Kevin Dougherty v. Esperion Therapeutics, 905 F.3d 971

Background

Esperion, a development-stage pharma company, focused solely on ETC-1002, an LDL‑cholesterol lowering drug; it had no products or revenue and relied on investor funding.
After an August 2015 End‑of‑Phase‑2 meeting with the FDA, Esperion publicly stated the FDA had "confirmed" LDL‑C remains an acceptable surrogate and that a completed cardiovascular outcomes trial (CVOT) would not be required prior to approval for certain high‑need populations.
CEO Tim Mayleben reiterated these statements on an analyst call but emphasized that final FDA minutes were still forthcoming and cautioned the company might change its Phase 3 design after receiving them.
When the FDA released its final meeting minutes in late September 2015, Esperion announced the FDA had encouraged initiation of a CVOT that might need to be well underway (or completed) before approval; the stock dropped ~48%.
Plaintiffs (purchasers between Aug. 18–Sept. 28) sued under §10(b), Rule 10b‑5, and §20(a), alleging Esperion/Mayleben knowingly or recklessly misrepresented the FDA’s statements; the district court dismissed for failure to plead scienter and held the statements fell within the PSLRA safe harbor.
The Sixth Circuit reversed and remanded, holding plaintiffs adequately alleged scienter and that the challenged August statements were not protected by the PSLRA safe harbor.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs pleaded a strong inference of scienter	Esperion’s August statements contradicted FDA minutes; divergence, contemporaneous facts, and close timing support knowing or reckless misstatements	Differences reflect either (1) FDA changed positions after the meeting or (2) Esperion misinterpreted the FDA — innocent explanations	Reversed: Allegations (divergence between internal FDA meeting and public statements; disregard of current info; 6‑week timing) give rise to a cogent inference of scienter (knowing or reckless) under Tellabs/Helwig factors
Whether Esperion’s August statements are forward‑looking and protected by PSLRA safe harbor	Statements were assertions of what the FDA had told Esperion — verifiable present facts, not protected forward‑looking predictions	Statements concerned future approval and were assumptions underlying future projections, falling within the safe harbor	Reversed: Statements were factual representations separable from any forward‑looking content and thus outside the PSLRA safe harbor
Whether the statements could be excused as reasonable misunderstanding of FDA minutes	Plaintiffs say not plausible — FDA minutes are the official record and Esperion did not use the FDA dispute process; misapprehension supports recklessness	Esperion contends minutes may differ from meeting substance and the company reasonably relied on its interpretation until minutes arrived	Court: Both innocent inferences (changed minutes or misunderstanding) are not more compelling than inference of scienter; misunderstanding could instead support recklessness
Whether §20(a) control‑person claim against CEO survives given §10(b) reversal	Plaintiffs argue Mayleben controlled Esperion and participated in misleading statements	Defendants argued underlying §10(b) failure defeats derivative §20(a) claim	Held: §20(a) claim adequately pleaded because §10(b)/Rule 10b‑5 claims survive dismissal

Key Cases Cited

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Sup. Ct.) (sets standard for assessing scienter: whether inference of scienter is cogent and at least as compelling as opposing inferences)
Doshi v. Gen. Cable Corp., 823 F.3d 1032 (6th Cir. 2016) (scienter includes knowing intent or recklessness; heightened pleading discussed)
Kuyat v. BioMimetic Therapeutics, Inc., 747 F.3d 435 (6th Cir. 2014) (contrast: no facts showing company knew FDA’s likely position when speaking)
In re Omnicare, Inc. Sec. Litig., 769 F.3d 455 (6th Cir. 2014) (elements of §10(b) claim and non‑exhaustive scienter/Helwig factors)
Miller v. Champion Enters., Inc., 346 F.3d 660 (6th Cir. 2003) (distinguishes present factual statements separable from forward‑looking statements under PSLRA)
Helwig v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001) (lists factors for evaluating scienter, including divergence between internal reports and external statements)
City of Monroe Emps. Ret. Sys. v. Bridgestone Corp., 399 F.3d 651 (6th Cir. 2005) (uses meeting contents as internal reports; timing probative of scienter)
PR Diamonds Inc. v. Chandler, 364 F.3d 671 (6th Cir. 2004) (defines recklessness in securities context; motive pleading requirements)