Schueneman v. Arena Pharmaceuticals, Inc. et al

Filing 105

ORDER Denying 95 Motion to Dismiss. Signed by Judge Cathy Ann Bencivengo on 4/28/2017. (All non-registered users served via U.S. Mail Service) (jjg)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 TODD SCHUENEMAN et al., Case No.: 3:10-CV-1959-CAB-BLM Plaintiffs, 12 13 v. 14 ORDER DENYING MOTION TO DISMISS [Doc. No. 95] ARENA PHARMACEUTICALS, INC. et al., 15 Defendants. 16 17 18 19 On October 26, 2016, the Ninth Circuit issued an opinion holding that the Second 20 Amended Complaint (“SAC”) “alleged scienter with sufficient particularity to survive a 21 motion to dismiss.” Schueneman v. Arena Pharm., Inc., 840 F.3d 698, 707 (9th Cir. 2016). 22 The case is now back before the undersigned after remand, and Defendants’ have filed 23 another motion to dismiss. This time, Defendants argue that the SAC does not adequately 24 allege any representations that were false or misleading when made. The Court is not 25 persuaded. 1 26 27 This motion was suitable for submission on the briefs. Accordingly, Defendants’ request for oral argument is denied. 1 28 1 3:10-CV-1959-CAB-BLM 1 Defendants base their arguments primarily on the Supreme Court’s recent decision 2 in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 3 S.Ct. 1318 (2015), and the Second Circuit’s opinion in Tongue v. Sanofi, 816 F.3d 199 (2d 4 Cir. 2016). Defendants, however, made these same arguments to the Ninth Circuit to no 5 avail. Moreover, it would be difficult to reconcile the Ninth Circuit’s holding that Plaintiffs 6 have adequately alleged scienter with a holding that Plaintiffs did not adequately allege 7 any false or misleading statements. “[T]he ultimate question [with scienter] is whether the 8 defendant knew his or her statements were false, or was consciously reckless as to their 9 truth or falsity.” Gebhart v. S.E.C., 595 F.3d 1034, 1042 (9th Cir. 2010). Defendants never 10 explain how a complaint could adequately allege that a defendant knew statements were 11 false if it did not adequately allege false statements in the first instance.2 12 “To adequately plead scienter, the complaint must now ‘state with particularity facts 13 giving rise to a strong inference that the defendant acted with the required state of mind.’” 14 Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009) (quoting 15 15 U.S.C. § 78u–4(b)(2)). “To adequately demonstrate that the ‘defendant acted with the 16 required state of mind,’ a complaint must ‘allege that the defendants made false or 17 misleading statements either intentionally or with deliberate recklessness.’” Id. (quoting 18 In re Daou Systems, Inc. Sec. Litig., 411 F.3d 1006, 1014-15 (9th Cir. 2005)) (emphasis 19 added); see also Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1066 20 (9th Cir. 2008) (“To meet this pleading requirement [for scienter], the complaint must 21 contain allegations of specific contemporaneous statements or conditions that demonstrate 22 the intentional or the deliberately reckless false or misleading nature of the statements when 23 made.”) (citation omitted). As a result, “falsity and scienter in private securities fraud cases 24 are generally strongly inferred from the same set of facts, and the two requirements may 25 be combined into a unitary inquiry under the PSLRA.” Daou, 411 F.3d at 1015. Thus, in 26 27 2 28 Notably, Defendants do not cite to any cases where a court found that scienter had been adequately pled but falsity had not. 2 3:10-CV-1959-CAB-BLM 1 finding that the SAC adequately alleged scienter, the Ninth Circuit implicitly found that 2 the SAC adequately alleged that Defendants made false or misleading statements. To hold 3 otherwise would result in a nonsensical outcome that the SAC adequately alleged that 4 Defendants acted intentionally or with deliberate recklessness in making false or 5 misleading statements (as the Ninth Circuit held), but did not adequately allege any false 6 and misleading statements (as Defendants ask this Court to hold with the instant motion). 7 Accordingly, the motion to dismiss is DENIED. 8 It is SO ORDERED. 9 Dated: April 28, 2017 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 3:10-CV-1959-CAB-BLM

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