Case 2:20-cv-07536-EP-MAH Document 64 Filed 08/17/22 Page 1 of 18 PageID: 3729
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`NOT FOR PUBLICATION
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`UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
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`CURTIS LAASKO,
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` Lead Plaintiff
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`Case No. 20cv07536(EP)(MAH)
`
`and
`BENOIT ALBIGES, on behalf of
`themselves and all others similarly
`situated,
`
`OPINION
`
`Named Plaintiff,
`
`v.
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`ENDO INTERNATIONAL, PLC, et al.,
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`Defendants.
`
`PADIN, District Judge.
`
`Motion to Dismiss the Second Amended Class Action Comp
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`pursuant to Fed.
`
`R. Civ. P. 9(b), 12(b)(6), and Section 21D of the Private Securities Litigation Reform Act of 1995
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`The Court decides the matter on the papers pursuant to Fed. R. Civ. P. 78 and L.Civ.R.78.1b.
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`For the
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`prejudice.
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`, and the SAC is DISMISSED with
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`

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`Case 2:20-cv-07536-EP-MAH Document 64 Filed 08/17/22 Page 2 of 18 PageID: 3730
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`I.
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`BACKGROUND
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`Plaintiffs represent a class of purchasers of Endo common stock between August 8, 2017 and
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`August 10, 2021
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` Endo is a publicly-traded pharmaceutical company that
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`manufactures, markets, and sells generic and branded pharmaceuticals, including opioids, in the U.S. and
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`internationally. Defendants are Endo; Paul V. Campanelli, former Endo President, Chief Executive
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`, and Chairman
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`; Blaise Coleman, former Endo
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`, and current Endo President and
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`CEO; Mark T. Bradley, former Endo
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`, and current Endo CFO and Board
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`member; and, Matthew J. Maletta, current Endo EVP
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`, and Secretary.
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`
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`FAC alleged violations of Sections 10(b) and 20(a) of
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`and Exchange Commission Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. It alleged that
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`Defendants made materially false or misleading statements to investors because Defendants allegedly
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`knew or recklessly disregarded information undermining their statements, Defendant Campanelli received
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`an allegedly suspicious bonus and resigned under questionable circumstances, and the opioid-related
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`litigatio
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`FAC ¶¶ 148, 175, 217, 317-23. After holding oral argument on
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`August 30, 2021, the Court
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`the alleged materially false or misleading statements inactionable and that it could not infer scienter from
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`the mere discussion of opioid-related litigation at company meetings. D.E. 46 at Tr. 22:5-28:9, 33:16-
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`34:12.
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`SAC alleges the same Exchange Act violations as those raised in its FAC. It alleges
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`that Defendants made materially false or misleading statements to investors when they allegedly engaged
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`in a coordinated campaign to obstruct opioid-related litigation and misrepresented the
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`2
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`

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`financial condition during the Class Period. Plaintiffs SAC makes nearly identical allegations as those
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`that the Court found deficient in its FAC. Defendants move to dismiss, contending that Plaintiffs have
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`failed to adequately allege the elements of their securities claims.1
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`II.
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`STANDARD OF REVIEW
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`Under Fed. R. Civ. P. 12(b)(6), a complaint
`
`
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`as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under
`
`Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (quotations omitted). Under this standard, the factual
`
` Phillips v. Cnty. Of
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`Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A] complaint must do more than allege the
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` Fowler v.
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`UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
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`Courts may only consider the complaint, exhibits attached to the complaint, matters of public
`
`
`
`
`
`Pension Guaranty Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Courts are not to
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` Rocks v. City of Philadelphia, 868
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`F.2d 644, 645 (3d Cir. 1989); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir.
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`1997).
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`Independent of the applicable standard under Rule 12(b)(6), Fed. R. Civ. P.
`
` In re
`
`
`1 Defendants previously moved to dismiss raising the same arguments as they do in the SAC. D.E. 34. Judge Arleo granted
`that motion after finding that Plaintiffs FAC failed to sufficiently plead the first two elements of a securities fraud claim.
`D.E. 46.
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`
`
`3
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`

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`Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002). Satisfying this heightened pleading
`
`
`
`
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`Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (quoting Lum v. Bank of America, 361 F.3d
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`217, 223-24 (3d Cir. 2004)).
`
`who, what, when,
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` In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256, 76-77
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`(3d Cir. 2006) (quoting In re Rockefeller, 311 F.3d at 216).
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`Additionally, the PSLRA requires an even higher pleading standard for plaintiffs bringing private
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`securities fraud actions. In re Suprema, 438 F.3d at 276.
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`misleading statement, why the statement was misleading, and, if an allegation is made on information and
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` Winer Family Trust v. Queen, 503 F.3d 319, 326
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`(3d Cir. 2007); see also 15 U.S.C. § 78i-4(b)(1).
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`omission alleged to violate this [chapter], state with particularity facts giving rise to a strong inference
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`that the defendant acted with
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` 15 U.S.C. § 78i-4(b)(2). Like Rule 9(b), both
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` In re Advanta Corp. Sec. Litig.,
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`180 F.3d 525, 534 (3d Cir. 1999) (finding that the PSLRA pleading standard
`
`
`
`III. ANALYSIS
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`A.
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`Plaintiffs Fail to Sufficiently Plead a Violation of Section 10(b) and Rule 10b-5
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`Defendants contend that the SAC fails to state a Section 10(b) claim under Rule 9(b) and the
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`PSLRA because it does not allege with particularity that: (1) any of the challenged statements were
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`materially misleading; (2) Defendants acted with fraudulent intent; and (3) the alleged fraud caused
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`
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`
`4
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`Section 10(b)
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`of such rules and regulations as the Commission may prescribe[.]
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` 15 U.S.C. § 78j(b). Rule 10b-5,
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`or to omit to state a material fact in order to make the statements made in light of the circumstances under
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` 17
`
`C.F.R. § 240.10b-5. To state a claim for relief under Section 10(b) and Rule 10b-5, a plaintiff must show:
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` or omission by the defendant; (2) scienter; (3) a connection between the
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`misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the
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` Stoneridge Inv. Partners, LLC
`
`v. Scientific-Atlanta, 552 U.S. 148, 157 (2008).
`
`1.
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`Whether Plaintiffs Have Alleged that Defendants Made a Materially False or Misleading
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`Statement
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`Defendants assert that Plaintiffs have not shown that Defendants made materially false or
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`misleading statements regarding the opioid-related litigation
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`alleged four-year Class Period. SAC ¶¶ 1, 288-475. Liability attaches for both affirmative misstatements
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`and misleading omissions, but the latter can only give rise to liability where the defendant had an
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`affirmative duty to disclose the information in question. Oran v. Stafford, 226 F.3d 275, 285-86 (3d Cir.
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`2000). The statement or omission is material if there is a
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`omitted fact would have been viewed by the reasonable investor as having significantly altered the total
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`mix of information made available.
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` In re Advanta Corp. Sec. Litig., 180 F.3d at 538 (citations omitted).
`
` EP Medsystems, Inc. v. EchoCath, Inc., 235 F.3d 865,
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`
`
`5
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`

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`872 (3d Cir. 2000); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1427 (noting claims
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`that these kinds of vague expressions of hope by corporate managers could dupe the market have been
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`almost uniformly rejected by the courts.
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`
`
`a.
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`opioid-related litigation disclosures were not false or misleading
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`Plaintiffs allege that Endo had an affirmative duty to disclose its alleged obstruction of opioid-
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`related litigation because it created the impression that it was vigorously defending the same litigation.
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`See, e.g., SAC ¶¶ 291-93. According to Plaintiffs,
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`against opioid-related litigation, when it was actually
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`engaged in a concealed campaign to obstruct that same litigation by, inter alia, allegedly failing to disclose
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`the existence of a data warehouse with relevant documents, delaying the production of documents that
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`contradicted sworn testimony until trial, exploiting withheld documents to gain a litigation advantage,
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`omitting data sets from searches without informing plaintiffs it was doing so, falsely stating document
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`productions were complete, and making false statement to plaintiffs and the court. SAC ¶¶ 147-270.
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`s for a few reasons. First, during oral argument related to
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` the FAC, the Court re
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`-related litigation on the merits, which if that were the
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`case,
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`, and instead informed Plaintiffs:
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`you what the statements were where they vigorously denied on the merits,
`and we
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`different than saying the lawsuits are meritless, the lawsuits are frivolous.
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`D.E. 46 at Tr. 14:4-12. The Court did not stop there and warned Plaintiffs:
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`The Amended Complaint alleges that these statements [in the SEC filings
`disclosing pending opioid-related litigation and that Endo will continue to
`vigorously defend itself and explore other options as appropriate in the
`
`
`
`6
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`

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`Case 2:20-cv-07536-EP-MAH Document 64 Filed 08/17/22 Page 7 of 18 PageID: 3735
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`] misleadingly downplay the allegations in the
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`misconduct in marketing and selling opioids, and did not advise investors
`that the Company faced billions in liability in New York for insurance fraud
` So the law is pretty clear, at least
`y need not make a
`in the Galena
`complete mea culpa when disclosing the investigation and its potential legal
`implications. As in Galena, Plaintiffs here do not claim that Defendants
`made a misrepresentation or actionable omission concerning the nature of
`the investigation itself nor as to the potential legal liability faced by [the
`Company], but rather claim that the disclosures were misleading because
` The
`theory is not supported by precedent. The
`Galena court rules that that
`law required [the Company] to disclose the [opioid actions] and their
`potential legal
`
`
`D.E. 46 at Tr. 22:5-23:3. Rather than remedying their pleading, Plaintiffs doubled down on their previous
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`allegations that Defendants were misleading investors with respect to their response to the opioid-related
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`litigation. In the SAC, Plaintiffs state several times
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`sured investors they would
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`vigorously contest the merits of the opioid-related actions, the allegations of wrongdoing by Endo were
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`egations in the SAC are simply a repackaging of the allegations raised in the FAC, which the
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`2 SAC ¶¶ 9, 147, 272.
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`Court has already rejected.
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`Second, after reviewing the repackaged allegations in the SAC, it is evident to the Court that
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` disclosures regarding the opioid-related litigation were not false or misleading. Plaintiffs cherry-
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`pick certain opioid-related litigation where Defendants misconduct during discovery led a handful of
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`courts to, inter alia, enter default judgment, but Plaintiffs ignore similar opioid-related litigation where
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`courts issued decisions in favor of Defendants. See D.E. 57 at Exs. 4, 6. If Endo was
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`defending against opioid-related litigation, as stated in
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` SEC filings, then it would not have
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`any favorable decisions. But it does, which leads the Court to conclude that Plaintiffs have not pled
`
`2
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`
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`12:15-16, 13:8-14:2.
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`7
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`specific facts as to why En
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` See Goldsmith v. Weibo Corp., 2018
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`U.S. Dist. LEXIS 95592, at *34 (D.N.J. June 6, 2018) (finding that
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`burden requiring that a securities fraud plaintiff
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` the
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`) (internal citations and
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`quotations omitted).
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`Lastly, Endo met any duty it had to disclose under the federal securities laws when it disclosed the
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`pending opioid-related litigation. It was not required to disclose further details about that same litigation
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`that were readily available in the public domain. See, e.g., SAC ¶¶ 289, 292, 302, 304, 314; Seibert v.
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`Sperry Rand Corp.
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`underlying philosophy of federal
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`securities regulation is that of full disclosure, there is no duty to disclose information to one who
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`reasonably should be aware of it.
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`see also In re Merrill Lynch
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`& Co., Inc. Research Reports Sec. Litig., 272 F. Supp. 2d 243, 249-
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` Again, Plaintiffs fail to
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`s about how it was prepared to vigorously
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`defend itself in the opioid-related litigation were false or misleading.
`
`b.
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`opioid-related
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`litigation risk disclosures were
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`forward-looking statements
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`accompanied by meaningful cautionary language
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`Plaintiffs also allege that End
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`-
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`related litigation and liability were materially false or misleading because they were generic catch-all
`
`provisions that
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`risks for further opioid-related litigation. See,
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`e.g., SAC ¶¶ 292-93, 304-09. Plaintiffs cannot claim that Defendants had a duty to disclose additional
`
`
`
`8
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`

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`details associated with the risks of opioid-related litigation and liability where Defendant
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`ere
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`merely speculative. See Williams v. Globus Med., Inc., 869 F.3d 235, 243 (3d Cir. 2017) (finding that the
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`company did not have a duty to disclose a risk
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`allegedly misleading prior disclosure). Consequently, Plaintiffs fail to provide any legitimate explanation
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`as to why these particular disclosures were materially false or misleading. See In re Mylan N.V. Sec.
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`Litig., 2018 WL 1595985, at *9 (S.D.N.Y. Mar. 28, 2018) (explaining
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`boilerplate disclosures of future regulatory risk would not cause a reasonable investor to believe that the
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`company faced no current
`
`mislead a reasonable investor.
`
` (citations omitted).
`
`c.
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`liquidity and cash reserves risk disclosures were forward-looking statements
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`accompanied by meaningful cautionary language
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`Similarly, Plaintiffs allege that Endo made materially false or misleading statements with respect
`
`to liquidity risk and cash reserves disclosures. According to Plaintiffs, those disclosures consisted of
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`generic catch-all provisions
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`significant potential for further opioid-related litigation. See, e.g., SAC ¶¶ 292, 296-97, 304-09. But
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`again, Plaintiffs fail to provide any legitimate explanation as to why Defendants would have been required
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`to speculate on risks that had not yet materialized. See Williams v. Globus Med., Inc., 869 F.3d at 243;
`
`see also In re Mylan N.V. Sec. Litig., 2018 WL 159585, at *9.
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`are forward-looking
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`statements within the definition provided in the PSLRA. 15 U.S.C. § 78u-5(i)(1)(A) and (D). The PSLRA
`
`provides a safe harbor provision for forward-looking statements so long as those statements are
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`results to differ materially from those in the forward-
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` 15 U.S.C. § 78u-5(c)(1)(A)(i).
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`
`
`9
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`

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`Where a forward-looking statement is accompanied by meaningful cautionary language, the alleged false
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`or misleading statement is rendered immaterial as a matter of law. EP MedSystems, Inc. v. EchoCath,
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`Inc., 235 F3d 865, 873 (3d Cir. 2000); In re Donald J. Trump Casino Sec. Litig., 7F.3d 357, 371-72 (3d
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`Cir. 1993), cert. denied, 114 S. Ct. 1219 (1994).
`
` GSC Partners CDO Fund v. Washington,
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`368 F.3d 228, 243 n.3 (3d Cir. 2004).
`
`statements regarding its expected ability to meet its liquidity requirements are forward-looking statements
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`that are not actionable. The 3rd
`
`statement as forward-
`
`-18 (citations and quotations omitted).
`
`-looking statements regarding liquidity risk and cash reserves were all
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`accompanied by extensive and detailed cautionary language. See, e.g., SAC ¶¶ 331, 377. The cautionary
`
`language goes so far as to include an extensive list of the types of developments and unexpected expenses
`
`.3 Considering this meaningful cautionary
`
`language, a reasonable factfinder could not conclude that the alleged false or misleading statements would
`
`3
`language:
`
`
`-Q provided the following forward-looking statement accompanied by meaningful cautionary
`
`We expect cash generated from operations together with our cash, cash equivalents,
`restricted cash and the revolving credit facilities to be sufficient to cover cash needs for
`working capital and general corporate purposes, contingent liabilities, payment of
`contractual obligations, principal and interest payments on our indebtedness, capital
`expenditures, ordinary share repurchases and any regulatory and/or sales milestones that
`may become due over the next year. However, on a longer term basis, we may not be able
`to accurately predict the effect of certain developments on the rate of sales growth, such as
`the degree of market acceptance, patent protection and exclusivity of our products, the
`impact of competition, the effectiveness of our sales and marketing efforts and the outcome
`of our current efforts to develop, receive approval for and successfully launch our product
`candidates. Additionally, we may not be successful in implementing, or may face
`unexpected changes or expenses in connection with our strategic direction, including the
`potential for opportunistic corporate development transactions. Any of the above could
`adversely affect our future cash flows.
`
`SAC ¶ 306.
`
`
`
`10
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`

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` In re Donald J. Trump Casino Sec. Litig., 7F.3d at
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`Notably, the Court gave Plaintiffs the opportunity to explain their liquidity risks and cash reserves-
`
`ffs
`
`
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`rejected that opportunity. D.E. 46 at Tr. 20:18-21:7.
`
`d.
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` remaining statements are opinions and puffery
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`Plaintiffs next allege that Endo made materially false or misleading statements regarding the
`
`compliance policies. For example, Plaintiffs contrast Defendant
`
`with Endo
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`allegedly taking several actions that were contrary to those same policies. E.g., SAC ¶¶ 274, 314, 315,
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`353-54, 478. Plaintiffs fail to sufficiently plead why the vague statement in the
`
` 2018 press
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`release is anything more than a generalized, immaterial statement that a reasonable investor would not
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`rely on.
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`considered several statements cited to by Plaintiffs as inactionable opinions
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`-actionable opinion statements because the Amended Complaint does not adequately
`
`allege that the statements were not honestly believed, lack reasonable basis, or any omitted facts that
`
` D.E. 46 at Tr. 25:3-9.
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`would not base decisions on such statements,
`
` In re Burlington Coat Factory Sec.
`
`Litig., 114 F.3d at 1427; Fan v. StoneMor Partners LP, 927 F.3d 710, 716 (3d Cir. 2019); In re Advanta
`
`
`
`11
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`Corp. Sec. Litig., 180 F.3d at 538-39. But, depending on the context, if a company repeatedly addresses
`
`a particular subject, then the company effectively transforms the statement into a material one by signaling
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`to a reasonable investor that he may rely on the statement. See Shapiro v. UJB Fin. Corp., 964 F.2d 272,
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`282 (3d Cir. 1992) (finding that where a defendant repeatedly addresses and affirmatively characterizes
`
`,
`
`.
`
`).
`
`Endo did not make repeated assurances about its policy to comply in all circumstances with applicable
`
`laws, regulations, and industry guidance governing the sale and marketing of pharmaceutical products,
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`but made only one generalized statement in the context of a disclosure that it had received a grand jury
`
`subpoena. SAC ¶ 478.
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`than an opinion. See City of Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 170 (3d Cir. 2014) (finding
`
`Inquirer is nothing more
`
`4 Plaintiffs have not pointed to any substantive reasons as to why Defendants did not
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`honestly believe or have a reasonable basis for believing the opinion statement.5 As a result, Plaintiffs
`
`have not sufficiently pled with particularity why
`
` statements in the 2018 press release and to
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`the Philadelphia Enquirer are materially false or misleading.
`
`2.
`
`Whether Plaintiffs Have Alleged Particularized Facts Giving Rise to a Strong Inference that
`
`Defendants Acted with Scienter
`
`Furthermore, Defendants assert that Plaintiffs have
`
`scienter pleading
`
`standard, which requires that the complaint
`
` facts giving rise to a strong
`
`inference that the defendant[s] acted with the required state of mind 15 U.S.C. § 78u-4(b)(2). To
`
`
`4 Judge Arleo previously raised this same issue up with Plaintiffs with respect to their FAC. D.E. 46 at Tr. 23:19-25:21.
`5
` See SAC ¶
`290.
`
`
`
`12
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`allegations can survive a motion to dismiss, courts engage in a
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` Tellabs Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
`
`308, 314 (2007).
`
`negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of
`
`misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have
`
`been aware of it
`
` In re Advanta Corp. Sec. Litig., 180 F.3d at 535. The facts pleaded must lead to a
`
` Fain v. USA Techs., Inc., 707 F.
`
`2017) (internal citations and quotations omitted).
`
`
`
`Even if Plaintiffs had adequately pled material misstatements or omissions, the claims against
`
`sufficiently plead facts supporting a strong
`
`inference of scienter.
`
`a.
`
`
`
`Signed SOX certifications alone do not add to the finding of scienter
`
`Plaintiffs allege that certain Individual Defendants
`
`6 evidence the requisite
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`scienter because those Individual Defendants allegedly knew the statements in the certifications were false
`
`and misleading. E.g., SAC ¶¶ 352, 415, and 431. This barebones allegation of scienter is insufficient
`
`certification attesting to the accuracy of an SEC
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`filing that turned out to be materially false does not add to the scienter puzzle in the absence of any
`
`allegation that the defendant knew he was signing a false SEC filing or recklessly disregarded inaccuracies
`
`contained in an SEC filing. In re Hertz Global Holdings Inc., 905 F.3d 106, 118 (3d Cir. 2018); In re
`
`
`
`6 t
`
`he financial condition and results of operations of the Company when Defendants were allegedly downplaying the scope of
`-related litigation.
`13
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`Silvercorp Metals, Inc. Sec. Litig., 26 F. Supp. 3d 266, 277 (S.D.N.Y. 2014) (emphasizing that allegations
`
`that an individual signed SEC filings would not be sufficient to show recklessness without more).
`
`b.
`
`
`
`
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`bonus and resignation support a
`
`finding of scienter because the timing of the two events were suspicious and abrupt. See SAC ¶¶ 284, 505,
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`519. These are barebones allegations not supported as a matter of law. First, Defendant Campanelli
`
`received a performance-based bonus in 2018, which, without more, does not support a finding of scienter.
`
`See In re Amarin Corp. PLC., Sec. Litig., 2015 WL 3954190, at *11 (D.N.J. June 29, 2015); see also
`
`Malin v. XL Capital Ltd., 499 F. Supp. 2d 117, 158-59 (D. Conn. 2007),
`
`2009)
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`mpensated
`
`-
`
`to establish scienter). Second,
`
`Defendant Campanelli
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` resignation eight weeks after the New York State Department of Financial
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`DFS announced it was investigating whether the Company had engaged in insurance fraud
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`in connection with its marketing of opioids also does not support a finding of scienter. Other courts have
`
`found that executives resigning from a company without a plausible link to the alleged fraud has little to
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`no probative value. See Teamsters Local 237 Welfare Fund v. ServiceMaster Global Holdings, Inc., 2022
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`WL 989240 (W.D. Tenn. Mar. 31, 2022); see also Woolgar v. Kingstone Companies, Inc., 477 F. Supp.
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`did not occur contemporaneously, and Plaintiffs have not alleged that Defendant Campanelli received any
`
`form of corporate punishment. See Fain v. USA Technologies, Inc.
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` 91, 97 (3d Cir. 2017)
`
`The link b
`
` because the two events
`
`
`
`14
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`

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`a relatively contemporaneous and public firing is accompanied by extreme corporate punishment such as
`
`the denial of previousl
`
` see also In re Intelligroup Sec. Litig.,
`
`
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`527 F. Supp. 2d 262, 347 (D.N.J. 2007).
`
`c.
`
`
`
`Additionally, Plaintiffs remaining scienter allegations are insufficient to
`
`
`
`. See In re Alpharma Sec. Litig., 372 F.3d, 137, 150 (3d Cir. 2004) (holding that
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`scienter survive
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`a motion to dismiss only if they are both reasonable and strong inferences. ) (internal citation and
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`quotation omitted).7 First, Plaintiffs allege that the discovery violations found by a handful of other courts
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`in the opioid-related litigation demonstrate that Defendants acted with scienter here. See, e.g., SAC ¶ 505.
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`do not allege a sufficient nexus between
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`misleading statements resulting in settlement
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`or victory in other opioid-related litigation. See D.E. 57 at Exs. 4, 6.
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`
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`Second, Plaintiffs appear to allege that the mere occurrence of meetings at the highest levels, as
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`well as Board meetings, where the opioid-related litigation was discussed show scienter. See SAC ¶¶ 505-
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`09. During oral argument
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` the FAC, the Court warned Plaintiffs
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`that this type of allegation alone was insufficient for scienter:
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`Of course they [meet and discuss the allegations in the opioid-related litigation].
`
`
`there was litigation. It would be reckless not to talk about ongoing litigation that
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`But beyond that, the fact that they talked about
`speculating that they had some kind of scienter in light of all the other conduct
`
`
`.
`
`7
`scienter pleadings. D.E. 46 at Tr. 30:14-18.
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`what they might have said about what was going on: We know that this
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`D.E. 46 at Tr. 31:3-21. Despite
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`
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`and have again pled that the mere occurrence of meetings, where the opioid-related litigation was
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`discussed, is evidence of scienter. Compare FAC ¶¶ 146, 317, with SAC ¶¶ 282, 505. Instead, Plaintiffs
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`doubled down on their deficient pleading by adding several paragraphs reiterating that these meetings
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`were taking place, where the opioid-related litigation was discussed, but adding nothing of substance to
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`g. SAC ¶¶ 506-10. Without more, the fact that the opioid-related litigation was
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`discussed within the Company does not provide a strong inference of scienter.
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`
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`Plaintiffs invoke the core operations doctrine, which provides that when misrepresentations or
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` Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 268 (3d Cir.
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`2009) (internal citations and quotations omitted). However, this doctrine requires
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`pleading include some additional allegation of specific information that was conveyed to management and
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`related to the fraud, which it does not. See Carmignac Gestion, S.A. v. Perrigo Co. PLC, 2019 WL
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`3451523, at *16 (D.N.J. July 31, 2019). Plaintiffs only really allege that meetings at the highest levels
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`occurred and that the opioid-related litigation was discussed extensively. See SAC ¶ 505-09. As
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`Defendants point out, Plaintiffs have not alleged any specific information that was conveyed to
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`management and related to the fraud. See id. Consequently, the core operations doctrine does not apply.
`
`
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`Lastly, Plaintiffs allege that the corporate scienter doctrine applies here, but the Court rejects this
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`allegation. As
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`neither accepted nor rejected this doctrine in securities fraud actions. See Rahman v. Kid Brands, Inc.,
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`736 F.3d 237, 246 (3d Cir. 2013).
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`3.
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`Whether Plaintiffs Have Alleged Loss Causation
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`Defendants assert that Plaintiffs have not satisfied the burden of showing that
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`alleged
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`misleading statements caused the loss for which they seek to recover damages. McCabe v. Ernst & Young,
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`LLP, 494 F.3d 418, 424 (3d Cir. 2007). Loss causation requires both: (1) a sufficient causal connection
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`between the alleged loss and the alleged misrepresentations; and (2) that the stock price dropped in
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`response to the disclosure of the alleged misrepresentations. Semerenko v. Cendant Corp., 223 F.3d 165,
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`183-87 (3d Cir. 2000). But whether a plaintiff has proven causation is an issue reserved for the trier of
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`fact, not a Court considering a motion to dismiss. EP Medsystems, Inc., 235 F.3d at 884; In re
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`MobileMedia Securities Litig., 28 F. Supp. 2d 901, 940 (D.N.J. Oct. 21, 1998). Because the Court has
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`concluded that Plaintiffs have failed to sufficiently plead the first two elements of a securities fraud claim,
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`it is unnecessary to analyze
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`.
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`B.
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`Plaintiffs Fail to Sufficiently Plead a Violation of Section 20(a)
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`Defendants contend that because Plaintiffs fail to state claim under Section 10(b) and do not plead
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`facts showing each Individual Defendant was a culpable participant that their Section 20(a) claims must
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`fail.
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`Section 20(a) of the Exchange Act provides for liability for controlling persons. 15 U.S.C. § 78t.
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`Controlling persons are jointly and severally liable with the controlled person. In re Merck & Co., Inc.
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`Sec. Litig., 432 F.3d 261, 275 (3d Cir. 2005).
`
`s liable under the [Exchange]
`
` Turfnofsky v. electroCore, Inc., 2021 WL 3579057, at *49-50 (D.N.J. Aug. 13, 2021) (quoting
`
`Belmont v. MB Inv. Partners, Inc., 708 F.3d 470, 484 (3d Cir. 2013)). But a Section 20(a) claim cannot
`
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`survive without an underlying violation of the Exchange Act. See Shapiro v. UJB Financial Corp., 964
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`F.2d 272, 279 (3d Cir. 1992). Because Plaintiffs have not adequately alleged an underlying securities
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`violation, their § 20(a) claim fails.
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`C.
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`Plaintiffs Fail to Properly Move for Leave to Amend
`
`Plaintiffs make a one-sentence request for leave to amend their complaint in the event that any of
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`their pleadings are found deficient. D.E. 58 at 40.
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`Fed. R. Civ. P. 15 states that leave to amend
`
`However,
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`amendment would cause undue delay or prejudice, or that amendment would be
`
`Oran v. Stafford,
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`226 F.3d 275, 291 (3d Cir. 2000). The Court believes it would be futile to allow another amendment in
`
`light of Plaintiffs: (1) failing to satisfy the stringent pleading requirements of the PSLRA, and thus failing
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`to state a claim under federal securities law in their SAC; and (2) failing to propose an amendment that
`
`would satisfy these requirements in their SAC. See In re Alpharma Sec. Litig., 372 F.3d at 153-54.
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`Plaintiffs were already given an opportunity to cure the deficiencies in their complaint and were even
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`provided with feedback before the previous motion to dismiss was granted and leave to amend was
`
`granted. See D.E. 46. Despite this, Plaintiffs did not sufficiently strengthen their pleadings in the SAC.
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`Motion for Leave to Amend is denied.
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`IV.
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`CONCLUSION
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`Motion for Leave to Amend is denied. An appropriate Order accompanies this Opinion.
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`Plaintiffs
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`Dated: August 17, 2022
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` _______________________
` Hon. Evelyn Padin, U.S.D.J.
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`18
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