09-1773-cv
In Re: Axonyx Securities Litigation
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE
32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS
COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY
NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 23rd day of March, two thousand ten.
PRESENT:
PETER W. HALL,
DEBRA ANN LIVINGSTON,
Circuit Judges,
DENNY CHIN,
District Judge.1
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City of Dearborn Heights Act 345 Police & Fire R, Paul Lichtman, Steve O’Brien, Robert Yasuhira,
Lead-Plaintiffs-Appellants,
Vincent W. Lee, On Behalf of Himself and All Others Similarly Situated, John Pifer,
Plaintiffs,
Alois Guy Bisschops, individually and on behalf of all others similarly situated, Wyma Jean Econ,
on behalf of herself and all others similarly situated, Aviva Partners, LLC, individually and on
behalf of all others similarly situated, Thomas Jordan, on behalf of himself and all others similarly
situated, Rami Rao, on behalf of himself and all others similarly situated, Ilene Amour, individually
and on behalf of all others similarly situated, Trevor I. Briede, on behalf of himself and all others
similarly situated,
Consolidated-Plaintiffs,
v. Docket Number: 09-1773-cv
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The Honorable Denny Chin, United States District Judge for the Southern District of
New York, sitting by designation.
Axonyx, Inc., Marvin S. Hausman, Gosse B. Bruinsman,
Defendants-Appellees,
S. Colin Neill,
Consolidated-Defendant.
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FOR APPELLANT: SUSAN K. ALEXANDER (Sanford Svetcov, Samuel H. Rudman, Evan J.
Kaufman, on the brief); Coughlin Stoia Geller Rudman & Robbins LLP;
San Francisco, CA.
FOR APPELLEE: MAY ORENSTEIN (Sigmund S. Wissner-Gross, on the brief); Brown Rudnick
LLP; New York, NY.
Appeal from a judgment of the United States District Court for the Southern District of New
York (Griesa, J.).
UPON DUE CONSIDERATION IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court be AFFIRMED.
Plaintiffs-Appellants appeal from the district court’s opinion and order dismissing their
complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. We assume the parties’
familiarity with the facts, procedural history, and specification of issues on appeal.
We review de novo a district court’s dismissal for failure to state a claim. S. Cherry St.,
LLC v. Hennessee Group LLC, 573 F.3d 98, 103 (2d Cir. 2009). We also assume all well-pleaded
factual allegations are true and, applying that assumption, determine whether complainants are
entitled to relief. Id. at 104; see also ECA, Local 134 IBEW Joint Pension Trust of Chi. v. JP
Morgan Chase Co., 553 F.3d 187, 196 (2d Cir. 2009). “Any complaint alleging securities fraud
must satisfy the heightened pleading requirements of the [Private Securities Litigation Reform Act
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(the “PSLRA”)] and Fed. R. Civ. P. 9(b) by stating with particularity the circumstances constituting
fraud.” Id. (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007)). Even though
“‘we normally draw reasonable inferences in the non-movant's favor on a motion to dismiss,’ the
PSLRA ‘establishes a more stringent rule for inferences involving scienter’ because the PSLRA
requires particular allegations giving rise to a strong inference of scienter.” Id. (quoting Teamsters
Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190, 194 (2d Cir. 2008)); see
also Tellabs, 551 U.S. at 314 (“To qualify as ‘strong’ within the intendment of [the PSLRA], we
hold, an inference of scienter must be more than merely plausible or reasonable-it must be cogent
and at least as compelling as any opposing inference of nonfraudulent intent.”).
Section 10(b) of the Securities Exchange Act of 1934 makes it illegal “for any person,
directly or indirectly, . . . [t]o use or employ . . . any manipulative or deceptive device” in
connection with a sale or purchase of securities. 15 U.S.C. § 78j. Its corollary, Rule 10b-5, makes
it illegal “[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, in the light of the circumstances under which they
were made, not misleading.” 17 C.F.R. § 240.10b-5(b).
The appellants argue that Axonyx and the individual appellees violated § 10(b) and Rule
10b-5 by presenting artificially positive statements about the first Phase III trial of the Alzheimer’s
drug Phenserine. The purpose of these statements, appellants allege, was to inflate the stock price
of Axonyx in order to profit Axonyx’s owners to the detriment of the stockholders. The district
court determined, however, that appellants failed to allege sufficient specific facts to state a claim
that appellees purposely misled investors regarding Phenserine and the likelihood it would be
successful as a drug to treat Alzheimer’s. In particular, the complaint failed to raise a strong
inference of scienter on the part of the defendants. We agree.
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Although appellants argue that, rather than accepting the arguments as true, Judge Griesa
dismissed the complaint because he was skeptical of them, his opinion states clearly that “the court
will accept as true the allegations about defects in the Phase III trials.” The decisive point for Judge
Griesa remained “that there [wa]s no sufficient pleading of scienter regarding the so-called defects”
in the Phase III trial. As Judge Griesa noted throughout his decision, appellants rely on opinions of
confidential witnesses to support their allegations, but they fail to offer any factual underpinnings
for those opinions. Ultimately, Judge Griesa determined, and we agree, that any inference in the
complaint of scienter is less compelling that any opposing inference that Axonyx’s trial of
Phenserine was merely unsuccessful. See Tellabs, 551 U.S. at 314.
After reviewing the issues on appeal and the record of proceedings below, we affirm for
substantially the reasons articulated by the district court in its thoughtful and well-reasoned order
and opinion.
Accordingly, the judgment of the district court is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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