Deka Int'l S.A. Luxemborg v. Genzyme Corp.
2008 U.S. App. LEXIS 28460
| 1st Cir. | 2014Background
- Genzyme faced a PSLRA securities-fraud action over Lumizyme BLA approval and Allston/Geel facility issues.
- Plaintiffs allege defendants made false/misleading statements about Lumizyme timing and manufacturing quality.
- District court dismissed with prejudice for lack of scienter under PSLRA, granting motion to dismiss.
- Plaintiffs moved for relief from judgment and post-judgment leave to amend; motions denied.
- Class period events culminated in FDA actions and a consent decree with fines, informing the market of supply and regulatory issues.
- Court reviews de novo all pleading sufficiency, with focus on scienter and Rule 9(b) specificity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the complaint plausibly alleges securities fraud with strong scienter | Plaintiffs contend defendants knew or recklessly ignored Lumizyme risks | Defendants argue no cogent scienter inference from the facts | Dismissal affirmed; no strong inference of scienter |
| Duty to disclose Form 483 and related FDA notices | Genzyme concealed the October 2008 Form 483 | No affirmative duty to disclose absent misleading statements | No strong inference of scienter; disclosure timing not a violation |
| Disclosure regarding bioreactor failures and viral contamination | Concealment showed fraudulent intent to mislead on approval prospects | Investigations were ongoing; disclosure timed with new information | No strong inference of scienter; disclosures and timelines counter the claim |
| Actionability of forward-looking Lumizyme projections | Statements about timeliness of approval were false/misleading | Statements were forward-looking with cautionary language; not actionable | Forward-looking statements not actionable absent actual knowledge of falsity |
Key Cases Cited
- In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187 (1st Cir. 2005) (requires cogent inference of scienter for 10(b) claims)
- Hill v. Gozani, 638 F.3d 40 (1st Cir. 2011) (heightened pleading and 9(b) standards apply)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Supreme Court 2007) (strong inference standard; plaintiff must show cogent inference)
- ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46 (1st Cir. 2008) (tells how to assess competing inferences for scienter)
- In re The First Marblehead Corp. Sec. Litig., 639 F. Supp. 2d 145 (D. Mass. 2009) (disclosures may negate inference of scienter)
- In re Boston Scientific Corp. Sec. Litig., 686 F.3d 21 (1st Cir. 2012) (discretion on timing of disclosures and scienter considerations)