FORBES: Firm Wins Historic Appeal in Court Known for Skepticism of Investors’ Claims

As Seen In… Forbes, February 29, 2016

Faruqi & Faruqi, LLP Wins Historic Appeal in Fourth Circuit

In a significant victory on behalf of investors in biopharmaceutical company, ChelseaTherapeutics, International Ltd., on March 16, 2015, the United States Court of Appeals for the Fourth Circuit determined that the claims should be remanded for further proceedings because they had been erroneously dismissed by the district court. This was the first successful appeal of a securities fraud class action in the Fourth Circuit since the enactment of the Private Securities Litigation Reform Act in 1995.
The claims alleged that the company and certain officers and directors violated the federal securities laws by intentionally concealing communications with the U.S. Food and Drug Administration concerning the likelihood of approval of the company’s sole product candidate.
The circuit court held that “the district court erred in taking judicial notice of the challenged documents filed with the SEC, because those documents did not relate to the contents of the complaint[,]” and that “based on the defendants’ failure to disclose critical information about the weaknesses of the new drug application, the plaintiffs’ allegations were sufficient to support a strong inference of scienter.”
Upon remand, the district court denied the defendants’ motion to dismiss and permitted the case to proceed to discovery.