747 F.Supp.3d 748
D.N.J.2024Background
- Celgene developed ozanimod (the Drug) and planned an NDA submission end of 2017; a metabolite (Metabolite) was definitively identified mid‑2017.
- Company public statements (ten identified) from July 2017 to Feb 2018 represented the company was "on track" to submit and that the NDA had been submitted based on phase III data.
- Celgene submitted a briefing book to the FDA proposing to submit certain metabolite-related data after the NDA; the FDA replied that the clinical pharmacology package and related reports must be complete at time of submission.
- FDA issued a Refusal to File in Feb 2018; Celgene stock fell ~8.5%.
- Plaintiffs (investors) sued under §10(b)/Rule 10b-5, alleging the company and three executives (Smith — COO; Curran — Franchise President; Martin — Managing Director) had scienter or that their scienter could be imputed to Celgene; defendants moved for partial summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether individuals had scienter for specific company statements | Plaintiffs: dissonance between what executives knew about Metabolite/timeline and the public "on‑track" statements supports inference of intent to deceive | Defendants: no sufficient dissonance or red flags; some executives never had the requisite awareness of the public statements | Court: jury could find scienter as to statements 8–10 for Smith and Curran; no scienter for Smith on statements 1–7 (law of the case); Curran lacks scienter for 1–4 (law of the case); Curran scienter for 5–7 needs further briefing |
| Whether an employee's scienter can be imputed to the corporation | Plaintiffs: scienter of Smith or Curran (and Martin) can be charged to Celgene because they were involved in disclosure/preparation | Defendants: imputation fails where employee was not a statement‑maker or did not act within scope of duties tied to disclosures | Held: Smith and Curran's scienter as to statements 8–10 can be imputed (disclosure committee roles, review duties). Martin's knowledge/intent cannot be imputed (no evidence he knew or intended public statements would follow) |
| Effect of prior rulings (law of the case) on summary judgment | Plaintiffs: seek to revisit earlier holdings | Defendants: rely on Judge Vazquez's earlier rulings to bar scienter findings for certain periods | Held: Law of the case applied — prior ruling that Smith lacked scienter through Oct 2017 controls (bars imputing Smith's scienter for statements 1–7); same reasoning extends to Curran for statements 1–4 |
| Whether further factual development is required for certain claims | Plaintiffs: contend briefing book and internal materials suffice to raise scienter for Curran on statements 5–7 | Defendants: contend record lacks necessary technical detail and direct ties | Held: Court held motion in abeyance as to Curran on statements 5–7 and ordered supplemental factual briefing on technical timing/mitigant issues |
Key Cases Cited
- Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) (scienter is an intent to deceive, manipulate, or defraud)
- Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308 (2007) (standards for evaluating scienter and allegations in securities suits)
- Janus Capital Grp. v. First Derivative Traders, 564 U.S. 135 (2011) (limits on who qualifies as the maker of a statement under §10(b))
- Dirks v. SEC, 463 U.S. 646 (1983) (scienter requires intent to deceive investors)
- Belmont v. MB Inv. Partners, Inc., 708 F.3d 470 (3d Cir. 2013) (Third Circuit discussion of imputation issues and state‑law treatment)