Securities Litigation Against Life Sciences Companies: 2023
Securities class actions against life sciences companies are mostly second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class-action attorneys search the company’s previous public statements and seek to identify inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys then seek to show that any arguable inconsistency amounts to fraud — that is, they will claim that the earlier statement was knowingly or recklessly false or misleading. When the challenged statement appears in a public offering document (that is, a registration statement or prospectus), plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter or caused their losses.
Petitioners Make Their Case That Pure Omissions Are Not Actionable Under Section 10(b) and Rule 10b-5.
In 2024, the Supreme Court will be looking once again at the federal securities laws in Macquarie Infrastructure Corp. v. Moab Partners, L.P., Dkt No. 22-1165. The question presented to the Court this time is: Whether the U.S. Court of Appeals for the Second Circuit erred in holding that a failure to make a disclosure required under Item 303 of SEC Regulation S-K can support a private claim under Section 10(b) of the Securities Exchange Act of 1934, even in the absence of an otherwise misleading statement. The Court thus is primed to resolve a split between the Second Circuit and three other courts—the Third, Ninth and Eleventh Circuits—and will contend with the reach of the court-created implied private right of action to enforce Section 10(b). (more…)
