Teachers' Retirement System v. Pfizer, Inc.
819 F.3d 642
| 2d Cir. | 2016Background
- Plaintiffs (a securities class) sued Pfizer and certain officers under §§10(b), 20(a), and 20A/Rule 10b‑5, alleging Pfizer concealed cardiovascular risks of Celebrex and Bextra and thus inflated Pfizer stock during Oct 31, 2000–Oct 19, 2005.
- Celebrex and Bextra were developed/marketed initially by Searle (later Pharmacia); Pfizer co‑promoted under a Co‑Promotion Agreement and ultimately acquired Pharmacia in April 2003.
- Plaintiffs relied on an "inflation‑maintenance" theory: Pfizer’s statements during the class period maintained preexisting market misperceptions (originally created by Searle/Pharmacia), so Pfizer should be liable for the artificial inflation realized when corrective information emerged.
- Plaintiffs’ damages expert (Prof. Daniel Fischel) ran an event study identifying several corrective (price‑decline) and positive (price‑increase) disclosure dates; after the district court excluded two corrective dates as unrelated to Pfizer, Fischel applied a 9.7% proportional reduction to positive dates in a supplemental report.
- Pfizer moved to exclude Fischel under Fed. R. Evid. 702, arguing (1) Fischel failed to disaggregate inflation attributable to Searle/Pharmacia from inflation attributable to Pfizer, and (2) his proportional reduction lacked analytical support. The district court excluded Fischel entirely and entered summary judgment for Pfizer. The Second Circuit vacated and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of Fischel's expert under Rule 702 | Fischel need not disaggregate prior‑owner statements because Pfizer's conduct maintained the same inflation; his event study is helpful | Fischel failed to separate inflation caused by Searle/Pharmacia from Pfizer and therefore his testimony is unhelpful; plus methodological flaws | Court: Excluding Fischel entirely was abuse of discretion — his event‑study opinions (except the proportional reduction) were admissible under Rule 702 in light of Plaintiffs’ inflation‑maintenance theory |
| Reliability of Fischel’s 9.7% Proportional Reduction to Positive Disclosure days | The proportional reduction is a reasonable data update to reflect the district court’s earlier summary judgment findings | The reduction has no analytical basis, peer support, or reliable application of methodology | Court: Proportional Reduction was unreliable and properly excluded, but that did not require excluding the remainder of Fischel’s testimony |
| Whether Pfizer "made" (is liable for) pre‑acquisition statements by Searle/Pharmacia employees | Pfizer had sufficient authority under co‑promotion practices and documents to have ultimate authority over some predecessor statements | Many predecessor statements were made by Searle/Pharmacia employees and attributed to them; Pfizer lacked "ultimate authority" to be the maker | Court: Genuine disputes of material fact exist as to eight press/media statements (summary judgment vacated as to those); Form 8‑K statements lacked evidence of Pfizer control and summary judgment as to that statement stands |
| Appropriateness of district court's summary judgment (based on expert exclusion) | Exclusion of the expert eliminated Plaintiffs’ ability to prove loss causation/damages — exclusion improper so summary judgment improper | Without an admissible expert on loss causation/damages, Plaintiffs cannot prove essential elements and summary judgment was proper | Court: Because exclusion of Fischel in full was an abuse of discretion and there are triable issues about certain predecessor statements, summary judgment is vacated and the case remanded |
Key Cases Cited
- Janus Capital Grp. v. First Derivative Traders, 131 S. Ct. 2296 (2011) (definition of who "made" a statement under Rule 10b‑5; "ultimate authority")
- Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) (district court gatekeeping duties for expert admissibility)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (Daubert gatekeeping applies to all expert testimony; inquiry is flexible)
- Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256 (2d Cir. 2002) (focus admissibility analysis on principles/methodology and reliable application)
- Joiner v. General Elec. Co., 522 U.S. 136 (1997) (courts may exclude expert opinion that connects data to conclusions by ipse dixit)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (fraud‑on‑the‑market presumption and market‑price theory)
- FindWhat Investor Grp. v. FindWhat.com, 658 F.3d 1282 (11th Cir. 2011) (inflation‑maintenance theory and how misstatements can maintain, not only cause, inflation)