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7/26/2019 Deka Int'l S.A. Luxemborg v. Genzyme Corp., 1st Cir. (2014)
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United States Court of AppealsFor the First Circuit
No. 13- 1085
I N RE: GENZYME CORP. SECURI TI ES LI TI GATI ON,
DEKA I NTERNATI ONAL S. A. LUXEMBOURG; CI TY OF EDI NBURGHCOUNCI L AS ADMI NI STERI NG AUTHORI TY OF THE LOTHI AN PENSI ON
FUND; GOVERNMENT OF GUAM RETI REMENT FUND,
Pl ai nt i f f s , Appel l ant s ,
VI VI AN OH, i ndi vi dual l y and on behal f of al l ot hersi mi l ar l y si t uat ed; J ON RAHN, i ndi vi dual l y and on behal f
of al l ot her s s i mi l ar l y s i t uat ed;GENZYME I NSTI TUTI ONAL I NVESTORS,
Pl ai nt i f f s,
v.
GENZYME CORPORATI ON; HENRI A. TERMEER; DAVI D P. MEEKER;MI CHAEL S. WYZGA; ALLI SON LAWTON; MARK R. BAMFORTH;
GEOFFREY MCDONOUGH,
Def endant s, Appel l ees.
APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS
[ Hon. Geor ge A. O' Tool e, U. S. Di st r i ct J udge]
Bef or e
Tor r uel l a, Ri ppl e, * and Thompson,Ci r cui t J udges.
* Of t he Sevent h Ci r cui t , si t t i ng by desi gnat i on.
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Dani el L. Ber ger , wi t h whomJ ay W. Ei senhof er , Di ane T. Zi l ka,Shel l y L. Fri edl and, Gr ant & Ei senhof er P. A. , Avi J osef son, J ohnRi zi o- Hami l t on, Ann M. Li pt on, Ber nst ei n Li t owi t z Ber ger &Gr ossmann LLP, Br yan A. Wood, J ohn H. Sut t er and Berman DeVal er i o,wer e on br i ef f or pl ai nt i f f s- appel l ant s.
J ohn D. Donovan, J r . , wi t h whom Rober t G. J ones, Mar k D.
Vaughn and Ropes & Gr ay LLP, were on br i ef f or appel l ee GenzymeCor por at i on.
Mi chael T. Mar cucci , wi t h whomJ ohn D. Hani f y and J ones Day,on br i ef f or appel l ees Termeer , Meeker , Wyzga, Lawt on, Bamf ort h andMcDonough.
Ri char d A. Samp, wi t h whom Cory L. Andr ews and Washi ngt onLegal Foundat i on, on br i ef as ami cus cur i ae.
J une 5, 2014
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TORRUELLA, Circuit Judge. Thi s i s an appeal f r omor der s
of t he Di st r i ct Cour t of Massachuset t s gr ant i ng Def endant s-
Appel l ees' mot i on t o di smi ss, and subsequent l y denyi ng Pl ai nt i f f s-
Appel l ant s' post - j udgment mot i ons t o amend t he compl ai nt .
Pl ai nt i f f s , a cl ass of i nvest or s, br ought t hi s secur i t i es f r aud
act i on agai nst Genzyme Corporat i on ( "Genzyme") , and several company
execut i ves ( t he l at t er her ei naf t er col l ect i vel y r ef er r ed t o as t he
" i ndi vi dual def endant s" ) . The Consol i dat ed Cl ass Act i on Compl ai nt
( "compl ai nt ") char ges al l def endant s wi t h act s const i t ut i ng
secur i t i es f r aud i n vi ol at i on of Sect i on 10( b) of t he Secur i t i es
Exchange Act , and wi t h vi ol at i ons of Sect i on 20( a) on t he par t of
t he i ndi vi dual def endant s.
Upon de novo r evi ew, we agr ee wi t h t he di st r i ct cour t
t hat t he compl ai nt f ai l s t o meet t he exact i ng pl eadi ng st andar d
t hat secur i t i es f r aud cl ai ms must sat i sf y. The al l egat i ons set
f or t h i n t he compl ai nt f ai l t o convey a cogent and compel l i ng
i nf er ence of decei t f ul i nt ent , or r eckl ess di sr egar d of t he t r ut h,
on t he par t of def endant s. Sci ent er has not been pl ed, and,
accor di ngl y, we af f i r m t he di st r i ct cour t ' s or der of di smi ssal .
We al so f i nd, not wi t hout t aki ng some except i on, t hat t he
di st r i ct cour t di d not abuse i t s di scr et i on i n denyi ng pl ai nt i f f s'
post - j udgment mot i on t o amend t he compl ai nt .
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I. Background
As t hi s i s a revi ew of a mot i on t o di smi ss, we r eci t e t he
f act s of t he case as al l eged i n t he nonmovi ng par t y' s compl ai nt ,
r esol vi ng any ambi gui t i es i n t hei r f avor . Ocasi o- Her nndez v.
For t uo- Bur set , 640 F. 3d 1, 5 ( 1st Ci r . 2011) .
Genzyme i s an i nt ernat i onal pharmaceut i cal company
engaged i n t he busi ness of devel opi ng and sel l i ng bi ol ogi cs.
Bi ol ogi cs, as opposed t o chemi cal l y- synt hesi zed phar maceut i cal s,
st em f r om nat ur al sour ces and ar e devel oped t hr ough a compl ex
manuf act ur i ng pr ocess desi gned to mi t i gat e t he ever - pr esent r i sk of
cont ami nat i on. Compani es wi shi ng t o mar ket bi ol ogi cs t o t he
gener al popul ace must obt ai n appr oval f r om t he Food and Dr ug
Admi ni st r at i on ( "FDA") t hr ough a bi ol ogi cs l i cense appl i cat i on
( "BLA") .
At t he t i me of t he conduct at i ssue i n t hi s case, t hr ee
of Genzyme' s mai n pr oduct s were bi ol ogi cs r el ated t o t he t r eat ment
of r ar e met abol i c di sor der s r esul t i ng f r om t he absence of cer t ai n
enzymes ( l yosomal st orage di sease, or "LSD" dr ugs) . Cerezyme,
Fabrazyme and Myozyme wer e devel oped t o t r eat t he r ar e Gaucher ,
Fabr y, and Pompe di seases, r espect i vel y. I n 2008, both Cerezyme
and Fabr azyme were gr eat er ear ners t han Myozyme, br i ngi ng i n
appr oxi mat el y $1. 7 bi l l i on i n r evenue combi ned. However , Myozyme
was an up- and- comi ng t r eat ment t hat had r ecent l y become the
f ast est - gr owi ng pr oduct i n Genzyme' s hi st or y, j umpi ng f r om $59
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mi l l i on i n r evenue i n 2006 t o $296 mi l l i on i n 2008. A subst ant i al
r eason f or t he pr oduct s' success was a compl et e l ack of
compet i t i on. Al l t hr ee ar e consi der ed "or phan" dr ugs under t he
Or phan Dr ug Act of 1983, 21 U. S. C. 360aa- ee, whi ch gr ant s
l i mi t ed monopol i es t o compani es t hat devel op dr ugs t o t r eat r ar e
di sorder s t hat mi ght not ot her wi se be commer ci al l y vi abl e f or
devel opment and product i on. Genzyme' s monopol y of Cerezyme expi r ed
i n 2001, wi t h Fabr azyme and Myozyme schedul ed t o expi r e i n 2010 and
2013, r espect i vel y.
I n Apr i l of 2006, t he FDA appr oved Genzyme' s BLA f or
Myozyme manuf act ured i n Genzyme' s Fr ami ngham, Massachuset t s,
f aci l i t y. Thi s ver si on of Myozyme was pr oduced i n 160- l i t er
( "160L") bi or eact or s. However , Genzyme soon r eal i zed t hat
pr oduct i on on a smal l scal e woul d be i nsuf f i ci ent t o meet mar ket
demand. As such, Genzyme devel oped a manuf act ur i ng process f or
cr eat i ng Myozyme i n a 2000- l i t er ( "2000L") bi or eact or i n i t s
Al l st on, Massachuset t s f aci l i t y. To di f f er ent i at e t he t wo
pr oduct s, Genzyme ter med t he 2000L Myozyme "Lumi zyme. " Genzyme was
abl e to obt ai n qui ck appr oval f or Lumi zyme wi t h Eur opean
phar maceut i cal r egul ator s, but needed to reappl y f or a new BLA wi t h
t he FDA f or t he U. S. market . Genzyme al so pl anned t o obt ai n
r egul at or y appr oval t o devel op a 4000- l i t er ( "4000L") ver si on of
Myozyme at i t s pl ant i n Geel , Bel gi um, f or t he Eur opean mar ket . I n
t he meant i me, Myozyme qui ckl y became an unquest i onabl e success f or
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Genzyme. Anal yst s consi dered appr oval of t he Lumi zyme BLA t o be
cr i t i cal f or Genzyme' s f ut ur e ear ni ng pot ent i al , as i t r epr esent ed
a l arge unt apped market f or an i n- demand pr oduct .
Genzyme i ni t i al l y r eveal ed i t s pl ans f or t he Lumi zyme BLA
on t he f i r st day of t he Cl ass Per i od, Oct ober 24, 2007. Dur i ng a
conf erence cal l , Davi d Termeer , who served as Genzyme' s CEO, t ol d
i nvest or s t hat t he company had f i l ed an appl i cat i on f or a
"suppl ement al " BLA f or Lumi zyme based of f of t he company' s
previ ousl y- approved 160L Myozyme BLA. 1 Ter meer s t ated he expect ed
t hat appr oval of t he suppl ement al BLA woul d occur i n t he f i r st
quar t er of 2008. He al so gave a posi t i ve out l ook f or al l t hr ee of
Genzyme' s LSD drugs.
On Apr i l 21, 2008, however , t he FDA not i f i ed Genzyme t hat
a suppl ement al BLA was i nsuf f i ci ent , and i t woul d need t o submi t a
separ at e BLA f or Lumi zyme appr oval . Af t er Genzyme submi t t ed t he
r evi sed BLA i n May, t he FDA gave Genzyme a "PDUFA dat e" of
November 29, 2008, as mandat ed by t he Pr escr i pt i on Dr ug User Fee
Act ( "PDUFA") of 1992, 21 U. S. C. 379g- h. 2 Ter meer cont i nued t o
1 A "suppl ement al " BLA al l ows compani es t o obt ai n r api d,
st r eaml i ned appr oval f or dr ugs t hat ar e subst ant i al l y si mi l ar t opr evi ousl y- appr oved pr oduct s.
2 The PDUFA al l ows t he FDA t o col l ect f ees f or appl i cat i ons, butr equi r es t he FDA t o set a t ar get dat e f or appr oval of t heappl i cat i on. Thi s t ar get dat e, however , i s not a guar ant ee ofappr oval nor i s i t bi ndi ng on t he FDA.
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gi ve an opt i mi st i c out l ook f or Lumi zyme appr oval t hr oughout t he
summer of 2008.
I n Sept ember of 2008, Genzyme' s manuf act ur i ng f aci l i t y i n
Geel , Bel gi um, suf f er ed a bi or eact or f ai l ur e. At t he t i me, Genzyme
had been wor ki ng t owar ds appr oval f r om Eur opean r egul at or s t o
devel op Myozyme at t he 4000L scal e at Geel . An i nt ernal
i nvest i gat i on ensued as t o t he cause of t he br eakdown, whi ch was
unknown at t he t i me. Genzyme di d not publ i cl y di scl ose t he
bi or eact or f ai l ur e at t hat t i me. Not wi t hst andi ng t hese event s, i n
Febr uary of 2009, Genzyme secur ed appr oval f r om t he Eur opean
Medi ci nes Agency ( "EMEA") t o pr oduce Myozyme 4000L at Geel .
I n Oct ober of 2008, t he FDA conduct ed an i nspect i on of
t he Al l st on, Massachuset t s pl ant . The FDA r out i nel y conduct s
i nspect i ons t o det er mi ne i f f aci l i t i es ar e compl yi ng wi t h Cur r ent
Good Manuf act ur i ng Pr act i ces ( "CGMP") st andar ds f or bi ol ogi cs
manuf act ur er s. As a r esul t of t he i nspect i on, t he FDA not ed
sever al var i at i ons f r omCGMP at Al l st on. The FDA summar i zed t hese
f i ndi ngs i n a For m 483 ( "Oct ober 2008 For m 483") . The f or m was
sent t o Ter meer , as i t i s common pr otocol f or t he FDA t o pr esent
For ms 483 t o t op management of f i ci al s. A For m 483 cont ai ns
advi sor y l anguage t hat make cl ear i t l i st s onl y " i nspect i onal
observat i ons and do[ es] not r epr esent a f i nal agency det er mi nat i on
r egardi ng your compl i ance. " Genzyme r esponded t o t he Oct ober 2008
Form 483 on Oct ober 31, 2008, wi t h a pr oposed pl an t o remedy t he
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pr obl ems by March 31, 2009, t hough i t di d not r ecei ve an i mmedi ate
r epl y f r om t he FDA. The Oct ober 2008 For m 483 made no ment i on of
t he Lumi zyme BLA and i t di d not otherwi se note that t he dr ug' s
appr oval pr ocess mi ght be j eopardi zed.
Br i ef l y af t er r ecei vi ng t he Oct ober 2008 For m 483,
Genzyme conduct ed a conf erence cal l wi t h market anal yst s on
Oct ober 22, 2008. No ment i on was made of t he Oct ober 2008 For m483
or of Genzyme' s response. One anal yst asked Al l i son Lawt on3 i f
anyt hi ng had been di scussed dur i ng a r ecent FDA Advi sor y Commi t t ee
meet i ng t hat coul d af f ect t he Lumi zyme BLA. Though no def endant
ment i oned t he Oct ober 2008 Form 483, Lawt on st ated t hat " [ i ] t was
r eal l y j ust a di scussi on about t he bi ochemi cal di f f er ences [ bet ween
Myozyme and Lumi zyme] " and t hat t he cl i ni cal dat a was " t he most
i mpor t ant pi ece. " On t hat not e, Seni or Vi ce Pr esi dent Geof f r ey
McDonough shar ed t he news t hat t he FDA Advi sor y Commi t t ee had
conf i r med t he cl i ni cal ef f ect i veness of Lumi zyme at t he 2000L
scal e, st at i ng t hat " t he l i kel i hood of appr oval seems t o be mor e
cer t ai n. " Dur i ng t hi s conf er ence cal l , Ter meer pr oj ect ed t hat
anal yst s coul d expect a r et ur n of $4. 70 per shar e i n 2009, a f i gur e
t hat assumed approval of Lumi zyme i n November of 2008. At t hat
3 Lawt on hel d numerous posi t i ons wi t h Genzyme dur i ng t he cl assper i od, i ncl udi ng Head of Regul at or y Or gani zat i on; Seni or Vi cePr esi dent of Gl obal Access, Qual i t y Syst ems & Regul at or y Af f ai r s;Seni or Vi ce Pr esi dent of Regul at or y Af f ai r s and Cor por at e Qual i t ySyst ems; and her cur r ent posi t i on as Seni or Vi ce Pr esi dent ofGl obal Pr oduct Access. Gener al l y speaki ng, Lawt on' sr esponsi bi l i t i es f ocused on r egul at or y compl i ance.
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t i me, t he PDUFA dat e t he FDA had provi ded Genzyme cont i nued t o be
November 28, 2008.
Al so i n November , t he Al l st on pl ant exper i enced an
epi sode of bi or eact or f ai l ur e si mi l ar t o t he one exper i enced at t he
Geel pl ant mont hs ear l i er . These event s sl owed manuf act ur i ng f or
t he company and f or ced Genzyme t o r amp down pr oduct i on of Cer ezyme
and Fabr azyme at Al l st on. The company di pped i nt o i t s suppl y of
Cer ezyme, Fabrazyme, and Myozyme t o make up f or t he manuf act ur i ng
shor t age, whi ch l ef t Genzyme vul ner abl e t o a l ack of suppl y that
coul d af f ect sal es i f pr obl ems cont i nued. Though an i nvest i gat i on
of t he causes of t he equi pment f ai l ur es at Al l st on and Geel was
under way, t he bi or eact or f ai l ur es wer e not di scl osed t o i nvest or s
at t hat t i me. However , company of f i ci al s di d i nf or mi nvest or s t hat
"t i ght " Myozyme i nvent or i es coul d pot ent i al l y l i mi t sal es unl ess
t he company coul d secur e Eur opean appr oval of a 4000L ver si on of
Lumi zyme f or pr oduct i on i n Geel , whi ch i t woul d event ual l y secur e
a f ew mont hs l ater i n Febr uary of 2009.
That same mont h, t he FDA i nf or med Genzyme t hat i t
consi der ed aspect s of i t s appl i cat i on to be a maj or amendment t o
i t s ear l i er Lumi zyme BLA, and t hat i t woul d t ake mor e t i me to
r evi ew t he changes. Accor di ngl y, t he FDA set a new PDUFA date of
Febr uar y 28, 2009. Genzyme pr ompt l y di scl osed t hi s i nf or mat i on t o
i nvest or s, st at ed t hat i t expect ed Lumi zyme to be appr oved by t he
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new PDUFA date, and t hat t hi s news woul d not af f ect t he pr oj ected
ear ni ngs of $4. 70 per shar e f or 2009.
Over t he next sever al mont hs, t he def endant s mai nt ai ned
t hat Lumi zyme woul d be approved and t he company was i n a good
posi t i on t o meet i ncr easi ng demand f or Cerezyme and Fabr azyme.
Dur i ng one conf er ence cal l wi t h anal yst s, an i nvest or asked f or
mor e i nf or mat i on about " i ncompl et e pr ocess val i dat i on r uns" at t he
4000L pl ant i n Geel . These r uns wer e af f ect ed by t he bi or eact or
f ai l ur es, t he cause f or whi ch was unknown at t he t i me. McDonough
st at ed t hat " t he way t o thi nk about t hat i s par t of t he nor mal
devel opment pr ocess t hat we woul d undergo f or any new f aci l i t y. "
Eur opean aut hor i t i es approved 4000L Myozyme f or manuf act ure i n Geel
shor t l y t her eaf t er i n Febr uar y of 2009.
Havi ng r ecei ved no r esponse f r om t he FDA as t o i t s
proposed remedi es t o t he Oct ober 2008 For m 483, Genzyme submi t t ed
a suppl ement al r esponse t o t he FDA on Febr uary 23, 2009. Four days
l at er , t he FDA r epl i ed wi t h a For mal War ni ng Let t er ( "Febr uar y
War ni ng Let t er " ) , as wel l as a Compl et e Response Let t er , bot h
addr essed t o Ter meer and l ater publ i shed on t he FDA websi t e. The
Compl ete Response Let t er st ated t hat t he FDA woul d wi t hhol d
appr oval of Lumi zyme unt i l t he i ssues i n t he Febr uar y War ni ng
Let t er were addr essed. The Febr uary Warni ng Let t er r ei t erated many
of t he i ssues t hat wer e cont ai ned i n t he Oct ober 2008 For m 483,
whi l e al so cr i t i qui ng Genzyme' s pr oposed r emedi es as i nsuf f i ci ent .
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On March 2, 2009, Genzyme i ssued a press r el ease
di scl osi ng both t he Febr uary Warni ng Let t er and t he Compl ete
Response Let t er . Genzyme al so di scl osed t he Oct ober 2008 For m483
f or t he f i r st t i me. That same day, Genzyme f i l ed t he company' s
For m 10- K f or 2008, whi ch st ated t hat t he Febr uar y War ni ng Let t er
r ei t er at ed many of t he pr obl ems f i r st i dent i f i ed i n t he Oct ober
2008 Form 483, and t hat appr oval of Lumi zyme was condi t i oned on
r esol ut i on of t hese i ssues.
Genzyme hel d a conf erence cal l t hat same af t ernoon,
dur i ng whi ch Ter meer not i f i ed i nvest ors t hat Lumi zyme woul d not be
appr oved by the expect ed PDUFA dat e of Febr uary 28, 2009. Whi l e
maki ng t hese di scl osur es, Genzyme mai nt ai ned t hat i t woul d be abl e
t o addr ess al l of t he i ssues t he FDA had r ai sed and t hat i t woul d
obt ai n appr oval of Lumi zyme several mont hs down t he r oad. A
cont emporaneous pr ess r el ease quot ed Ter meer as sayi ng t hat t he
i ssues coul d be r esol ved "wi t hi n t hr ee t o si x mont hs" and t hat t he
company was "conf i dent t hat t he pr oduct s produced at t he Al l st on
f aci l i t y cont i nue t o meet t he hi ghest qual i t y and saf et y
st andar ds. " Dur i ng t he conf er ence cal l , Lawt on st at ed t hat Genzyme
was conf i dent t hat t hey coul d r espond i n f ul l t o t he Febr uar y
War ni ng Let t er by t he end of t he week. Seni or Vi ce Presi dent of
Corporate Operat i ons and Pharmaceut i cal s Mark Bamf ort h t ol d
i nvest or s t hat t he i ssues r ai sed by the Febr uar y War ni ng Let t er
woul d not have an i mpact on Genzyme' s abi l i t y t o pr oduce dr ugs
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manuf actur ed at Al l st on, i ncl udi ng Cerezyme and Fabr azyme. I n
l i ght of t he news, Genzyme adj ust ed i t s pr oj ect i ons t o account f or
a si x- mont h del ay i n Lumi zyme appr oval , pr edi ct i ng a 12- cent per
shar e dr op and a $60 mi l l i on decr ease i n Myozyme revenue.
Not sur pr i si ngl y, t he mar ket r eact ed negat i vel y t o t hi s
news. J P Morgan comment ed t hat "we remai n t r oubl ed at t he l ack of
di scl osur e of t he For m 483 i ssuance l ast f al l , si nce we bel i eve
i nvest ors woul d have been more caut i ous on near - t erm Myozyme
appr oval . " Some al so cr i t i ci zed Genzyme f or i ssui ng a pr ess
r el ease af t er t r adi ng cl osed on Monday despi t e r ecei vi ng t he l et t er
on Fr i day, and some suspect ed t hat a f our percent dr op i n Genzyme
st ock on Fr i day coul d be at t r i but ed t o ear l y l eakage of t he
l et t er s. Af t er t he Mar ch 2, 2009 di scl osur es, Genzyme' s shar es
f el l by $4. 04, or appr oxi mat el y seven per cent .
On Mar ch 24, 2009, Genzyme' s 2008 Annual Report
ant i ci pated Lumi zyme appr oval i n mi d- 2009. On Apr i l 22, 2009,
Genzyme r epor t ed i t s ear ni ngs f or t he f i r st quar t er of 2009, wi t h
Myozyme sal es f al l i ng mor e t han $20 mi l l i on bel ow est i mat es.
Genzyme agai n at t r i but ed t hi s t o " t i ght " Myozyme suppl y, but di d
not di scl ose t he bi or eact or pr obl ems i n Geel or Al l st on. That same
day, Lawt on t ol d i nvest ors t hat t he Lumi zyme BLA was on schedul e
and sai d t hat "at t hi s poi nt we' ve act ual l y resol ved al l of any
out st andi ng i t ems wi t h [ t he] FDA. "
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The FDA r ei nspect ed t he Al l st on pl ant i n mi d- May of 2009,
but di d not i ssue any war ni ngs or advi sory mat er i al s at t hat t i me.
Af t er t hi s i nspect i on, Genzyme adj ust ed i t s t i mel i ne f or t he
Lumi zyme BLA appr oval and r esubmi t t ed i t s BLA t o t he FDA. The
company acknowl edged t hat a PDUFA was l i kel y si x mont hs away, but
was opt i mi st i c t hat t he FDA woul d wor k wi t h t hem t o expedi t e
appr oval .
On J une 16, 2009, Genzyme detect ed a t hi r d bi oreact or
f ai l ur e event , t he second such out br eak i n Al l st on. Thi s t i me,
Genzyme publ i cl y announced t he bi oreact or f ai l ur e, and acknowl edged
t hat i t had suf f er ed t wo such event s i n Al l st on and Geel i n l at e
2008. Genzyme expl ai ned t hat i nt er nal i nvest i gat i ons had r ecent l y
shown t he f ai l ur es wer e due t o t he out br eak of a r ar e vi r us,
Vesi vi r us 2117. I n or der t o sani t i ze t he pl ant , Genzyme hal t ed al l
product i on of Cer ezyme and Fabr azyme i n Al l st on. As Genzyme had
al r eady begun sel l i ng of f i t s Cer ezyme and Fabr azyme i nvent or y i n
or der t o i ncr ease Al l st on pr oduct i on of Myozyme, t hi s l ed t o
f ur t her suppl y const r ai nt s on t hese dr ugs.
Genzyme deni ed t o i nvest ors t hat t he Vesi vi r us 2117
cont ami nat i ons wer e l i nked t o t he CGMP i ssues i dent i f i ed by the
FDA, st at i ng t hat t he FDA had si gned of f on pl ant condi t i ons dur i ng
t hei r May 2009 r e- i nspect i on. Ter meer st at ed t hat no f or mal l et t er
si gni ng of f on t he pl ant had been r ecei ved, but Lawt on sai d t hat
whi l e t hey had no wr i t t en communi cat i on, t hey had posi t i ve ver bal
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communi cat i on f r omt he FDA i nspect ors. Whi l e Genzyme st ated i t had
not yet i dent i f i ed t he sour ce of t he vi r al out br eaks, i t bel i eved
t he vi r us was r el at ed t o t he r aw mat er i al s used i n t he bi ol ogi cs.
The company al so predi ct ed i t woul d not need anot her i nspect i on and
t hat Lumi zyme was on t r ack f or November 2009 appr oval , or possi bl y
ear l i er .
Genzyme r el eased i t s second quart er ear ni ngs st atement s
on J ul y 22, 2009. Due t o t he shut down of t he Al l st on pl ant ,
Genzyme adj ust ed i t s proj ect i ons f or t he year downward
consi derabl y. A pr ess rel ease accompanyi ng t he ear ni ngs st atement
r eveal ed Genzyme' s pl ans f or 4000L Myozyme/ Lumi zyme i n the Uni t ed
St at es f or t he f i r st t i me. On a conf er ence cal l , Ter meer expl ai ned
t hat i n or der t o "si mpl i f y oper at i ons i n Al l st on" and dedi cat e al l
of t he r eact or s t o Cerezyme and Fabr azyme, t he company woul d not be
pur sui ng commerci al sal es of 2000L Lumi zyme i n t he Uni t ed St ates.
Rat her , t he company hoped to obt ai n BLA appr oval of 2000L Lumi zyme,
and then f i l e a suppl ement al BLA f or 4000L Lumi zyme manuf act ur ed i n
Geel . Dur i ng t he cal l , McDonough conceded t hat even i f 2000L
Lumi zyme was appr oved i n November of 2009, approval of a
suppl ement al BLA woul d take at l east f our addi t i onal mont hs,
meani ng commerci al sal es of Lumi zyme i n the U. S. woul d not t ake
pl ace unt i l at l east 2010. Fol l owi ng t hi s news, Genzyme' s shar es
dr opped appr oxi matel y ei ght percent .
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On J ul y 27, 2009, t he FDA sent a l et t er t o Genzyme,
st at i ng t hat i t pl anned t o r ei nspect t he pl ant due t o Genzyme' s
i nadequat e r esponse t o sever al of i t s concer ns. Accor di ng t o t he
FDA, Genzyme had yet t o val i dat e t he cryoshi pper s - - speci al
equi pment desi gned t o t r anspor t bi ol ogi cal mat er i al i n a f r ozen
st at e - - despi t e ear l i er pr omi ses t o do so. Si mi l ar l y, Genzyme
had f ai l ed t o i mpl ement promi sed mai ntenance procedures. Genzyme
di scl osed t he l et t er t o t he publ i c on J ul y 31, 2009 and r ecei ved a
negat i ve r esponse f r omt he mar ket . Shar es f el l an addi t i onal 7. 75
per cent f ol l owi ng t he di scl osur e.
Meanwhi l e, t he shor t age of Cerezyme and Fabr azyme caused
r egul at or s t o t ake act i on. The FDA r eached out t o sever al of
Genzyme' s compet i t or s f or hel p addr essi ng the shor t age of t hese
dr ugs i n J ul y of 2009. The FDA f ast - t r acked appr oval f or drugs
manuf actur ed by Genzyme compet i t or Shi r e i n an ef f ort t o t r eat
Gaucher and Fabr y di seases. I n August of 2009, Genzyme admi t t ed
t hat t he cont i nui ng shor t age of Cerezyme and Fabr azyme meant t hat
t hose dr ugs wer e i n danger of l osi ng t hei r l ucr at i ve "or phan"
monopol y.
On August 14, 2009, Termeer , Lawt on, Bamf or t h and
Execut i ve Vi ce Pr esi dent Davi d Meeker wr ot e a pr i vat e, undi scl osed
l et t er t o the FDA addr essi ng t he or gani zat i on' s r ecent concer ns.
The l et t er acknowl edged "syst emi c causes" f or t he probl ems i n
Al l st on and st ated t hat " [ w] e pl an t o make f undament al syst emi c and
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cul t ur al changes as appr opr i at e. " The l et t er f ur t her r ecogni zed
t hat "t he vi r al i nvest i gat i on . . . . must be compl et ed i n t he
cont ext of t he br oader compl i ance r emedi at i on act i vi t i es. " The
l et t er al so acknowl edged the FDA' s most r ecent obser vat i ons and
pr oposed new r emedi es t o addr ess t he concer ns. Publ i cl y, Genzyme
cont i nued t o pr oj ect Lumi zyme appr oval i n November of 2009.
On t he f i nal day of t he Cl ass Per i od, November 13, 2009,
sever al event s t r anspi r ed. Fi r st , Genzyme and t he FDA i ssued a
publ i c not i ce t o heal t hcar e pr ovi der s, expl ai ni ng t hat vi al s of
Cer ezyme, Fabr azyme, and Myozyme wer e di scover ed t o have been
cont ami nat ed wi t h f or ei gn par t i cl es, such as st eel and non- l at ex
r ubber . The not i ce war ned t hat i ngest i ng such par t i cl es coul d have
ser i ous negat i ve heal t h ef f ect s on pat i ent s.
That same day, t he FDA sent a second For m483 ( "November
2009 For m 483") t o Termeer , as wel l as a second Compl ete Response
Let t er , once agai n suspendi ng t he Lumi zyme BLA. The November 2009
For m483 noted numerous CGMP vi ol at i ons, i ncl udi ng sever al pr obl ems
t hat had been f i r st poi nt ed out i n t he Oct ober 2008 For m 483.
Genzyme di scl osed t he f or m shor t l y af t er t hese event s wer e made
publ i c; Genzyme' s shar es dr opped shar pl y once agai n, decl i ni ng more
t han seven percent .
I n t he post - cl ass per i od, def endant s hel d a conf er ence
cal l t o addr ess t he i ssues st emmi ng f r omt he November 2009 For m483
and t he deni al of t he Lumi zyme BLA. The conf erence cal l r eveal ed
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t hat many of t he i ssues r el at i ng t o t he cont ami nat ed dr ugs wer e
rel at ed t o t he pl ant ' s f i l l / f i ni sh capabi l i t i es , t he process i n
whi ch vi al s ar e f i l l ed and t hen seal ed. Dur i ng t he cal l , Ter meer
t r aced many of t he i ssues i n Al l st on back t o 2006, when t he company
deci ded t o add Myozyme pr oduct i on l i nes on t op of exi st i ng l i nes
f or Cerezyme and Fabr azyme. The r esul t i ng i nvent ory shor t age t hat
occur r ed f or Cerezyme and Fabr azyme "cl ear l y can never happen
agai n, " Ter meer st at ed. Dur i ng t hat same cal l , Meeker conceded
t hat t he pr obl ems r el at ed t o f i l l / f i ni sh wer e t he r esul t of ol d
equi pment i n t he Al l st on f aci l i t y and t hat t he company had been
awar e of t he pr obl ems, st at i ng t hat t he pr obl em was " not new" and
"t hese were el ement s t hat we obvi ousl y knew about . " Short l y
t hereaf t er , Genzyme announced i t woul d shut down t he Al l st on pl ant ,
abandon pur sui t of a 2000L Lumi zyme BLA, and move f or war d wi t h
at t empt i ng t o r ecei ve appr oval f or 4000L Lumi zyme manuf actur ed i n
Geel .
The end of t he r oad approached as t he FDA f i l ed a
compl ai nt i n f ederal cour t on May 24, 2010 to per manent l y enj oi n
Genzyme f r omcommi t t i ng vi ol at i ons of t he Food, Dr ug and Cosmet i cs
Act , 21 U. S. C. 310- 399f . As a r esul t , t he FDA and Genzyme
ent ered i nt o a consent decree r equi r i ng Genzyme t o pay $175 mi l l i on
i n f i nes, t r ansf er cer t ai n oper at i ons out of Al l st on, and under t ake
a compr ehensi ve r emedi at i on pl an under t he supervi si on of
i ndependent expert s.
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The pl ai nt i f f s, on behal f of al l pur chaser s of Genzyme
st ock dur i ng t he r el evant t i me per i od, f i l ed t hei r compl ai nt i n
t hi s act i on on March 1, 2010, sui ng Genzyme Corporat i on, Ter meer ,
Meeker , Lawt on, McDonough, Bamf ort h and Chi ef Fi nanci al Of f i cer
Mi chael Wygza. The compl ai nt al l eges t hat t he def endant s vi ol at ed
t he Secur i t i es Exchange Act by maki ng f al se or mi sl eadi ng
st at ement s t o i nvest or s i n connect i on t o t he Al l st on pl ant and t he
Lumi zyme BLA approval process.
The def endant s f i l ed a mot i on t o di smi ss t he compl ai nt
f or f ai l ur e t o st at e a cl ai m upon whi ch r el i ef coul d be gr ant ed,
and t he di st r i ct cour t di smi ssed t he compl ai nt on Mar ch 30, 2012.
Whi l e t he cour t f ound t hat "pl ai nt i f f s' t heor y i s pl ausi bl e, and
per haps even r easonabl e, " t he al l egat i ons i n t he compl ai nt wer e
"t oo specul at i ve t o gi ve r i se t o a st r ong i nf er ence of sci ent er "
under t he hei ght ened pl eadi ng st andar ds of t he Pr i vat e Secur i t i es
Li t i gat i on Ref or m Act ( "PSLRA") , 15 U. S. C. 78u- 4( b) . As t he
di smi ssal of t he compl ai nt was wi t h pr ej udi ce, t he pl ai nt i f f s moved
f or r el i ef f r omj udgment and f or l eave t o amend t he compl ai nt . The
di st r i ct cour t deni ed bot h mot i ons on December 21, 2012, f i ndi ng
t hat any new evi dence pl ai nt i f f s wi shed t o pr esent coul d have been
pr esent ed ear l i er . Thi s appeal f ol l owed.
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II. Discussion
A. The order of dismissal
As wi t h any mot i on t o di smi ss, our anal ysi s cent er s on
t he compl ai nt , and we accept al l wel l - pl eaded f act ual al l egat i ons
as t r ue and dr aw al l a r easonabl e i nf er ences i n f avor of t he
pl ai nt i f f . Hi l l v. Gozani , 638 F. 3d 40, 55 ( 1st Ci r . 2011) . I n
or der t o survi ve a mot i on t o di smi ss, t he compl ai nt must pl ead
suf f i ci ent f act s t o r ender t he pl ai nt i f f ' s ent i t l ement t o r el i ef
pl ausi bl e, and not mer el y possi bl e. Bel l At l . Cor p. v. Twombl y,
550 U. S. 544, 557 ( 2007) . As t o al l egat i ons of f r aud i n
par t i cul ar , Feder al Rul e of Ci vi l Pr ocedur e Rul e 9( b) r equi r es
pl ai nt i f f s t o pl ead t he ci r cumst ances of f r aud wi t h hei ght ened
speci f i ci t y. Hi l l , 638 F. 3d at 55.
To st at e a cl ai m f or secur i t i es f r aud under Sect i on
10( b) , a pl ai nt i f f must al l ege: ( 1) a mat er i al mi sr epr esent at i on or
omi ssi on; ( 2) sci ent er , or a wr ongf ul st at e of mi nd; ( 3) i n
connect i on wi t h t he pur chase or sal e of a secur i t y; ( 4) r el i ance;
( 5) economi c l oss; and ( 6) l oss causat i on. I n r e St one & Webst er ,
I nc. , Sec. Li t i g. , 414 F. 3d 187, 195 ( 1st Ci r . 2005) . A compl ai nt
al l egi ng vi ol at i ons of Sect i on 10( b) must pl ead f act s gi vi ng r i se
t o a "st r ong i nf er ence" of sci ent er . 15 U. S. C. 78u- 4( b) ( 2) .
Sci ent er may be pl ed by "showi ng that def endant s ei t her
' consci ousl y i nt ended t o def r aud, or t hat t hey act ed wi t h a hi gh
degr ee of r eckl essness. ' " Mi ss. Pub. Emps. Ret . Sys. v. Bos.
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Sci ent i f i c Cor p. , 523 F. 3d 75, 85 ( 1st Ci r . 2008) ( i nt er nal ci t at i on
omi t t ed) . An i nf er ence of sci ent er i s "st r ong" onl y i f i t i s
"cogent and at l east as compel l i ng as any opposi ng i nf erence one
coul d dr aw f r omt he f act s al l eged. " Tel l abs, I nc. v. Makor I ssues
& Ri ght s, Lt d. , 551 U. S. 308, 324 ( 2007) . " [ W] her e t her e ar e
equal l y st r ong i nf er ences f or and agai nst sci ent er , Tel l abs now
awar ds t he dr aw t o t he pl ai nt i f f . " ACA Fi n. Guar . Cor p. v. Advest ,
I nc. , 512 F. 3d 46, 59 ( 1st Ci r . 2008) .
The 140 page compl ai nt , t hough seemi ngl y an at t empt at
ar t f ul pl eadi ng, i s an i l l or gani zed and convol ut ed col l ect i on of
364 par agr aphs. The event s ar e not al l eged chr onol ogi cal l y, and
t he happeni ngs t hat pl ai nt i f f s al l ege wer e conceal ed, as wel l as
t he st at ement s al l eged t o be mi sl eadi ng, ar e of t en not cl ear l y
pai r ed t o r el at ed event s, dat es, char act er s or a t i me- l i ne. Not
wi t hout consi der abl e di f f i cul t y, we have endeavor ed t o or gani ze t he
al l egat i ons of f r aud i nt o t hr ee mai n cat egor i es. We f i r st di scuss
t he ci r cumst ances surr oundi ng the al l eged conceal ment of t he
Oct ober 2008 For m 483. We t hen di scuss t he pur port ed non-
di scl osur e of t he vi r al out br eaks at t he Al l st on and Geel pl ant s.
Fi nal l y, we addr ess t he def endant s' s al l egedl y mi sl eadi ng
asser t i ons of Lumi zyme' s t i mel y appr oval and di si ngenuous r evenue
and perf ormance pr oj ect i ons.
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1. October 2008 Form 483
As t o t he Oct ober 2008 For m 483, pl ai nt i f f s essent i al l y
cont end t hat def endant s conceal ed t he f or mwi t h f r audul ent i nt ent .
Thi s t heor y f ai l s f or several r easons, not t he l east per suasi ve of
whi ch i s t he f act t hat def endant s ul t i mat el y di scl osed t he f or mnot
l ong af t er i t s r el evance became apparent t o Genzyme.
Af t er t he FDA car r i ed out i t s i nspect i on of t he Al l st on
pl ant somet i me between l ate Sept ember and ear l y Oct ober 2008, i t
i ssued t he Oct ober 2008 For m483 t o CEO Ter meer . The f ormdetai l ed
sever al observat i ons r egar di ng pot ent i al compl i ance pr obl ems wi t h
CGMPs. The FDA di d not post pone t he PDUFA dat e f or Lumi zyme of
November 29, 2009 by way of t he Oct ober 2008 For m 483, nor di d the
f orm ot her wi se st at e t hat t he Lumi zyme BLA had been compromi sed.
Shor t l y t her eaf t er , on Oct ober 22, 2008, Genzyme i ssued
a pr ess r el ease, and hel d a conf er ence cal l wi t h anal yst s r egar di ng
t he gener al st at e of af f ai r s at t he company. Dur i ng t he conf er ence
cal l , execut i ves gener al l y t out ed posi t i ve pr oj ect i ons f or Genzyme.
As t o appr oval of t he Lumi zyme BLA i n par t i cul ar , CEO Ter meer
r ef erenced t he recent deci si on by an FDA advi sor y commi t t ee
appr ovi ng the t her apy, and st at ed that t hey wer e "wor ki ng ver y har d
wi t h t he FDA t o get ever ythi ng done at t hat t i me, [ t he as of yet
PDUFA date of November 29, 2008] t hat st i l l needs t o be done. "
Asked by an anal yst i f anyt hi ng had been di scussed dur i ng t he
"cl osed manuf act ur i ng sessi on" t hat mi ght af f ect BLA appr oval f or
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Lumi zyme, Lawt on repl i ed that t he di scussi on mai nl y cent er ed on the
di f f erences i n t he scal e of pr oduct i on between Myozyme and
Lumi zyme, and on the cl i ni cal data on Lumi zyme; an FDA advi sor y
panel had r ecent l y vouched f or t he cl i ni cal ef f ect i veness of
Lumi zyme. Nei t her Lawt on nor any ot her def endant made any ment i on
of t he Oct ober 2008 For m 483 at t hat t i me.
Towar ds t he end of November , t he FDA i nf or med Genzyme
t hat t he Lumi zyme BLA was subst ant i al l y di st i nct f r om t he Myozyme
BLA, and t hat i t woul d r equi r e mor e t i me t o r evi ew t he appl i cat i on.
The PDUFA dat e was ext ended t o Februar y 28, 2009. Genzyme prompt l y
di scl osed t he new PDUFA dat e t o i nvest or s, but not t he ear l i er
r ecei pt of t he Oct ober 2008 For m 483.
Def endant s woul d not make any ment i on of t he Oct ober 2008
For m483 unt i l Mar ch 2, 2009, shor t l y af t er r ecei pt of t he Febr uar y
War ni ng Let t er and t he f i r st Compl et e Response Let t er , bot h of
whi ch addressed some of t he obser vat i ons i n t he Oct ober 2008 Form
483. Al l t hr ee document s wer e di scl osed si mul t aneousl y, t hat same
day.
We f i r st not e t hat Sect i on 10( b) does not cr eat e an
af f i r mat i ve dut y t o di scl ose. I n r e Bos. Sci ent i f i c Cor p. Sec.
Li t . , 686 F. 3d 21, 27 ( 1st Ci r . 2012) . A dut y t o di scl ose
i nf or mat i on ear l i er omi t t ed ar i ses onl y when af f i r mat i ve st at ement s
wer e made and t he speaker " f ai l [ ed] t o reveal t hose f act s t hat ar e
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needed so t hat what was r eveal ed woul d not be so i ncompl ete as t o
mi sl ead. " I d.
The f act s al l eged her e qui t e ni cel y t r ack t hi s
pr oposi t i on. Though t he Oct ober 2008 For m483 was not di scl osed by
Genzyme at t he t i me i t was i ssued by the FDA, i t was di scl osed
r oughl y f our mont hs l ater upon Genzyme' s r ecei pt of t he Febr uary
War ni ng Let t er and t he f i r st Compl et e Response Let t er , whi ch
f or mal i zed some of t he Oct ober 2008 For m 483' s observat i ons. I t
was t hese l at t er t wo communi cat i ons t hat cr yst al i zed t he rel evance
of t he Oct ober 2008 For m 483 t o def endant s ear l i er posi t i ve
st at ement s r egar di ng Lumi zyme' s appr oval . Thi s r i ngs par t i cul ar l y
t r ue gi ven t he advi sory l anguage t hat accompani es al l For ms 483, t o
t he ef f ect t hat t he ci r cumst ances not ed t her ei n ar e mer el y
observat i onal i n nat ur e, and do not r epr esent t he FDA' s f i nal
wor d. 4 That i t was not di scl osed at an ear l i er t i me t hat
pl ai nt i f f s' woul d have pr ef er r ed, does not amount t o a br each of
t he dut y t o di scl ose, i f t her e ever was one. ACA Fi n. Guar . Cor p. ,
512 F. 3d at 61.
4 The par t i es debat e t he st at e of t he l aw as t o t he mat er i al i t y of
For ms 483. Because we f i nd t he compl ai nt does not suf f i ci ent l ypl ead sci ent er , we need not r each t hi s par t i cul ar quest i on. Wenot e however , t he Ei ght Ci r cui t ' s vi ew t hat For ms 483 i n gener al ,as i s t he case wi t h any ot her pur por t ed evi dence, may or may not bemater i al dependi ng on t he ci r cumst ances of each case. See Pub.Pensi on Fund Gr . v. KV Pharm. Co. , 679 F. 3d 972, 983 ( 8t h Ci r .2012) .
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Mor e i mpor t ant l y, and f at al t o t hi s t heor y of t he
compl ai nt , t he al l egat i ons r egar di ng t he Oct ober 2008 For m483 f al l
wel l shor t of pl eadi ng a st r ong i nf er ence of sci ent er . Dear bor n
Hei ght s Act 345 Pol . & Fi r . Ret . Sys. v. Wat er s Cor p. , 632 F. 3d
751, 757 ( 1st Ci r . 2011) ( "A pl ai nt i f f must al l ege f act s t hat make
an i nf er ence of sci ent er ' mor e t han mer el y pl ausi bl e or r easonabl e
- - i t must be cogent and at l east as compel l i ng as any opposi ng
i nf er ence of nonf r audul ent i nt ent ' ") ( i nt er nal ci t at i on omi t t ed) .
At t he t i me of t he i ssuance of t he Oct ober 2008 For m483, t he PDUFA
dat e of November 29, 2008 had been l ef t unchanged. Fur t her more,
al so ar ound t hat same t i me an FDA advi sory commi t t ee vouched f or
t he cl i ni cal ef f ect i veness of Lumi zyme ther apy, i ndeed a cr uci al
st ep i n t he appr oval pr ocess. Though i t i s possi bl e t hat
def endant s acted wi t h sci ent er under t hese ci r cumst ances, t he
i nf er ence of t he r equi si t e i nt ent t o def r aud i s cer t ai nl y not
cogent or compel l i ng. I d. I t i s mor e l i kel y t hat def endant s made
no ment i on of t he Oct ober 2008 For m 483, because, gi ven t he
observat i onal nat ur e of such f or ms, t he f act t hat i t made no
ment i on of t he Lumi zyme appr oval pr ocess , and more i mpor t ant l y,
gi ven ot her si gni f i cant f act or s t hat poi nt ed t o Lumi zyme appr oval
- - r ecent endorsement f r omt he FDA advi sor y commi t t ee, and a st eady
PDUFA date - - t hey l i kel y bel i eved Genzyme cont i nued t o be on t he
pat h t owar ds Lumi zyme appr oval . Tel l abs, 551 U. S. at 324 ( "A
compl ai nt wi l l sur vi ve, we hol d, onl y i f a reasonabl e per son woul d
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deemt he i nf er ence of sci ent er cogent and at l east as compel l i ng as
any opposi ng i nf er ence one coul d dr aw f r om t he f act s al l eged. " ) .
Fi nal l y, t he f act t he Genzyme pr ompt l y di scl osed t he
extended PDUFA dat e - - whi ch was ext ended i n l at e November f or
r easons unr el at ed t o t he Oct ober 2008 For m 483 - - and t hat t he
Oct ober 2008 For m 483 was di scl osed onl y a f ew mont hs l ater , i n
ear l y Mar ch of 2009, al ong wi t h a f ul l and pr ompt di scl osur e of t he
Febr uar y War ni ng Let t er and the f i r st Compl et e Response Let t er ,
f ur t her under cut any i nf er ence of f r audul ent i nt ent on t he par t of
def endant s. See I n r e The Fi r st Mar bl ehead Cor p. Sec. Li t . , 639 F.
Supp. 2d 145, 163 ( D. Mass. 2009) ( f i ndi ng t hat cor por at i on' s
r el at ed i nf or mat i ve di scl osur es negat e i nf er ence of sci ent er ) .
2. Bioreactor failures and viral contamination events
Pl ai nt i f f s' cl ai m that def endant s ' f ai l ur e t o
cont empor aneousl y di scl ose t he bi or eact or f ai l ur e event s at i t s
Geel and Al l st on f aci l i t y, whi l e si mul t aneousl y i nsi st i ng on t he
expect ed appr oval of t he Lumi zyme BLA, i s al so i ndi cat i ve of
sci ent er . As wi t h t he al l eged non- di scl osur e of t he Oct ober 2008
For m 483, t hese al l egat i ons al so f ai l t o amount t o a st r ong
i nf er ence of f r audul ent i nt ent .
Genzyme i ni t i al l y came acr oss a bi or eact or r un f ai l ur e at
i t s Geel pl ant i n Sept ember of 2008. The cause of t he bi or eact or
r un f ai l ur e was unknown at t he t i me. Accordi ngl y, Genzyme l aunched
an i nvest i gat i on i nt o t he mat t er . Lat er , i n Oct ober of 2008,
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anot her bi or eact or f ai l ur e event occur r ed, t hi s t i me at t he Al l st on
pl ant . A second bi or eact or f ai l ur e event occur r ed at t he Al l st on
pl ant somet i me i n l ate May of 2009, t he thi r d such event f or
Genzyme. Shor t l y t her eaf t er , Genzyme publ i cl y di scl osed t he
bi or eact or f ai l ur es, t he cause of whi ch i t had onl y r ecent l y
di scover ed upon concl usi on of a mont hs- l ong i nvest i gat i on, and
i nf or med i nvest or s t hat t he cul pr i t was t he rare Vesi vi r us 2117.
Pl ai nt i f f s cl ai m t hat def endant s conceal ed t he vi r al
cont ami nat i on event s wi t h decei t f ul i nt ent , as t hey knew,
pur por t edl y, t hat t hese i ssues woul d hamper appr oval of t he
Lumi zyme BLA. For a number of r easons, t hi s t heor y f ai l s as wel l .
As an i ni t i al mat t er , t he bi or eactor r un f ai l ur es at t he
Geel pl ant bore no rel at i on t o FDA appr oval of t he Lumi zyme BLA f or
pr oduct i on at t he Al l st on pl ant . I nf or mat i on r egar di ng t hat event
i s, t her ef or e, i mmat er i al t o Lumi zyme' s BLA appr oval at Al l st on.
Hi l l , 638 F. 3d at 57 ( "[ I ] nf or mat i on i s mat er i al onl y i f i t s
di scl osur e woul d al t er t he t ot al mi x of f act s avai l abl e t o t he
i nvest or and i f t her e i s a subst ant i al l i kel i hood t hat a r easonabl e
shar ehol der woul d consi der i t i mpor t ant t o t he i nvest ment
deci si on. ") ( i nt er nal quot at i ons and ci t at i ons omi t t ed) .
Fur t hermore, t he EMEA i ssued a pr ess r el ease i n J anuary of 2009
not i ng t hat t he manuf act ur i ng di f f i cul t i es at Geel wer e bei ng
i nvest i gat ed by t he company. Thus, t he pr obl ems at Geel were not
qui t e a myst ery.
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As t o t he speci f i c ci r cumst ances r egar di ng any of t he
t hr ee bi or eact or r un f ai l ur es at ei t her pl ant , and as wi t h t he
Oct ober 2008 For m 483, def endant s had no af f i r mat i ve dut y to
di scl ose t hem. I n r e Bos. Sci ent i f i c, 686 F. 3d at 27. Thi s i s
par t i cul ar l y so consi der i ng t hat - - even r eadi ng t he compl ai nt i n
t he l i ght most f avor abl e t o t he pl ai nt i f f s - - t he cause of t hese
events was unknown to def endants, and woul d remai n a myst ery f or
sever al mont hs whi l e an i nvest i gat i on was underway. Fur t hermore,
at no poi nt bef or e Genzyme di scl osed t he resul t s of i t s i nt er nal
i nvest i gat i on di d t he FDA gi ve any i ndi cat i on t hat t he bi or eact or
r un f ai l ur es woul d hi nder appr oval of t he Lumi zyme BLA.
Al so, t hr oughout t he per i od whi l e t he i nvest i gat i on was
under way, Genzyme kept t he market i nf or med by way of sever al press
r el eases t hat suppl y of Myozyme woul d r emai n const r ai ned unt i l EMEA
gave appr oval of Lumi zyme pr oduct i on at t he Geel f aci l i t y. When
t he EMEA approved Geel f or product i on of Lumi zyme, Genzyme
nonet hel ess cont i nued t o i nf or m t he mar ket of t hei r di mi ni shi ng
suppl y of al l of t hei r LSD t her apeut i cs, as pr oduct i on sl owed
because of t he bi or eact or f ai l ur es. Genzyme' s const ant r epor t s t o
t hat ef f ect cont i nued unt i l i t i nf or med i nvest or s of t he second
bi or eactor r un f ai l ur e at Al l st on, shor t l y af t er concl usi on of
t hei r i nvest i gat i on, when t he cause of t hese event s was
ascer t ai ned.
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Throughout t hi s per i od, Genzyme al so t i mel y and prompt l y
di scl osed t he revi sed PDUFA dat e handed down by t he FDA i n November
of 2008, t he Febr uar y War ni ng Let t er and t he f i r st Compl et e
Response Let t er . Pl ai nt i f f s pr ovi de no suppor t f or t he pr oposi t i on
t hat def endant s knew al l al ong t he cause of t he bi or eact or
f ai l ur es. They ul t i mat el y r est suppor t f or an i nf er ence of
sci ent er on f ai l ur e t o di scl ose ci r cumst ances at Genzyme f aci l i t i es
t hat wer e, at best , onl y par t i al l y known t o def endant s. However ,
Genzyme' s ef f or t s t o keep the mar ket i nf or med of t i ght eni ng pr oduct
suppl i es, and of r el evant and i mpor t ant exchanges i t hel d wi t h t he
FDA, coupl ed wi t h t he f act t hat t he r esul t s of t he i nvest i gat i on
wer e r el at i vel y pr ompt l y di scl osed, r un count er t o any i nf er ence of
sci ent er . I n r e Fi r st Mar bl ehead, 639 F. Supp. 2d at 163 ( D. Mass.
2009) .
Mor eover , and agai n, as a gener al mat t er , a cor por at i on
cannot be expect ed t o i nf or m t he mar ket of any and al l
devel opment s t hat mi ght possi bl y af f ect st ock val ue. I n r e Bost on
Sci ent i f i c, 686 F. 3d at 27 ( " [ C] ompani es do not have t o di scl ose
i mmedi at el y al l i nf or mat i on t hat mi ght concei vabl y af f ect st ock
pr i ces . . . . ") . Thi s gener al pr i nci pl e i s par t i cul ar l y r el evant
here, where the def endant s di d not i mmedi atel y know t he cause of
t he f i r st t wo bi or eactor r un f ai l ur es at Geel and Al l st on.
Bi or eact or f ai l ur es can i ndeed come about f or di f f er ent r easons.
Accor di ngl y, on t hese f act s, i t was proper f or Genzyme to open an
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i nqui r y i nt o t he mat t er , and t o wai t f or a compl et e pi ct ur e t o
become appar ent bef ore maki ng any f ormal announcement s. See N. J .
Carpent ers Pen. & Ann. Funds v. Bi ogen I DEC I nc. , 537 F. 3d 35, 45
( 1st Ci r . 2008) ; see al so Hi ggi nbot ham v. Baxt er I nt ' l . I nc. , 495
F. 3d 753, 761 ( 7t h Ci r . 2007) ( "Manager s cannot t el l l i es but ar e
ent i t l ed t o i nvest i gat e f or a r easonabl e t i me, unt i l t hey have a
f ul l st or y t o r eveal . " ) . Under t hese ci r cumst ances, wher e Genzyme
kept t he market appr i sed of suppl y short ages, we are not compel l ed
t o i nf er t hat def endant s act ed wi t h f r audul ent i nt ent by t aki ng t he
t i me to i nvest i gat e, and di scover , what was essent i al l y unknown t o
t hem.
3. Assurances of Lumizyme approval and projections
Pl ai nt i f f s' al so asser t , t hough mor e gener al l y, t hat
def endant s decei ved the mar ket by r epeat edl y assur i ng i nvest or s and
anal yst s al i ke t hat t he BLA f or Lumi zyme woul d be appr oved i n a
t i mel y f ashi on. To t he extent t hat def endant s' st at ement s wer e
posi t i ve yet gener al l y qual i f i ed, wer e accompani ed by di scl osur es
of r el evant exchanges wi t h t he FDA, and general l y t r acked t he PDUFA
dates set by t he FDA, we f i nd these general st atement s were not
mi sl eadi ng.
The FDA i ni t i al l y set a PDUFA dat e f or t he Lumi zyme BLA
of November 29, 2008. Dur i ng t he Oct ober 22, 2008 conf erence cal l ,
def endant s t out ed Lumi zyme' s r ecent advances wi t h t he FDA at t he
cl i ni cal t r i al st age. McDonough i n par t i cul ar ment i oned t hey
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expect ed t he FDA t o t ake act i on by t he PDUFA date, and t hat t he
l i kel i hood of appr oval "seemed" t o be "t aki ng a mor e sol i d shape. "
Termeer r emar ked t hat t hey wer e "wor ki ng ver y har d wi t h t he FDA t o
get everyt hi ng done" by t he PDUFA dat e. These are hardl y
cat egor i cal st at ement s, and wer e wel l wi t hi n t he expect at i ons set
by t he PDUFA date. Fur t hermore, l est we f orget , t he Oct ober 2008
Form 483 made no ment i on of any r i sk t o Lumi zyme appr oval , and,
agai n, t he t her apy' s cl i ni cal ef f ect i veness had been r ecent l y
backed by an FDA advi sor y commi t t ee.
Lat e i n November of 2008, t he FDA i nf or med Genzyme t hat
t he Lumi zyme BLA woul d requi r e more t i me f or r evi ew, as cer t ai n
aspect s of t he cur r ent appl i cat i on wer e si gni f i cant l y di f f er ent
f r omt he ear l i er suppl ement al one. The FDA i ssued a new PDUFA date
of Febr uar y 28, 2009, and unt i l t hat t i me, Genzyme' s publ i c
communi cat i ons conveyed t he gener al message t hat Lumi zyme was on
t r ack f or appr oval at t hat dat e. Consi der i ng t he Febr uar y 2009
PDUFA date was ear l y i n t he year , Genzyme mai nt ai ned t hat i t di d
not expect t hi s del ay t o af f ect r evenue pr oj ect i ons f or 2009.
Upon r ecei pt of t he Febr uar y War ni ng Let t er and the f i r st
Compl ete Response Let t er , Genzyme r el ayed t o i nvest ors t hat , by way
of t hese communi cat i ons, t he FDA had caut i oned t hat Lumi zyme
appr oval woul d not occur unt i l t he pr obl ems i dent i f i ed by t he FDA
were r esol ved. Though def endant s empl oyed r ather r osy l anguage t o
expr ess opt i mi sm t hat Genzyme woul d event ual l y be abl e t o appease
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t he FDA, t hei r st atement s as t o when t he Lumi zyme appr oval woul d
come about wer e f ar f r om cat egor i cal , and t hey wer e cl ear t hat
appr oval woul d be months away.
Fromt hat poi nt f or war d, t hr oughout most of 2009, al l of
Genzyme' s communi cat i ons r egardi ng t he appr oval pr ocess were
gener al l y opt i mi st i c, yet f or war d l ooki ng and cer t ai nl y not
cat egor i cal . Genzyme pr oj ect ed t he company' s bel i ef t hat t he
pr obl ems r el ated t o t he Lumi zyme BLA were bei ng addr essed, and t he
expect at i on t hat Lumi zyme approval woul d come about at some poi nt
l at er i n 2009. Genzyme' s communi cat i ons were accompani ed, and
suppl ement ed, by f ul l and pr ompt di scl osur e of al l r el evant
communi cat i ons f r omt he FDA, and per i odi c submi ss i ons t o t he SEC,
as wel l as r evi sed ear ni ngs pr oj ect i ons.
On J une 16, 2009, Genzyme announced t he second bi or eact or
r un f ai l ur e at Al l st on, and as a r esul t of i t s i nvest i gat i on,
expl ai ned t he cause f or t hat f ai l ur e and t he ear l i er Oct ober 2008
event . I nvest or s wer e made awar e t hat t he Al l st on pl ant woul d hal t
pr oduct i on whi l e t he pl ant was sani t i zed i n or der t o pur ge t he
vi r al cont ami nat i on. Genzyme al so announced t hat per f ormance
pr oj ect i ons, as wel l as pr oduct suppl i es, woul d obvi ousl y be
negat i vel y af f ect ed.
On J ul y 27, 2009, t he FDA i nf ormed Genzyme i t woul d
r ei nspect t he Al l st on pl ant . Genzyme di scl osed t he upcomi ng
i nvest i gat i on i n a J ul y 31, 2009 pr ess r el ease.
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On November 13, 2009, t he l ast day of t he cl ass per i od,
t he FDA i ssued Genzyme anot her For m483 ( "November 2009 For m483") ,
and a second Compl ete Response Let t er , t hi s t i me wi t hhol di ng
approval of Lumi zyme. Genzyme announced r ecei pt of bot h document s
onl y sever al days l at er , and host ed a conf er ence cal l announci ng
t hat , due to anot her vi r al out br eak, i t woul d have t o shut down
Al l st on once agai n. Genzyme agai n made cl ear t hat t hese event s
woul d negat i vel y i mpact ear ni ngs.
The bul k of t he st at ement s pl ai nt i f f s cl ai m wer e
mi sl eadi ng, wer e mer e f or war d- l ooki ng pr oj ect i ons t hat ar e not
act i onabl e Sect i on 10( b) t r ansgr essi ons. See I n r e St one &
Webst er , 414 F. 3d at 195; Gr eebl e v. FTP Sof t war e, I nc. , 194 F. 3d
185, 201 ( 1st Ci r . 1999) ( "The saf e har bor . . . . shel t er s
f orward- l ooki ng st atement s t hat are accompani ed by meani ngf ul
caut i onar y st at ement s . . . . [ and] pr ecl udes l i abi l i t y f or a
f orward- l ooki ng st atement unl ess t he maker of t he st atement had
act ual knowl edge i t was f al se or mi sl eadi ng. " ) . Def endant s'
st at ement s, t hough opt i mi st i c, expr essed bel i ef and not cer t ai nt y,
and were accompani ed by ei t her caut i onary l anguage or f ur t her
qual i f yi ng i nf or mat i on. I n r e St one & Webst er , 414 F. 3d at 195
( hol di ng t hat f or war d- l ooki ng st at ement s ar e not f r audul ent even i f
l ater f ound to be i naccur ate, when t hey ar e accompani ed by
meani ngf ul caut i onar y st at ement s i dent i f yi ng i nf or mat i on that may
cause r esul t s t o di f f er mat er i al l y f r om st at ement s) .
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I n sum, as t he di st r i ct cour t not ed, pl ai nt i f f s' account
i s pl ausi bl e. However , t hei r al l egat i ons do not must er suf f i ci ent
st r engt h t o meet t he f ormi dabl e pl eadi ng st andard set by Congr ess
f or secur i t i es f r aud cl ai ms under Sect i on 10( b) . The el ement of
mat er i al i t y i s want i ng as t o some al l egat i ons, as i s t he el ement of
f al si t y as to ot her s. But mor e i mpor t ant l y, t he compl ai nt as a
whol e, as wel l as t he al l egat i ons i ndi vi dual l y, f ai l t o compel a
st r ong i nf er ence of sci ent er on t he par t of def endant s. 5
B. The order denying post-judgment leave to amend
Pl ai nt i f f s ' chal l enge t o t he di str i ct cour t ' s deni al of
t hei r mot i on t o amend t he compl ai nt i s, i n a way, t wo- f ol d.
Pl ai nt i f f s f i r st cont end t hat t he cour t er r ed i n di smi ssi ng t he
compl ai nt wi t h pr ej udi ce, par t i cul ar l y consi der i ng t hat t he
di st r i ct cour t r ecogni zed t hei r cl ai ms wer e pl ausi bl e. Pl ai nt i f f s
al so chal l enge t he di st r i ct cour t ' s or der denyi ng t hei r post
j udgment ef f or t s t o amend t he compl ai nt .
A Rul e 15( a) mot i on t o amend pl eadi ngs i s ordi nar i l y
gr ant ed f r eel y. See Fed. R. Ci v. P. 15( a) ( 2) . However , once
j udgment has been ent er ed, t he di st r i ct cour t i s wi t hout power t o
ent ert ai n any amendment s unl ess t he j udgment i s set asi de. Fi sher
v. Kadant , 589 F. 3d 505, 508- 09 ( 1st Ci r . 2009) . A mot i on t o al t er
or amend a j udgment may be gr ant ed under Rul e 59 onl y i f t he movant
5 As pl ai nt i f f s' cl ai ms under Sect i on 20( a) ar e cont i ngent ont hose under Sect i on 10( b) , we need go no f ur t her .
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demonst r at es t hat an i nt er veni ng change i n cont r ol l i ng l aw, a cl ear
l egal er r or , or newl y di scover ed evi dence war r ant s modi f i cat i on of
t he j udgment . Sot o- Padr v. Pub. Bl dgs. Aut h. , 675 F. 3d 1, 9 ( 1st
Ci r . 2012) . We r evi ew a di st r i ct cour t ' s deni al of a mot i on t o
al t er j udgment f or abuse of di scr et i on. Mar kel Am. I ns. Co. v.
D az- Sant i ago, 674 F. 3d 21, 32 ( 1st Ci r . 2012) ; ACA Fi n. Guar .
Cor p. , 512 F. 3d at 55 ( "Revi ew of t he deni al of [ a] Rul e 59( e)
mot i on i s f or ' mani f est abuse of di scret i on. ' ") ( quot i ng Counci l of
I ns. Agent s & Br oker s v. J uar be- J i mnez, 443 F. 3d 103, 111 ( 1st
Ci r . 2006) ) .
We const r ue pl ai nt i f f s' t wo- pr onged at t ack as a si ngl e
chal l enge - - t hat t he di st r i ct cour t shoul d have ei t her al t er ed t he
j udgment so as t o ent er a di smi ssal wi t hout prej udi ce, or shoul d
have gr ant ed r el i ef f r om j udgment and al l owed t he submi ssi on of an
amended compl ai nt . Though we ar e somewhat concer ned wi t h t he
di st r i ct cour t ' s or der on t hi s f r ont , we ul t i mat el y f i nd t hat i t
di d not abuse i t s di scret i on i n denyi ng pl ai nt i f f s Rul e 59 r el i ef .
Pl ai nt i f f s sought post - j udgment l eave t o amend t he
compl ai nt bef or e t he di st r i ct cour t , ar gui ng t hat af t er f i l i ng t he
compl ai nt t hey had cont i nued conduct i ng i nt ervi ews wi t h Genzyme
empl oyees who pr ovi ded i nf or mat i on t hat f ur t her st r engt hened t hei r
case. They cont end t hat t hese wi t nesses yi el ded val uabl e new
i nf or mat i on t o suppor t new al l egat i ons t hat woul d bol st er t he
i nf er ence t hat def endant s acted wi t h f r audul ent i nt ent t hr oughout
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t he cl ass per i od, and t hat t hey shoul d be al l owed to amend t he
compl ai nt t o i ncl ude t hese new al l egat i ons.
However , pl ai nt i f f s admi t t hat most of t hi s pur por t edl y
new evi dence was avai l abl e to them wel l bef or e the or der of
di smi ssal . I ndeed, many of t he i nt er vi ews wer e conduct ed af t er t he
f i l i ng of t he compl ai nt , and cont i nued af t er br i ef i ngs on t he
mot i on t o di smi ss had subsi ded. But most had concl uded bef ore t he
di st r i ct cour t di smi ssed t he compl ai nt on Mar ch 30, 2012, t wo year s
af t er t he compl ai nt had been f i l ed. Accor di ngl y, we agr ee wi t h t he
di st r i ct cour t t hat t hi s was not newl y di scover ed, or pr evi ousl y
unavai l abl e evi dence, whi ch i s t he onl y ki nd t hat woul d war r ant
r el i ef f r om j udgment under Rul e 59. Uni t ed St at es ex r el . Ge v.
Takeda Phar m. Co. , 737 F. 3d 116, 127 ( 1st Ci r . 2013) ; Mar i e v.
Al l i ed Home Mor t g. Cor p. , 402 F. 3d 1, 7 n. 2 ( 1st Ci r . 2005) . We
t hus f i nd t he di st r i ct cour t di d not abuse i t s di scr et i on i n
denyi ng pl ai nt i f f s' Rul e 59 mot i on.
We pause t o not e our di scomf or t wi t h t he di st r i ct cour t ' s
choi ce t o di smi ss the compl ai nt wi t h pr ej udi ce. The di st r i ct cour t
gr ant ed r el i ef i n t he f or mpet i t i oned f or by def endant s, and i t i s
cer t ai nl y wi t hi n t he bounds of t he di st r i ct cour t ' s di scret i on t o
di smi ss wi t h pr ej udi ce. However , as we have done i n t he past , we
agai n make cl ear t hat t he PSLRA has not modi f i ed t he l i beral
amendment pol i cy of Rul e 15( a) . ACA Fi n. Guar . Corp. , 512 F. 3d at
56. Mor e t o t he poi nt , we emphat i cal l y r ei t er at e t hat t he PSLRA
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does not r equi r e t hat or der s of di smi ssal be wi t h pr ej udi ce. I d.
( quot i ng Bel i zan v. Her shon, 434 F. 3d 579, 583- 84 ( D. C. Ci r . 2006)
( " [ H] ad t he Congr ess wi shed t o make di smi ssal wi t h pr ej udi ce the
nor m, and t o t hat extent super cede the or di nar y appl i cat i on of Rul e
15( a) , we woul d expect t he text of t he PSLRA so t o pr ovi de. " ) ) .
Thi s i s par t i cul ar l y so i n l i ght of t he f act t hat t he PSLRA i s a
t ool desi gned t o cur b vexat i ous l i t i gat i on, not a mechani sm f or
denyi ng bona f i de cl ai mant s thei r day i n cour t . Tel l abs, 551 U. S.
at 320. The l at t er r i ght i s one t hat Congr ess speci f i cal l y sought
t o pr eserve. Hi l l , 638 F. 3d at 54. Cour t s must be mi ndf ul of t he
wi l l of Congr ess, and not mer el y i n par t . And our dut y t o
guar ant ee access t o t he cour t s, i s equal l y par amount .
III. Conclusion
We f i nd t he compl ai nt f ai l s t o mar shal suf f i ci ent
al l egat i ons t o meet t he r equi r ed pl eadi ng st andar d f or secur i t i es
f r aud cl ai ms. We f i nd i t i s par t i cul ar l y want i ng on t he el ement of
sci ent er .
We al so f i nd t he di st r i ct cour t di d not abuse i t ' s
di scret i on i n denyi ng pl ai nt i f f s r el i ef f r omj udgment . Accor di ngl y,
we af f i r m t he j udgment of t he di st r i ct cour t .
AFFIRMED.