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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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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TODD SCHUENEMAN et al.,

Case No.: 3:10-CV-1959-CAB-BLM
Plaintiffs,

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v.

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ORDER DENYING MOTION TO
DISMISS
[Doc. No. 95]

ARENA PHARMACEUTICALS, INC. et
al.,

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Defendants.

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On October 26, 2016, the Ninth Circuit issued an opinion holding that the Second

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Amended Complaint (“SAC”) “alleged scienter with sufficient particularity to survive a

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motion to dismiss.” Schueneman v. Arena Pharm., Inc., 840 F.3d 698, 707 (9th Cir. 2016).

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The case is now back before the undersigned after remand, and Defendants’ have filed

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another motion to dismiss. This time, Defendants argue that the SAC does not adequately

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allege any representations that were false or misleading when made. The Court is not

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persuaded. 1

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This motion was suitable for submission on the briefs. Accordingly, Defendants’ request for oral
argument is denied.
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3:10-CV-1959-CAB-BLM

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Defendants base their arguments primarily on the Supreme Court’s recent decision

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in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135

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S.Ct. 1318 (2015), and the Second Circuit’s opinion in Tongue v. Sanofi, 816 F.3d 199 (2d

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Cir. 2016). Defendants, however, made these same arguments to the Ninth Circuit to no

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avail. Moreover, it would be difficult to reconcile the Ninth Circuit’s holding that Plaintiffs

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have adequately alleged scienter with a holding that Plaintiffs did not adequately allege

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any false or misleading statements. “[T]he ultimate question [with scienter] is whether the

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defendant knew his or her statements were false, or was consciously reckless as to their

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truth or falsity.” Gebhart v. S.E.C., 595 F.3d 1034, 1042 (9th Cir. 2010). Defendants never

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explain how a complaint could adequately allege that a defendant knew statements were

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false if it did not adequately allege false statements in the first instance.2

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“To adequately plead scienter, the complaint must now ‘state with particularity facts

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giving rise to a strong inference that the defendant acted with the required state of mind.’”

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Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009) (quoting 15

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U.S.C. § 78u–4(b)(2)). “To adequately demonstrate that the ‘defendant acted with the

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required state of mind,’ a complaint must ‘allege that the defendants made false or

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misleading statements either intentionally or with deliberate recklessness.’” Id. (quoting

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In re Daou Systems, Inc. Sec. Litig., 411 F.3d 1006, 1014-15 (9th Cir. 2005)) (emphasis

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added); see also Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1066

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(9th Cir. 2008) (“To meet this pleading requirement [for scienter], the complaint must

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contain allegations of specific contemporaneous statements or conditions that demonstrate

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the intentional or the deliberately reckless false or misleading nature of the statements when

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made.”) (citation omitted). As a result, “falsity and scienter in private securities fraud cases

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are generally strongly inferred from the same set of facts, and the two requirements may

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be combined into a unitary inquiry under the PSLRA.” Daou, 411 F.3d at 1015. Thus, in

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Notably, Defendants do not cite to any cases where a court found that scienter had been adequately pled
but falsity had not.
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3:10-CV-1959-CAB-BLM

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finding that the SAC adequately alleged scienter, the Ninth Circuit implicitly found that

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the SAC adequately alleged that Defendants made false or misleading statements. To hold

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otherwise would result in a nonsensical outcome that the SAC adequately alleged that

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Defendants acted intentionally or with deliberate recklessness in making false or

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misleading statements (as the Ninth Circuit held), but did not adequately allege any false

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and misleading statements (as Defendants ask this Court to hold with the instant motion).

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Accordingly, the motion to dismiss is DENIED.

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It is SO ORDERED.

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Dated: April 28, 2017

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3:10-CV-1959-CAB-BLM