In re: Keryx Biopharmaceutical v.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 21-1870
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IN RE: KERYX BIOPHARMACEUTICAL
John Andruela and Abraham Kiswani,
Appellants
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On Appeal from the United States District Court
for the District of Delaware
(Civ. No. 1:18-cv-01589)
District Judge: Honorable Colm F. Connolly
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Submitted Under Third Circuit LAR 34.1(a)
on February 10, 2022
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Before: GREENAWAY, JR., SCIRICA, and RENDELL, Circuit Judges,
(Opinion Filed: July 21, 2022)
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OPINION
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
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
GREENAWAY, JR., Circuit Judge.
Keryx Biopharmaceutical, Inc. (“Keryx”) shareholders, Abraham Kisawani and
John Andreula (collectively, the “Appellants”), on behalf of themselves and all other
public Keryx shareholders, commenced this putative class action suit against Keryx and
members of its Board of Directors (collectively, the “Appellees”). They allege that
Keryx’s Schedule 14A Definitive Proxy Statement (the “Proxy”) proposing a merger
with Akebia Therapeutics, Inc. (“Akebia”) included false and misleading statements.
However, Appellants’ claims fail either because Appellants’ claims are not plausibly
alleged, or Appellees did not make false or misleading statements. Because Appellants
fail to allege actionable omissions, misrepresentations, or falsehoods, we will affirm the
District Court’s order dismissing Appellants’ complaint.
I. BACKGROUND
A. Merger Transaction
In December 2017, Akebia, a development-stage biopharmaceutical company,
contacted Keryx, a commercial-stage biopharmaceutical company, to discuss a potential
merger transaction. During negotiations, Keryx prepared two relevant sets of financial
projections—the first of which was based on Keryx’s assumptions about Akebia’s
business and the second of which was partially based on information that Akebia
provided to Keryx (the “Adjusted Projections”). Keryx presented these projections
during a special committee meeting1 on May 30, 2018.
1
Keryx had convened a special committee to discuss the possibility of a merger.
2
Between June 12 and 14, 2018, Akebia determined that the completion of its
clinical trial and, by extension, the commercial launch of its lead product, vadadustat,
would be delayed. Given these developments, Akebia updated its financial projections.
Akebia’s CEO then advised Keryx’s Interim CEO of this development on June 15, 2018.
On June 27, 2018, MTS Securities LLC (“MTS”), an affiliate of Keryx’s financial
advisor for the merger, opined that the merger was financially fair.2 MTS based its
fairness opinion on, amongst other information, Keryx’s Adjusted Projections—which
were prepared before May 30, 2018, and were not revised to incorporate the vadadustat
delay. The following day, Keryx announced its approval of the merger transaction.
Ultimately, the companies jointly filed the Proxy on October 30, 2018, and a majority of
Keryx’s shareholders approved the transaction on December 12, 2018.
B. Proxy Statement
Appellants challenge three statements in the Proxy. The first statement they
challenge is included in the section of the Proxy describing MTS’s fairness opinion. It
states:
In arriving at its opinion, MTS Securities assumed and relied upon, without
assuming liability or responsibility for independent verification, the accuracy and
completeness of all of the financial, legal, regulatory, tax, accounting and other
information that was publicly available or was provided to, discussed with or
reviewed by MTS Securities and upon the assurances of Keryx management that
they were not aware of any material relevant developments or matters related to
Keryx or Akebia or that may affect the Merger that were omitted or that remained
undisclosed to MTS Securities.
2
Keryx retained MTS “to render an opinion as to the fairness of the Merger to Keryx
stockholders from a financial perspective.” JA30 ¶ 13.
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(the “Material Developments Statement”). JA214. Appellants argue that this statement
was misleading because “Keryx management was aware of material relevant
developments or matters related to Akebia that were likely to affect the Merger and that
were omitted or remained undisclosed to MTS.” Appellants Br. at 7-8.
Similarly, Appellants challenge a second statement in the MTS fairness opinion
section, which states:
Without limiting the generality of the foregoing, with respect to the Projections,
MTS Securities assumed, with the consent of the Keryx Board and based upon
discussions with Keryx management and Akebia management, that each of the
Projections was reasonably prepared in good faith and that the Projections,
including any estimates of certain potential benefits of the Merger prepared by
Keryx management and the timing to achieve such benefits, reflected the best
currently available estimates and judgments of Keryx management and Akebia
management regarding the future results of operations and financial performance
of Keryx and Akebia.
(the “Best Estimates Statement”). JA214. Appellants contend that this statement was
misleading because “Keryx management did not believe that its projections regarding the
future results of operations and financial performance of Akebia, reflected its best
currently available estimates and judgments.” Appellants’ Br. at 8.
Lastly, Appellants challenge two Keryx statements that characterized the merger
as fair (collectively, the “Fairness Statements”). Specifically, in the Notice of Special
Meeting of Shareholders, which accompanied the Proxy, Keryx stated that “the Merger
Agreement and the Merger are advisable, fair to, and in the best interests of Keryx and its
shareholders.” JA114. Likewise, the Proxy indicates that “[t]he Keryx Board has
determined that the Merger Agreement and the merger are advisable and in the best
interest of Keryx and the Keryx shareholders.” JA122. Appellants assert these
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statements were misleading because “[Appellees] knew that the Merger was not ‘fair’ to
[Keryx’s] stockholders.” Appellants’ Br. at 8.
C. Procedural History
Appellants commenced this action on October 16, 2018. Following Appellants’
filing of a Consolidated Amended Class Action Complaint on June 3, 2019,3 the District
Court granted Appellees’ motion to dismiss on April 15, 2020. Appellants then sought
leave to amend the complaint, which the District Court granted. In their Second
Amended Complaint, Appellants alleged the Material Developments, Best Estimates, and
Fairness Statements violated Sections 14(a) and 20(a) of the Securities Exchange Act of
1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a) and 78t(a), and U.S. Securities and
Exchange Commission (“SEC”) Rule 14a-9, 17 C.F.R. § 240.14a-9.
Appellees again moved to dismiss Appellants’ complaint, and, on April 1, 2021,
the District Court dismissed Appellants’ action with prejudice, concluding that none of
the statements were actionable. Concerning Appellants’ claim based on the Material
Developments Statement, the District Court first concluded that it was not plausibly
alleged. Although it agreed with Appellants that the Material Developments Statement
implied that Keryx had made assurances to MTS as of June 27, 2018, (the date of the
3
The three related actions that were consolidated in this case are: Corwin v. Keryx
Biopharmaceuticals, Inc., 18-cv-1589-CFC; Van Hulst v. Keryx Biopharmaceuticals,
Inc., l 8-cv-1656-CFC; and Andreula v. Keryx Biopharmaceuticals, Inc., 18-cv-1721-
CFC.
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fairness opinion), the District Court determined that Appellants had not made sufficient
factual allegations that any material relevant developments were not disclosed.
The District Court then rejected the argument that the Material Developments
Statement was misleading based on Appellees’ failure to disclose what Keryx believed as
of June 27, 2018; it reasoned that the Proxy explicitly disclosed that the Projections were
prepared before May 30, 2018. In addition, the District Court determined that the
Material Developments Statement was not material because “a disclosure by Keryx in the
Proxy that its management had not told MTS before June 27, 2018 that its May 2018
projections were stale and not its best estimate as of June 27, 2018, would not have
significantly altered the ‘total mix’ of information made available” to shareholders. JA14
(internal quotation marks and citation omitted). The District Court reasoned that the
Proxy disclosed, among other factors, the vadadustat delay, MTS’s reliance upon
Akebia’s updated projections, and MTS’s discussions with Akebia about the revised
projections. Id.Next, in dismissing Appellants’ claim based on the Best Estimates Statement, the
District Court relied on its reasoning from the April 15, 2020 opinion. There, the District
Court had concluded that any challenge to the Best Estimates Statement based on the
reasonableness of the Projections was inactionable given the Proxy’s disclaimers, see
OFI Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481, 500-01 (3d Cir. 2016), and that
the Private Securities Litigation Reform Act’s safe harbor provision, see 15 U.S.C.
§ 78u-5, protecting forward looking statements, applied. The District Court had also
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rejected Appellants’ position that the Best Estimates Statement challenged a statement of
opinion because that statement concerned what MTS assumed. Given that the Proxy
explicitly disclosed the Projections were made in May 2018, the District Court had also
rejected Appellants’ argument that the Best Estimates Statement implicitly stated what
the Appellees believed as of June 27, 2018.
Lastly, the District Court concluded that Appellants had not plausibly alleged that
Keryx did not believe the merger was fair. Specifically, it determined that paragraph 10
of the Second Amended Complaint contained conclusory allegations. Subsequently,
Appellants timely appealed the April 1, 2021 order.
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction pursuant to 28 U.S.C. § 1291.
“We review a district court’s decision granting a party’s motion to dismiss de
novo.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). In doing so,
we must “accept all factual allegations in the complaint as true and view them in the light
most favorable to the plaintiff.” Id. We cannot “dismiss a complaint for failure to state a
claim upon which relief can be granted unless we find that the plaintiff can prove no set
of facts that would entitle her to relief.” Id.III. DISCUSSION
“Section 14(a) seeks to prevent management or others from obtaining
authorization for corporate actions by means of deceptive or inadequate disclosures in
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proxy solicitations.” Seinfeld v. Becherer, 461 F.3d 365, 369 (3d Cir. 2006) (citation
omitted). Pursuant to Section 14(a), it is unlawful to solicit a proxy “in contravention of
such rules and regulations as the [SEC] may prescribe as necessary or appropriate in the
public interest.” 15 U.S.C. § 78n(a). Rule 14a–9, which is promulgated under Section
14(a), provides that proxy statements shall not include “any statement which, at the time
and in the light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any material fact necessary in order to
make the statements therein not false or misleading . . . .” 17 C.F.R. § 240.14a–9(a); see
also Seinfeld, 461 F.3d at 369.
To successfully plead a claim pursuant to Section 14(a), a plaintiff must
demonstrate that: “(1) a proxy statement contained a material misrepresentation or
omission which (2) caused the plaintiff injury and (3) that the proxy solicitation itself,
rather than the particular defect in the solicitation materials, was an essential link in the
accomplishment of the transaction.” Jaroslawicz v. M&T Bank Corp., 962 F.3d 701, 710
(3d Cir. 2020), cert. denied, 141 S. Ct. 1284 (2021) (quoting Tracinda Corp. v.
DaimlerChrysler AG, 502 F.3d 212, 228 (3d Cir. 2007)). Our inquiry here is focused on
the first element.
We have held that omissions are actionable “if either the SEC regulations
specifically require disclosure of the omitted information in a proxy statement, or the
omission makes other statements in the proxy statement materially false or misleading.”
Seinfeld, 461 F.3d at 369 (citation omitted). We have further held that a
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misrepresentation or omission is material, “if there is a substantial likelihood that a
reasonable shareholder would consider it important in deciding how to vote.” Shaev v.
Saper, 320 F.3d 373, 379 (3d Cir. 2003) (citations omitted). In analyzing materiality, we
first consider whether “the disclosure of the omitted fact [or misrepresentation] would
have been viewed by the reasonable investor as having significantly altered the total mix
of information made available.” EP Medsystems, Inc., v. EchoCath, Inc., 235 F.3d 865,
872 (3d Cir. 2000) (alteration in original) (internal quotation marks and citation omitted).
“Second, we assess the materiality of a statement ‘at the time and in the light of the
circumstances under which it is made.’” Jaroslawicz, 962 F.3d at 709–10 (quoting
Seinfeld, 461 F.3d at 369).
A. Material Developments Statement
Appellants essentially allege that the Material Developments Statement was false
and misleading because Appellees had not disclosed the vadadustat developments to
MTS but indicated in the Proxy that they had shared all material developments with it.
As an initial matter, Appellants’ claim based on the Material Developments Statement is
not plausibly alleged. As the District Court concluded, Appellants’ allegation that
“Keryx management was aware of material relevant developments or matters related to
Akebia that may affect the Merger and that were omitted or remained undisclosed to
MTS” is conclusory. JA77 ¶ 10; see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.”). Although Appellants make factual allegations concerning
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Keryx’s knowledge of the vadadustat development, its meetings with MTS, and its
instructions that MTS use the Adjusted Projections, their factual allegations do not
sufficiently support the inference that Keryx did not disclose the vadadustat
developments to MTS.
Even assuming this claim was plausibly alleged, it otherwise fails because the
Material Developments Statement is neither false nor misleading. The Proxy explicitly
disclosed that Keryx’s Adjusted Projections were prepared before May 30, 2018. Thus,
the Material Developments Statement solely represents what MTS assumed at the time
that Keryx gave MTS the projections. See OFI Asset Mgmt., 834 F.3d at 501 (reasoning
that, when a proxy disclaimed the accuracy of financial projections included therein,
these projections represented only that they “were, in fact, the projections that [the
defendant] provided to [the counterparty] and the financing bank during the negotiation
of the deal”). Appellants do not dispute that MTS made these assumptions, so their
claims regarding the Material Developments Statement fail for an additional reason.
B. Best Estimates Statement
In short, Appellants allege that the Best Estimates Statement was false and
misleading because Appellees represented that the Adjusted Projections were their best
available estimates despite knowing they were stale. Appellants, however, fail to plead
falsity. As stated previously, the Proxy made clear that Keryx disclaimed that its
financial projections showed anything other than Keryx’s views at the time they were
prepared. The Best Estimates Statement, then, represents only that, when Keryx provided
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these projections to MTS, MTS assumed that they “reflected the best currently available
estimates and judgments of Keryx management[.]” JA214; see also OFI Asset Mgmt.,
834 F.3d at 501. Because Appellants do not allege that MTS did not make this
assumption, their claims concerning the Best Estimates Statement also fail.
C. Fairness Statements
Appellants allege the Fairness Statements were false because the Appellees knew
the merger was not fair. In support of this position, Appellants rely on various
allegations concerning Keryx’s share price, Keryx’s instructions that MTS use the
Adjusted Projections, MTS’s analyses, and Keryx employees’ incentives for closing the
transaction.
However, Appellants’ claim fails because it is not plausibly alleged. As Appellees
argue, Appellants’ claim relies on facts that were specifically disclosed in the Proxy. The
Proxy also contains several other positive considerations that Appellees weighed in
making its Fairness Statements. Without more, we cannot conclude that Appellants
sufficiently pleaded facts that support the inference that Appellees genuinely disbelieved
the Fairness Statements.
IV. CONCLUSION
For the foregoing reasons, Appellants have failed to allege a violation of
Section 14(a). Accordingly, Appellants’ control-liability claims against the individual
Appellees also fail. See In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 211
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(3d Cir. 2002). The Court will affirm the District Court’s order dismissing Appellants’
complaint.
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