March 11, 2016
John Neuwirth, Co-Head of Weil’s Securities Litigation practice, has been selected as “Litigator of the Week” by The AmLaw Litigation Daily for securing a significant appellate victory for Sanofi in a suite of securities fraud cases. In its March 4 opinion affirming a lower court’s order dismissing all claims brought in these two cases against Sanofi, the Second Circuit addressed the U.S. Supreme Court’s seminal, March 2015 Omnicare decision, which articulated the standard for securities fraud liability for allegedly misleading statements of opinion. As AmLaw noted, this opinion is the first in which the Second Circuit “fully grappled” with the meaning of Omnicare.
The underlying cases focused on Sanofi’s statements regarding the results of Phase 3 clinical trials of its breakthrough multiple sclerosis drug, Lemtrada, which Sanofi acquired in 2011 when it bought Genzyme, and its prospects for FDA approval to investors. Plaintiffs were holders of contingent value rights (CVRs) issued by Sanofi to Genyzme investors, which as AmLaw noted, “called for cash payouts at pre-set milestones tied to Lemtrada’s success, with FDA approval counting as one milestone.” When the FDA initially rejected Lemtrada, the value of the CVRs decreased, and shareholder suits followed in federal court. Mr. Neuwirth was retained to defend Sanofi in subsequent shareholder litigation in the U.S. District Court for the Southern District of New York, and in January 2015, obtained an order from Judge Engelmayer that dismissed the cases in their entirety. Plaintiffs promptly appealed.
As the case began in the Second Circuit, the U.S. Supreme Court issued its Omnicare ruling, which, as AmLaw indicated, “held that a company’s statement of opinion could give rise to a securities fraud claim in certain instances, including if the company didn’t sincerely believe the opinion it expressed.” The Sanofi shareholder plaintiffs then adopted Omnicare into their appellate arguments.
However, Mr. Neuwirth successfully countered by arguing that the plaintiffs had never actually shown that Sanofi didn’t firmly believe its opinions about Lemtrada’s prospects for FDA approval, as required under Omnicare. After hearing oral arguments, the Second Circuit agreed, holding, as AmLaw covered, that “while companies must be forthright with investors, ‘securities law does not impose on them an obligation to disclose every piece of information in their possession.’”
Commenting on the decision for AmLaw, Mr. Neuwirth said: “This is a very good decision for issuers and I think it reiterates that, in order to successfully allege an opinion as a misleading statement, the bar is high.”
The Weil team also included partners Joshua Amsel and Caroline Zalka, and associates Justin D’Aloia, Ellen Shapiro and Zoe Deluzio. The Chairman of Weil’s Corporate Department, Michael Aiello, led the team advising Sanofi in its 2011 acquisition of Genzyme.
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Weil Scores Decisive Win for Sanofi at Second Circuit in the Circuit’s First Opinion to Address Omnicare