Court Opinion

ID: 2774692
Source: CourtListenerOpinion
Date Created: 2015-01-29 21:01:09.464072+00
Date Added: 2024-06-11T12:26:17.698736
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                 JAN 29 2015

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

JOHN INGRAM, on behalf of himself and           No. 12-17398
all others similarly situated,
                                                D.C. No. 4:10-cv-04957-PJH
              Plaintiff-Appellant,

  v.                                            MEMORANDUM*

VIVUS, INC., LELAND F. WILSON, and
WESLEY W. DAY, Ph. D.,

              Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Northern District of California
                   Phyllis J. Hamilton, District Judge, Presiding

                      Argued and Submitted January 16, 2015
                            San Francisco, California

Before: NOONAN and CLIFTON, Circuit Judges, and ADELMAN, District
Judge.**

       The plaintiff appeals from a judgment of the district court granting the

defendants’ motion to dismiss his class action complaint, which asserts claims under

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The Honorable Lynn S. Adelman, District Judge for the United States
District Court for the Eastern District of Wisconsin, sitting by designation.
the Securities Exchange Act of 1934. A complaint alleging securities fraud must

comply with Federal Rules of Civil Procedure 8 and 9 and the pleading requirements

of the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4(b). In the present

case, the district court concluded that the complaint did not satisfy these requirements

because it did not adequately allege that the defendants made materially misleading

statements or omissions and did not adequately state facts giving rise to a strong

inference of scienter.

      We agree with the district court that the complaint did not adequately allege that

the defendants made materially misleading statements or omissions. The plaintiff

does not allege that any of the defendants’ statements were literally false. Instead, he

alleges that when the defendants made positive statements about the safety of Qnexa,

VIVUS’s then-developmental weight-loss drug, they misled investors by failing to

disclose information about certain side effects observed during the Qnexa clinical

trials. However, the complaint does not give rise to a plausible inference that it is

substantially likely that a reasonable investor wold have viewed that information as

significantly altering the total mix of information the defendants made available about

Qnexa’s safety. See Matrixx Initiatives, Inc. v. Siracusano, __ U.S. __, 131 S.Ct.

1309, 1318 (2011).

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      We also agree with the district court that the allegations of the complaint do not

give rise to an inference of scienter that is “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). Even if we were to assume that the

defendants materially misled investors when they made positive statements about the

safety of Qnexa without also disclosing the side-effect data, the most compelling

inference one can draw from the facts alleged is that the defendants were, at worst,

negligent in failing to appreciate that a reasonable investor would deem the omitted

data material. See In re VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 694, 702 (9th

Cir. 2012) (stating that negligence is insufficient to establish scienter).

      Because we conclude that the plaintiff has failed to plead primary violations of

Section 10(b) and Rule 10b-5, we also conclude that the Section 20 claims were

properly dismissed. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990

(9th Cir. 2009) (control-person claims may be dismissed summarily when plaintiff

fails to plead primary claim of securities fraud).

      Finally, we conclude that the district court did not abuse its discretion in

dismissing the complaint without granting leave to amend. Id. at 989, 1007.

      AFFIRMED.

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