UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

IN RE CARACO PHARMACEUTICAL 

LABORATORIES, LTD. SECURITIES 

LITIGATION

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Case No. 2:09-cv-12830-AJT-DAS

CLASS ACTION

ORAL ARGUMENT REQUESTED

DEFENDANTS’ REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS

THE CONSOLIDATED AMENDED CLASS ACTION COMPLAINT

FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

Frank A. Taylor

Margaret Adamczyk Goetze

Briggs and Morgan, P.A.

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Telephone: (612) 977-8400

Facsimile: (612) 977-8650

ftaylor@briggs.com

mgoetze@briggs.com

Attorneys for Defendants

Case 2:09-cv-12830-AJT-DAS Document 37 Filed 06/24/10 Page 1 of 15
TABLE OF CONTENTS

PAGE

i

INTRODUCTION ......................................................................................................................... 1

ARGUMENT................................................................................................................................. 1

I. THE ALLEGED MISREPRESENTATIONS WERE NOT MATERIAL............ 1

II. ALL OF THE ALLEGATIONS IN PLAINTIFFS‟ AMENDED 

COMPLAINT, EXAMINED COLLECTIVELY, DO NOT GIVE RISE 

TO A STRONG INFERENCE OF SCIENTER ON THE PART OF ANY 

DEFENDANT........................................................................................................ 4

A. Plaintiffs have not satisfied their burden of demonstrating that a 

nonfraudulent explanation for Defendants‟ conduct is less 

plausible ..................................................................................................... 4

B. The facts alleged by Plaintiffs do not satisfy any of the Helwig

factors......................................................................................................... 7

1. Defendants‟ self motivation........................................................... 7

2. Fraudulent statement followed by disclosure of inconsistent 

information..................................................................................... 8

3. Divergence between internal reports and external 

statements and disregard of most current factual 

information before making statements........................................... 8

CONCLUSION.............................................................................................................................. 9

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ii

TABLE OF AUTHORITIES

CASES

Ashcroft v. Iqbal,

129 S. Ct. 1937 (2009)...............................................................................................................1

Bell Atlantic Corp. v. Twombly,

550 U.S. 544 (2007)...............................................................................................................1, 8

City of Monroe Employees Retirement Sys. v. Bridgestone Corp.,

399 F.3d 651 (6th Cir. 2005) .................................................................................................3, 7

D.E. & J Ltd. P’ship v. Conaway,

284 F. Supp. 2d 719 (E.D. Mich. 2003).....................................................................................7

Grillo v. Tempur-Pedic Int’l, Inc.,

553 F. Supp. 2d 809 (E.D. Ky. 2008) ........................................................................................8

Helwig v. Vencor,

251 F.3d 540 (6th Cir. 2001) ............................................................................................. 3, 7-8

Higginbotham v. Baxter Int’l Inc.,

495 F.3d 753 (7th Cir. 2007) .....................................................................................................5

In re Able Labs. Sec. Litig.,

No. 05-2681, 2008 WL 1967509 (D.N.J. Mar. 24, 2008) .........................................................1

In re CBT Group PLC Sec. Litig.,

No. C-98-21014, 1999 WL 1249287 (N.D. Cal. July 21, 1999) ........................................... 7-8

In re Copley Pharm., Inc. Sec. Litig.,

No. 94-11897, 1995 WL 169215 (D. Mass. Mar. 16, 1995) .....................................................5

In re Diebold Sec. Litig.,

No. 5:05CV2873, 2008 WL 3927467 (N.D. Ohio Aug. 22, 2008) ...........................................7

In re Federal-Mogul Corp. Sec. Litig.,

166 F. Supp. 2d 559 (E.D. Mich. 2001).....................................................................................9

In re Ford Motor Co. Sec. Litig.,

184 F. Supp. 2d 626 (E.D. Mich. 2001).....................................................................................2

In re Immune Response Sec. Litig.,

375 F. Supp. 2d 983 (S.D. Cal. 2005)........................................................................................1

In re Indep. Energy Holdings PLC Sec. Litig.,

154 F. Supp. 2d 741 (S.D.N.Y. 2001)........................................................................................1

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iii

In re Silicon Graphics Inc. Sec. Litig.,

183 F.3d 970 (9th Cir. 1999) .....................................................................................................9

In re Sofamor Danek Group, Inc.,

123 F.3d 394 (6th Cir. 1997) .................................................................................................3, 6

In re Time Warner, Inc. Sec. Litig.,

9 F.3d 259 (2d Cir. 1993)...........................................................................................................2

In re United Am. Healthcare Corp. Sec. Litig.,

No. 2:05-cv-72112, 2007 WL 313491 (E.D. Mich. Jan. 30, 2007)...........................................2

In re Zenith Labs. Sec. Litig.,

No. 86-3241A, 1993 WL 260683 (D. N.J. Feb. 11, 1993) ........................................................1

Konkol v. Diebold, Inc.,

590 F.3d 390 (6th Cir. 2009) ............................................................................................. 4, 6-7

Ley v. Visteon Corp.,

543 F.3d 801 (6th Cir. 2008) .....................................................................................................3

McGuire v. Dendreon Corp.,

No. C07-800, 2008 WL 5130042 (W.D. Wash. Dec. 5, 2008)..................................................1

Miller v. Champion Enters., Inc.,

346 F.3d 660 (6th Cir. 2003) .....................................................................................................9

Nicholson v. N-Viro Int’l Corp.,

No. 3:06CV01669, 2007 WL 2994452 (N.D. Ohio Oct. 12, 2007)...........................................4

PR Diamonds, Inc. v. Chandler,

364 F.3d 671 (6th Cir. 2004) .................................................................................................5, 8

Sinay v. Lamsen & Sessions Co.,

948 F.2d 1037 (6th Cir. 1991) ............................................................................................... 6-7

Tellabs, Inc. v. Makor Issues & Rights, Ltd.,

551 U.S. 308 (2007)...................................................................................................................4

Yanek v. Staar Surgical Co.,

388 F. Supp. 2d 1110 (C.D. Cal. 2005) .................................................................................1, 6

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1

INTRODUCTION

This Court must dismiss the Consolidated Amended Class Action Complaint for 

Violations of the Federal Securities Laws (“Amended Complaint”) with prejudice. The factual 

allegations in the Amended Complaint are insufficient to create a pleading that is “plausible on 

its face” and, as a result, Plaintiffs have failed to “nudge” their claims across the line from 

conceivable to plausible.1 Nor have Plaintiffs provided this Court with any authority supporting 

their position. The majority of cases cited by Plaintiffs are unpublished, outside the jurisdiction, 

or entirely distinguishable. 

Plaintiffs‟ most glaring error is their reliance upon a string of cases in which courts 

denied motions to dismiss because the defendants in those cases concealed from shareholders the 

fact that the companies had received Form 483s from the Food and Drug Administration 

(“FDA”).2 That is not the case here.

I. The alleged misrepresentations were not material. 

Defendant Caraco Pharmaceutical Laboratories, Ltd. (“Caraco”) fully disclosed to its 

investors all Form 483s, as well as the Warning Letter, that it received from the FDA. None of 

 

1

To survive a motion to dismiss, a complaint must contain sufficient factual allegations to state a 

claim for relief “that is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); 

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The allegations in the complaint must 

produce an inference of liability strong enough to “nudge” the plaintiff‟s claims “across the line 

from conceivable to plausible.” Iqbal, 129 S. Ct. at 1952; Twombly, 550 U.S. at 570.

2

See, e.g., Yanek v. Staar Surgical Co., 388 F. Supp. 2d 1110, 1119 (C.D. Cal. 2005); McGuire 

v. Dendreon Corp., No. C07-800, 2008 WL 5130042, at *2 (W.D. Wash. Dec. 5, 2008); In re 

Zenith Labs. Sec. Litig., No. 86-3241A, 1993 WL 260683, at *5 (D. N.J. Feb. 11, 1993); Cf. In re 

Immune Response Sec. Litig., 375 F. Supp. 2d 983, 1021 (S.D. Cal. 2005) (company failed to 

disclose negative clinical study results to investors); In re Indep. Energy Holdings PLC Sec. 

Litig., 154 F. Supp. 2d 741, 760 (S.D.N.Y. 2001) (company failed to disclose that it was the 

target of an investigation by the United Kingdom‟s energy regulator); In re Able Labs. Sec. 

Litig., No. 05-2681, 2008 WL 1967509, at *2 (D.N.J. Mar. 24, 2008) (company did not receive 

FDA Form 483 until six weeks after the end of the class period).

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the Defendants withheld information regarding the FDA‟s assessment of Caraco‟s regulatory 

compliance from the investing public.3 Am. Compl.4¶¶ 106, 112, 114, 122 & 131. During the 

putative class period, the Plaintiffs knew that Caraco‟s record with the FDA was not flawless. 

The facts regarding the FDA‟s investigations of Caraco were publicly available. Any investor 

could have viewed the Warning Letter or the Form 483s on the FDA‟s website. The second 

sentence of the Warning Letter clearly states that the FDA‟s inspection from May 1 to June 11, 

2008 “revealed significant deviations from current Good Manufacturing Practice (cGMP) 

regulations . . . .” Defendants‟ Memo.,5Ex. E. 

Caraco could not have predicted that the FDA would initiate a seizure,6but nevertheless 

warned investors of that possibility. Defendants‟ Memo. at 2, 12. Despite Caraco‟s explicit 

 

3 Despite Caraco‟s transparency with the investing public, Plaintiffs essentially argue that Caraco 

should have done more—i.e., Caraco should have disclosed every manufacturing problem that 

came to management‟s attention. But that is not the standard. “[A] corporation is not required to 

disclose a fact merely because a reasonable investor would very much like to know that fact.” In 

re Time Warner, Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993); In re United Am. Healthcare 

Corp. Sec. Litig., No. 2:05-cv-72112, 2007 WL 313491, at *14 (E.D. Mich. Jan. 30, 2007) 

(company had no duty to disclose its allegedly illegal marketing practices and possible negative 

consequences “even if investors would have very much liked to have known this information”).

4

In this Reply Brief, “Am. Compl.” refers to the Plaintiffs‟ Consolidated Amended Class Action 

Complaint for Violations of the Federal Securities Laws, filed with this Court on February 11, 

2010.

5

In this Reply Brief, “Defendants‟ Memo.” or “Defendants‟ Memorandum” refers to the 

Defendants‟ Memorandum of Law in Support of their Motion to Dismiss the Consolidated 

Amended Class Action Complaint for Violations of the Federal Securities Laws, filed with this 

Court on April 12, 2010.

6 Plaintiffs blame the seizure for the decline in Caraco‟s stock price at the end of the putative 

class period. Am. Compl. ¶¶ 135, 136. In the absence of the seizure, there is no basis for 

Plaintiffs‟ alleged damages. Plaintiffs‟ claims therefore hinge on Caraco‟s failure to advise 

investors that an FDA seizure was certain to occur. Yet, the Defendants had no duty to predict 

“future regulatory actions or losses the company may suffer as a result.” In re United Am. 

Healthcare Corp. Sec. Litig., 2007 WL 313491, at *8. Caraco simply cannot be held liable for 

failing to predict the future. See In re Ford Motor Co. Sec. Litig., 184 F. Supp. 2d 626, 633 

(E.D. Mich. 2001).

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warnings to investors that noncompliance with FDA rules could result in fines and other 

judicially-imposed sanctions, including product seizures and injunction actions, Plaintiffs falsely 

accuse the Defendants of “downplaying,” “minimizing,” or not “fully disclosing” the risks. Opp. 

Br.7at 13, 24. 

The United States Court of Appeals for the Sixth Circuit has flatly rejected Plaintiffs‟ 

notion. In re Sofamor Danek Group, Inc., 123 F.3d 394, 402 (6th Cir. 1997). The Circuit 

teaches in Sofamor Danek that even though a company (Sofamor Danek) “downplayed” the 

significance of an FDA warning letter, there was no violation of federal securities laws because 

“any analyst could easily obtain a copy of the letter and could make an independent judgment of 

its significance.” Id. Even if the Defendants downplayed the FDA‟s letters (which they did not), 

Sofamor Danek instructs that such is not actionable under federal securities laws.

In fact, this case is distinguishable from Sofamor Danek because Caraco did not 

downplay the situation. It even went so far as to direct investors to the FDA‟s website. Am. 

Compl. ¶ 114. 

Finally, although the Plaintiffs urge this Court to ignore Defendants‟ argument at the 

motion-to-dismiss stage, the Sixth Circuit has not rejected the truth-on-the-market defense. Ley 

v. Visteon Corp., 543 F.3d 801, 811 (6th Cir. 2008). Instead, the Sixth Circuit has “voiced the 

logical compliment” in Helwig v. Vencor, 251 F.3d 540 (6th Cir. 2001), where the court 

concluded that the statements at issue were material because the information was “„known 

exclusively‟ to the defendants.” City of Monroe Employees Retirement Sys. v. Bridgestone 

Corp., 399 F.3d 651, 675-76 (6th Cir. 2005). In contrast, Caraco was candid with shareholders 

 

7

In this Reply Brief, “Opp. Br.” refers to the Plaintiffs‟ Opposition to Defendants‟ Motion to 

Dismiss the Consolidated Amended Class Action Complaint for Violations of the Federal 

Securities Laws, filed with this Court on May 27, 2010.

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about the FDA‟s warnings and disclosed all risks. Defendants‟ Memo. at 11-13. Together, the 

FDA and Caraco told investors about the full range of possible sanctions.8

Consequently, the Amended Complaint must be dismissed with prejudice, because the 

Defendants did not misrepresent any fact, or omit to state any material fact, to the investing 

public. This case is nothing more than allegations of fraud by hindsight,9 which must be 

rejected.

II. All of the allegations in Plaintiffs’ Amended Complaint, examined collectively, do 

not give rise to a strong inference of scienter on the part of any Defendant. 

When evaluating whether a complaint adequately alleges scienter, a court “must consider 

plausible nonculpable explanations for the defendant‟s conduct.” Tellabs, Inc. v. Makor Issues 

& Rights, Ltd., 551 U.S. 308, 323-24 (2007). The Private Securities Litigation Reform Act of 

1995 (“PSLRA”), 15 U.S.C. § 78u-4, and the Tellabs decision “make clear that the burden of 

proof, at this stage of the proceedings, rests with the investors,” not with the Defendants. 

Konkol, 590 F.3d at 403. Plaintiffs do not carry their burden.

A. Plaintiffs have not satisfied their burden of demonstrating that a 

nonfraudulent explanation for Defendants’ conduct is less plausible.

Plaintiffs have failed to “establish an inference of scienter that is more plausible and 

powerful than competing inferences of defendants‟ state of mind.” Nicholson v. N-Viro Int’l 

Corp., No. 3:06CV01669, 2007 WL 2994452, at *4 (N.D. Ohio Oct. 12, 2007). According to 

Plaintiffs, the “mere existence” of a pervasive product variability issue “essentially means that 

the Company was neither cGMP compliant nor could any defendant „believe‟ that Caraco was 

 

8 Even prior to Caraco‟s disclosures, the investing public knew that the FDA could seize drug 

product if it found violations. See Defendants‟ Memo. at 11.

9

See, e.g., Konkol v. Diebold, Inc., 590 F.3d 390, 403 (6th Cir. 2009) (dismissing “classic fraud 

by hindsight case where a plaintiff alleges that the fact that something turned out badly must 

mean defendant knew earlier that it would turn out badly”) (quotation omitted).

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5

„substantially compliant.‟” Opp. Br. at 6. This allegation, which is based solely on claims from 

anonymous former Caraco employees, all of whom “have axes to grind,”10 does not nudge 

Plaintiffs‟ Amended Complaint over the motion-to-dismiss hurdle. See PR Diamonds, Inc. v. 

Chandler, 364 F.3d 671, 684 (6th Cir. 2004) (even when a court concludes that the allegations 

“no doubt merit drawing some inference of scienter, that is not enough”). 

Plaintiffs erroneously rely on In re Copley Pharm., Inc. Sec. Litig., No. 94-11897, 1995 

WL 169215 (D. Mass. Mar. 16, 1995), for their notion that if a company publicly states that it 

believes that it is in material compliance with cGMP standards and it is later determined to be 

out of compliance, the company‟s statements about its beliefs are actionable under Section 10(b) 

of the Securities Exchange Act of 1934 and Rule 10b-5. Opp. Br. at 22. In Copley, the 

Massachusetts federal district court dismissed all but one of the complaint‟s allegations (a 

bribery allegation that is not at issue in this case) and held: 

It must be remembered throughout analysis of this case that the alleged awareness 

by the defendants of certain problems in the process of production of Albuterol 

and Brompheril is not the equivalent of knowledge or belief that the Company 

was not in “material compliance” with FDA or cGMP standards.

Copley, 1995 WL 169215, at *2, *6 n.7. Plaintiffs‟ allegation that Defendants‟ supposed 

awareness of various problems in Caraco‟s manufacturing process is the equivalent of their 

knowledge or belief that Caraco was not “substantially compliant” with FDA regulations 

similarly fails to establish scienter. Copley does not support Plaintiffs‟ assertions and, instead, 

supports dismissal of the Amended Complaint.

Since the Plaintiffs do not allege facts to support the view that Defendants knew Caraco 

was not in compliance with cGMP, Plaintiffs must instead offer factual allegations to show that 

Defendants did not believe Caraco was substantially compliant with cGMP at the time that the 

 

10 Higginbotham v. Baxter Int’l Inc., 495 F.3d 753, 756-57 (7th Cir. 2007).

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6

statements were made. Plaintiffs, however, simply do not allege any facts in the Amended 

Complaint that demonstrate Defendants did not act in good faith. 

For instance, there is no allegation that Defendant Daniel H. Movens (“Movens‟) told any 

of the confidential witnesses that he did not believe Caraco was substantially compliant with 

cGMP. Nor do Plaintiffs allege the existence of an internal memorandum or report that states 

any Defendant believes Caraco is out of compliance with FDA regulations. Because the 

Plaintiffs have failed to offer any factual allegations to show that Defendants‟ statements “were 

not made in good faith,” the Amended Complaint must be dismissed with prejudice. Sinay v. 

Lamsen & Sessions Co., 948 F.2d 1037, 1040 (6th Cir. 1991).

Plaintiffs‟ scienter analysis relies on Yanek v. Staar Surgical Co., 388 F. Supp. 2d 1110 

(C.D. Cal. 2005). But, in Yanek, the California federal district court rejected the plaintiffs‟ 

argument that the company‟s history of product recalls and adverse events provided 

circumstantial evidence of scienter because information about the recalls was available to the 

public. Yanek, 388 F. Supp. 2d at 1126. “[U]nder the fraud-on-the-market theory, the market 

already had the necessary information to assess any impact of prior product recalls on FDA 

approval.” Id. (quotation omitted). Plaintiffs likewise overlook the fact that the FDA had 

already informed the market about Caraco‟s manufacturing problems. Once the FDA did so, the 

market had sufficient disclosure. Sofamor Danek, 123 F.3d at 402.

Finally, Plaintiffs falsely assert that Defendants “offer no more compelling inferences” 

than the Plaintiffs offer. Opp. Br. at 41. But the Sixth Circuit “has never held that a securitiesfraud defendant must proffer a nonfraudulent explanation.” Konkol, 590 F.3d at 403. 

Regardless, the Defendants did in fact offer a more compelling, nonculpable explanation for their 

behavior. Defendants‟ Memo. at 28-29. The Defendants truly believed that Caraco was in 

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7

substantial compliance with cGMP and worked to rectify any problems identified either 

internally or by the FDA. Id. “When a corporation, through its officers or otherwise, states an 

honestly held view based on the information currently before it, neither it nor its officers may be 

held liable, pursuant to Section 10(b) or Rule 10b-5.” Sinay, 948 F.2d at 1040.11 The fact that 

the FDA may have come to a different conclusion than Caraco does not make the Defendants‟ 

earlier statements fraudulent. 

B. The facts alleged by Plaintiffs do not satisfy any of the Helwig factors.

Plaintiffs‟ allegations fail to fall within the rubric of Helwig. Indeed, the absence of the 

Helwig factors in the Amended Complaint “indicates the absence of scienter,” mandating 

dismissal. In re Diebold Sec. Litig., No. 5:05CV2873, 2008 WL 3927467, at *5 (N.D. Ohio 

Aug. 22, 2008).

1. Defendants’ self motivation

Plaintiffs claim that Defendants Movens and Dilip Shanghvi (“Shanghvi”) committed 

fraud because they were interested in “saving their salaries and bonuses.” Opp. Br. at 38. The 

Amended Complaint, however, contains no reference to their alleged financial benefits (e.g., 

salary, bonus, stock options). A court must be able to find allegations supporting the Helwig

factors in the complaint, not an opposition brief. Konkol, 590 F.3d at 403-04; City of Monroe, 

399 F.3d at 684; D.E. & J Ltd. P’ship v. Conaway, 284 F. Supp. 2d 719, 744 (E.D. Mich. 2003). 

Besides the fact that the Court cannot consider Plaintiffs‟ new “self motivation” allegations, 

Plaintiffs‟ argument has no merit. “[A]n executive‟s desire to protect his position within a 

 

11 See also In re CBT Group PLC Sec. Litig., No. C-98-21014, 1999 WL 1249287, at *3 (N.D. 

Cal. July 21, 1999) (“[E]ven if a company knows that a problem exists, it could still honestly and 

in good faith report that the company will continue to perform as expected. Management simply 

may have been confident that they could overcome the problems or merely underestimated the 

severity of such problems.”).

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8

company or increase his compensation,” does not constitute a motive for fraud. PR Diamonds, 

Inc. v. Chandler, 364 F.3d 671, 690 (6th Cir. 2004).

2. Fraudulent statement followed by disclosure of inconsistent information

Plaintiffs claim that the temporal proximity between Defendants‟ false statements and the 

disclosure of the truth provide a strong inference of scienter. Opp. Br. at 35. Specifically, 

Plaintiffs allege that, although Caraco told investors that it initiated a voluntary recall of Digoxin 

in April 2009, FDA documents reveal that the recall was “FDA initiated.” Am. Compl. ¶ 128(a). 

Even if the FDA “talked the company into” conducting a recall, Am. Compl. ¶ 128(b), Caraco‟s 

characterization of the recall as “voluntary” is nevertheless true. According to FDA documents, 

Caraco had discussions with the FDA about the potential health hazard, and Plaintiffs concede 

that, ultimately, Caraco “decided” to recall the product. Am. Compl. ¶ 128(b)(ii) (emphasis 

added). Caraco‟s decision to recall its product is not the equivalent of an FDA-mandated recall. 

Plaintiffs have to allege more than mere semantic variances to cross the plausibility threshold 

and avoid dismissal. See Twombly, 550 U.S. at 570.

3. Divergence between internal reports and external statements and 

disregard of most current factual information before making statements

Plaintiffs vaguely assert that internal reports “alerted” Defendants “that there were severe 

problems with the quality of the pharmaceuticals produced by Caraco.” Opp. Br. at 31. This 

conclusory allegation fails to satisfy any of the Helwig factors. Plaintiffs do not offer any 

information from these alleged internal reports that confirms that Defendants knew their 

statements were false. In re CBT Group PLC Sec. Litig., 1999 WL 1249287, at *2. Plaintiffs do 

not allege how they got the reports and who produced the reports. Id. Nor do Plaintiffs “provide 

any of these reports or cite any of their specific details.” Grillo v. Tempur-Pedic Int’l, Inc., 553 

F. Supp. 2d 809, 819 (E.D. Ky. 2008). In addition, other than one reference to a report received 

Case 2:09-cv-12830-AJT-DAS Document 37 Filed 06/24/10 Page 12 of 15
9

by Movens followed by an allegedly contradictory public statement,12 the Amended Complaint 

lacks any allegations regarding whether the other Defendants had access to any negative internal 

reports. Other courts have rejected similar efforts to cite internal reports without providing 

“adequate corroborating details.” See, e.g., In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 

985 (9th Cir. 1999). Thus, Plaintiffs‟ general allegations of the Defendants‟ receipt of negative 

reports are insufficient to support a strong inference of fraudulent intent. 

CONCLUSION

Defendants‟ Motion to Dismiss, with prejudice, should be granted for all of the reasons 

set forth in this Reply Brief and Defendants‟ Memorandum. Plaintiffs have already had an 

opportunity to correct any pleading deficiencies when they filed the Consolidated Amended 

Complaint. The “purpose of the PSLRA would be frustrated if district courts were required to 

allow repeated amendments to complaints filed under the PSLRA.” Miller v. Champion Enters., 

Inc., 346 F.3d 660, 692 (6th Cir. 2003). Because the PSLRA restricts Plaintiffs‟ ability to 

amend, the Defendants respectfully request that the Court grant their motion and dismiss the 

Consolidated Amended Complaint with prejudice. 

 

12 Plaintiffs challenge the following comment by Movens in a press release: “We are working 

with local universities and technical schools in order to provide the proper talented employees 

required to perform in a highly regulated business.” Am. Compl. ¶ 100. Plaintiffs contend that 

Movens‟ remarks were fraudulent because he earlier received a report that four employees in the 

Dispensing Department did not have the minimum training requirements necessary for their jobs. 

Am. Compl. ¶ 101(a). Such a tenuous argument clearly does not create a strong inference of 

scienter. First, Plaintiffs make no allegations that specifically discredit Caraco‟s recruiting 

efforts at local universities and technical schools. Second, Plaintiffs have alleged no facts that 

cast doubt on Movens‟ genuine belief that Caraco was in substantial compliance with cGMP, 

even if four employees, out of a company total of 650 employees, lacked the necessary training. 

Am. Compl. ¶ 138. Finally, Movens‟ general optimistic comments about Caraco‟s training and 

recruiting are not actionable. See In re Federal-Mogul Corp. Sec. Litig., 166 F. Supp. 2d 559, 

562 (E.D. Mich. 2001) (“The Sixth Circuit has upheld the finding that „vague, optimistic 

statements‟ are not material.”).

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10

Dated: June 24, 2010 BRIGGS AND MORGAN, P.A.

s/ Margaret Adamczyk Goetze

Frank A. Taylor

Margaret Adamczyk Goetze

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Telephone: (612) 977-8400

Facsimile: (612) 977-8650

ftaylor@briggs.com

mgoetze@briggs.com

Attorneys for Defendants

Case 2:09-cv-12830-AJT-DAS Document 37 Filed 06/24/10 Page 14 of 15
CERTIFICATE OF SERVICE

I hereby certify that, on this 24th day of June 2010, I electronically filed the foregoing 

Defendants‟ Reply Brief In Support of Motion to Dismiss the Consolidated Amended Class 

Action Complaint with the Clerk of Court using the ECF system, which will send notification of 

such filing to the following counsel of record:

• Peter A. Binkow

pbinkow@glancylaw.com

• Courtney B. Ciullo

cbc@millerlawpc.com

• E. Powell Miller

epm@millerlawpc.com

• Marc L. Newman

mln@millerlawpc.com

• S. Thomas Wienner

twienner@wiennergould.com

s/ Margaret Adamczyk Goetze

Margaret Adamczyk Goetze

Briggs and Morgan, P.A.

2200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

Telephone: (612) 977-8400

Facsimile: (612) 977-8650

mgoetze@briggs.com

Case 2:09-cv-12830-AJT-DAS Document 37 Filed 06/24/10 Page 15 of 15