Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Metzler Asset Management GMBH v. Kingsley

United States Court of Appeals, First Circuit

June 27, 2019

METZLER ASSET MANAGEMENT GMBH, on behalf of itself and all other similarly situated parties; ERSTE-SPARINVEST KAPITALANANLAGEGESELLSCHAFT MBH, on behalf of itself and all other similarly situated parties, Plaintiffs, Appellants/Cross-Appellees,
STUART A. KINGSLEY; GEORGE A. SCANGOS; PAUL J. CLANCY; BIOGEN INC., Defendants, Appellees/Cross-Appellants.


          Gregg S. Levin, with whom Christopher F. Moriarity, William H. Narwold, Motley Rice LLC, Jonathan Gardner, Labaton Sucharow LLP, Robert M. Rothman, Mark T. Millkey, Susan K. Alexander, Andrew S. Love, and Robbins Geller Rudman & Dowd LLP were on brief, for appellants/cross-appellees.

          James R. Carroll, with whom Michael S. Hines, Sara J. van Vliet, and Skadden, Arps, Slate, Meagher & Flom LLP were on brief, for appellees/cross-appellants.

          Before Lynch, Stahl, and Barron, Circuit Judges.


         Metzler Asset Management GmbH ("Metzler") and Erste-Sparinvest Kapitalanlagegesellschaft mbH ("Erste-Sparinvest") have been designated the lead plaintiffs, pursuant to the Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. § 78u-4, in a federal securities class action that they brought against Biogen Inc. and three Biogen executives ("Biogen"). The suit alleges that Biogen and its executives committed fraud, in violation of regulations promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act, 15 U.S.C. § 78a et seq, by falsely stating that Biogen's product, Tecfidera, was both safer and more widely used than it was. The putative class is comprised of all purchasers of Biogen common stock from July 23, 2014, through July 23, 2015.

         The defendants moved to dismiss the suit on claim preclusion grounds, based on this Court's earlier decision in In re Biogen Inc. Securities Litigation, 857 F.3d 34 (1st Cir. 2017) ("Biogen I"), and for failing to plead facts "giving rise to a strong inference" of scienter, 15 U.S.C. § 78u-4(b)(2)(A), as the PSLRA requires that a complaint alleging fraud must in order for it to survive such a motion. The District Court rejected the defendants' claim preclusion argument but dismissed the suit under the PSLRA for failing to adequately plead scienter. We affirm.


         The corporate defendant, Biogen, is a multinational biotechnology company based in Cambridge, Massachusetts. Its stock trades on the NASDAQ. Id. at 37. The three individual defendants are George Scangos, who was Biogen's Chief Executive Officer from July 23, 2014, through July 23, 2015; Paul Clancy, who was Biogen's Chief Financial Officer and Executive Vice President of Finance during that time; and Stuart Kingsley, who was its Executive Vice President of Global Commercial Operations during the same period. Id.

         The plaintiffs' complaint sets forth the following allegations. Biogen developed and sold a United States Food and Drug Administration ("FDA") approved drug for multiple sclerosis ("MS") called Tecfidera during the relevant time period. Tecfidera accounted for a third of Biogen's total revenue in this time frame. As of July 23, 2014, Tecfidera bore a label that warned patients taking the drug of an increased risk of developing lymphopenia -- a condition of having low lymphocyte counts, leading to a weakened immune system.

         On October 22, 2014, Biogen held a third-quarter earnings call with its investors. The company announced for the first time publicly that an MS patient who had been regularly taking Tecfidera had died of progressive multifocal leukoencephalopathy ("PML"), a rare neurological disease which counts lymphopenia as one of its precursors. One month later, Biogen amended the Tecfidera label to include a warning about the risk of PML.

         On January 29, 2015, Biogen provided full-year revenue guidance for 2015. It predicted a 14% to 16% overall growth rate for the company for the year. However, on April 24, 2015, Biogen released first-quarter financial results for the year that showed that Tecfidera's revenue had fallen below the market estimates.

         On July 24, 2015, Biogen released its second-quarter earnings report. The report amended the company's 2015 revenue guidance. It lowered Biogen's predicted revenue growth from 14-16% to 6-8% for the year. Biogen attributed its tempered expectations, in part, to slowing Tecfidera growth.

         Biogen's stock fell by more than 20% in one day due to the second quarter earnings report. On October 9, 2015, Biogen announced that Kingsley was leaving the company. Less than two weeks later, the company announced that it was cutting roughly 11% of its workforce. Id. at 39.

         On August 18, 2015, a putative federal securities fraud class action was filed in the District of Massachusetts against the company and the same three individual defendants in the case before us in this appeal. Id. at 36-39. The putative class in that action consisted of persons who had purchased common stock of Biogen between January 29, 2015, and July 23, 2015. Tehrani v. Biogen, Inc., No. 15-13189, 2015 WL 7302132, at *1 (D. Mass. Nov. 18, 2015). The suit alleged that Biogen and the three executives had fraudulently misled investors, in violation of Sections 10(b)[1]and 20(a)[2] of the Securities Exchange Act of 1934, see 15 U.S.C. §§ 78j(b), 78t(a), regarding Tecfidera's usage rates in light of the PML incident. Tehrani, 2015 WL 7302132, at *1.

         Notice of the action was published pursuant to the PSLRA, which establishes procedures for bringing securities class actions. See id. at *2. In accordance with those procedures, on November 17, 2015, the District Court preliminarily appointed GBR Group Ltd. ("GBR") "lead plaintiff" in the matter, a status that Congress created in the PSLRA "to increase the chances that securities fraud cases are brought by investors who have substantial and genuine interests in the litigation." Id.

         On January 19, 2016, GBR filed an amended complaint. The amended complaint changed the class period, such that it ran from December 2, 2014, through July 23, 2015. Biogen I, 857 F.3d at 36.

         Biogen moved to dismiss the complaint. The District Court granted that motion as to both the Section 10(b) and 20(a) claims. See Biogen I, 193 F.Supp.3d 5, 56 (D. Mass. 2016).

         GBR moved to vacate the order of dismissal and for leave to file a second amended complaint with the District Court under Federal Rules 59(e) and 60(b)(2). In re Biogen Inc. Sec. Litig., No. 15-13189, 2016 WL 5660329, at *3 (D. Mass. Sept. 28, 2016). The motion requested that the District Court vacate the order of dismissal based on the new scienter allegations in the proposed second amended complaint. Id. The District Court denied the motion. Id. at *6. The District Court determined that the plaintiffs could have discovered the evidence on which they were based earlier with reasonable diligence. Id.

         GBR appealed both the dismissal of the complaint for failure to state a claim as well as the denial of its motion to vacate that dismissal and for leave to file the second amended complaint. As discussed below, that appeal ultimately ended in affirmance of the District Court. During the pendency of the appeal in that case, however, separate Biogen stockholders filed a subsequent putative class action in the District Court on October 20, 2016, against Biogen and certain of its executives on behalf of a class of investors in the company. Metzler Asset Mgmt. GmbH v. Kingsley ("Biogen II"), 305 F.Supp.3d 181, 205, 202 (D. Mass. 2018). They alleged that, through its comments to investors, Biogen misled the market about Tecfidera's safety profile and discontinuation rates.

         This new action is the one before us on appeal. It, too, asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act. Nonetheless, it differs from the first putative class action that had been filed against Biogen in three ways. First, the class period for the putative class in the new suit began on July 23, 2014, as opposed to December 2, 2014. Second, the complaint in the new suit alleged that Biogen had made additional misleading statements not referenced in the prior suit and also set forth statements from confidential witnesses ("CWs") to prove scienter that had not been referenced in the complaint in the earlier suit. These newly alleged statements included ones that had been set forth in the amended complaint in the earlier putative class action that the District Court rejected for not having been included in a timely manner. See Biogen I, 857 F.3d at 45-46. Third, the new suit alleged that, in addition to making fraudulent statements regarding Tecfidera's usage rate, Biogen executives also made fraudulent statements about the drug's safety profile.

         On February 1, 2017, the District Court preliminarily appointed Metzler and Erste-Sparinvest -- not GBR -- to be the lead plaintiffs in this new suit pursuant to the PSLRA. See Metzler Asset Mgmt. GmbH v. Kinglsey, No. 16-12101, 2017 WL 438731 (D. Mass. Feb. 1, 2017). Plaintiffs also filed a motion to stay the District Court proceedings pending resolution of the appeal of the earlier action. That motion was denied. Id. at *4.

         On May 12, 2017, we affirmed the District Court's order of dismissal for lack of sufficient allegations of scienter in Biogen I. Biogen I, 857 F.3d at 46. In so doing, we also held that the confidential witness statements provided by the plaintiffs were "insufficiently particular" to prove scienter. Id. at 41. Finally, we denied the plaintiffs' motion to vacate and file a second amended complaint. Id. at 45.

         Following Biogen I, Biogen moved to dismiss the complaint in the putative class action that is now before us for failing to adequately plead scienter and on claim preclusion grounds. The District Court rejected the claim preclusion argument but agreed that the complaint in the new suit failed to plead facts sufficient to create a strong inference ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.