Fire and Police Pension Assoc v. Abiomed, Inc. , 778 F.3d 228 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 14-1502
FIRE AND POLICE PENSION ASSOCIATION OF COLORADO;
CITY OF AUSTIN POLICE RETIREMENT SYSTEM,
Plaintiffs, Appellants,
and
KARSE SIMON, individually and on behalf of all others
similarly situated; ARLENE SIMON, individually and
on behalf of all others similarly situated; OKLAHOMA
POLICE PENSION AND RETIREMENT SYSTEM; CITY OF HOLLYWOOD
(FL) EMPLOYEES' RETIREMENT FUND; TULARE COUNTY EMPLOYEES'
RETIREMENT ASSOCIATION; ORLANDO POLICE PENSION FUND,
Plaintiffs,
v.
ABIOMED, INC.; MICHAEL R. MINOGUE; ROBERT L. BOWEN,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]
Before
Lynch, Chief Judge,
Souter,* Associate Justice,
and Selya, Circuit Judge.
*
Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
Patrick T. Egan, with whom Kristin J. Moody, Daryl DeValerio
Andrews, Berman DeValerio, Robert D. Klausner, and Klausner,
Kaufman, Jensen & Levinson were on brief, for appellants.
John D. Donovan, Jr., with whom Daniel V. Ward, Matthew
Mazzotta, Elizabeth D. Johnston, Dara A. Reppucci, and Ropes & Gray
LLP were on brief, for appellees.
February 6, 2015
LYNCH, Chief Judge. Not all claims of wrongdoing by a
company make out a viable claim that the company has committed
securities fraud. This case is an example.
Institutional investors, asserting claims on behalf of a
putative class of purchasers of the stock of defendant Abiomed,
Inc.,1 brought suit against Abiomed and two of its officers,
Michael Minogue and Robert Bowen, alleging that all defendants
committed securities fraud in violation of section 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule
10b-5; and that the individual defendants violated section 20(a) of
the Act, 15 U.S.C. § 78t(a). The alleged misleading statements and
omissions concerned Abiomed's flagship product, a micro heart pump
called the Impella Recover LP 2.5. The complaint alleges that
defendants told investors that its policy was to avoid off-label
marketing of the Impella 2.5, when in fact defendants "were
orchestrating and engaged in widespread off-label market
promotion." And when the Food and Drug Administration (FDA)
initiated inquiries into the company's marketing tactics,
defendants told investors that it was "cooperating" with the agency
and "working to resolve [a] few discrete issues," when in fact the
1
The named plaintiffs are Fire and Police Pension
Association of Colorado, City of Austin Police Retirement System,
Oklahoma Police Pension and Retirement System, City of Hollywood
(FL) Employees' Retirement Fund, Tulare County Employees'
Retirement Association, Orlando Police Pension Fund, and individual
investors Karse and Arlene Simon.
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company was "trivializing the concerns" and "continuing to off-
label market."
The district court dismissed the complaint on the ground
that plaintiffs had not pleaded facts giving rise to a "'cogent and
compelling'" inference of scienter, as is required under the
Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub. L.
No. 104-67, 109. Stat. 737. Simon v. Abiomed, Inc., No. 12-12137-
FDS, 2014 WL 1413638 (D. Mass. Apr. 10, 2014) (citation omitted).
We affirm. The district court correctly held that the
pleadings are insufficient to establish the requisite inference of
scienter. Even assuming that plaintiffs plausibly alleged that
defendants made false or misleading statements which had a material
effect on Abiomed's stock price -- a matter that is far from
clear -- plaintiffs have not sufficiently alleged that defendants
made those statements with the "conscious intent to defraud or 'a
high degree of recklessness.'" ACA Fin. Guar. Corp. v. Advest,
Inc., 512 F.3d 46, 58 (1st Cir. 2008) (quoting Aldridge v. A.T.
Cross Corp., 284 F.3d 72, 82 (1st Cir. 2002)).
I. Factual Background
We draw the following statement of facts from plaintiffs'
Amended Class Action Complaint and from materials defendants filed
in the district court in support of their motion to dismiss.2
2
These materials consist of correspondence between the FDA
and Abiomed and public records, such as Abiomed's filings with the
SEC. Neither party disputes that the court may properly consider
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A. The Parties
Defendant Abiomed is a Massachusetts-based company
employing approximately 150 people which develops, manufactures,
markets and sells medical devices designed for circulatory support.
Minogue is Abiomed's CEO, and Bowen is its CFO. Plaintiffs are a
class of entities and individuals who purchased Abiomed stock from
August 4, 2011, to October 31, 2012 (the "Class Period").
The allegations in the complaint are based in part on
interviews with confidential witnesses who are former employees of
Abiomed. Confidential Witness 1 ("CW1") "worked in a
clincial/surgical support position as a clinical representative
from March 2011 until April 2012." According to CW1, Abiomed
employees were in close proximity to one another, and Minogue and
Bowen were very "hands-on" leaders.
The Impella 2.5, "a percutaneous micro heart pump with an
integrated motor and sensors" that "can pump up to 2.5 liters of
blood per minute," is Abiomed's most important product. In fiscal
year (FY) 2012, 85% of Abiomed's revenues came from sales of
Impella products, and "most" of that revenue came from the sales of
the Impella 2.5. The Impella 2.5's main competitor is the
these materials. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir.
1993) (noting that, in ruling on a motion to dismiss, court may
consider "documents the authenticity of which are not disputed by
the parties; [] official public records; [] documents central to
plaintiffs' claim; or [] documents sufficiently referred to in the
complaint").
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intra-aortic balloon pump (IABP), which is much cheaper and more
widely used than the Impella 2.5.
B. The FDA's Regulation of Medical Devices
The FDA regulates the labeling and marketing of medical
devices pursuant to the Food, Drug, and Cosmetics Act (FDCA).
Under section 510(k) of the FDCA, the agency can "clear" a device
that is substantially equivalent in safety and effectiveness to an
existing approved device and thereby allow the device to be used
for the same intended purposes. The FDA may also grant an
investigational device exemption ("IDE") to a company to allow it
to use a device in a clinical study to test its safety and
efficacy.
Under FDA regulations, a company is not allowed to market
a device for a use for which it has not been approved -- that is,
an "off-label" use. However, the FDA does not prohibit physicians
and hospitals from off-label use of medical devices, and a medical
device company is allowed to respond to unsolicited requests from
physicians for information regarding off-label uses of the
company's products. FDA regulations also prohibit a company with
an IDE from representing that the device is safe and effective for
the purpose for which it is being tested.
C. The Protect II and Recover II Studies
In August 2007, Abiomed received an IDE from the FDA that
allowed it to begin a clinical trial comparing the performance of
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the Impella 2.5 to that of the IABP during high-risk percutaneous
coronary interventions ("PCIs"), commonly known as angioplasties
(the "Protect II Study"). The study's purpose was to measure major
adverse events suffered by patients 30 days after the PCI
procedure.
On December 6, 2010, Abiomed terminated the Protect II
Study after finding that the Impella 2.5 did not achieve superior
outcomes compared with the IABP at the 30-day endpoint. However,
Abiomed continued to collect and analyze data from the study, and
the study eventually yielded "exploratory" results "suggesting a
possible benefit for the device at 90 days." The study was
published in September 2012 in Circulation, a peer-reviewed medical
journal.
In March 2008, Abiomed received an IDE for a second study
(the "Recover II Study") designed to compare the Impella 2.5 to the
IABP in hemodynamically unstable patients undergoing a PCI due to
an acute myocardial infarction ("AMI"), more commonly known as a
heart attack. The Recover II Study was suspended in September 2009
and eventually terminated due to insufficient enrollment.
D. 510(k) Clearance for the Impella 2.5, the Alleged
"Pervasive" Scheme of Off-Label Marketing, and the FDA's
Response
In June 2008, pursuant to the 510(k) process, Abiomed
received clearance from the FDA to market and commercially
distribute the Impella 2.5 for partial circulatory support for up
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to six hours. Under FDA regulations, to repeat, Abiomed was not
permitted to market or promote the Impella 2.5 for any other use.
Plaintiffs allege that defendants flouted these regulations and
"engage[d] in widespread improper promotion and marketing of the
Impella 2.5." They make the following specific allegations in
support of that claim.
1. The January 2010 Untitled Letter
On January 28, 2010, the FDA sent Abiomed an Untitled
Letter objecting to certain of Abiomed's activities promoting the
Impella 2.5. Untitled Letters are intended to address alleged
regulatory violations that do not meet the threshold for regulatory
significance warranting a Warning Letter. They "do[] not include
a warning that a company's failure to take prompt corrective steps
could lead to an enforcement action." Simon, 2014 WL 1413638, at
*3 n.2 (citing U.S. Food & Drug Admin., Regulatory Procedures
Manual: Advisory Actions, 2004 WL 3363386, at *24 (2010)).
The FDA stated that Abiomed had improperly "promot[ed]
the Impella 2.5 for high risk PCI and AMI" and represented that the
Impella 2.5 was superior to the IABP in those uses. Essentially,
in the FDA's view, Abiomed's promotional materials represented that
the device was effective for uses for which it was being tested
under the Protect II and Recover II IDEs, which constituted a
violation of FDA regulations.
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Abiomed responded to the FDA letter on March 4, 2010,
stating that it "now recognize[d]" that the challenged promotions
had made improper efficacy claims and that it would revise its
marketing materials in order to remove the offending statements.
Abiomed also represented that it had "strengthened its review
process" for promotional materials.
The FDA viewed this response as inadequate, however, and
Abiomed made further changes to its advertisements and reviewed its
marketing materials and website to ensure that "there were no other
materials" beyond those identified by the FDA that made improper
safety or efficacy claims. On April 20, 2010, the FDA wrote
Abiomed stating that its "response appear[ed] adequate" and that no
further action was necessary. Abiomed did not publicly disclose
this correspondence with the FDA at that time.
2. The June 2011 Warning Letter
Over a year later, on June 10, 2011, the FDA issued an
official Warning Letter to Abiomed stating that the company's
"marketing materials continued to improperly compare the Impella
2.5 to the IABP and promote the device for non-cleared uses." A
Warning Letter is a step above an Untitled Letter in the FDA's
enforcement hierarchy. It communicates that the FDA believes the
regulated entity has committed a violation of regulatory
significance but does not commit the FDA to taking enforcement
action. Simon, 2014 WL 1413638, at *3 n.2 (citing U.S. Food & Drug
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Admin., Regulatory Procedures Manual: Advisory Actions, 2004 WL
3363386, at *1-2 (2010)).
The Warning Letter criticized an Abiomed magazine
advertisement that pictured a hand puncturing a red balloon and
suggested that the Impella 2.5 was superior to the IABP "for
circulatory support in the Cath lab." The FDA's letter also
complained about the Abiomed slogan, "Recovering Hearts, Saving
Lives," which the FDA stated would require a study under an IDE "to
evaluate whether the device could salvage heart tissue and
muscle."3 Finally, the agency took issue with a claim at a
conference of cardiovascular physicians that the Impella could
improve hemodynamics and cardiac output in AMI Shock patients,
since those indications also needed to be supported with a study
performed under an IDE.
The Warning Letter was posted on the FDA's website. An
Abiomed spokeswoman stated publicly that the "letter addresses
specific promotional items from 2010. . . . We are working with
the FDA to ensure all of our promotional materials comply with the
agency moving forward." According to CW1, however, Abiomed senior
management did not take the warning letter seriously and
"trivialized the FDA concerns." CW2, "a senior quality compliance
3
The FDA subsequently revised its position on the slogan,
"stat[ing] that [it] had decided to leave the tagline issue alone"
and asking only that the company not claim that the Impella 2.5
could "Recover Heart Muscle."
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and validation engineer at Abiomed from April 2008 through March
2011," likewise said that "Abiomed 'didn't change anything' after
being notified by the FDA."
In July 2011, at Abiomed's request, the FDA held a
"clarification call" with Abiomed to discuss the Warning Letter.
The FDA reminded Abiomed of the Impella 2.5's very limited
clearance and told them to refrain from comparing the device to the
IABP. One agency member noted that Abiomed "should have had some
awareness of the issues given" the January 2010 Untitled Letter.
In August 2011, Abiomed sent a formal response letter to
the FDA discussing the actions it had taken to address the FDA's
concerns. The company stated that it would not run the balloon
advertisement again and would ensure that the advertisement did not
exist on Abiomed's website, and that it had removed materials
related to the cardiovascular conference from the website. The
letter also stated that Abiomed would put into place a plan to
prevent future violations. Abiomed did not receive any follow-up
correspondence from the FDA for several months.
3. The Off-Label Marketing Allegedly Continues
Plaintiffs allege that, even in the wake of the June 2011
Warning Letter, Abiomed continued to "engage[] in pervasive
off-label marketing of the Impella 2.5 beyond its FDA cleared
indications." For example, during a February 2012 episode of the
CNBC program "Mad Money," Minogue suggested that the Impella 2.5
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could be used in patients experiencing heart attacks, and he held
up an IABP and an Impella 2.5 side by side and stated that the
latter was "cost effective." Also, Abiomed made repeated claims in
SEC filings and conference calls regarding the efficacy of the
Impella 2.5 based on the results of the Protect II Study.
Plaintiffs also allege that Abiomed trained its sales and
clinical staff to compare the Impella 2.5 to the IABP and to
"prompt and steer physicians to ask about off-label uses of the
Impella 2.5." CW1 and CW5, a "clinical representative at Abiomed
from February 2012 until February 2013," said they were provided
with "talking points" about the Protect II Study and encouraged to
"discuss the superiority of the Impella 2.5 over the IABP." CW2
stated that Abiomed senior management "knew Abiomed did not have
the clinical studies to support the claims they were making." CW3,
"an account manager at Abiomed from September 2008 until the end of
March 2011," relayed similar concerns to senior management and was
"blown off." CW7, "a director of clinical operations for
Abiomed . . . from February 2009 until November 2011," stated that
Abiomed promoted the Impella 2.5 for use in procedures that take
longer than six hours. CW4, "a clinical representative in
cardiology at Abiomed . . . from August 2007 until September 2010,"
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stated that Abiomed "help[ed] doctors identify candidates to use
the Impella 2.5 on, including high-risk PCI patients."4
On February 24, 2012, Abiomed and the FDA "had a meeting,
in part to discuss Abiomed's improper marketing practices."
Plaintiffs allege that Abiomed "never disclosed the true purpose of
this meeting," instead stating in a later filing with the SEC that
the meeting was held to "present the final results of the Protect
II Study" and to discuss other unrelated matters.
4. The April 2012 Letter
In April 2012, the FDA sent another letter to Abiomed
asserting that its promotional materials were still improperly
marketing the Impella 2.5. The FDA noted that the "AbiomedImpella"
YouTube channel included several videos discussing unapproved uses
of the Impella 2.5, and that the company's website contained a link
to "Patient Stories" describing unapproved uses of the device. The
agency also objected to Minogue's statements on the "Mad Money"
episode. The letter stated that these examples "represent[ed] a
fraction of the objectionable claims regarding the Impella," and
the agency threatened enforcement action "absent prompt and
effective corrections."
4
Plaintiffs include these allegations in the section of
the complaint detailing Abiomed's allegedly improper marketing
after the Warning Letter was issued, but they do not provide any
indication of the specific time period to which the confidential
witnesses' observations correspond.
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Abiomed disclosed this FDA letter in its 2012 10-K, filed
with the SEC on June 4, 2012. The company announced that it had
"received a follow up letter from the FDA stating that some of our
promotional materials continued to market the Impella 2.5 in ways
that are not compliant with FDA regulations" and that it was
"cooperating with the FDA in addressing its concerns."
5. The August 2012 Meeting with the FDA and
Subsequent Compliance Audits
On August 7, 2012, the FDA and Abiomed met again, again
at Abiomed's request. "[T]he primary objective of the meeting was
to present Abiomed's actions to close-out the Warning Letter and
maintain compliance and then have a discussion as to whether
Abiomed was meeting FDA requirements." After Abiomed detailed the
measures it was taking to ensure compliance with the regulations,
an FDA representative "suggested that Abiomed 'take a step back'"
because "[h]e saw the corrective actions as too targeted, and not
addressing the whole labeling program." Another representative
commented that the FDA did "not think of the clearances of the
product in the same way Abiomed does." The FDA was "frustrated"
because it felt that regulatory violations were "happen[ing]
repeatedly." Minogue responded that "Abiomed had to comply, and
will comply," but that, because Abiomed was such a small company,
it was "critical to market the device." An FDA representative
opined that "it would involve 'walking a fine line' to stay in
compliance while marketing." The meeting closed with the FDA
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admonishing Abiomed that it took the matter "very seriously," "that
a Warning Letter is the last communication given, [and] that
Abiomed needed to do a systemic review of its procedures in order
to give the [agency] a systemic response for compliance."
In the late summer of 2012, the FDA conducted a
compliance audit of Abiomed, and Abiomed simultaneously conducted
its own internal audit. After those audits, Abiomed pulled its
marketing and training materials "for compliance reasons" and did
not put up replacement materials for several months. The
replacement materials, according to CW5, were "extremely limited
compared to what they had previously" -- for example, they no
longer included slides about the Protect II Study. Abiomed
confirmed in a letter to the FDA dated August 20, 2012, that it
understood its prior approach to compliance was "too narrow in
focus" and so was "adopting a broad, systemic approach to address
the issues raised by FDA." This approach included "destroy[ing]
the Impella marketing brochures cited by FDA, stopp[ing]
distribution of all marketing labeling, recall[ing] all marketing
labeling held by Abiomed field personnel, and stopp[ing] any
planned updates to all labeling and the [Abiomed] website."
6. The U.S. Attorney's Office Investigation
On November 1, 2012, Abiomed disclosed that the U.S.
Attorney's Office for the District of Columbia had begun an
investigation into its marketing and promotional practices
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regarding the Impella 2.5. "Abiomed also maintained its Impella
revenue guidance at approximately 30% for the fiscal year, despite
45% growth through the first half of the year, implying a marked
slowdown during the second half of the year . . . ." Minogue
disclosed the FDA's compliance audit in a conference call conducted
the same day and stated that Abiomed "ha[d] taken extensive actions
to correct [its] noted compliance issues identified in [its] annual
report." Abiomed's stock price fell from $19.82 per share to
$13.61 per share on November 1, a drop of approximately 32%.
7. The February 2013 FDA Close-Out Letter
On February 19, 2013, the FDA issued a "Close-Out Letter"
to Abiomed stating that the agency had completed its evaluation of
Abiomed's corrective actions taken in response to the Warning
Letter and had determined that Abiomed had adequately addressed
those violations. Abiomed's stock price recovered from the
November 2012 fall. As of May 20, 2013, the stock was trading at
$23.11 per share.
E. Defendants' Allegedly False and Misleading Statements
Plaintiffs allege that, between August 4, 2011, and
October 31, 2012, defendants made specific false and misleading
statements that "deceived the investing public" and caused the
plaintiffs to purchase Abiomed stock at artificially inflated
prices. These statements fall into three principal categories.
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First, plaintiffs allege that several of defendants'
statements about the growth of Impella product revenues were false
and misleading because Abiomed "failed to disclose that the
reported revenue growth was substantially the result of off-label
marketing." Defendants either provided no explanation for the
growth or attributed the revenues to sources such as "increased
Impella 2.5 utilization in the cath lab." Plaintiffs allege these
statements were misleading because "they failed to disclose that
Abiomed's continued revenue . . . was at risk should the Company be
forced to discontinue [its marketing] practices." Defendants
allegedly made these statements in an August 2011 press release and
conference call announcing Abiomed's first quarter 2012 ("Q1 2012")
earnings; in Abiomed's Q1 2012 10-Q; in a November 2011 press
release and conference call announcing Abiomed's Q2 2012 earnings;
in Abiomed's Q2 2012 10-Q; in a February 2012 press release and
conference call announcing Abiomed's Q3 2012 earnings; in Abiomed's
Q3 2012 10-Q; in a May 2012 press release and conference call
announcing Abiomed's Q4 2012 earnings; in Abiomed's 2012 Form 10-K;
and in an August 2012 press release and conference call announcing
Abiomed's Q1 2013 earnings.
Second, defendants allegedly continued to compare the
Impella 2.5 to the IABP based on the results of the Protect II
Study, even though FDA regulations prohibited Abiomed from doing
so. For example, plaintiffs cite Minogue's statements in an August
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2011 conference call that, according to the study, Impella patients
"had significantly better outcomes at 90 days" relative to IABP
patients. Defendants allegedly made similar statements in
Abiomed's Q1 2012 10-Q; in Abiomed's Q2 2012 10-Q; in a February
2012 press release and conference call concerning Abiomed's Q3 2012
results; on the February 7, 2012, episode of Mad Money; in
Abiomed's 2012 Form 10-K; and in an August 2012 conference call.
Plaintiffs also allege that Abiomed's May 2012 disclosure of the
February 24, 2012, meeting with the FDA was false and misleading
because it "failed to disclose that the purpose of the meeting was
to discuss Abiomed's improper marketing of the Impella 2.5 . . .
and the FDA's safety concerns with the device related to the
Protect II Study."
Third, plaintiffs allege that many of defendants'
statements concerning the regulatory back-and-forth between Abiomed
and the FDA were false and misleading. Defendants claimed that
Abiomed policy was to refrain from off-label marketing and that
Abiomed was taking steps to resolve the FDA's concerns, but in fact
Abiomed was "engaged in widespread management-directed off-label
marketing and promotion of the Impella 2.5 . . . and was not
properly addressing the FDA's issues." In particular, plaintiffs
cite the following statement, some version of which was contained
in Abiomed's Q1 2012 10-Q, Q2 2012 10-Q, and Q3 2012 10-Q:
Although our policy is to refrain from
statements that could be considered off-label
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promotion of our products, the FDA or another
regulatory agency could disagree and conclude
that we have engaged in off-label promotion.
In June 2011, we received a warning letter
from the FDA stating that some of our
promotional materials marketed the Impella 2.5
for uses that had not been approved by the
FDA. We have cooperated with the FDA in
addressing its concerns and believe that we
have resolved the matter without any
penalties. Although we believe that this
issue has been resolved, if similar matters
come up in the future, we may not be able to
resolve them without facing significant
consequences.
Abiomed's 2012 Form 10-K, filed on June 4, 2012, used similar
language, and added:
[I]n April 2012, we received a follow up
letter from the FDA stating that some of our
promotional materials continued to market the
Impella 2.5 in ways that are not compliant
with FDA regulations. We are cooperating with
the FDA in addressing its concerns. While we
hope to be able to resolve this matter without
incurring penalties, we may not be able to
resolve it, or any similar matters that may
come up in the future without facing
significant consequences. Such matters could
result in reduced demand for our products and
would have a material adverse effect on our
operations and prospects.
Finally, the complaint alleges that the certifications of
Minogue and Bowen contained in the Form 10-Qs and the Form 10-K
were false and misleading because the forms did not "fairly present
in all material respects the financial condition [of Abiomed],
including the reliance on off-label marketing, and that the revenue
and growth reported therein was the result of undisclosed, illicit
and unsustainable off-label marketing."
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Plaintiffs make additional allegations that they argue
bolster the inference that defendants had the requisite scienter
(that is, that they had the conscious intent to defraud investors
or acted with a high degree of recklessness). First, they contend
that Minogue, Bowen, and other senior Abiomed executives sold an
uncharacteristically large amount of stock during the Class Period.
Minogue allegedly sold 586,149 shares of Abiomed stock,
representing 48% of his holdings, for a total of $9,636,124 from
January 2010 through the end of the Class Period. Bowen sold
57,919 shares, representing 6.5% of his holdings, for $1,302,878
during that period, after having sold no stock before January 2010.
Plaintiffs cite similar figures for five other non-defendant
Abiomed executives, who collectively earned approximately $5.6
million by selling stock during this period.
Defendants counter that many of the trades cited by
plaintiffs were made pursuant to 10b5-1 plans which were entered
into before the Class Period (August 4, 2011, to October 31, 2012)
and Minogue in fact increased his holdings of Abiomed stock during
the Class Period. Defendants also counter that the reason Bowen
made no trades prior to the cited period was because he only became
eligible to trade Abiomed stock during that period.
Plaintiffs also allege that, because the Impella 2.5 was
part of Abiomed's "core business," Minogue and Bowen must have been
aware of the fact that Abiomed was unlawfully promoting the device,
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and that "the pervasiveness of the illicit and off-label marketing
and promotion of the Impella 2.5 . . . further supports a strong
inference of scienter."
F. Summary
Distilled to its essence, plaintiffs' complaint tells the
following story: For a 38-month period, beginning with the FDA's
Untitled Letter in January 2010 and ending with the FDA's Close-Out
Letter in February 2013, the FDA repeatedly raised concerns that
Abiomed's marketing of the Impella 2.5 did not comply with
applicable regulations. Abiomed responded to these concerns by
making limited changes to its promotional tactics, but the FDA was
not satisfied until the summer of 2012, when Abiomed conducted an
internal compliance audit and pulled all of its marketing and
training materials, to be replaced with entirely new ones.
Confidential witnesses cited in the complaint state that Abiomed's
senior management was aware that its promotional practices before
that audit were in violation of FDA regulations and willfully chose
not to alter them. We note that might raise issues under FDA
regulations.
What raises securities law concerns, according to
plaintiffs, is that management allegedly misled investors during
this period by (1) failing to attribute the growth in Impella
revenues to unlawful off-label marketing practices; (2) improperly
comparing the Impella 2.5 to the IABP by touting the results of the
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Protect II Study; (3) stating that it had a policy of not engaging
in off-label marketing; and (4) stating that Abiomed was taking
steps to address the agency's concerns, when in fact the company
was engaged in intentional and pervasive off-label marketing,
contrary to its stated policy.
II. Litigation Procedural History
On November 16, 2012, two individuals filed a complaint
on behalf of all purchasers of Abiomed stock during the Class
Period. Simon, 2014 WL 1413638, at *10. In February 2013, the
district court appointed the two appealing institutional investors
as lead plaintiffs, and the lead plaintiffs filed an amended
complaint on May 20, 2013. Id.
On April 10, 2014, the district court, in a thorough
opinion, granted defendants' motion to dismiss. The court found
that plaintiffs had plausibly alleged that Abiomed engaged in
off-label marketing practices and that those practices materially
affected the stock price. Id. at *12-16. It also held that the
plaintiffs had plausibly alleged several actionable
misrepresentations: (1) Abiomed's statements that its policy was to
refrain from off-label marketing; (2) Abiomed's statements that
Impella revenue growth was attributable to "particular primary
source[s]" other than off-label uses; and (3) Abiomed's statements
about the Protect II Study "[t]o the extent [they were made] to
promote off-label marketing." Id. at *16-20. However, the court
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found that the complaint's allegations of scienter were not "cogent
and compelling," as is required for pleadings in securities fraud
cases. Id. at *20-23. The court also dismissed plaintiffs'
§ 20(a) claims because such a violation "depend[s] on an underlying
violation of the Exchange Act." Id. at *23.
This appeal followed. Plaintiffs argue that the district
court erred in holding that they failed to adequately plead
scienter and that the court should have granted them leave to file
an amended complaint.
III. Section 10 and Rule 10b-5 Claim
A. Legal Standard
"Section 10(b) of the Securities Exchange Act of 1934
forbids the 'use or employ, in connection with the purchase or sale
of any security . . ., [of] any manipulative or deceptive
device . . . ." Tellabs, Inc. v. Makor Isssues & Rights, Ltd., 551
U.S. 308, 318 (2007) (first and second alterations in original)
(quoting 15 U.S.C. § 78j(b)). SEC Rule 10b-5 implements that
statute by making it unlawful, inter alia,
[t]o make any untrue statement of a material
fact or to omit to state a material fact
necessary in order to make the statements made
. . . not misleading, or . . . [t]o engage in
any act, practice, or course of business which
operates or would operate as a fraud or deceit
upon any person, in connection with the
purchase or sale of any security.
Id. (second alteration in original) (quoting 17 C.F.R. § 240.10b-5)
(internal quotation marks omitted).
-23-
"To state a claim for securities fraud under Section
10(b), a plaintiff must allege: (1) a material misrepresentation or
omission; (2) scienter, or a wrongful state of mind; (3) in
connection with the purchase or sale of a security; (4) reliance;
(5) economic loss; and (6) loss causation." Deka Int'l v. Genzyme
Corp. (In re Genzyme Corp. Sec. Litig.), 754 F.3d 31, 40 (1st Cir.
2014).
The PSLRA requires a securities fraud complaint to
"'specify each statement alleged to have been misleading [and] the
reason or reasons why the statement is misleading.'" ACA Fin., 512
F.3d at 58 (alteration in original) (quoting 15 U.S.C.
§ 78u-4(b)(1)). While this case turns on scienter, we also discuss
the requirements for materiality, as the materiality and scienter
inquiries are linked. See City of Dearborn Heights Act 345 Police
& Fire Ret. Sys. v. Waters Corp., 632 F.3d 751, 756-58 & n.2 (1st
Cir. 2011). "A fact is material when there is 'a substantial
likelihood' that a reasonable investor would have viewed it as
'significantly alter[ing] the total mix of information made
available.'" Id. at 756 (alteration in original) (quoting Basic
Inc. v. Levinson, 485 U.S. 224, 231–32 (1988) (internal quotation
marks omitted)). "A statement can be 'false or incomplete' but not
actionable 'if the misrepresented fact is otherwise
insignificant.'" Id. at 756-57 (quoting Basic, 485 U.S. at 238).
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"The PSLRA also separately imposes a rigorous pleading
standard on allegations of scienter." ACA Fin., 512 F.3d at 58.
"Scienter is a 'mental state embracing intent to deceive,
manipulate, or defraud.'" Waters Corp., 632 F.3d at 757 (quoting
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976)). A
complaint will survive a motion to dismiss only if it states with
particularity facts giving rise to a "strong inference" that
defendants acted with a conscious intent "to deceive or defraud
investors by controlling or artificially affecting the price of
securities" or "acted with a high degree of recklessness." Id.
(citations omitted) (internal quotation marks omitted); accord ACA
Fin., 512 F.3d at 58-59. Recklessness, as used in this context,
"does not include ordinary negligence, but is closer to being a
lesser form of intent." Greebel v. FTP Software, Inc., 194 F.3d
185, 188 (1st Cir. 1999).
An inference of scienter is "strong" if "a reasonable
person would deem [it] cogent and at least as compelling as any
opposing inference one could draw from the facts alleged."
Tellabs, 551 U.S. at 324. "When there are equally strong
inferences for and against scienter, the draw is awarded to the
plaintiff." Waters Corp., 632 F.3d at 757. "[S]cienter should be
evaluated with reference to the complaint as a whole rather than to
piecemeal allegations." ACA Fin., 512 F.3d at 59. "There is no
set pattern of facts that will establish scienter; it is a case-by-
-25-
case inquiry." Id. at 66. We review de novo the district court's
dismissal of the complaint for failure to state a claim. Id. at
58.
Plaintiffs seize on several purported legal errors made
by the district court. They argue, for example, that the district
court had an erroneous conception of the scienter required for a
violation of the securities laws, failed to make a recklessness
finding, and failed to properly weigh competing evidence. Since
our review of the dismissal is de novo, however, we need not attend
separately to each of these arguments.5 Instead, we explain why we
5
We are skeptical of the merits of the arguments, in any
event. Plaintiffs contend that the district court erroneously
required them to show that defendants had actual knowledge that
their representations or omissions were misleading. But the court
stated the correct standard ("a conscious intent to defraud or a
high degree of recklessness") at the outset of its scienter
discussion. Simon, 2014 WL 1413638, at *20. True, the court then
stated that the defendant must have "actual knowledge that the
representation of omission was misleading," see id. at *20-21, but
the focus on actual knowledge almost certainly reflects the fact
that plaintiffs' theory of the case consistently has been that the
higher-ups at Abiomed knew full well that what they were doing was
wrong, and yet did it anyway. Plaintiffs have not relied on a
recklessness theory, and it is thus unsurprising that the district
court spent little space in its opinion on the concept of
recklessness.
Plaintiffs also argue that the district court found that the
inferences for and against scienter were equally strong and
erroneously awarded that tie to the defendant. This contention
wrests loose language from the district court's opinion out of
context. The court did state that "it is equally reasonable to
infer that senior management was merely negligent, inattentive, or
even incompetent, rather than engaged in deliberate acts of
securities fraud," id. at *21, and that the insider sales provided
"at best equivocal support of the proposition that defendants
intended to defraud investors," id. at *23. But elsewhere, the
court correctly stated that a "tie goes to the plaintiff," id. at
*11, and its analysis, considered as a whole, shows that the
inference of scienter was in fact less plausible than competing
-26-
agree with the district court's ultimate conclusion that
plaintiffs' complaint fails to state a claim under the PLSRA's
pleading standards.6 See Bryceland v. Minogue, 557 F. App'x 1, 3
(1st Cir. 2014) (Souter, J.) ("[B]ecause our review of the
dismissal . . . is de novo, rather than answer each of
[plaintiff]'s assignments of error, it will suffice to highlight
the deficiencies in her complaint." (citation omitted)); cf.
Aldridge v. A.T. Cross Corp., 284 F.3d 72, 84 (1st Cir. 2002)
(noting that an appellate court may affirm a district court's
decision on any grounds supported by the record). Plaintiffs have
failed to show that defendants made the challenged statements with
a conscious intent to defraud or with a high degree of
recklessness.
B. Application
Plaintiffs allege that defendants made the following
misrepresentations that deceived investors: (1) statements about
growth in Impella revenues that did not disclose that the growth
was due to off-label marketing; (2) statements about the 90-day
results of the Protect II Study that improperly compared the
inferences. Cf. Connor B. ex rel Vigurs v. Patrick, 774 F.3d 45,
54 n.9 (1st Cir. 2014) (determining, based on a reading of the
district court's opinion as a whole, that the "court did not
misapprehend the correct [legal] standard," despite some isolated
language suggesting otherwise).
6
Our discussion applies to the scienter analysis with
respect to the individual defendants, Minogue and Bowen, as well as
the corporate defendant, Abiomed.
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Impella 2.5 to the IABP; (3) statements that Abiomed had a policy
of not engaging in off-label marketing; and (4) statements that
Abiomed was taking steps to address the FDA's concerns, when in
fact the company was engaged in intentional and pervasive off-label
marketing, contrary to its stated policy. Plaintiffs' counsel
conceded at oral argument that plaintiffs' case depends on the
first, third, and fourth categories of statements. Statements in
the second category are simply examples of improper off-label
marketing; those are relevant to this case only insofar as they
show that the defendants' statements that they were not engaged in
off-label marketing were untrue.7
We therefore focus on defendants' statements about
increased Impella revenues and their statements that Abiomed's
policy was to comply with FDA regulations concerning off-label
marketing and that the company was taking steps to address the
agency's concerns regarding promotion of the Impella 2.5. We
address the revenue-related statements first, then turn to the
statements regarding Abiomed's interactions with the FDA, and
finally address the complaint's insider trading allegations.
1. Statements Regarding Increased Revenues
7
The district court reached the same conclusion. See
Simon, 2014 WL 1413638, at *20 (finding that, "[t]o the extent that
defendants made statements concerning the Protect II study in order
to promote off-label marketing, the statements may be actionable"
because Abiomed claimed that it did not engage in off-label
marketing, "[b]ut to the extent defendants simply gave accurate
information about the study, it cannot form the basis of a claim of
misrepresentation").
-28-
We assume arguendo that the district court correctly
found that plaintiffs had alleged enough to survive dismissal on
claims that Abiomed provided false explanations for Impella revenue
growth. See Simon, 2014 WL 1413638, at *17. We hold that the
statements are not actionable on scienter grounds. We do address
the strength of the materiality of the statements because "[t]he
question of whether a plaintiff has pled facts supporting a strong
inference of scienter has an obvious connection to the question of
the extent to which the omitted information is material." Waters
Corp., 632 F.3d at 757. "If it is questionable whether a fact is
material or its materiality is marginal, that tends to undercut the
argument that defendants acted with the requisite intent or extreme
recklessness in not disclosing the fact." Id.
The materiality of the impugned omission here --
Abiomed's failure to state that some of the increased revenues were
due to off-label marketing -- is marginal at best. Plaintiffs'
contention that the omission would have mattered to a reasonable
investor depends on a long chain of inferences, most of which are
not sufficiently substantiated by the allegations in the complaint.
First, we would have to infer that, of the 85% of Abiomed
revenue due to sales of Impella products, a substantial portion is
due to sales of the Impella 2.5. The complaint alleges that the
Impella 2.5 accounted for "most" of that revenue, but provides no
specifics. Second, we would have to infer that, of the revenues
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from the Impella 2.5, a substantial portion was due to purchases
for off-label use by health care professionals. The complaint
provides no indication of the proportion of Impella 2.5 use that
was off-label. Third, we would have to infer that, of the revenues
from off-label use, a substantial portion of that use was due to
off-label marketing of the device, and, further, that the portion
was so significant as to undercut the company's projected growth
figures. And fourth, we would have to infer that the resulting
undercutting of the growth figures was substantial enough to have
a material effect on the stock price. Again, the complaint
provides no basis in fact for making these inferences.
Plaintiffs do allege that off-label promotion was
widespread, but they do not state or even suggest what proportion
of sales were made as a result of such efforts, or the significance
of the contribution of those sales to Abiomed's stock price. The
marginal materiality of the alleged statements and omissions
concerning revenues weighs against an argument that defendants here
possessed the requisite scienter. See Waters Corp., 632 F.3d at
757.8
8
Plaintiffs' counsel contended at oral argument that we
can infer that Abiomed's failure to disclose its off-label
marketing activities was material because the company scaled back
its revenue projections on November 1, after it "purged all of its
off-label marketing materials." We think that unlikely, but more
than that, it is much more plausible to infer that Abiomed lowered
its revenue projections in light of the simultaneous announcement
that the U.S. Attorney's Office had begun an investigation into the
company.
-30-
Plaintiffs attempt an argument that defendants made
statements about Abiomed's revenues with the intent to deceive
investors or with reckless disregard as to whether investors would
be deceived. The argument is undercut by the fact that Abiomed
explicitly warned investors both (a) that the FDA might disagree
with the company's assessment of the legality of its marketing
practices and (b) that, if the FDA took enforcement action against
it, that "could result in reduced demand for our products and would
have a material adverse effect on our operations and prospects."
See Genzyme Corp., 754 F.3d at 42-43 (noting that a corporation's
informative disclosures "undercut any inference of fraudulent
intent on the part of defendants"); Waters Corp., 632 F.3d at 760
("'[A]ttempts to provide investors with warnings of risks generally
weaken the inference of scienter.'" (alteration in original)
(quoting Ezra Charitable Trust v. Tyco Int'l, Ltd., 466 F.3d 1, 8
(1st Cir. 2006))).
Further, the company did not withhold information about
the FDA's concerns once the FDA issued a Warning Letter.9 Abiomed
promptly disclosed receipt of the June 2011 Warning Letter and
stated repeatedly throughout the Class Period that the FDA "could
9
"Section 10(b) does not create an affirmative duty to
disclose." Genzyme Corp., 754 F.3d at 41. Thus, there is no per
se rule that a company immediately disclose receipt of any
correspondence with the FDA. See id. at 42 (holding that a company
need not immediately disclose a Form 483 issued by the FDA because
it was "merely observational in nature, and d[id] not represent the
FDA's final word").
-31-
disagree [with Abiomed's position that its marketing was lawful]
and conclude that we have engaged in off-label promotion." Abiomed
did not promise a positive resolution of the matter; rather, it
acknowledged that "if similar matters come up in the future, we may
not be able to resolve them without facing significant
consequences." These are not the actions of a company bent on
deceiving investors as to their future earnings prospects.10
Under plaintiffs' theory of the case, Abiomed should have
affirmatively admitted widespread wrongdoing rather than stating
that the outcome of its regulatory back-and-forth with the FDA was
uncertain. That would be a perverse result; such an admission
would have been misleading, since the off-label marketing issues
had the potential to be resolved with no adverse action from the
FDA. We made a similar point in In re Boston Scientific Corp.
Securities Litigation, 686 F.3d 21 (1st Cir. 2012), where we noted
that "a company may behave 'irresponsibly' if it issues an ominous
warning about an uncertain risk that 'had not yet been adequately
investigated.'" Id. at 31 (quoting N.J. Carpenters Pension &
Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35, 58 (1st Cir.
10
This court reached a similar conclusion in the parallel
derivative action brought by Abiomed shareholders against Abiomed
and its directors. See Bryceland, 557 F. App'x at 5 (holding that
the shareholders' complaint did not "allege facts showing that the
directors hid from investors the trouble that th[e alleged off-
label] marketing had created; indeed, as the reproduced sections of
Abiomed's SEC filings make clear, the company was not shy in
disclosing its exposure to liability").
-32-
2008)). There must be some room for give and take between a
regulated entity and its regulator.11
2. Statements About Abiomed's Policy with Respect to
Off-Label Marketing and its Interaction with the
FDA
Again, we assume arguendo that "Abiomed had an actual
policy or practice of off-label marketing, while its public
statements were that its policy was to refrain from such
marketing," Simon, 2014 WL 1413638, at *17, and that defendants
stated that they were cooperating with the FDA when they were not
doing so. But we conclude that plaintiffs have failed to allege
that defendants made these statements with the requisite scienter.
First, there are Abiomed's substantial disclosures about
its correspondence with the FDA. As said, these disclosures
undercut any inference of scienter. Plaintiffs' brief glosses over
these disclosures in an effort to make the case for scienter more
compelling. According to the brief, Abiomed said that it did not
engage in off-label marketing and that all of the FDA's concerns
"had been resolved." But this characterization is inaccurate, both
as to the complaint and as to what the actual statements were. The
complaint actually says that Abiomed stated its policy was to
"refrain from statements that could be considered off-label
11
That the company did not disclose the receipt of the
Untitled Letter from the FDA is not proof of scienter. The FDA
gradates its levels of inquiry and does not itself make Untitled
Letters public.
-33-
promotion," but that the FDA could disagree with Abiomed's view on
that question; and that while it "believe[d]" the issue had been
resolved, it could come up again in the future and could entail
"significant consequences." In resolving this appeal, we focus, as
did the district court, on the allegations of the complaint, not on
plaintiffs' characterization of those allegations.
Other evidence supports Abiomed's argument that it was
not involved in a scheme to defraud investors but rather in finding
a solution amenable to the FDA while meeting its need to market its
products. It was Abiomed which asked for meetings with the FDA.
And an agreement was reached. The FDA in fact sent a close-out
letter in February 2013 saying that Abiomed's corrective actions
undertaken in response to the June 2011 Warning Letter had
adequately addressed the FDA's concerns. This significantly
undercuts any inference that defendants purposefully or recklessly
misled investors about the extent of Abiomed's cooperation with the
FDA.
Scienter is not established because there were statements
from confidential witnesses that Abiomed management was in fact
intentionally violating FDA regulations. These witnesses said that
Abiomed senior management knew that Abiomed was improperly
marketing the Impella 2.5, did not take the FDA's warnings
-34-
seriously, and "blew off" the concerns of lower-level employees.12
The confidential witnesses are not described with sufficient
particularity for their statements to give rise to the requisite
"strong inference" of scienter on the part of Abiomed and its
management. As the district court noted, none of the witnesses
"were in senior management positions, and they appear to have had
relatively little ongoing contact with senior management." Simon,
2014 WL 1413638, at *14. CW2, CW3, CW4, and CW6 did not even work
at Abiomed during the Class Period and so would not have had
firsthand knowledge of the state of mind of Abiomed's management
during that period. And CW1, CW5, and CW7, who stated that the
training and marketing materials Abiomed provided were "improper"
under FDA regulations, did not identify the time period to which
most of their statements related. Cf. Biogen IDEC, 537 F.3d at 52-
12
That the witnesses were confidential did not disqualify
them.
[W]here plaintiffs rely on confidential
personal sources but also on other facts, they
need not name their sources as long as the
latter facts provide an adequate basis for
believing that the defendants' statements were
false. Moreover, even if personal sources
must be identified, there is no requirement
that they be named, provided they are
described in the complaint with sufficient
particularity to support the probability that
a person in the position occupied by the
source would possess the information alleged.
Mesko v. Cabletron Sys., Inc. (In re Cabletron Sys., Inc.), 311
F.3d 11, 29 (1st Cir. 2002) (alteration in original) (quoting Novak
v. Kasaks, 216 F.3d 300, 314 (2d Cir. 2000)).
-35-
53 (discounting probative value of observations by confidential
sources in part because the sources did not disclose when those
observations were made). The CWs' statements are also undermined
by the fact that the FDA eventually closed out its investigation of
Abiomed without taking any action adverse to the company.
More fundamentally, even if the CWs' statements plausibly
suggest that Abiomed was acting improperly, they do not show that
defendants' statements about company policy and the FDA's inquiries
were made with conscious intent to defraud or recklessly. As we
said in Waters Corp., "[t]he key question . . . is not whether
defendants had knowledge of certain undisclosed facts, but rather
whether defendants knew or should have known that their failure to
disclose those facts 'present[ed] a danger of misleading buyers or
sellers.'" 632 F.3d at 758 (third alteration in original) (emphasis
added) (citation omitted) (quoting Greebel, 194 F.3d at 198). For
example, CW7's statements, far from suggesting an intent to defraud
investors, suggest instead that Abiomed was aggressively marketing
the Impella 2.5 "every which way" in order to sell more units.13
3. Insider Trading Allegations
The plaintiffs' allegations of insider trading do not
alter our conclusion as to lack of scienter. "Depending on
13
At oral argument, plaintiffs' counsel disavowed any
reliance on the argument, based on an efficient market hypothesis,
that any statements regarding the Impella 2.5 aimed at potential
buyers of the device were also effectively aimed at investors in
Abiomed.
-36-
context, allegations of insider trading may offer some support for
inferences of scienter." Waters Corp., 632 F.3d at 760. "'The
vitality of the inference to be drawn depends on the facts, and can
range from marginal to strong.'" Id. (quoting Greebel, 194 F.3d at
197–98). For stock sales by corporate officials to bolster an
inference of scienter, the trading must be, "[a]t a minimum, . . .
unusual, well beyond the normal patterns of trading by those
defendants." Id. at 761 (quoting Greebel, 194 F.3d at 198)
(internal quotation marks omitted); accord Greebel, 194 F.3d at
206-07 (sales must be "out of the ordinary or suspicious").
Here, the trading cited in the complaint was neither
unusual nor suspicious. Minogue increased his holdings of Abiomed
stock by 9.2% during the Class Period, which negates any inference
that he had a motive to artificially inflate Abiomed's stock during
that period. Cf. ACA Fin., 512 F.3d at 66-67 (declining to find a
strong inference of scienter in part because defendants would not
have been personally enriched by defrauding investors). Bowen made
his first sales of Abiomed stock (totaling 6.5% of his holdings)
between January 2010 and the end of the Class Period. But those
sales are hardly suspicious given that he had just joined the
company in December 2008 and first became eligible to trade in
December 2009.14 Plaintiffs list the amounts of stock sales made
14
We need not address the parties arguments concerning
defendants' 10b5-1 trading plans because plaintiffs' arguments
concerning the purported insider trading fail even without
-37-
by other senior executives during that period, but they do not
provide sufficient evidence about those trades to allow the court
to draw from them a strong inference of scienter. For example, the
complaint is silent as to the percentage of holdings sold or the
circumstances surrounding the trades. It is also unclear whether
all of the cited executives would have had detailed knowledge about
Abiomed's marketing practices. Cf. Waters Corp., 632 F.3d at 762
n.5 (finding that allegations regarding non-defendant insider sales
were not probative because the complaint listed "only bare facts
about the shares sold").
4. Conclusion
Abiomed's promotional and marketing activities for its
core product might have been a risky course in terms of its
likelihood of prompting sanctions from the FDA. Still,
"[a]llegations of corporate mismanagement are not actionable under
Rule 10b-5. Nor are allegations of mere negligence." Id. at 760
(citations omitted); see also Greebel, 194 F.3d at 188 (noting that
the mens rea required for securities fraud "does not include
ordinary negligence, but is closer to being a lesser form of
intent"). As the district court correctly noted, "this case is not
about whether or not defendants violated the FDCA or FDA
regulations. It concerns alleged violations of securities
considering those plans.
-38-
law . . . ." Simon, 2014 WL 1413638, at *14. Plaintiffs' Rule
10b-5 claim fails.
IV. Section 20(a) Claim
Section 20(a) of the Securities Exchange Act imposes
joint and several liability on persons in control of entities that
violate securities laws. 15 U.S.C. § 78t(a). A section 20(a)
claim is derivative of an underlying violation of the securities
laws. ACA Fin., 512 F.3d at 67-68. Because the district court
correctly dismissed plaintiffs' claims under Rule 10b-5, it also
correctly dismissed plaintiffs' section 20(a) claims. See id.
V. Leave To Amend
On a hopeless quest, plaintiffs argue we should remand to
allow them amend the complaint. No proper request was made to the
district court, only a mention in a footnote in their opposition to
dismissal. See Joblove v. Barr Labs, Inc. (In re Tamoxifen Citrate
Antitrust Litig.), 466 F.3d 187, 220 (2d Cir. 2006) ("It is within
the court's discretion to deny leave to amend implicitly by not
addressing the request when leave is requested informally in a
brief filed in opposition to a motion to dismiss."), abrogated on
other grounds by F.T.C. v. Actavis, Inc., 133 S. Ct. 2223 (2013);
Calderon v. Kan. Dep't of Soc. & Rehab. Servs., 181 F.3d 1180,
1185-87 (10th Cir. 1999) (noting with approval an earlier holding
that a district court need not grant leave to amend if plaintiffs
make a "bare request in their response to a motion to dismiss").
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In any event, it is far too late; plaintiffs were put on
notice of the deficiencies in the complaint by the motion to
dismiss. If they had something relevant to add, they should have
moved to add it then. See ACA Fin., 512 F.3d at 57 (rejecting
plaintiffs' argument that the district court erred in denying them
leave to amend because "[p]laintiffs took no action to add new
allegations" in response to defendants' motion to dismiss "even
though they knew what they would add if they amended," and noting
that allowing such a practice would "lead to delays,
inefficiencies, and wasted work"). And even now there is no
suggestion that amendment would be anything other than futile.
See, e.g., HSBC Realty Credit Corp. (USA) v. O'Neill, 745 F.3d 564,
578 (1st Cir. 2014); Braunstein v. McCabe, 571 F.3d 108, 127 (1st
Cir. 2009); Universal Commc'n Sys., Inc. v. Lycos, Inc., 478 F.3d
413, 418 (1st Cir. 2007). We wish to discourage this practice of
seeking leave to amend after the case has been dismissed.
VI. Conclusion
We affirm the judgment of the district court. Costs are
awarded to Abiomed.
-40-