NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

 FOR THE NINTH CIRCUIT

DAVID APPLESTEIN; RANDY

SCHINDLER; MICHAEL SOLOMON;

MARC WERNER, Dr.; MARK

SLOTKIN,

 Plaintiffs,

 and

CATOOSA FUND LP, individually and

on behalf of all others similarly situated,

 Plaintiff - Appellant,

 v.

MEDIVATION, INC.; DAVID T. HUNG;

C. PATRICK MACHADO; LYNN

SEELY; ROHAN PALEKAR;

GREGORY BAILEY,

 Defendants - Appellees.

No. 12-15960

D.C. No. 3:10-cv-00998-EMC

MEMORANDUM*

FILED

MAR 07 2014

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

 * This disposition is not appropriate for publication and is not precedent

except as provided by 9th Cir. R. 36-3. Circuit Rule 36-2(e) states that the panel

should publish an opinion for any case where “there is a published opinion by a

lower court . . . unless the panel determines that publication is unnecessary for

clarifying the panel’s disposition of the case.” The district court published a

thorough opinion, and the panel concludes that it is unnecessary to publish a full

opinion in this matter.
Appeal from the United States District Court

for the Northern District of California

Edward M. Chen, District Judge, Presiding

Argued and Submitted January 17, 2014

San Francisco, California

Before: WALLACE and BYBEE, Circuit Judges, and GETTLEMAN, Senior

District Judge.** 

Catoosa Fund LP appeals the district court’s dismissal of its class action

securities fraud complaint for failure to plead falsity and scienter adequately. We

have jurisdiction under 28 U.S.C. § 1291, and we affirm.

A dismissal for failure to state a claim under Fed. R. Civ. P. 12(b)(6) is

reviewed de novo. Zimmerman v. City of Oakland, 255 F.3d 734, 737 (9th Cir.

2001). In addition to the pleading standards set forth in Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007), a party asserting a claim for securities fraud

under Section 10(b) of the Securities Exchange Act and Rule 10b-51

 must meet the

particularity requirements of Fed. R. Civ. P. 9(b), and the heightened pleading

requirements of the Private Securities Litigation Reform Act of 1995 (“PSLRA”).2

 ** The Honorable Robert W. Gettleman, Senior District Judge for the

U.S. District Court for the Northern District of Illinois, sitting by designation.

1

 17 CFR § 240.10b–5 (2010). 

2

 15 U.S.C. §§ 78u–4 et seq. 

2
Rule 9(b) provides that “[i]n alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or mistake.” The PSLRA requires

plaintiffs to “specify each statement alleged to have been misleading, [and] the

reason or reasons why the statement is misleading” to allege the element of falsity

adequately and “state with particularity facts giving rise to a strong inference that

the defendant acted with the required state of mind” to allege the element of

scienter. 15 U.S.C. § 78u–4(b)(1), (2). A complaint alleging securities fraud will

survive “only if a reasonable person would deem the inference of scienter cogent

and at least as compelling as any opposing inference one could draw from the facts

alleged.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007). 

Because plaintiff has failed to meet these standards, the Third Amended Complaint

(“TAC”) was properly dismissed by the district court. 

Regarding falsity, plaintiff claims that the Phase II study of the drug in

question, Dimebon, was unmatched and unblinded, contrary to defendants’ public

statements, and that defendants’ subsequent statements and publications describing

the trial and touting its success were therefore false as well. To support these

allegations, the TAC relies on statements of three confidential witnesses (“CWs”)

and other factual information. The other factual information principally includes

the statements of an expert, Dr. Lon S. Schneider, who concluded that the Phase II

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study was not a double-blind, placebo-controlled trial. Dr. Schneider's opinion is

insufficient to establish falsity adequately because he has no personal knowledge

of the facts on which he bases his conclusion. Dr. Schneider also relies on an

unattributed statement of an un-named colleague who allegedly heard defendants

admit that the pills used in the Phase II study were unmatched, and draws a

negative inference from the absence of a description of the pills in a clinical trial

paper. Such uncredited and speculative conclusions do not “provide an adequate

basis for believing that the defendants’ statements were false.” Zucco Partners,

LLC v. Digimarc Corp., 552 F.3d 981, 995 (9th Cir. 2009) (internal quotation

marks and citations omitted).

Plaintiff also relies on the statements of the three CWs. When a complaint

for securities fraud relies heavily on CWs, those statements may be relied on only

“where the confidential witnesses are described with sufficient particularity to

support the probability that a person in the position occupied by the source would

possess the information alleged,” and the complaint “provide[s] an adequate basis

for determining that the witnesses in question have personal knowledge of the

events they report.” Id. (internal quotation marks and citations omitted). As the

district court found, the complaint fails to allege with requisite particularity the job

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titles and responsibilities of the CWs and facts supporting an inference that they

had personal knowledge of the relevant information. 

To establish scienter, plaintiff claims that defendants either affirmatively

decided to conduct an unblinded Phase II trial, knew that the study was unblinded,

or with deliberate recklessness disregarded the fact that the study was unblinded. 

Although the TAC repeats the allegations from the CWs that the study was

unblinded, there is no allegation that any CW relayed this information to any

defendant. 

None of plaintiff's allegations “giv[e] rise to a strong inference that the

defendant[s] acted with the required state of mind.” 15 U.S.C. § 78u–4(b)(2)(A). 

With the exception of the tenuous and unattributed statement that Dr. Schneider

relates secondhand, plaintiff has not pled any facts supporting an inference of

actual knowledge by defendants. Plaintiff relies heavily on the inference that, due

to their positions, the defendants must have known about the unmatched nature of

the study. That inference is entirely speculative and does not rise to the required

strong inference; plaintiff's allegation is not “at least as compelling as any

opposing inference one could draw from the facts alleged.” Tellabs, 551 U.S. at

324.

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Because plaintiff has failed to allege with particularity facts that support an

inference of falsity and scienter, the complaint was properly dismissed.

AFFIRMED.

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