ARTICLE
1 August 2016

In Re Pfizer Inc. Securities Litigation: Federal Appeals Court Stresses Control In Determining Whether A Defendant "Made" A Statement

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Shearman & Sterling LLP

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The federal appeals court based in New York vacated the lower court's grant of summary judgment dismissing claims of securities fraud arising out of alleged misstatements...
United States Corporate/Commercial Law

Also on 12 April 2016, in In re Pfizer Inc. Securities Litigation, the federal appeals court based in New York vacated the lower court's grant of summary judgment dismissing claims of securities fraud arising out of alleged misstatements concealing the health risks associated with two of the defendant company's drugs. The court held that the lower court improperly determined that Pfizer did not "make" the statements at issue under the principles set forth in the US Supreme Court's decision in 2011 in Janus Capital Group, Inc. v. First Derivative Traders ("Janus").

Some of the statements that the plaintiffs alleged to be false were communicated to the public not by Pfizer, but by companies that had agreed to promote the drugs together with Pfizer. The court held that, even though Pfizer did not issue these statements, it could still be considered the "maker" of some of them under Janus. In Janus, the Supreme Court established that the "maker" of a statement under Section 10(b) of the Exchange Act "is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it." The court here held that, even though the statements at issue were communicated to the public by, and made in the name of, companies other than Pfizer, a jury would need to decide whether Pfizer's level of involvement in drafting, and influence over approving, some of the statements was enough for Pfizer to be deemed to have ultimate authority over the statements.

Janus is often understood to limit a defendant's liability by narrowing the circumstances in which a defendant will be deemed to have "made" a false statement. But this case demonstrates how Janus's focus on ultimate authority can lead to liability for parties that did not actually utter the statements at issue.

For additional information about this case, please see our client note:

http://www.shearman.com/en/newsinsights/publications/2016/04/second-circuit-stresses-control-not-attribution

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