a mat er i al mi sr epr esent at i on or

omi ssi on; ( 2) sci ent er , or a wr ongf ul st at e of mi nd; ( 3) i n

connect i on wi t h t he pur chase or sal e of a secur i t y; ( 4) r el i ance;

( 5) economi c l oss; and ( 6) l oss causat i on. " Deka I nt ' l v. Genzyme

Cor p. ( I n r e Genzyme Cor p. Sec. Li t i g. ) , 754 F. 3d 31, 40 ( 1st Ci r .

2014) .

The PSLRA r equi r es a secur i t i es f r aud compl ai nt t o

" ' speci f y each st at ement al l eged to have been mi sl eadi ng [and] t he

r eason or r easons why t he st at ement i s mi sl eadi ng. ' " ACA Fi n. , 512

F. 3d at 58 ( al t er at i on i n or i gi nal ) ( quot i ng 15 U. S. C.

§ 78u- 4( b) ( 1) ) . Whi l e t hi s case t ur ns on sci ent er , we al so di scuss

t he r equi r ement s f or mat er i al i t y, as t he mat er i al i t y and sci ent er

i nqui r i es ar e l i nked. See Ci t y of Dear bor n Hei ght s Act 345 Pol i ce

& Fi r e Ret . Sys. v. Water s Corp. , 632 F. 3d 751, 756- 58 & n. 2 ( 1st

Ci r . 2011) . "A f act i s mat er i al when t her e i s ' a subst ant i al

l i kel i hood' t hat a r easonabl e i nvest or woul d have vi ewed i t as

' si gni f i cant l y al t er [ i ng] t he t ot al mi x of i nf or mat i on made

avai l abl e. ' " I d. at 756 ( al t er at i on i n or i gi nal ) ( quot i ng Basi c

I nc. v. Levi nson, 485 U. S. 224, 231–32 ( 1988) ( i nt er nal quot at i on

mar ks omi t t ed) ) . "A st at ement can be ' f al se or i ncompl et e' but not

act i onabl e ' i f t he mi sr epr esent ed f act i s ot her wi se

i nsi gni f i cant . ' " I d. at 756- 57 ( quot i ng Basi c, 485 U. S. at 238) .

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"The PSLRA al so separat el y i mposes a r i gorous pl eadi ng

st andar d on al l egat i ons of sci ent er . " ACA Fi n. , 512 F. 3d at 58.

"Sci ent er i s a ' ment al st at e embr aci ng i nt ent t o decei ve,

mani pul at e, or def r aud. ' " Water s Cor p. , 632 F. 3d at 757 ( quot i ng

Er nst & Er nst v. Hochf el der , 425 U. S. 185, 193 n. 12 ( 1976) ) . A

compl ai nt wi l l sur vi ve a mot i on t o di smi ss onl y i f i t st at es wi t h

par t i cul ar i t y f acts gi vi ng r i se t o a "st r ong i nf er ence" t hat

def endant s acted wi t h a consci ous i nt ent " t o decei ve or def r aud

i nvestor s by cont r ol l i ng or ar t i f i ci al l y af f ect i ng t he pr i ce of

secur i t i es" or " act ed wi t h a hi gh degr ee of r eckl essness. " I d.

( ci t at i ons omi t t ed) ( i nt er nal quot at i on mar ks omi t t ed) ; accor d ACA

Fi n. , 512 F. 3d at 58- 59. Reckl essness, as used i n t hi s cont ext ,

"does not i ncl ude or di nar y negl i gence, but i s cl oser t o bei ng a

l esser f or m of i nt ent . " Gr eebel v. FTP Sof t war e, I nc. , 194 F. 3d

185, 188 ( 1st Ci r . 1999) .

An i nf er ence of sci ent er i s " st r ong" i f "a r easonabl e

per son woul d deem [ i t ] cogent and at l east as compel l i ng as any

opposi ng i nf er ence one coul d dr aw f r om t he f act s al l eged. "

Tel l abs, 551 U. S. at 324. "When t here ar e equal l y st r ong

i nf er ences f or and agai nst sci ent er , t he dr aw i s awar ded t o t he

pl ai nt i f f . " Wat er s Cor p. , 632 F. 3d at 757. "[ S] ci ent er shoul d be

eval uat ed wi t h ref er ence t o t he compl ai nt as a whol e rat her t han t o

pi ecemeal al l egat i ons. " ACA Fi n. , 512 F. 3d at 59. "Ther e i s no

set pat t er n of f acts t hat wi l l est abl i sh sci ent er ; i t i s a case- by-

-25-



case i nqui r y. " I d. at 66. We r evi ew de novo t he di st r i ct cour t ' s

di smi ssal of t he compl ai nt f or f ai l ur e t o st at e a cl ai m. I d. at

58.

Pl ai nt i f f s sei ze on sever al pur por t ed l egal er r or s made

by t he di st r i ct cour t . They ar gue, f or exampl e, t hat t he di st r i ct

cour t had an er r oneous concept i on of t he sci ent er r equi r ed f or a

vi ol at i on of t he secur i t i es l aws, f ai l ed t o make a r eckl essness

f i ndi ng, and f ai l ed t o pr oper l y wei gh compet i ng evi dence. Si nce

our r evi ew of t he di smi ssal i s de novo, however , we need not at t end

separat el y t o each of t hese argument s. 5 I nst ead, we expl ai n why we

5We are skeptical of the merits of the arguments, in any

event. Plaintiffs contend that the district court erroneouslyrequired them to show that defendants had actual knowledge thattheir representations or omissions were misleading. But the courtstated the correct standard ("a conscious intent to defraud or ahigh degree of recklessness") at the outset of its scienterdiscussion. Simon, 2014 WL 1413638, at *20. True, the court thenstated that the defendant must have "actual knowledge that therepresentation of omission was misleading," see id. at *20-21, butthe focus on actual knowledge almost certainly reflects the factthat plaintiffs' theory of the case consistently has been that thehigher-ups at Abiomed knew full well that what they were doing waswrong, and yet did it anyway. Plaintiffs have not relied on arecklessness theory, and it is thus unsurprising that the districtcourt spent little space in its opinion on the concept ofrecklessness.

Plaintiffs also argue that the district court found that theinferences for and against scienter were equally strong anderroneously awarded that tie to the defendant. This contentionwrests loose language from the district court's opinion out ofcontext. The court did state that "it is equally reasonable to

infer that senior management was merely negligent, inattentive, oreven incompetent, rather than engaged in deliberate acts ofsecurities fraud," id. at *21, and that the insider sales provided"at best equivocal support of the proposition that defendantsintended to defraud investors," id. at *23. But elsewhere, thecourt correctly stated that a "tie goes to the plaintiff," id. at*11, and its analysis, considered as a whole, shows that theinference of scienter was in fact less plausible than competing

-26-



agr ee wi t h t he di st r i ct cour t ' s ul t i mat e concl usi on t hat

pl ai nt i f f s' compl ai nt f ai l s t o st at e a cl ai m under t he PLSRA' s

pl eadi ng st andar ds. 6 See Br ycel and v. Mi nogue, 557 F. App' x 1, 3

( 1st Ci r . 2014) ( Sout er , J . ) ( "[ B] ecause our r evi ew of t he

di smi ssal . . . i s de novo, r at her t han answer each of

[ pl ai nt i f f ] ' s assi gnment s of er ror , i t wi l l suf f i ce t o hi ghl i ght

t he def i ci enci es i n her compl ai nt . " ( ci t at i on omi t t ed) ) ; cf .

Al dr i dge v. A. T. Cr oss Cor p. , 284 F. 3d 72, 84 ( 1st Ci r . 2002)

( not i ng t hat an appel l at e cour t may af f i r m a di st r i ct cour t ' s

deci si on on any gr ounds suppor t ed by t he r ecor d) . Pl ai nt i f f s have

f ai l ed t o show t hat def endant s made t he chal l enged st atement s wi t h

a consci ous i nt ent t o def r aud or wi t h a hi gh degr ee of

r eckl essness.

B. Appl i cat i on

Pl ai nt i f f s al l ege t hat def endant s made t he f ol l owi ng

mi sr epr esent at i ons t hat decei ved i nvest or s: ( 1) st at ement s about

gr owt h i n I mpel l a r evenues t hat di d not di scl ose t hat t he gr owt h

was due t o of f - l abel mar ket i ng; ( 2) st atement s about t he 90- day

r esul t s of t he Pr ot ect I I St udy t hat i mpr oper l y compar ed t he

inferences. Cf. Connor B. ex rel Vigurs v. Patrick, 774 F.3d 45,

54 n.9 (1st Cir. 2014) (determining, based on a reading of thedistrict court's opinion as a whole, that the "court did notmisapprehend the correct [legal] standard," despite some isolatedlanguage suggesting otherwise).

6Our discussion applies to the scienter analysis with

respect to the individual defendants, Minogue and Bowen, as well asthe corporate defendant, Abiomed.

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I mpel l a 2. 5 t o t he I ABP; ( 3) st at ement s t hat Abi omed had a pol i cy

of not engagi ng i n of f - l abel mar ket i ng; and ( 4) st at ement s t hat

Abi omed was t aki ng st eps t o addr ess t he FDA' s concerns, when i n

f act t he company was engaged i n i nt ent i onal and per vasi ve of f - l abel

mar ket i ng, cont r ar y t o i t s st at ed pol i cy. Pl ai nt i f f s' counsel

conceded at or al ar gument t hat pl ai nt i f f s' case depends on t he

f i r st , t hi r d, and f our t h cat egor i es of st at ement s. St at ement s i n

t he second category ar e si mpl y exampl es of i mpr oper of f - l abel

mar ket i ng; t hose ar e r el evant t o t hi s case onl y i nsof ar as t hey

show t hat t he def endant s' st at ement s t hat t hey were not engaged i n

of f - l abel mar ket i ng wer e unt r ue. 7

We theref ore f ocus on def endant s' st at ement s about

i ncr eased I mpel l a revenues and t hei r st at ement s t hat Abi omed' s

pol i cy was t o compl y wi t h FDA r egul at i ons concer ni ng of f - l abel

market i ng and t hat t he company was t aki ng st eps t o addr ess t he

agency' s concer ns r egardi ng pr omot i on of t he I mpel l a 2. 5. We

addr ess t he r evenue- r el at ed st at ement s f i r st , t hen t ur n t o t he

st atement s r egardi ng Abi omed' s i nt er act i ons wi t h t he FDA, and

f i nal l y addr ess t he compl ai nt ' s i nsi der t r adi ng al l egat i ons.

1. St at ement s Regar di ng I ncreased Revenues

7

The district court reached the same conclusion. SeeSimon, 2014 WL 1413638, at *20 (finding that, "[t]o the extent thatdefendants made statements concerning the Protect II study in orderto promote off-label marketing, the statements may be actionable"because Abiomed claimed that it did not engage in off-labelmarketing, "[b]ut to the extent defendants simply gave accurateinformation about the study, it cannot form the basis of a claim ofmisrepresentation").

-28-



We assume arguendo that t he di st r i ct cour t cor r ect l y

f ound t hat pl ai nt i f f s had al l eged enough t o sur vi ve di smi ssal on

cl ai ms t hat Abi omed pr ovi ded f al se expl anat i ons f or I mpel l a revenue

growt h. See Si mon, 2014 WL 1413638, at *17. We hol d t hat t he

st atement s are not act i onabl e on sci ent er gr ounds. We do addr ess

t he st r engt h of t he mat er i al i t y of t he st at ement s because " [ t ] he

quest i on of whet her a pl ai nt i f f has pl ed f act s suppor t i ng a st r ong

i nf er ence of sci ent er has an obvi ous connect i on t o t he quest i on of

t he extent t o whi ch t he omi t t ed i nf or mat i on i s mater i al . " Wat er s

Cor p. , 632 F. 3d at 757. "I f i t i s quest i onabl e whet her a f act i s

mat er i al or i t s mat er i al i t y i s mar gi nal , t hat t ends t o under cut t he

ar gument t hat def endant s act ed wi t h the requi si t e i nt ent or ext r eme

r eckl essness i n not di scl osi ng t he f act. " I d.

The mat er i al i t y of t he i mpugned omi ssi on here - -

Abi omed' s f ai l ur e t o st at e t hat some of t he i ncr eased r evenues wer e

due t o of f - l abel mar ket i ng - - i s mar gi nal at best . Pl ai nt i f f s'

cont ent i on t hat t he omi ssi on woul d have mat t er ed t o a reasonabl e

i nvest or depends on a l ong chai n of i nf er ences, most of whi ch ar e

not suf f i ci ent l y subst ant i at ed by the al l egat i ons i n t he compl ai nt .

Fi r st , we woul d have t o i nf er t hat , of t he 85%of Abi omed

r evenue due t o sal es of I mpel l a pr oduct s, a subst ant i al por t i on i s

due t o sal es of t he I mpel l a 2. 5. The compl ai nt al l eges t hat t he

I mpel l a 2. 5 account ed f or "most " of t hat r evenue, but pr ovi des no

speci f i cs. Second, we woul d have t o i nf er t hat , of t he r evenues

-29-



f r om t he I mpel l a 2. 5, a subst ant i al por t i on was due t o pur chases

f or of f - l abel use by heal t h car e pr of essi onal s. The compl ai nt

pr ovi des no i ndi cat i on of t he pr opor t i on of I mpel l a 2. 5 use t hat

was of f - l abel . Thi r d, we woul d have t o i nf er t hat , of t he r evenues

f r om of f - l abel use, a subst ant i al por t i on of t hat use was due t o

of f - l abel mar ket i ng of t he devi ce, and, f ur t her , t hat t he por t i on

was so si gni f i cant as t o under cut t he company' s pr oj ect ed gr owt h

f i gur es. And f our t h, we woul d have t o i nf er t hat t he r esul t i ng

under cut t i ng of t he gr owt h f i gur es was subst ant i al enough to have

a mat er i al ef f ect on t he st ock pr i ce. Agai n, t he compl ai nt

pr ovi des no basi s i n f act f or maki ng t hese i nf er ences.

Pl ai nt i f f s do al l ege t hat of f - l abel pr omot i on was

wi despread, but t hey do not st ate or even suggest what pr oport i on

of sal es wer e made as a resul t of such ef f or t s, or t he si gni f i cance

of t he cont r i but i on of t hose sal es t o Abi omed' s st ock pr i ce. The

mar gi nal mat er i al i t y of t he al l eged st at ement s and omi ssi ons

concerni ng r evenues wei ghs agai nst an argument t hat def endant s here

possessed t he r equi si t e sci ent er . See Wat er s Cor p. , 632 F. 3d at

757. 8

8Plaintiffs' counsel contended at oral argument that we

can infer that Abiomed's failure to disclose its off-labelmarketing activities was material because the company scaled backits revenue projections on November 1, after it "purged all of itsoff-label marketing materials." We think that unlikely, but morethan that, it is much more plausible to infer that Abiomed loweredits revenue projections in light of the simultaneous announcementthat the U.S. Attorney's Office had begun an investigation into thecompany.

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Pl ai nt i f f s at t empt an argument t hat def endant s made

st atement s about Abi omed' s r evenues wi t h the i nt ent t o decei ve

i nvest or s or wi t h r eckl ess di sr egar d as t o whet her i nvest or s woul d

be decei ved. The argument i s undercut by t he f act t hat Abi omed

expl i ci t l y war ned i nvest or s bot h ( a) t hat t he FDA mi ght di sagr ee

wi t h t he company' s assessment of t he l egal i t y of i t s mar ket i ng

pr act i ces and ( b) t hat , i f t he FDA t ook enf or cement act i on agai nst

i t , t hat "coul d r esul t i n r educed demand f or our pr oduct s and woul d

have a mat er i al adver se ef f ect on our oper at i ons and pr ospect s. "

See Genzyme Corp. , 754 F. 3d at 42- 43 ( not i ng t hat a cor porat i on' s

i nf or mat i ve di scl osur es "under cut any i nf er ence of f r audul ent

i nt ent on t he par t of def endant s" ) ; Wat er s Cor p. , 632 F. 3d at 760

( "' [ A] t t empt s t o pr ovi de i nvest or s wi t h war ni ngs of r i sks gener al l y

weaken t he i nf er ence of sci ent er . ' " ( al t er at i on i n or i gi nal )

( quot i ng Ezr a Char i t abl e Tr ust v. Tyco I nt ' l , Lt d. , 466 F. 3d 1, 8

( 1st Ci r . 2006) ) ) .

Fur t her , t he company di d not wi t hhol d i nf ormat i on about

t he FDA' s concerns once t he FDA i ssued a Warni ng Let t er . 9 Abi omed

pr ompt l y di scl osed r ecei pt of t he J une 2011 Warni ng Let t er and

st at ed r epeat edl y t hr oughout t he Cl ass Per i od t hat t he FDA "coul d

9"Section 10(b) does not create an affirmative duty to

disclose." Genzyme Corp., 754 F.3d at 41. Thus, there is no perse rule that a company immediately disclose receipt of anycorrespondence with the FDA. See id. at 42 (holding that a companyneed not immediately disclose a Form 483 issued by the FDA becauseit was "merely observational in nature, and d[id] not represent theFDA's final word").

-31-



di sagr ee [wi t h Abi omed' s posi t i on t hat i t s mar ket i ng was l awf ul ]

and concl ude t hat we have engaged i n of f - l abel pr omot i on. " Abi omed

di d not pr omi se a posi t i ve r esol ut i on of t he mat t er ; r at her , i t

acknowl edged that " i f si mi l ar mat t er s come up i n the f ut ur e, we may

not be abl e t o r esol ve t hem wi t hout f aci ng si gni f i cant

consequences. " These are not t he act i ons of a company bent on

decei vi ng i nvest or s as t o thei r f ut ur e ear ni ngs pr ospect s. 10

Under pl ai nt i f f s' t heor y of t he case, Abi omed shoul d have

af f i r mat i vel y admi t t ed wi despr ead wr ongdoi ng r at her t han st at i ng

t hat t he out come of i t s r egul at or y back- and- f or t h wi t h t he FDA was

uncer t ai n. That woul d be a per ver se r esul t ; such an admi ssi on

woul d have been mi sl eadi ng, si nce t he of f - l abel mar ket i ng i ssues

had t he pot ent i al t o be r esol ved wi t h no adver se act i on f r om t he

FDA. We made a si mi l ar poi nt i n I n r e Bost on Sci ent i f i c Cor p.

Secur i t i es Li t i gat i on, 686 F. 3d 21 ( 1st Ci r . 2012) , wher e we not ed

t hat "a company may behave ' i r r esponsi bl y' i f i t i ssues an omi nous

warni ng about an uncer t ai n r i sk t hat ' had not yet been adequatel y

i nvest i gat ed. ' " I d. at 31 ( quot i ng N. J . Car pent er s Pensi on &

Annui t y Funds v. Bi ogen I DEC I nc. , 537 F. 3d 35, 58 ( 1st Ci r .

10

This court reached a similar conclusion in the parallelderivative action brought by Abiomed shareholders against Abiomedand its directors. See Bryceland, 557 F. App'x at 5 (holding thatthe shareholders' complaint did not "allege facts showing that thedirectors hid from investors the trouble that th[e alleged off-label] marketing had created; indeed, as the reproduced sections of

Abiomed's SEC filings make clear, the company was not shy indisclosing its exposure to liability").

-32-



2008) ) . There must be some r oom f or gi ve and t ake between a

r egul at ed ent i t y and i t s regul at or . 11

2. St at ement s About Abi omed' s Pol i cy wi t h Respect t oOf f - Label Mar ket i ng and i t s I nt er act i on wi t h t he

FDA

Agai n, we assume arguendo t hat "Abi omed had an act ual

pol i cy or pr acti ce of of f - l abel mar ket i ng, whi l e i t s publ i c

st at ement s wer e t hat i t s pol i cy was t o r ef r ai n f r om such

market i ng, " Si mon, 2014 WL 1413638, at *17, and t hat def endants

st at ed t hat t hey were cooperat i ng wi t h t he FDA when t hey were not

doi ng so. But we concl ude t hat pl ai nt i f f s have f ai l ed t o al l ege

t hat def endant s made t hese st atement s wi t h t he r equi si t e sci ent er .

Fi r st , t her e ar e Abi omed' s subst ant i al di scl osur es about

i t s cor r espondence wi t h t he FDA. As sai d, t hese di scl osur es

under cut any i nf er ence of sci ent er . Pl ai nt i f f s' br i ef gl osses over

t hese di scl osur es i n an ef f or t t o make t he case f or sci ent er mor e

compel l i ng. Accor di ng t o t he br i ef , Abi omed sai d t hat i t di d not

engage i n of f - l abel mar ket i ng and t hat al l of t he FDA' s concer ns

"had been r esol ved. " But t hi s char act er i zat i on i s i naccur at e, bot h

as to t he compl ai nt and as t o what t he act ual st at ement s were. The

compl ai nt act ual l y says t hat Abi omed st at ed i t s pol i cy was t o

"r ef r ai n f r om st at ement s t hat coul d be consi der ed of f - l abel

11That the company did not disclose the receipt of the

Untitled Letter from the FDA is not proof of scienter. The FDAgradates its levels of inquiry and does not itself make UntitledLetters public.

-33-



pr omot i on, " but t hat t he FDA coul d di sagr ee wi t h Abi omed' s vi ew on

t hat quest i on; and t hat whi l e i t "bel i eve[ d] " t he i ssue had been

r esol ved, i t coul d come up agai n i n t he f ut ur e and coul d ent ai l

"si gni f i cant consequences. " I n r esol vi ng t hi s appeal , we f ocus, as

di d t he di st r i ct cour t , on t he al l egat i ons of t he compl ai nt , not on

pl ai nt i f f s ' char act er i zat i on of t hose al l egat i ons.

Ot her evi dence suppor t s Abi omed' s argument t hat i t was

not i nvol ved i n a scheme t o def r aud i nvest or s but r at her i n f i ndi ng

a sol ut i on amenabl e t o t he FDA whi l e meet i ng i t s need t o market i t s

pr oduct s. I t was Abi omed whi ch asked f or meet i ngs wi t h t he FDA.

And an agr eement was reached. The FDA i n f act sent a cl ose- out

l et t er i n Febr uar y 2013 sayi ng t hat Abi omed' s corr ect i ve act i ons

undert aken i n r esponse t o t he J une 2011 Warni ng Let t er had

adequat el y addr essed t he FDA' s concer ns. Thi s si gni f i cant l y

under cut s any i nf er ence t hat def endant s pur posef ul l y or r eckl essl y

mi sl ed i nvest or s about t he extent of Abi omed' s cooper at i on wi t h t he

FDA.

Sci ent er i s not est abl i shed because t her e wer e st atement s

f r om conf i dent i al wi t nesses t hat Abi omed management was i n f act

i nt ent i onal l y vi ol at i ng FDA r egul at i ons. These wi t nesses sai d t hat

Abi omed seni or management knew t hat Abi omed was i mproper l y

mar ket i ng the I mpel l a 2. 5, di d not t ake t he FDA' s war ni ngs

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ser i ousl y, and "bl ew of f " t he concer ns of l ower - l evel empl oyees. 12

The conf i dent i al wi t nesses ar e not descr i bed wi t h suf f i ci ent

par t i cul ar i t y f or t hei r st at ement s t o gi ve r i se t o t he r equi si t e

"st r ong i nf er ence" of sci ent er on t he par t of Abi omed and i t s

management . As t he di st r i ct cour t noted, none of t he wi t nesses

"were i n seni or management posi t i ons, and t hey appear t o have had

r el at i vel y l i t t l e ongoi ng cont act wi t h seni or management . " Si mon,

2014 WL 1413638, at *14. CW2, CW3, CW4, and CW6 di d not even wor k

at Abi omed dur i ng t he Cl ass Per i od and so woul d not have had

f i r st hand knowl edge of t he st at e of mi nd of Abi omed' s management

dur i ng t hat per i od. And CW1, CW5, and CW7, who st at ed t hat t he

t r ai ni ng and market i ng mat er i al s Abi omed pr ovi ded were " i mpr oper"

under FDA r egul at i ons, di d not i dent i f y t he t i me per i od t o whi ch

most of t hei r st at ement s r el at ed. Cf . Bi ogen I DEC, 537 F. 3d at 52-

12That the witnesses were confidential did not disqualify

them.

[W]here plaintiffs rely on confidentialpersonal sources but also on other facts, theyneed not name their sources as long as thelatter facts provide an adequate basis forbelieving that the defendants' statements werefalse. Moreover, even if personal sourcesmust be identified, there is no requirementthat they be named, provided they are

described in the complaint with sufficientparticularity to support the probability thata person in the position occupied by thesource would possess the information alleged.

Mesko v. Cabletron Sys., Inc. (In re Cabletron Sys., Inc.), 311F.3d 11, 29 (1st Cir. 2002) (alteration in original) (quoting Novakv. Kasaks, 216 F.3d 300, 314 (2d Cir. 2000)).

-35-



53 ( di scount i ng pr obat i ve val ue of obser vat i ons by conf i dent i al

sour ces i n part because t he sour ces di d not di scl ose when t hose

obser vat i ons were made) . The CWs' st at ement s are al so undermi ned

by t he f act t hat t he FDA event ual l y cl osed out i t s i nvest i gat i on of

Abi omed wi t hout t aki ng any act i on adver se t o t he company.

More f undament al l y, even i f t he CWs' st atement s pl ausi bl y

suggest t hat Abi omed was act i ng i mpr oper l y, t hey do not show t hat

def endant s' st atement s about company pol i cy and t he FDA' s i nqui r i es

wer e made wi t h consci ous i nt ent t o def r aud or r eckl essl y. As we

sai d i n Wat er s Cor p. , "[ t ] he key quest i on . . . i s not whet her

def endant s had knowl edge of cer t ai n undi scl osed f act s, but r at her

whet her def endant s knew or shoul d have known t hat t hei r f ai l ur e to

di scl ose t hose f act s ' pr esent [ ed] a danger of mi sl eadi ng buyer s or

sel l er s. ' " 632 F. 3d at 758 ( t hi r d al t er at i on i n or i gi nal ) ( emphasi s

added) ( ci t at i on omi t t ed) ( quot i ng Gr eebel , 194 F. 3d at 198) . For

exampl e, CW7' s st at ement s, f ar f r omsuggest i ng an i nt ent t o def r aud

i nvest ors, suggest i nst ead t hat Abi omed was aggr essi vel y market i ng

t he I mpel l a 2. 5 "ever y whi ch way" i n or der t o sel l mor e uni t s. 13

3. I nsi der Tr adi ng Al l egat i ons

The pl ai nt i f f s' al l egat i ons of i nsi der t r adi ng do not

al t er our concl usi on as t o l ack of sci ent er . "Dependi ng on

13 At oral argument, plaintiffs' counsel disavowed any

reliance on the argument, based on an efficient market hypothesis,that any statements regarding the Impella 2.5 aimed at potentialbuyers of the device were also effectively aimed at investors in

Abiomed.

-36-



cont ext , al l egat i ons of i nsi der t r adi ng may of f er some suppor t f or

i nf er ences of sci ent er . " Wat er s Cor p. , 632 F. 3d at 760. " ' The

vi t al i t y of t he i nf er ence t o be dr awn depends on t he f act s, and can

r ange f r ommar gi nal t o st r ong. ' " I d. ( quot i ng Gr eebel , 194 F. 3d at

197–98) . For st ock sal es by cor por at e of f i ci al s t o bol st er an

i nf er ence of sci ent er , t he t r adi ng must be, " [ a] t a mi ni mum, . . .

unusual , wel l beyond the nor mal pat t er ns of t r adi ng by t hose

def endant s. " I d. at 761 ( quot i ng Gr eebel , 194 F. 3d at 198)

( i nt er nal quot at i on mar ks omi t t ed) ; accor d Gr eebel , 194 F. 3d at

206- 07 ( sal es must be "out of t he or di nar y or suspi ci ous" ) .

Her e, t he t r adi ng ci t ed i n t he compl ai nt was nei t her

unusual nor suspi ci ous. Mi nogue i ncr eased hi s hol di ngs of Abi omed

st ock by 9. 2% dur i ng t he Cl ass Per i od, whi ch negat es any i nf er ence

t hat he had a mot i ve t o ar t i f i ci al l y i nf l at e Abi omed' s st ock dur i ng

t hat per i od. Cf . ACA Fi n. , 512 F. 3d at 66- 67 ( decl i ni ng t o f i nd a

st r ong i nf er ence of sci ent er i n par t because def endant s woul d not

have been personal l y enr i ched by def r audi ng i nvest ors) . Bowen made

hi s f i r st sal es of Abi omed st ock ( t ot al i ng 6. 5% of hi s hol di ngs)

between J anuary 2010 and t he end of t he Cl ass Per i od. But t hose

sal es ar e har dl y suspi ci ous gi ven t hat he had j ust j oi ned t he

company i n December 2008 and f i r st became el i gi bl e to t r ade i n

December 2009. 14 Pl ai nt i f f s l i st t he amount s of st ock sal es made

14We need not address the parties arguments concerning

defendants' 10b5-1 trading plans because plaintiffs' argumentsconcerning the purported insider trading fail even without

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by ot her seni or execut i ves dur i ng t hat per i od, but t hey do not

pr ovi de suf f i ci ent evi dence about t hose t r ades t o al l ow t he cour t

t o dr aw f r omt hema st r ong i nf er ence of sci ent er . For exampl e, t he

compl ai nt i s si l ent as t o the per cent age of hol di ngs sol d or t he

ci r cumst ances sur r oundi ng t he t r ades. I t i s al so uncl ear whet her

al l of t he ci t ed execut i ves woul d have had det ai l ed knowl edge about

Abi omed' s mar ket i ng pr act i ces. Cf . Wat er s Cor p. , 632 F. 3d at 762

n. 5 ( f i ndi ng t hat al l egat i ons r egar di ng non- def endant i nsi der sal es

wer e not pr obat i ve because the compl ai nt l i st ed "onl y bar e f act s

about t he shar es sol d" ) .

4. Concl usi on

Abi omed' s pr omot i onal and mar ket i ng act i vi t i es f or i t s

cor e pr oduct mi ght have been a r i sky cour se i n ter ms of i t s

l i kel i hood of pr ompt i ng sanct i ons f r om t he FDA. St i l l ,

" [ a] l l egat i ons of corporate mi smanagement are not act i onabl e under

Rul e 10b- 5. Nor ar e al l egat i ons of mer e negl i gence. " I d. at 760

( ci t at i ons omi t t ed) ; see al so Gr eebel , 194 F. 3d at 188 ( not i ng t hat

t he mens r ea r equi r ed f or secur i t i es f r aud "does not i ncl ude

or di nar y negl i gence, but i s cl oser t o bei ng a l esser f or m of

i nt ent ") . As the di st r i ct cour t cor r ectl y not ed, "t hi s case i s not

about whet her or not def endant s vi ol at ed t he FDCA or FDA

r egul at i ons. I t concer ns al l eged vi ol at i ons of secur i t i es

considering those plans.

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l aw . . . . " Si mon, 2014 WL 1413638, at *14. Pl ai nt i f f s' Rul e

10b- 5 cl ai m f ai l s .

I V. Sect i on 20( a) Cl ai m

Sect i on 20( a) of t he Secur i t i es Exchange Act i mposes

j oi nt and several l i abi l i t y on persons i n cont r ol of ent i t i es t hat

vi ol at e secur i t i es l aws. 15 U. S. C. § 78t ( a) . A sect i on 20( a)

cl ai m i s der i vat i ve of an under l yi ng vi ol at i on of t he secur i t i es

l aws. ACA Fi n. , 512 F. 3d at 67- 68. Because t he di st r i ct cour t

cor r ect l y di smi ssed pl ai nt i f f s' cl ai ms under Rul e 10b- 5, i t al so

cor r ect l y di smi ssed pl ai nt i f f s' sect i on 20( a) cl ai ms. See i d.

V. Leave To Amend

On a hopel ess quest , pl ai nt i f f s argue we shoul d r emand t o

al l ow t hem amend t he compl ai nt . No proper r equest was made t o t he

di st r i ct cour t , onl y a ment i on i n a f oot not e i n t hei r opposi t i on t o

di smi ssal . See J obl ove v. Bar r Labs, I nc. ( I n r e Tamoxi f en Ci t r at e

Ant i t r ust Li t i g. ) , 466 F. 3d 187, 220 ( 2d Ci r . 2006) ( "I t i s wi t hi n

t he cour t ' s di scr et i on t o deny l eave t o amend i mpl i ci t l y by not

addr essi ng t he r equest when l eave i s r equest ed i nf or mal l y i n a

br i ef f i l ed i n opposi t i on t o a mot i on t o di smi ss. ") , abr ogat ed on

ot her gr ounds by F. T. C. v. Act avi s, I nc. , 133 S. Ct . 2223 ( 2013) ;

Cal deron v. Kan. Dep' t of Soc. & Rehab. Ser vs. , 181 F. 3d 1180,

1185- 87 ( 10t h Ci r . 1999) ( not i ng wi t h appr oval an ear l i er hol di ng

t hat a di st r i ct cour t need not gr ant l eave t o amend i f pl ai nt i f f s

make a "bar e r equest i n t hei r r esponse t o a mot i on t o di smi ss" ) .

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I n any event , i t i s f ar t oo l at e; pl ai nt i f f s wer e put on

not i ce of t he def i ci enci es i n t he compl ai nt by t he mot i on t o

di smi ss. I f t hey had somet hi ng r el evant t o add, t hey shoul d have

moved t o add i t t hen. See ACA Fi n. , 512 F. 3d at 57 ( r ej ect i ng

pl ai nt i f f s' ar gument t hat t he di st r i ct cour t er r ed i n denyi ng t hem

l eave t o amend because "[ p] l ai nt i f f s t ook no act i on t o add new

al l egat i ons" i n r esponse t o def endant s' mot i on t o di smi ss " even

t hough t hey knew what t hey woul d add i f t hey amended, " and not i ng

t hat al l owi ng such a pr act i ce woul d " l ead to del ays,

i nef f i ci enci es, and wast ed wor k") . And even now t her e i s no

suggest i on t hat amendment woul d be anyt hi ng ot her t han f ut i l e.

See, e. g. , HSBC Real t y Cr edi t Cor p. ( USA) v. O' Nei l l , 745 F. 3d 564,

578 ( 1st Ci r . 2014) ; Br aunst ei n v. McCabe, 571 F. 3d 108, 127 ( 1st

Ci r . 2009) ; Uni ver sal Commc' n Sys. , I nc. v. Lycos, I nc. , 478 F. 3d

413, 418 ( 1st Ci r . 2007) . We wi sh t o di scour age t hi s pr act i ce of

seeki ng l eave t o amend af t er t he case has been di smi ssed.

VI . Concl usi on

We af f i r m t he j udgment of t he di st r i ct cour t . Cost s ar e

awar ded t o Abi omed.

Documents

Fire and Police Pension Assoc v. Abiomed, Inc., 1st Cir. (2015)