155 F. Supp. 3d 386
S.D.N.Y.2016Background
- Plaintiffs (Meitav and Mofsenson) sued Sanofi and its CEO Christopher Viehbacher on behalf of ADS purchasers (Feb 7, 2013–Oct 29, 2014), alleging securities fraud under §10(b), Rule 10b-5 and §20(a).
- Core allegation: Sanofi inflated U.S. diabetes-line sales (notably Lantus) by funneling disguised payments to Accenture and Deloitte as kickbacks to induce pharmacies/hospitals to favor Sanofi, and concealed that scheme while touting sales growth and compliance.
- Allegations rely largely on two former employees (Ponte and Kazimir) who described miscoded contracts, nine specific contracts (~$34M) Ponte flagged, and broader millions in payments allegedly routed through consultants.
- Plaintiffs contend internal investigations occurred in 2013 and that corporate processes would have put Viehbacher and the Board on notice; plaintiffs say Sanofi later stopped the scheme, diabetes sales slowed, Viehbacher was fired, and stock price dropped.
- Defendants moved to dismiss under Rules 9(b) and 12(b)(6) and the PSLRA; the court granted the motion, finding plaintiffs failed to plead the alleged kickback scheme, actionable misstatements/omissions, scienter, or loss causation with required particularity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs pled the underlying illegal-kickback scheme with particularity | Ponte/Kazimir’s accounts and miscoded contracts show Sanofi paid disguised kickbacks that inflated diabetes sales | Allegations are speculative: contracts not identified or shown to be unlawful, miscoding not explained, no facts showing consultants performed illegal referrals | Dismissed — plaintiffs failed to plead scheme beyond speculation and did not satisfy Rule 9(b)/PSLRA particularity requirements |
| Whether Sanofi/Viehbacher made actionable misstatements or omissions (sales growth, compliance statements, CSR, 20‑F/SOX certifications) | Omissions (failure to disclose scheme, whistleblower complaints, internal probe) rendered growth and compliance statements misleading | Statements were either accurate historical sales data or nonactionable puffery; SOX certifications depend on defendant's actual knowledge and plaintiffs failed to allege that knowledge | Dismissed — compliance language and growth reports not actionable; SOX certifications not shown false absent scienter |
| Whether plaintiffs adequately alleged scienter (intent or recklessness) for Viehbacher or corporate scienter for Sanofi | Corporate policies, alleged internal investigation, and Godleski/Urbaniak’s conduct show knowledge or reckless disregard; Ponte’s report that Viehbacher was “extremely unhappy” about held-back contracts implies awareness | Allegations rely on position/access or second‑hand/confidential-source assertions without specific reports; no motive alleged and no concrete facts showing management knew payments were unlawful | Dismissed — plaintiffs failed to plead a strong, cogent inference of scienter as required by Tellabs/PSLRA |
| Whether plaintiffs pleaded loss causation (materialization of concealed risk) | Ending the kickback scheme caused diabetes sales to slow and triggered stock declines in Oct 2014, so the loss flowed from the concealed risk | Plaintiffs did not plausibly show the scheme materially inflated sales or that ending it caused the October stock drops; no link tying alleged payments to specific increased prescriptions/sales | Dismissed — no plausible causal link between alleged omissions (kickbacks) and the market losses |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (explains plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes pleading must show more than speculative claims)
- ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (Rule 9(b) particularity in securities fraud suits)
- Novak v. Kasaks, 216 F.3d 300 (PSLRA requires particularized facts for allegations made on information and belief)
- Rombach v. Chang, 355 F.3d 164 (puffery and opinions not actionable without particularized facts)
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (PSLRA pleading requirements for securities suits)
- ECA Local 134 IBEW Joint Pension Trust v. JPMorgan Chase Co., 553 F.3d 187 (motive/opportunity and circumstantial scienter framework)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (standard for weighing competing inferences to determine strong inference of scienter)
- Lentell v. Merrill Lynch & Co., 396 F.3d 161 (defines loss causation and proximate cause in securities fraud)
- In re Marsh & McLennan Cos., Inc. Sec. Litig., 501 F. Supp. 2d 452 (duty to disclose uncharged misconduct only when omission makes other statements misleading)