Public Pension Fund Group v. KV PHARMACEUTICAL CO.
2012 U.S. App. LEXIS 11211
| 8th Cir. | 2012Background
- KV Pharmaceutical faced a class action alleging securities fraud tied to FDA/cGMP compliance and earnings claims during 2004–2009 Class Period.
- KV repeatedly stated in five Form 10-Ks that its facilities were in material compliance with regulatory requirements and cGMP.
- FDA inspections produced Form 483s detailing numerous violations; the February 2009 Form 483 documented thirty-five serious conditions.
- The FDA later sued KV in March 2009 for ongoing cGMP violations and KV’s manufacturing issues allegedly continuing through the Class Period.
- Investors alleged KV’s statements about compliance and earnings were false or misleading; the district court dismissed, leading to this appeal.
- The panel affirmed in part, reversed in part, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether KV’s FDA/cGMP statements were false or misleading | Investors claim Form 483s show misrepresentation | KV argues Form 483s are not final determinations | Yes; statements could be misleading given Form 483s and materiality facts |
| Whether earnings statements tied to Metoprolol required disclosure | KV concealed manufacturing problems affecting Metoprolol earnings | No duty to disclose manufacturing issues when only past results are reported | District court did not err; no duty to disclose beyond past financials |
| Whether scheme liability claims against Van Vliet and Bleser were adequately pled | Van Vliet/Bleser engaged in a scheme with knowledge of misrepresentations | Claims are conclusory and lack specific scheme acts | Dismissed; lack of particularized facts on scheme involvement |
| Whether post-judgment amendment should be permitted | New facts (ETHEX plea, 2008–2009 conduct) cure deficiencies | Amendment would be improper and not timely | Abused discretion; remanded to permit amendment on remand |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (materiality framework for securities fraud)
- Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309 (S. Ct. 2011) (materiality and loss causation in disclosures)
- In re Scholastic Corp. Sec. Litig., 252 F.3d 63 (2d Cir. 2001) (requires facts showing falsity and scienter with particularity)
- In re Merck & Co., Inc. Sec. Litig., 432 F.3d 261 (3d Cir. 2005) (use of post-class period data to evaluate class-period statements)
- K-tel Int'l, Inc. Sec. Litig., 300 F.3d 881 (8th Cir. 2002) (particularity and materiality requirements under PSLRA)
- Gebhardt v. ConAgra Foods, Inc., 335 F.3d 824 (8th Cir. 2003) (duty to disclose hidden risks when statements imply compliance)
- Acito v. IMCERA Group, Inc., 47 F.3d 47 (2d Cir. 1995) (distinguishability regarding FDA inspection results)