Battle Construction Co., Inc., et al v. InVivo Therapeutics Holdings C, et al

Filing

OPINION issued by Jeffrey R. Howard, Chief Appellate Judge; Bruce M. Selya, Appellate Judge and Kermit V. Lipez, Appellate Judge. Published. [15-1544]

Case: 15-1544

Document: 00117102239

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Date Filed: 01/09/2017

Entry ID: 6060383

United States Court of Appeals
For the First Circuit
No. 15-1544
EDMOND GANEM,
Plaintiff, Appellant,
BATTLE CONSTRUCTION CO., INC., individually and on behalf of all
others similarly situated; STEVE ADAMS,
Plaintiffs,
v.
INVIVO THERAPEUTICS HOLDINGS CORP.; FRANK REYNOLDS,
Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]

Before
Howard, Chief Judge,
Selya and Lipez, Circuit Judges.

Thomas G. Shapiro, with whom Patrick J. Vallely and Shapiro
Haber & Urmy LLP were on brief, for appellant.
Michael G. Bongiorno, with whom James W. Prendergast, Andrew
S. Dulberg, Wilmer Cutler Pickering Hale and Dorr LLP, Richard J.
Rosensweig, Paul F. Beckwith, Derek B. Domian, and Goulston &
Storrs PC were on brief, for appellee InVivo Therapeutics Holdings
Corp.
Richard J. Rosensweig for appellee Frank Reynolds.

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LIPEZ, Circuit Judge.

Date Filed: 01/09/2017

Entry ID: 6060383

Following a drop in the share

price of InVivo Therapeutics Holdings Corporation's ("InVivo")
common stock, investors filed suit against the company and its
former chief executive officer ("CEO"), Frank Reynolds, alleging
securities fraud in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§
78j(b)

and

78t(a),

as

well

as

the

Securities

and

Commission's ("SEC") Rule 10b-5, 17 C.F.R. § 240.10b-5.

Exchange
On behalf

of himself and a putative class of shareholders, lead plaintiff
Edmond Ganem ("Ganem") alleges that InVivo and Reynolds inflated
the value of InVivo's common stock for about five months in 2013
by

issuing

false

or

materially

misleading

press

releases

concerning the approval of human clinical trials for a new medical
device the company was developing, by, inter alia, failing to
identify the caveats and conditions imposed by the Food and Drug
Administration ("FDA") for the clinical trials.

The district

court, in a well-reasoned opinion, granted defendants' motion to
dismiss the complaint. We affirm, agreeing with the district court
that Ganem has failed to allege false or misleading statements
sufficient to state a claim under Section 10(b) and Rule 10b-5,
and, having failed to plead a viable claim of a primary violation,
Ganem's control person claim against Reynolds under Section 20(a)
was also properly dismissed.

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I.
A. Factual Background
According to InVivo's 2012 annual report to the SEC
("Form 10-K"), which was filed in early March 2013, the company
focuses on "develop[ing] and commercializ[ing] new technologies
for the treatment of spinal cord injuries."
InVivo's

"Lead

Product

Under

The report identified

Development"

as

"biopolymer

scaffolding," a device that would attach to a patient's body at
the point of a spinal injury to prevent additional damage to the
spinal cord.

The report outlined the company's strategy for

marketing the device, including the steps for securing the required
approval from the FDA.
The report explained that InVivo would first need to
obtain an Investigational Device Exception ("IDE") to permit it to
conduct human clinical trials.

Such a clinical study was a

prerequisite for obtaining either Pre-Market Approval ("PMA") or
a Humanitarian Device Exemption ("HDE"), either of which would
permit the company to sell the product in the United States.
InVivo stated that it "plan[ned] to conduct an initial clinical
study to evaluate the device in five spinal cord injury patients
with acute thoracic injuries.

We are also planning a larger

follow-on human study in acute spinal cord injury patients after
the initial study is completed."

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In the report, InVivo qualified the above statements,
noting that "forward-looking statements" -- such as "statements
about our plan to conduct an initial clinical study to evaluate
our product" -- are necessarily contingent because they "involve
substantial known and unknown risks."

InVivo stated that "[t]he

start of clinical trials can be delayed or take longer than
anticipated for many and varied reasons, many of which would be
outside of our control."
On March 29, 2013, the Acting Director of the FDA's
Office of Device Evaluation sent an eleven-page letter to InVivo.
Because Ganem's claims rely on the proposition that InVivo later
misrepresented the content of the letter, we quote from it at some
length:

The [FDA] has reviewed your amendment to your [IDE]
application to conduct an early feasibility study
. . . . Your application to begin your study is
approved with conditions . . . .
You may begin
your investigation, using a revised informed
consent document which corrects deficiency number
1 and 3, at an institution in accordance with the
investigational site waiver granted below.
Your
investigation is limited to 3 institutions and 1
subject.
Your IDE application has been approved with
conditions as a staged study; you may enroll one
subject at this time.
You should follow this
subject for 3 months before requesting approval for
an additional subject, who should also be followed
for three months before requesting another subject.
This will result in a total of 5 subject[s] enrolled
over a minimum 15 month period. . . .

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A feasibility study is a preliminary study which is
not expected to provide the primary support for the
safety and effectiveness evaluation of a medical
device
for
the
purposes
of
a
marketing
application. . . . FDA believes that additional
modifications, as outlined in "Study Design
Considerations" below, are needed for your study
design
to
support
a
future
study.
This approval is being granted on the condition
that, within 45 days from the date of this letter,
you submit information correcting the following
issues[.]

The FDA listed thirteen issues for which it required further
information before the initial study could begin.1

Then, under

"Study

that

Design

Considerations,"

the

FDA

stated

"[w]e

recommend, but do not require, that you modify your study to
address the following issues" so that it could support a future
study, listing eight specific issues.2
The following week, on April 5, 2013, InVivo issued the
three-page press release at the heart of Ganem's complaint:

1

These thirteen issues required InVivo to, among other
things: make revisions to its draft informed consent document,
provide results from preclinical animal testing, provide certain
test protocols and reports for FDA review, and remove specified
language from product labeling.
2

These modifications included, for example: a recommendation
to include a randomized control group; a recommendation that InVivo
"pre-specify . . . effectiveness and safety endpoints"; a
recommendation that InVivo “include the age range of the study
population” in the “Indications for Use”; and a recommendation
that InVivo accompany all symbols on its "carton labeling" (such
as "Rx") with descriptive text.

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InVivo Therapeutics Receives Approval from FDA for
First Human Trial Using Biomaterials for Traumatic
Spinal Cord Injury
. . .
InVivo Therapeutics Holdings Corp. . . .
today announced that the U.S. Food and Drug
Administration (FDA) has approved the Company's
Investigational Device Exemption (IDE) to begin
human studies to test its biopolymer scaffold
product, a technology developed to treat patients
with acute, traumatic SCI.
With this approval, InVivo intends to commence a
first-in-man clinical study in the next few months
that will test safety and performance of its
biopolymer scaffold in five patients. The Company
expects the study to occur over approximately 15
months. There are currently no treatment options
approved by the FDA, or in clinical trials, to
intervene directly in the spinal cord following
SCI. The trial will be conducted at multiple U.S.
hospitals, and work to gain Institutional Review
Board (IRB) approval at Massachusetts General
Hospital in Boston is already underway.
" . . . [W]hen conducting a first-in-man study, it
is imperative to take the time to get it right,
because any mistakes can lead to years of lost time
for the scientists and patients that follow," said
Frank Reynolds, InVivo Chief Executive Officer.
. . .
Continued Reynolds, "Over the next month or so, we
plan to finalize the details of our study, and we
expect to have all data to the FDA by the end of
2014. We will be conducting an open label study,
and so we look forward to keeping the public aware
of its progress. . . ."

The press release did not reveal that FDA approval was
conditional, or list any of the conditions, or explain that the
FDA had recommended changes to the study protocol in order to allow

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the staged study to support future studies.

Entry ID: 6060383

The release did,

however, contain a "Safe Harbor Statement" indicating that certain
statements in the press release were covered by the Exchange Act's
statutory safe harbor for "forward-looking statements."3

The safe

harbor statement explained that the covered statements included
"those related to the expected approval of the FDA to conduct human
clinical

trials

for

the

Company's

products,

the

expected

commencement date of any approved human clinical trials, the
expected size of the pilot study, the expectation that the scaffold
product will be regulated under an HDE pathway, and the expected
acceleration

of

commercialization

of

the

Company's

products

resulting therefrom[,]" which were "subject to a number of risks
and uncertainties[,]" including "risks and uncertainties relating
to the Company's ability to obtain FDA approval to conduct human
clinical trials[.]"

The release also referred to InVivo's Form

10-K, which described the potential risks in more detail.
Ganem alleges that the price of InVivo stock increased
as a result of the apparent good news contained in the press

3

The Exchange Act's safe harbor provision is found in
15 U.S.C. § 78u-5. Under this provision, a person "shall not be
liable" with respect to any "forward-looking statements when not
made with knowledge of falsity or when the statement itself is
identified as forward-looking and is accompanied by 'meaningful
cautionary statements identifying important factors that could
cause actual results to differ materially from those in the
forward-looking statement.'" Hill v. Gozani, 638 F.3d 40, 54 (1st
Cir. 2011) (quoting 15 U.S.C. § 78u–5(c)(1)(A)(i)).

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release.

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Historical stock prices cited by both parties indicate

that there was a relatively high volume of trading on Monday, April
8, 2013, after the press release the previous Friday.

That day,

the stock price rose from $2.85 per share to $3.19 per share.
Ganem

also

points

to

alleged

another press release from May 9, 2013.

misrepresentations

in

In that release, Reynolds

was quoted as saying "[w]e are off to a great start for 2013 and
continue

to

successfully

accelerate

our

plans[.]"

It

also

reiterated some of the statements made a month earlier: "In April
2013, the FDA approved InVivo's Investigational Device Exemption
(IDE) application to begin human studies to evaluate its biopolymer
scaffold product for acute traumatic SCI. . . .
will be evaluated in five patients.

[T]he product

The Company expects to

commence the study in mid-2013 and submit data to the FDA by the
end of 2014."

The May 9 release contained a safe harbor statement

similar to the one in the April 5 release.

Ganem does not allege

any change in InVivo's stock price resulting from the May 9
release.
Finally, on August 27, 2013, before regular trading
hours, InVivo issued a press release titled "InVivo Therapeutics
Updates Clinical Plan."

That release said:

The Company now expects that, based on the judgment
of new management, it will enroll the first patient
during the first quarter of 2014.

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Under the conditions of the FDA's approval of the
Investigational Device Exemption, the five-person
pilot trial will be staggered such that each
patient will be followed for three months prior to
requesting approval to enroll the next patient.
Because the Company must obtain FDA approval to
enroll each subsequent patient, the Company
anticipates that from the date of the first
enrolled patient, it will take at least 21 months
to complete enrollment.
Consistent with FDA
guidance, the Company then expects to conduct a
pivotal study with a control group to obtain FDA
approval to commence commercialization under a
Humanitarian Device Exemption.

Interim CEO Michael Astrue was quoted as saying: "While the study
will take additional time, we look forward to bringing this
important therapy into the clinic."
Ganem

alleges

that

InVivo's

stock

price

dropped

in

reaction to the revised 2014 start date and estimated 21-month
time for completion of the clinical trial revealed in this press
release.

Historical stock prices show that an unusually high

volume of trading started on Friday, August 23, 2013, and continued
from Monday, August 26 through the end of the class period on
August 28.

The stock price fluctuated during those four trading

days, ultimately dropping from $4.00 per share at the opening of
trading on August 23 to $2.07 at the close of trading on August 28.
B. Procedural Background
Ganem brought this action against InVivo and its former
CEO, Reynolds, on behalf of a putative class "consisting of all
persons and entities who purchased the common stock of [InVivo]

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from April 5, 2013, through August 26, 2013, inclusive" -- i.e.,
all

purchasers

of

stock

between

the

dates

of

the

initial

announcement of the clinical trial and the press release nearly
five months later that revealed problems with the timeline for the
trial. The operative amended complaint asserted two claims: first,
that InVivo and Reynolds deceived investors into buying common
stock

at

high

prices,

artificially

boosted

by

the

false

or

misleading press releases, in violation of § 10(b) of the Exchange
Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17
C.F.R. § 240.10b-5; and, second, that Reynolds is liable as a
"controlling person" under § 20(a) of the Exchange Act, 15 U.S.C.
§ 78t(a).
The district court rejected both claims, concluding that
Ganem had failed adequately to plead material misrepresentations
or scienter supporting a claim under § 10(b) and Rule 10b-5, and
that, absent a primary violation under § 10(b), Ganem's derivative
control person claim against Reynolds must be dismissed. Battle
Constr. Co., Inc. v. InVivo Therapeutics Holdings Corp., 101 F.
Supp. 3d 135, 141-42 & n.6 (D. Mass. 2015).

We focus on the claim

under § 10(b) and Rule 10-b5 (the "10(b) claim").4

4

We review a

Because, as we explain, the district court properly
dismissed the § 10(b) claim, the derivative control person claim
under § 20(a) was also properly dismissed.
Automotive Indus.
Pension Tr. Fund v. Textron Inc., 682 F.3d 34, 36 n.2 (1st Cir.
2012).

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dismissal for failure to state a claim de novo.

Entry ID: 6060383

SEC v. Tambone,

597 F.3d 436, 441 (1st Cir. 2010) (en banc). We accept as true all
well-pleaded allegations in the complaint and make all reasonable
inferences in favor of the pleader.

Id.

II.
A. The Exchange Act and Rule 10-b5.
Section 10(b) of the Exchange Act "forbids the 'use or
employ, in connection with the purchase or sale of any security
. . . , [of] any manipulative or deceptive device . . . .'" Tellabs
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007)
(alteration in original) (quoting 15 U.S.C. § 78j(b)).

The SEC

has implemented this provision via Rule 10b-5, which proscribes,
among other things, "any untrue statement of a material fact" or
omission of any "material fact necessary in order to make the
statements made, in the light of the circumstances under which
they were made, not misleading."

17 C.F.R. § 240.10b-5.

To state

a claim under Section 10(b) and Rule 10b-5, a plaintiff must plead
the

following

elements:

(1)

a

material

misrepresentation

or

omission; (2) scienter; (3) a connection with the purchase or sale
of a security; (4) reliance; (5) economic loss; and (6) loss
causation.

In re Ariad Pharm., Inc. Sec. Litig., 842 F.3d 744,

750 (1st Cir. 2016)(citing ACA Fin. Guar. Corp. v. Advest, Inc.,
512 F.3d 46, 58 (1st Cir. 2008)).

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Only

the

Page: 13

first

two

Date Filed: 01/09/2017

elements

--

Entry ID: 6060383

a

material

misrepresentation or omission and scienter -- are implicated by
this

appeal.

Though

Ganem

contests

the

district

court's

conclusions as to both, we begin and end with the first.5

To

establish a material misrepresentation or omission, Ganem must
show

"that

defendants

made

a

materially

false

or

misleading

statement or omitted to state a material fact necessary to make a
statement not misleading."
34 (1st Cir. 2001).

Geffon v. Micrion Corp., 249 F.3d 29,

"[M]ere possession of material, nonpublic

information does not create a duty to disclose it,"

Hill, 638

F.3d at 57 (internal punctuation omitted), but "when a company
speaks, it cannot omit any facts 'necessary in order to make the
statements made, in the light of the circumstances under which

5

InVivo also argues that its forward-looking statements are
protected by the bespeaks caution doctrine, which "embodies the
principle that when statements of 'soft' information such as
forecasts, estimates, opinions, or projections are accompanied by
cautionary disclosures that adequately warn of the possibility
that actual results or events may turn out differently, the 'soft'
statements may not be materially misleading under the securities
laws." Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1213 (1st Cir.
1996); see also id. at 1213 n.23. InVivo does not, however, invoke
the statutory safe harbor codifying the bespeaks caution doctrine,
15 U.S.C. § 78u-5(c)(1), because, it explains, "arguably, the
[statutory] safe harbor does not apply to the challenged statements
because, while InVivo is now listed on the NASDAQ, the Company
could have been, at the time, considered an issuer of 'penny
stock.'" See id. § 77z-2(b)(1)(C) (excluding issuers of "penny
stock" from the statutory safe harbor). Because the absence of a
material misrepresentation or omission is determinative, we need
not decide the applicability of either the bespeaks caution
doctrine or the statutory safe harbor to InVivo's statements.

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they

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were

made,

not

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misleading.'"

Id.

(quoting

Entry ID: 6060383

17

C.F.R.

§ 240.10b-5); see also Matrixx Initiatives, Inc. v. Siracusano,
563 U.S. 27, 37 (2011)
Finally,
plaintiff

must

"[a]s

plead

with

the

all

allegations

circumstances

particularity, pursuant to Rule 9(b)."

of

of

the

fraud,
fraud

a

with

Hill, 638 F.3d at 55.

Moreover, under the additional pleading requirements imposed by
the Private Securities Litigation Reform Act ("PSLRA"), in order
to survive a motion to dismiss, the plaintiff must "specify each
statement alleged to have been misleading [and] the reason or
reasons why the statement is misleading."

ACA Fin. Guar. Corp.,

512 F.3d at 58 (modification in original) (quoting 15 U.S.C. §
78u–4(b)(1)); see also Hill, 638 F.3d at 54-56 (discussing the
history and purpose of the PSLRA).

As we have previously noted,

although "the PSLRA does not require plaintiffs to plead evidence
. . . a significant amount of 'meat' is needed on the 'bones' of
the complaint."

Id. at 56 (citation omitted).

B. Analysis of the Claims.
Ganem claims that the statements in InVivo's April 5 and
May

9

press

preliminary

releases
study

about

were

the

projected

materially

false

timeline
or

for

the

misleading.

Specifically, with regard to the start date of the study, the April
5 release expressed the intention that the study begin "in the
next few months," and the May 9 release predicted it would start

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"in mid-2013."
release

said

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Regarding the duration of the study, the April 5
that

InVivo

approximately 15 months."

"expects

the

study

to

occur

over

As for the end date of the study, the

April 5 release said "we expect to have all data to the FDA by the
end of 2014," and the May 9 release predicted that InVivo would
"submit data to the FDA by the end of 2014."
Ganem

claims

that

InVivo's

failure

to

mention

the

details of the FDA approval letter rendered these statements
materially false or misleading.
omissions: (1) the FDA's

He cites three allegedly material

requirement that InVivo satisfy a number

of conditions within 45 days (including correcting the informed
consent

form

before

testing

could

begin

on

the

first

human

subject); (2) the FDA's recommendation that InVivo modify its study
design so that the preliminary study could serve as the basis for
approval of a larger follow-on study; and (3) the FDA requirement
of a staged study, in which separate FDA approval was required for
each of five stages.
According

to

Ganem,

the

FDA's

conditions,

recommendations, and requirement of a staged study inevitably
prevented InVivo from following through on its stated timeline.
He alleges that "Defendants failed to disclose in the April 5 and
May 9 press releases that the FDA's approval of the clinical study
included conditions that made it impossible to complete the study
in 15 months or to submit data to the FDA by the end of 2014, as

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represented."

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Am. Compl. ¶ 34.

Date Filed: 01/09/2017

Entry ID: 6060383

In short, Ganem's theory of

material misrepresentation is that InVivo's omissions about the
content of the FDA approval letter rendered the company's temporal
predictions materially misleading.
Like the district court, however, we readily conclude
that none of the challenged statements is false or misleading. We
discuss each of the allegedly false or misleading statements in
turn.
1. Commencement of the Clinical Trial.
Ganem contends that InVivo misrepresented the imminence
of the commencement of the study when the company reported in April
that it would begin "in the next few months" and in May that it
was expected to begin "in mid-2013." According to Ganem, the "mid2013" start date provided by InVivo would be impossible to achieve
given the conditions imposed by the FDA, thus making InVivo's
optimistic statements materially misleading.

However, as the

district court found, "any objective reading of the [approval]
letter makes clear that the FDA erected no material barriers to an
immediate enrollment of the first patient for the exploratory
study."

Although the FDA required particular changes to the

informed consent form before the first human was tested, Ganem
understandably does not argue that simply changing a form could
have delayed the beginning of the study.

Also, as the district

court found, "[w]hile the FDA did require additional information

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of a corrective nature from InVivo, it did not condition the first
enrollment on the prior receipt of this information."

In fact,

the FDA's letter explicitly permits a start date in the near
future:

"[InVivo] may enroll one subject at this time."

Further,

although the FDA required additional information within 45 days,
Ganem alleges no facts suggesting that InVivo would fail to meet
that deadline.

And, though InVivo needed to obtain Institutional

Review Board approval to use each testing site, Ganem alleges no
facts suggesting that this would delay the beginning of the study
beyond

the

"few

months"

InVivo

projected.

Indeed,

InVivo

represented in the April 5 press release that it was already
"work[ing] to gain Institutional Review Board (IRB) approval at
Massachusetts General Hospital," making clear that the approval
had not yet been obtained.
Ganem also alleges that InVivo's statements regarding
commencement of the study were misleading because the FDA letter
required InVivo to make eight specific modifications to its initial
feasibility study for that study to support a future, separate
study, and implementing such modifications would make InVivo's
proposed timeline impossible to meet. As an initial matter, this
argument fails for the simple reason that Ganem alleges no facts
suggesting that InVivo could not make these eight changes within
the proposed timeline, a necessary showing for the statements to
have been misleading when made.

See 15 U.S.C. § 78u–4(b)(1); ACA

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Fin. Guar. Corp., 512 F.3d at 62 ("The PSLRA requires plaintiffs'
complaint

to

'specify

each

statement

alleged

to

have

been

misleading [and] the reason or reasons why the statement is
misleading.'") (alteration in original).

Moreover, the FDA did

not require InVivo to make these eight changes before commencing
its initial feasibility study. The FDA, in fact, stated that "[w]e
recommend, but do not require, that you modify your study to
address the following issues."

Although Ganem alleges that going

forward without the recommended changes would have made "no sense"
and

would

serve

"no

purpose,"

Ganem's

own

speculation

and

conjecture about InVivo's business decisions cannot substitute for
well-pleaded facts.
2. Duration of the Clinical Trial
In

alleging

that

InVivo's

statements

regarding

the

estimated duration of the study were false or misleading, Ganem
relies

on

the

impossible,

proposition

particularly

that

in

a

light

fifteen-month
of

the

duration

sequential

was

patient

enrollment process that the FDA required, which InVivo did not
disclose

in

its

April

5

and

May

6

9

press

releases.6

Ganem

Ganem similarly argues that "[InVivo's] statement that the
FDA 'has approved' a study to evaluate 'five patients' was false."
This claim is without merit. InVivo's April 5 release says that
the FDA approved InVivo's plan "to begin human studies," and that
"InVivo intends to commence a . . . study . . . in five patients,"
and its May 9 release repeats that the approval was "to begin human
studies," adding that "the product will be evaluated in five
patients." These statements are not "literally false" as Ganem
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Entry ID: 6060383

acknowledges, however, that the FDA itself wrote that the staged
study "will result in a total of 5 subject[s] enrolled over a
minimum of [a] 15 month period."

Ganem also acknowledges, as he

must, that if each subject was observed for the required three
months and then the next subject was enrolled almost immediately,
observing five subjects would take approximately fifteen months.
Ganem insists, however, that it would be impossible to
do

this

study

in

these

fifteen

months

because

of

the

steps

necessary after each patient was observed for the requisite three
months -- at a minimum, reviewing the data, preparing a report for
the FDA, and waiting for FDA approval to proceed with the next
patient.

As with Ganem's other claims, however, this timing

allegation is not supported by any well-pleaded facts.

We have no

basis on which to conclude that it would take a significant length
of time to complete the steps for each patient, and the only
available evidence -- the FDA's own letter suggesting a fifteenmonth minimum testing period -- suggests the opposite.
3. Submitting data to the FDA
As for the timing of InVivo's submission of data to the
FDA at the end of the study, Ganem relies on the assumption that
analyzing the data from the study would take a significant amount

claims.
InVivo correctly stated that the FDA had approved a
clinical trial expected to ultimately include five patients.
InVivo did not say that the FDA had already approved the enrollment
of all five patients.

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Case: 15-1544

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Entry ID: 6060383

of time after all five patients had been observed for three months
each.

Again, Ganem provides no facts supporting this assertion.

Ganem does not explain why he believes that the analysis and
preparation of the data could only begin after all the data is
collected, nor does he point to any FDA requirement that InVivo
actually analyze the data at all before submitting it.

Ganem's

allegations amount to nothing more than unsupported speculation.
Thus, to support a claim that InVivo's statements were
false or misleading, Ganem is left only with the inference that
because, in retrospect, the test lagged significantly behind the
proposed timeline, the timeline must have always been impossible
to achieve. Yet, as the district court properly recognized, "fraud
by hindsight" does not satisfy the pleading requirements in a
securities fraud case.

See ACA Fin. Guar. Corp. 512 F.3d at 62

("A plaintiff may not plead 'fraud by hindsight'; i.e., a complaint
'may not simply contrast a defendant's past optimism with less
favorable actual results' in support of a claim of securities
fraud." (quoting Shaw 82 F.3d at 1223)); Gross v. Summa Four, Inc.,
93 F.3d 987, 991 (1st Cir. 1996).

The securities laws do not make

it unlawful for a company to publicize an aggressive timeline or
estimate

for

a

proposed

action

without

disclosing

every

conceivable stumbling block to realizing those plans. Hence, while
"greater clairvoyance" might have led InVivo to propose a more
conservative timeline, "failure to make such perceptions does not

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Case: 15-1544

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constitute fraud."

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Date Filed: 01/09/2017

Entry ID: 6060383

Denny v. Barber, 576 F.2d 465, 470 (2d Cir.

1978) (Friendly, J.).
III.
In

sum,

Ganem

has

failed

to

allege

any

material

misrepresentation or omission sufficient to state a claim under
§ 10(b) and Rule 10b-5.

Hence, the district court properly

dismissed the complaint.
Affirmed.

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