Vicky Nguyen v. Endologix, Inc., 962 F.3d 405

Endologix developed Nellix, an endovascular aneurysm sealing device; it received CE Mark (Europe) in 2013 and began a U.S. IDE clinical trial (EVAS Forward) in Jan. 2014.
Plaintiff alleges Endologix learned of device "migration" problems in European commercial use and nonetheless told investors FDA approval was likely in 2016–2017.
Year‑1 U.S. IDE results (released May–June 2016) were favorable (94% treatment success; 2.3% migration); two‑year data later showed increased migration and Endologix narrowed the IFU.
The FDA requested two‑year follow‑up data, delaying PMA and ultimately leading Endologix to abandon the submission in May 2017; Endologix stock fell sharply after disclosures.
Nguyen sued under §§ 10(b)/20(a) and Rule 10b‑5, alleging defendants knowingly or with deliberate recklessness misled investors; the district court dismissed for failure to plead scienter under the PSLRA and denied leave to amend.
The Ninth Circuit affirmed, concluding the complaint failed to plead particularized facts giving rise to a strong inference of scienter; more plausible non‑culpable inferences existed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether complaint pleads scienter under PSLRA (strong inference)	Defendants knew of Europe migration problems and thus knowingly misled investors about FDA approval prospects	Defendants relied on favorable U.S. trial data; no evidence they believed approval was impossible or that they acted with intent/reckless disregard	Dismissed: plaintiff failed to plead a strong inference of scienter; innocent inference (reliance on U.S. data) is more plausible
Sufficiency of confidential witness (CW1) allegations to show knowledge	CW1 reported internal complaints, meetings, and presentations about migration in Europe	CW1 lacked particularized facts (numbers, severity, timelines), left before key events, and later disavowed some attributed statements	CW1 allegations insufficiently particular to raise a strong inference of scienter
Denial of leave to amend	Nguyen sought another amendment to cure defects	Defendants note plaintiff already had leave and failed to plead requisite particularity	Affirmed: district court did not abuse discretion in denying further leave to amend

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (describes the PSLRA "strong inference" standard)
Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (9th Cir. 2009) (PLSRA/9(b) pleading standards and comparing inferences)
Cozzarelli v. Inspire Pharm., Inc., 549 F.3d 618 (4th Cir. 2008) (probability that company would continue a doomed clinical program is implausible)
Schueneman v. Arena Pharm., Inc., 840 F.3d 698 (9th Cir. 2016) (distinguishing cases where a preclinical/sticking‑point study made scienter plausible)
Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (materiality of adverse event reports and when omission can be actionable)
Lipton v. Pathogenesis Corp., 284 F.3d 1027 (9th Cir. 2002) (insider characterizations without report content insufficient under PSLRA)
Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051 (9th Cir. 2014) (requiring specifics from internal reports cited by witnesses)
In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046 (9th Cir. 2014) (rejecting theories where confidential witness timing undermines plausibility)