Commercial Litigation and Arbitration

Securities — True Statements About Statistical Results Are Not False or Misleading Simply Because the Methodology Producing Them Was Not the Best or Most Accepted

In re Rigel Pharm., Inc. Secs. Litig., 697 F.3d 869 (9th Cir. 2012):

Neither the Supreme Court nor this court has addressed the question of whether statements concerning statistical results of a clinical trial may be considered false or misleading under Rule 10b-5 because the statistical methodology that produced those results was not the best or most acceptable methodology. However, the district courts that have addressed this issue support our conclusion that merely alleging that defendants should have used different statistical methodology in their drug trials is not sufficient to allege falsity. For example, in Padnes v. Scios Nova Inc., No. C 95-1693, 1996 U.S. Dist. LEXIS 22858, 1996 WL 539711 (N.D. Cal. Sept. 18, 1996), the plaintiffs alleged that the defendants made false public statements relating to the results of a Phase II drug study. The defendants had made public statements that the results of a drug trial were statistically significant. 1996 U.S. Dist. LEXIS 22858, [WL] at *2. The plaintiffs did not allege that the defendants' statements summarizing their study inaccurately reported their own conclusions. 1996 U.S. Dist. LEXIS 22858, [WL] at *5. Rather, among other things, the plaintiffs alleged that the defendants should have included in their public summaries of the study different measurements of the study's outcome than those performed by the researchers. 1996 U.S. Dist. LEXIS 22858, [WL] at *5.

The court held that the fact that the plaintiffs disagreed with the researchers about the import of the data did not make the defendants' summaries of the study false or misleading. Id. In addition, the court concluded that the securities laws do not require that companies report information only from optimal studies, even assuming that scientists could agree on what is optimal, and that companies reporting information from imperfect studies are not required to disclose alternative methods for interpreting the data. Id. The court therefore held that the plaintiffs did not plead facts sufficient to explain why the defendants' summaries of the study were false or misleading. Id.; see also In re Adolor Corp. Sec. Litig., 616 F. Supp. 2d 551, 568 n.15 (E.D. Pa. 2009) (where plaintiffs' statistician identified what he believed were problems with a defendant's statistical analysis of a clinical trial, plaintiff merely alleged a disagreement about how to conduct and analyze the study, not a false or misleading statement); DeMarco v. DepoTech Corp., 149 F. Supp. 2d 1212, 1225 (S.D. Cal. 2001) ("Although Plaintiffs may have established a legitimate difference in opinion as to the proper statistical analysis, they have hardly stated a securities fraud claim.").

We find this reasoning persuasive. Because Plaintiff does not allege that Defendants misrepresented their own statistical methodology, analysis, and conclusions, but instead criticizes only the statistical methodology employed by Defendants, Plaintiff did not adequately plead falsity with respect to statistic results.

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