Tehrani v. Biogen, Inc. et al

Filing 88

Judge F. Dennis Saylor, IV: ORDER entered. Order on Plaintiffs' Motion to VacateOrder of Dismissal and For Leave to Amend the Complaint. (Pezzarossi, Lisa)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
____________________________________
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IN RE: BIOGEN INC.
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SECURITIES LITIGATION
)
____________________________________)

Civil Action No.
15-13189-FDS

ORDER ON PLAINTIFFS’ MOTION TO VACATE
ORDER OF DISMISSAL AND FOR LEAVE TO AMEND THE COMPLAINT
SAYLOR, J.
This is a putative class action involving alleged violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and SEC Rule 10b-5. The
Court granted defendants’ motion to dismiss the amended complaint with prejudice for failing to
plead facts giving rise to a strong inference of scienter. Citing “newly discovered” evidence of
defendants’ scienter, plaintiffs have moved pursuant to Fed. R. Civ. P. 59(e) and 60(b)(2) for relief
from the order of dismissal and for leave to amend the complaint. (Dkt. 74). After careful

consideration of plaintiffs’ proposed second amended complaint (“SAC”) (Dkt. 76, Ex. A) and
their stated reasons why the “new” evidence was previously undiscoverable, the motion will be
denied.
Lead plaintiff GBR Group, Ltd. brought suit, on behalf of a class of similarly situated
persons, against biopharmaceutical company Biogen Inc. and three Biogen executives. Plaintiffs
contended that class members were harmed when they purchased Biogen’s common stock at
prices that were artificially inflated by the company’s materially misleading statements and
omissions about Tecfidera, its leading multiple sclerosis drug. The original complaint was filed
in August 2015. After GBR was appointed lead plaintiff in November and received a sixty-day
extension to file an amended complaint, the amended complaint was filed on January 19, 2016.

In March, defendants moved to dismiss the amended complaint with prejudice under the Private
Securities Litigation Reform Act of 1995 (“PSLRA”) and Fed. R. Civ. P. 12(b)(6). Without
moving for leave to amend the complaint, plaintiffs opposed defendants’ motion.1 In April, the
parties appeared for a motion hearing, during and after which plaintiffs continued to oppose
dismissal without moving for leave to amend.
On June 23, the Court granted defendants’ motion to dismiss. The Court concluded that
the 216-paragraph amended complaint plausibly alleged three material misstatements or
omissions concerning Tecfidera’s discontinuation rates.2 However, it also concluded that the
complaint failed to plead specific facts giving rise to a strong inference of scienter, as required
by the PSLRA, 15 U.S.C. § 78u-4(b)(2). (Dkt. 72 at 51-69). Specifically, the Court concluded
that the non-fraudulent inferences were stronger than the alleged inference of scienter––that is,
an intent to defraud or recklessness:
Considered as a whole, the complaint presents allegations of scienter that are
perhaps plausible, but not “cogent and compelling.” Tellabs, 551 U.S. at 324; see
also ACA Fin., 512 F.3d at 59 (noting that scienter “should be evaluated with
reference to the complaint as a whole rather than to piecemeal allegations”).
Again, the allegations from confidential sources––none of whom personally spoke
to defendants or witnessed any overtly fraudulent behavior––contribute somewhat
to plaintiffs’ asserted inference of scienter. However, they are too vague and
conclusory to create a strong inference of recklessness or intent. Indeed, the
allegations concerning physicians’ discomfort after the PML death and declining
Tecfidera sales are at least partly consistent with defendants’ repeated public
disclosures. Furthermore, the complaint’s “additional” motive and core-product
allegations provide very little support to an inference of scienter. Without more,
plaintiffs’ circumstantial case of scienter is not strong or compelling.
On the final page of their thirty-page opposition to defendants’ motion to dismiss, plaintiffs contended
that their investigation was “ongoing” and that “leave to amend should be permitted if defendants’ motion is
granted.” (Dkt. 67 at 30) (emphasis added). That practice has been specifically discouraged by the First Circuit.
See Fire & Police Pension Ass’n of Colo. v. Abiomed, Inc., 778 F.3d 228, 247 (1st Cir. 2015) (“We wish to
discourage this practice of seeking leave to amend after the case has been dismissed.”).
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The amended complaint “allege[d] that defendants made more than twenty misrepresentations and
omissions that materially understated the actual effect that the PML death was having on Tecfidera sales.” (Dkt. 72
at 43). The Court concluded that the majority of those alleged misrepresentations were not actionable as a matter of
law. (Id. at 43-51).
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In sum, even after drawing all reasonable inferences on behalf of plaintiffs, the
most compelling inference to be drawn from the complaint as a whole is that
defendants were unduly optimistic––at worst, negligently so––in predicting how
quickly Tecfidera sales would recover from the PML announcement. “Still,
‘allegations of corporate mismanagement are not actionable under Rule 10b-5.
Nor are allegations of mere negligence.’” Fire & Police Pension Ass’n of Colo.,
778 F.3d at 246 (quoting Waters Corp., 632 F.3d at 760) (alteration omitted).
Without evidence sufficient to support a strong inference of intent, or at least
recklessness, defendants’ failure to predict the future does not support a claim for
securities fraud . . . .
(Id. at 68-69). The order of dismissal was entered on July 1.
On July 21, plaintiffs filed a proposed second amended complaint and moved pursuant to
Fed. R. Civ. P. 59(e) and 60(b)(2) to vacate the order of dismissal based on “newly discovered”
evidence of defendants’ scienter. Plaintiffs’ “new” evidence consists of allegations from two
additional confidential witnesses (CW11 and CW12), and a declaration from a neurologist
describing discontinuations of Tecfidera at the MS Institute at Shepherd in Atlanta, Georgia.
Amendment or alteration of a judgment under Rule 59(e) is “an extraordinary remedy”
that “should be used sparingly.” Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir. 2006)
(internal quotation marks omitted). The Court has “substantial discretion and broad authority” to
grant a motion for reconsideration pursuant to the rule. Ruiz Rivera v. Pfizer Pharm., LLC, 521
F.3d 76, 81 (1st Cir. 2008). However, a motion for reconsideration will be granted only upon a
showing of (1) a “manifest error of law,” (2) new evidence, or (3) a misunderstanding or other
error “not of reasoning but apprehension.” Id. at 81-82. In addition, Rule 60(b) provides a
mechanism for setting aside a judgment in certain circumstances. The rule provides, in relevant
part, that a court “may relieve a party or its legal representative from a final judgment, order, or
proceeding for the following reasons . . . (2) newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to move for a new trial under Rule 59(b).”

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Fed. R. Civ. P. 60(b)(2). “Because Rule 60(b) is a vehicle for extraordinary relief, motions
invoking the rule should be granted only under exceptional circumstances.” Davila-Alvarez v.
Escuela de Medicina Universidad Central del Caribe, 257 F.3d 58, 64 (1st Cir. 2001) (internal
quotation marks omitted).
A Rule 59(e) motion brought on the basis of new evidence “must be denied where the
‘new evidence’ consists of information that, in the exercise of due diligence, could have been
presented earlier.” In re Genzyme Corp., 2012 WL 6674483, at *2 (D. Mass. Dec. 21, 2012),
aff’d sub nom. In re Genzyme Corp. Sec. Litig., 754 F.3d 31 (1st Cir. 2014) (citing Emmanuel v.
International Broth. of Teamsters, Local Union No. 25, 426 F.3d 416, 422 (1st Cir. 2005)); see
Biltcliffe v. CitiMortgage, Inc., 952 F. Supp. 2d 371, 384 (D. Mass. 2013). “At the very least the
[moving party] must put forth a ‘cogent reason’ as to why this evidence could not have been
offered at an earlier stage of the proceedings.” Id. (quoting Fisher v. Kadant, 589 F.3d 505, 513
(1st Cir. 2009)). Similarly, a party moving for relief from judgment on the basis of newly
discovered evidence under Rule 60(b)(2) “must at the very least, offer a convincing explanation
as to why he could not have proffered the crucial evidence at an earlier stage of the proceedings.”
Fisher, 589 F.3d at 513 (quoting Karak v. Bursaw Oil Corp., 288 F.3d 15, 19-20 (1st Cir. 2002)).
As an initial matter, plaintiffs were aware of at least some of the “new” evidence before
the Court entered the order of dismissal on July 1. See Gonzalez-Pina v. Rodriguez, 407 F.3d
425, 433 (1st Cir. 2005) (affirming denial of Rule 60(b)(2) motion because “new” evidence was
discovered fourteen days before court granted summary judgment, which “quickly dispose[d]” of
the issue) (citing Mitchell v. United States, 141 F.3d 8, 18 (1st Cir. 1998)). In fact, both CW11
and CW12 were interviewed by plaintiffs approximately two months before the Court entered

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the dismissal.3 Plaintiffs contend that they did not immediately receive documents confirming
the allegations of CW11 and CW12, and they were “developing [the neurologist’s] expected
testimony . . . when the Court issued the Order.” (Pl. Mem. 19). At a bare minimum, however,
plaintiffs should have moved for leave to amend shortly after the interviews, citing the interview
allegations as grounds for seeking additional time to file an amended complaint.
In any event, plaintiffs fail to provide a “cogent” or “convincing” reason why the “new”
evidence could not have been discovered earlier with appropriate diligence. As reasons,
plaintiffs cite “the timing of CW11’s departure from [Biogen],” “CW12’s initial unwillingness to
cooperate,” and the fact that “[w]ithout the introduction from CW12, [plaintiffs] could not know
that [the neurologist] should be interviewed.” (Pl. Mem. 7, 20). Those justifications fall well
short of justifying the “extraordinary” relief that plaintiffs request, especially given the amount
of time they had to conduct their investigation. The proposed class period is December 2014 to
July 2015. The initial complaint was filed August 8, 2015. GBR moved to be appointed lead
counsel on October 19, 2015, and its motion was granted on November 17. The Court then
granted plaintiffs an additional sixty days from the appointment date to file an amended
complaint. The hearing on defendants’ motion to dismiss was not held until early April 2016,
and the Court did not issue its 72-page order granting defendants’ motion until late June. In
short, plaintiffs had ample time to conduct a diligent investigation and, if necessary, move for
leave to amend. They did not.
There are numerous reasons why plaintiffs’ justifications are not convincing, but one
example will suffice. Plaintiffs contend that CW12 did not suggest until June 2016 that they
interview Dr. Thrower, the Shepherd Center neurologist, and therefore “they could not know that

3

CW11 was interviewed on May 11 and CW12 was interviewed on April 29. (Greenbaum Decl. ¶¶ 5, 6).

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Dr. Thrower should be interviewed or that he had knowledge about the facts set forth in his
declaration” until then. (Greenbaum Decl. ¶¶ 9-10) (emphasis added). However, there is a
considerable difference between plaintiffs arguing that they “could not know” something
because a witness did not volunteer the information to them, and demonstrating a cogent reason
why a diligent investigation could not uncover the evidence. For example, plaintiffs concede
that they interviewed CW12 in April 2016, and that he alleged “[m]ost of the doctors [he] sold
Tecfidera to discontinued patients off the drug because of the PML death.” (SAC ¶ 64). Setting
aside the fact that plaintiffs did not interview CW12 until three months after the filing of the
amended complaint (and weeks after the motion hearing), surely a diligent follow-up question or
two would likely have uncovered who those doctors were, or at least where (generally) they
worked. In light of the fact that Dr. Thrower worked at the Shepherd Center––supposedly
CW12’s “number one MS volume and influencer account”––plaintiffs could have uncovered Dr.
Thrower’s identity by late April at the latest. (Id. ¶ 65).
In sum, after careful consideration of the proposed second amended complaint and
plaintiffs’ explanations, it appears that the “newly discovered” evidence should have, with the
appropriate investigative diligence, been discovered and presented earlier in the proceeding. At
the very least, plaintiffs have failed to provide the Court with a cogent or convincing reason
otherwise. Accordingly, plaintiffs’ motion for the “extraordinary” relief under Fed. R. Civ. P.
59(e) and 60(b)(2) is DENIED.
So Ordered.

/s/ F. Dennis Saylor IV
F. Dennis Saylor IV
United States District Judge

Dated: September 28, 2016

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