Kovtun v. Vivus, Inc. et al

Filing 40

ORDER by Judge Hamilton granting 30 Motion to Dismiss (pjhlc1, COURT STAFF) (Filed on 10/13/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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MERLE KOVTUN,
Plaintiff,

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v.

ORDER GRANTING MOTION
TO DISMISS

VIVUS, INC., et al.,

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For the Northern District of California

United States District Court

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No. C 10-4957 PJH

Defendants.
_______________________________/

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The motion of defendants VIVUS, Inc., Leland F. Wilson, and Wesley W. Day for an

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order dismissing the first amended class action complaint in the above-entitled action came

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on for hearing before this court on October 12, 2011. Lead plaintiff John Ingram appeared

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by his counsel David A.P. Brower, and defendants appeared by their counsel Michael L.

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Charlson and Benjamin T. Diggs. Having read the parties’ papers and carefully considered

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their arguments and the relevant legal authority, and good cause appearing, the court

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hereby GRANTS the motion as follows and for the reasons stated at the hearing.

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A motion to dismiss should be granted if the complaint does not proffer enough facts

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to state a claim for relief that is plausible on its face. See Bell Atlantic Corp. v. Twombly,

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550 U.S. 544, 558-59 (2007). “To survive a motion to dismiss, a complaint must contain

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sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

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face.’ A claim has facial plausibility when the plaintiff pleads factual content that allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). “[W]here the well-pleaded facts

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do not permit the court to infer more than the mere possibility of misconduct, the complaint

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has alleged – but it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’” Id. at 1950.

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To state a claim for securities fraud under § 10(b) of the Securities Exchange Act

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and SEC Rule 10b-5 promulgated thereunder, a plaintiff must plead “(1) a material

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misrepresentation or omission by the defendant; (2) scienter; (3) a connection . . . [with] the

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purchase or sale of a security; (4) reliance . . . ; (5) economic loss; and (6) loss causation.”

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Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 157 (2008); see also Dura

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Pharms, Inc. v. Broudo, 544 U.S. 336, 341-42 (2005).

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At the pleading stage, a complaint stating claims under § 10(b) and Rule 10b-5 must

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satisfy the requirements of both Federal Rule of Civil Procedure 9(b) and the Private

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Securities Litigation Reform Act (“PSLRA”). WPP Luxembourg Gamma Three Sarl v. Spot

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For the Northern District of California

United States District Court

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Runner, Inc., __ F.3d __ , 2011 WL 3673116 at *4 (9th Cir., Aug. 23, 2011).
Under Rule 9(b), falsity must be pled with specificity, including an account of the

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“time, place, and specific content of the false representations as well as the identities of the

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parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007)

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(citations omitted). “[A]llegations of fraud must be specific enough to give defendants

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notice of the particular misconduct which is alleged to constitute the fraud charged so that

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they can defend against the charge and not just deny that they have done anything wrong.”

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Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (citation and quotations

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omitted); see also Yourish v. California Amplifier, 191 F.3d 983, 992–93 (9th Cir. 1999).

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Under the PSLRA, whether alleging that a defendant “made an untrue statement of

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a material fact” or alleging that a defendant “omitted to state a material fact necessary in

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order to make the statements made, in the light of the circumstances in which they were

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made, not misleading,” the complaint must “specify each statement alleged to have been

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misleading, the reason or reasons why the statement is misleading, and, if an allegation

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regarding the statement or omission is made on information and belief, . . . [must] state with

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particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1), quoted in

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Spot Runner, 2011 WL 3672116 at *4. The PSLRA further requires that the complaint

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“state with particularity facts giving rise to a strong inference that the defendant acted with

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the required state of mind.” 15 U.S.C. § 78u-4(b)(2).
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The court finds that the amended complaint fails to specify each statement alleged

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to have been misleading, and also fails to state the reason or reasons why each such

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statement is misleading. Because the court cannot ascertain from the amended complaint

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exactly which statements plaintiff claims were misleading, or why, the court grants the

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motion to dismiss, with leave to amend, and does not address the other arguments raised

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by defendants.

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The amended complaint shall be filed no later than November 9, 2011. Defendants
response shall be filed no later than December 7, 2011.

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IT IS SO ORDERED.

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For the Northern District of California

United States District Court

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Dated: October 13, 2011
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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