Opinion ID: 203247
Heading Depth: 3
Heading Rank: 2

Heading: LaViolette's Statements

Text: Plaintiff also disputes the district court's rejection of the LaViolette allegations under the doctrine of fraud by hindsight. The allegations are that defendant Paul LaViolette made public statements that were false and misleading and constituted a misrepresentation (1) when he stated on July 29  a week before the third recall was announced on August 5  that the problem with TAXUS had been fixed, and (2) when he stated on July 26 that there was simply a lag time in the marketplace's conversion to the improved version of TAXUS. CAC ¶ 101. Plaintiff's complaint may be read as alleging a material omission and as supporting scienter. LaViolette's remarks were misleading not because the problem had not been fixed, but because LaViolette excluded any mention of the upcoming recall. In other words, it was misleading for LaViolette to say that the problem had been fixed while failing to mention that a third recall, of another 3,000 stents, would be announced a week later. As with plaintiff's allegations regarding the manufacturing change, we cannot say that LaViolette's omission was immaterial as a matter of law. The investors with whom LaViolette was speaking in the conference call would very well have wanted to know about the existence of an upcoming recall in addition to hearing LaViolette's assurances that the TAXUS problems were in the past. With respect to scienter, the district court held that plaintiff was merely alleging fraud by hindsight because plaintiff was claiming no more than that LaViolette should have known about the recall earlier. According to the district court, Lead Plaintiff fails to allege facts that provide a strong inference that Defendant LaViolette knew that an additional recall was necessary or that his remarks were false when he made them. In re Boston Scientific, 490 F.Supp.2d at 160. We disagree. This fails to account for the very short amount of time between LaViolette's remarks, some of which were made on Thursday, July 29, and the third recall, which was announced the following Thursday, August 5. Temporal proximity alone is insufficient to establish a claim for fraud, see Shaw, 82 F.3d at 1225, but this court has insisted on a fact-specific inquiry regarding scienter. Greebel, 194 F.3d at 196. The extremely short time period here is strong evidence. Moreover, LaViolette was the company's Chief Operating Officer and a point person on TAXUS, and so he would presumably have been aware of the status of the company's ongoing monitoring of old TAXUS stents. CAC ¶¶ 18, 93. The third recall, like the two before it, was voluntary and initiated by Boston Scientific rather than the FDA.