Allergan Wins Summary Judgment in Securities Fraud Class Action
December 13, 2022
Cleary Gottlieb represented Allergan plc (Allergan) and several former and current executives in successfully securing summary judgment and full dismissal of a securities fraud class action in the U.S. District Court for the Southern District of New York.
The plaintiff claimed that Allergan and its executives had mislead investors regarding an alleged increased risk of a rare form of cancer associated with Allergan’s textured breast implants, in violation of the securities laws. The plaintiff also claimed that Allergan knew of studies that showed a higher incidence of this cancer in patients with Allergan’s textured implants compared to implants made by other manufacturers, but nonetheless issued public statements that downplayed this higher risk.
On December 12, 2022, Judge Colleen McMahon granted Allergan’s motion for summary judgment and so dismissed the plaintiff’s case in its entirety. The court held that the plaintiff had not produced sufficient evidence to show that there was a genuine issue of material fact on three of the required elements of a Section 10(b) claim: falsity, materiality, and loss causation.
First, the court concluded that none of the alleged misstatements were either literally untrue or misleading in context, given that the science available at the time of the disclosures had not concluded that Allergan’s textured implants in fact carried an increased risk of the disease as compared to textured implants produced by other manufacturers. With respect to two of the four challenged statements, the court criticized the plaintiff for making a “‘Hail Mary pass’ of an argument” that was “arguably bad faith.” Second, the court concluded that the plaintiff had failed to produce evidence that the disclosures about Allergan’s textured implant business, which constituted less than 1% of Allergan’s total revenues, were material to investors. Finally, on loss causation, the court said that the plaintiff had produced “not a scintilla” of evidence showing that the recall of Allergan’s textured implants in December 2018 by a French regulator was driven by concerns that Allergan’s textured breast implants carried a heightened risk of the disease as compared to other manufacturers’ textured implants.
The court also rejected the plaintiff’s attempts to introduce new or recycled theories of fraud in support of its claims. Even if it were to consider those improperly raised theories, the court stated that it would reject them based on the undisputed evidence. The court concluded that while it had let the case proceed past the motion to dismiss phase when drawing all inferences in favor of the plaintiff’s theories, following discovery the plaintiff had failed to produce the required evidence to support its allegations.