United States District Court, D. Massachusetts
IN RE BIOGEN INC. SECURITIES LITIGATION
ORDER ON PLAINTIFFS' MOTION TO VACATE ORDER OF
DISMISSAL AND FOR LEAVE TO AMEND THE COMPLAINT
Dennis Saylor IV United States District Judge
a putative class action involving alleged violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, 15 U.S.C. §§ 78j(b), 78t(a), and SEC Rule
10b-5. The Court granted defendants' motion to dismiss
the amended complaint with prejudice for failing to plead
facts giving rise to a strong inference of scienter. Citing
“newly discovered” evidence of defendants'
scienter, plaintiffs have moved pursuant to Fed.R.Civ.P.
59(e) and 60(b)(2) for relief from the order of dismissal and
for leave to amend the complaint. (Dkt. 74). After careful
consideration of plaintiffs' proposed second amended
complaint (“SAC”) (Dkt. 76, Ex. A) and their
stated reasons why the “new” evidence was
previously undiscoverable, the motion will be denied.
plaintiff GBR Group, Ltd. brought suit, on behalf of a class
of similarly situated persons, against biopharmaceutical
company Biogen Inc. and three Biogen executives. Plaintiffs
contended that class members were harmed when they purchased
Biogen's common stock at prices that were artificially
inflated by the company's materially misleading
statements and omissions about Tecfidera, its leading
multiple sclerosis drug. The original complaint was filed in
August 2015. After GBR was appointed lead plaintiff in
November and received a sixty-day extension to file an
amended complaint, the amended complaint was filed on January
19, 2016. In March, defendants moved to dismiss the amended
complaint with prejudice under the Private Securities
Litigation Reform Act of 1995 (“PSLRA”) and
Fed.R.Civ.P. 12(b)(6). Without moving for leave to amend the
complaint, plaintiffs opposed defendants'
motion. In April, the parties appeared for a
motion hearing, during and after which plaintiffs continued
to oppose dismissal without moving for leave to amend.
23, the Court granted defendants' motion to dismiss. The
Court concluded that the 216-paragraph amended complaint
plausibly alleged three material misstatements or omissions
concerning Tecfidera's discontinuation
rates. However, it also concluded that the
complaint failed to plead specific facts giving rise to a
strong inference of scienter, as required by the PSLRA, 15
U.S.C. § 78u-4(b)(2). (Dkt. 72 at 51-69). Specifically,
the Court concluded that the non-fraudulent inferences were
stronger than the alleged inference of scienter--that is, an
intent to defraud or recklessness:
Considered as a whole, the complaint presents allegations of
scienter that are perhaps plausible, but not “cogent
and compelling.” Tellabs, 551 U.S. at 324;
see also ACA Fin., 512 F.3d at 59 (noting that
scienter “should be evaluated with reference to the
complaint as a whole rather than to piecemeal
allegations”). Again, the allegations from confidential
sources--none of whom personally spoke to defendants or
witnessed any overtly fraudulent behavior--contribute
somewhat to plaintiffs' asserted inference of scienter.
However, they are too vague and conclusory to create a strong
inference of recklessness or intent. Indeed, the allegations
concerning physicians' discomfort after the PML death and
declining Tecfidera sales are at least partly consistent with
defendants' repeated public disclosures. Furthermore, the
complaint's “additional” motive and
core-product allegations provide very little support to an
inference of scienter. Without more, plaintiffs'
circumstantial case of scienter is not strong or compelling.
In sum, even after drawing all reasonable inferences on
behalf of plaintiffs, the most compelling inference to be
drawn from the complaint as a whole is that defendants were
unduly optimistic--at worst, negligently so--in predicting
how quickly Tecfidera sales would recover from the PML
announcement. “Still, ‘allegations of corporate
mismanagement are not actionable under Rule 10b-5. Nor are
allegations of mere negligence.'” Fire &
Police Pension Ass'n of Colo., 778 F.3d at 246
(quoting Waters Corp., 632 F.3d at 760) (alteration
omitted). Without evidence sufficient to support a strong
inference of intent, or at least recklessness,
defendants' failure to predict the future does not
support a claim for securities fraud . . . .
(Id. at 68-69). The order of dismissal was entered
on July 1.
21, plaintiffs filed a proposed second amended complaint and
moved pursuant to Fed.R.Civ.P. 59(e) and 60(b)(2) to vacate
the order of dismissal based on “newly
discovered” evidence of defendants' scienter.
Plaintiffs' “new” evidence consists of
allegations from two additional confidential witnesses (CW11
and CW12), and a declaration from a neurologist describing
discontinuations of Tecfidera at the MS Institute at Shepherd
in Atlanta, Georgia.
or alteration of a judgment under Rule 59(e) is “an
extraordinary remedy” that “should be used
sparingly.” Palmer v. Champion Mortg., 465
F.3d 24, 30 (1st Cir. 2006) (internal quotation marks
omitted). The Court has “substantial discretion and
broad authority” to grant a motion for reconsideration
pursuant to the rule. Ruiz Rivera v. Pfizer Pharm.,
LLC, 521 F.3d 76, 81 (1st Cir. 2008). However, a motion
for reconsideration will be granted only upon a showing of
(1) a “manifest error of law, ” (2) new evidence,
or (3) a misunderstanding or other error “not of
reasoning but apprehension.” Id. at 81-82. In
addition, Rule 60(b) provides a mechanism for setting aside a
judgment in certain circumstances. The rule provides, in
relevant part, that a court “may relieve a party or its
legal representative from a final judgment, order, or
proceeding for the following reasons . . . (2) newly
discovered evidence that, with reasonable diligence, could
not have been discovered in time to move for a new trial
under Rule 59(b).” Fed.R.Civ.P. 60(b)(2).
“Because Rule 60(b) is a vehicle for extraordinary
relief, motions invoking the rule should be granted only
under exceptional circumstances.” Davila-Alvarez v.
Escuela de Medicina Universidad Central del Caribe, 257
F.3d 58, 64 (1st Cir. 2001) (internal quotation marks
59(e) motion brought on the basis of new evidence “must
be denied where the ‘new evidence' consists of
information that, in the exercise of due diligence, could
have been presented earlier.” In re Genzyme
Corp., 2012 WL 6674483, at *2 (D. Mass. Dec. 21, 2012),
aff'd sub nom. In re Genzyme Corp. Sec. Litig.,
754 F.3d 31 (1st Cir. 2014) (citing Emmanuel v.
International Broth. of Teamsters, Local Union No. 25,
426 F.3d 416, 422 (1st Cir. 2005)); see Biltcliffe v.
CitiMortgage, Inc., 952 F.Supp.2d 371, 384 (D. Mass.
2013). “At the very least the [moving party] must put
forth a ‘cogent reason' as to why this evidence
could not have been offered at an earlier stage of the
proceedings.” Id. (quoting Fisher v.
Kadant, 589 F.3d 505, 513 (1st Cir. 2009)). Similarly, a
party moving for relief from judgment on the basis of newly
discovered evidence under Rule 60(b)(2) “must at the
very least, offer a convincing explanation as to why he could
not have proffered the crucial evidence at an earlier stage
of the proceedings.” Fisher, 589 F.3d at 513
(quoting Karak v. Bursaw Oil Corp., 288 F.3d 15,
19-20 (1st Cir. 2002)).
initial matter, plaintiffs were aware of at least some of the
“new” evidence before the Court entered the order
of dismissal on July 1. See Gonzalez-Pina v.
Rodriguez, 407 F.3d 425, 433 (1st Cir. 2005) (affirming
denial of Rule 60(b)(2) motion because “new”
evidence was discovered fourteen days before court
granted summary judgment, which “quickly
dispose[d]” of the issue) (citing Mitchell v.
United States, 141 F.3d 8, 18 (1st Cir. 1998)). In fact,
both CW11 and CW12 were interviewed by plaintiffs
approximately two months before the Court entered the
dismissal. Plaintiffs contend that they did not
immediately receive documents confirming the allegations of
CW11 and CW12, and they were “developing [the
neurologist's] expected testimony . . . when the Court
issued the Order.” (Pl. Mem. 19). At a bare minimum,
however, plaintiffs should have moved for leave to amend
shortly after the interviews, citing the interview
allegations as grounds for seeking additional time to file an
event, plaintiffs fail to provide a “cogent” or
“convincing” reason why the “new”
evidence could not have been discovered earlier with
appropriate diligence. As reasons, plaintiffs cite “the
timing of CW11's departure from [Biogen], ”
“CW12's initial unwillingness to cooperate, ”
and the fact that “[w]ithout the introduction from
CW12, [plaintiffs] could not know that [the neurologist]
should be interviewed.” (Pl. Mem. 7, 20). Those
justifications fall well short of justifying the
“extraordinary” relief that plaintiffs request,
especially given the amount of time they had to conduct their
investigation. The proposed class period is December 2014 to
July 2015. The initial complaint was filed August 8, 2015.
GBR moved to be appointed lead counsel on October 19, 2015,
and its motion was granted on November 17. The Court then
granted plaintiffs an additional sixty days from the
appointment date to file an amended complaint. The hearing on
defendants' motion to dismiss was not held until early
April 2016, and the Court did not issue its 72-page order
granting defendants' motion until late June. In short,
plaintiffs had ample time to conduct a diligent investigation
and, if necessary, move for leave to amend. They did not.
are numerous reasons why plaintiffs' justifications are
not convincing, but one example will suffice. Plaintiffs
contend that CW12 did not suggest until June 2016 that they
interview Dr. Thrower, the Shepherd Center neurologist, and
therefore “they could not know that Dr.
Thrower should be interviewed or that he had knowledge about
the facts set forth in his declaration” until then.
(Greenbaum Decl. ¶¶ 9-10) (emphasis added).
However, there is a considerable difference between
plaintiffs arguing that they “could not know”
something because a witness did not volunteer the information
to them, and demonstrating a cogent reason why a diligent
investigation could not uncover the evidence. For example,
plaintiffs concede that they interviewed CW12 in April 2016,
and that he alleged “[m]ost of the doctors [he] sold
Tecfidera to discontinued patients off the drug because of
the PML death.” (SAC ¶ 64). Setting aside the fact
that plaintiffs did not interview CW12 until three months
after the filing of the amended complaint (and weeks after
the motion hearing), surely a diligent follow-up question or
two would likely have uncovered who those doctors were, or at
least where (generally) they worked. In light of the fact
that Dr. Thrower worked at the Shepherd Center--supposedly
CW12's “number one MS volume and influencer
account”--plaintiffs could have uncovered Dr.
Thrower's identity by late April at the latest.
(Id. ¶ 65).
after careful consideration of the proposed second amended
complaint and plaintiffs' explanations, it appears that
the “newly discovered” evidence should have, with
the appropriate investigative diligence, been discovered and
presented earlier in the proceeding. At the very least,
plaintiffs have failed to provide the Court with a cogent or
convincing reason otherwise. Accordingly, ...