On January 30, 2009, the Third Circuit vacated a district court’s grant of summary judgment to Pfizer, finding that no indicia of potential malfeasance existed that would have put plaintiffs on inquiry notice to trigger the running of the statute of limitations.
The lower court had shortened the class period by more than a year, finding that investors could not have reasonably relied on defendants’ alleged misrepresentations after February 6, 2001, the date on which certain FDA staff reports were published. Based on that, defenfants moved for summary judgment on statute of limitations grounds, asserting that if reliance was unreasonable after February 6, 2001, plaintiffs must necessarily have been on inquiry notice of their claims at that time.
The lower court granted defendants’ motion for summary judgment, finding that because the first securities fraud suit was filed on April 7, 2003, and the statute of limitations for § 10(b) claims is two years, the plaintiffs’ claims were untimely.
The Third Circuit, however, vacated that ruling, concluding that
investors are not put on inquiry notice of fraud when, in the context of this case, an apparently legitimate scientific dispute arises between the FDA and a pharmaceutical company, and note that the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4, itself suggests this conclusion. A rule that would place investors on inquiry notice of fraud the moment that the FDA questions the seemingly good faith scientific analysis of a pharmaceutical company would encourage putative plaintiffs to file premature securities suits. In imposing heightened pleading requirements, Congress evinced an intent to discourage such suits; our inquiry notice jurisprudence reflects this intent.
For inquiry notice to take hold, there must be some indicia of potential malfeasance. Because no such indicia existed here, we will vacate the District Court’s grant of summary judgment.
Read the Third Circuit’s opinion in Alaska Electrical Pension Fund v. Pharmacia Corp., et al.
