Opinion ID: 691379
Heading Depth: 2
Heading Rank: 3

Heading: Omission of the study results

Text: 53 Kaplan also argues that Medstone had a duty to disclose the results of the Baylor clinical study in the prospectus, given the results detailed in Burke's memorandum. Medstone counters that the clinical data was too speculative and premature. If the failure to disclose the clinical results would have misled the reasonable investor about the nature of an investment in Medstone stock, then the omission was material. VeriFone, 11 F.3d at 868-69. 54 This is a close question. [S]ilence is not misleading in the absence of a duty to disclose. In re VeriFone Sec. Litig., 784 F.Supp. 1471, 1480 (N.D.Cal.1992), aff'd, 11 F.3d 865 (9th Cir.1993). While internal forecasts need not be disclosed, VeriFone, 11 F.3d at 869, the scientific evaluation of clinical trials is harder data. Kaplan alleges the omission of material, actual facts from which forecasts of success may be derived. Id. Although a prospectus should not  'bury the shareholders in an avalanche of trivial information,'  Basic Inc. v. Levinson, 485 U.S. 224, 231, 108 S.Ct. 978, 983, 99 L.Ed.2d 194 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 448-49, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976)), this information was not trivial, as the efficacy and competitiveness of Medstone's system was essential to the company's performance. 55 Medstone argues that the study results were preliminary. But Medstone also bases its claim that Statements 1 and 2 were not misleading on the same study, characterizing the results as successful. Having used the study results to justify its prospectus statements, Medstone may not simultaneously claim that the study was too preliminary to disclose. 56 Viewing the evidence in the light most favorable to Kaplan, we believe the inclusion of the test results might have explained what successful use of the Medstone system meant and whether it compared favorably with its competitors. The rate of fragmentation achieved by the Medstone system was well below the German machine's results, and is generally inconsistent with the term successfully. We believe a reasonable jury could find that the study results might have given a reasonable investor pause. We therefore find there is a genuine issue of fact whether the omission of the study results was material, especially in the light of Medstone's statement that the lithotripter was competitive and had been used successfully.