Securities Snapshot
March 12, 2020

New Jersey District Court Dismisses Putative Securities Class Action Against Galena Biopharma, Inc. for Second Time

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On November 12, 2019, in In re Galena Biopharma Inc. Securities Litigation, a New Jersey district court dismissed without prejudice a putative class action complaint asserting claims for securities fraud under the Securities Exchange Act of 1934 against Galena and five of its former executives. The plaintiffs seek to bring claims on behalf of a putative class of investors who purchased Galena stock over a nearly two-and-a-half-year period before the announcement of the company’s merger with Sellas Life Sciences Group in 2017 and the subsequent announcement of a $7.55 million settlement with the Department of Justice concerning allegations of kickbacks to doctors.

The plaintiffs alleged that the defendants misled investors by failing to disclose that Galena’s net sales and revenues were achieved through “illegal off-label marketing and kickbacks” and that 30 percent of the company’s revenues were attributable to two doctors who overprescribed Galena’s fentanyl tablet, Abstral, to earn kickbacks and manipulate the company’s stock price.

The district court concluded that the plaintiffs’ allegations largely were “seemingly untethered to any particular material misstatement or omission,” and “cannot provide a basis for a Section 10(b) violation as pled.” Although the district court acknowledged that the amended complaint included allegations that could support a securities fraud claim, it found that the plaintiffs opted “to use a shotgun approach and essentially argue that all allegations comprise the Section 10(b) claim. As a result, the district court explained that it “is unable to effectively separate the wheat from the chaff.”

The district court afforded the plaintiffs a third chance to re-plead their claims. The plaintiffs now have 30 days to file a further complaint to cure the defects in their allegations. Otherwise, the plaintiffs’ claims will be dismissed with prejudice.


On November 15, 2019, in Knowles et al. v. TD Ameritrade, a Nebraska district court dismissed a putative class action against TD Ameritrade asserting claims for breach of contract and negligence under Nebraska law. TD Ameritrade allegedly employed a tax-loss harvesting feature designed to sell securities at a loss to offset potential capital gains and taxable income. The plaintiffs alleged that TD Ameritrade did not create and manage the tax-loss harvesting feature as agreed.

The district court concluded that, at its core, the complaint alleged that TD Ameritrade misrepresented how the tax-loss harvesting feature would operate when a suitable replacement security was not immediately available after a tax-loss harvesting sale. The plaintiffs’ claims depended on the assertion that TD Ameritrade misled investors about the consequences of such a lapse.

The district court held (among other things) that, because the plaintiffs’ claims centered on TD Ameritrade’s failure to inform its clients of material information regarding how an entire investment feature could function, the plaintiffs’ claims were precluded by the Securities Litigation Uniform Standards Act (“SLUSA”). The district court explained that SLUSA was enacted to prevent precisely what the plaintiffs were attempting: filing a putative securities class action under state law to avoid the heightened pleading standards of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The district court concluded that, while TD Ameritrade might have failed to disclose the undesired side effects of its tax-loss harvesting feature, SLUSA pre-empted the plaintiffs’ state law claims.


On November 13, Judge Leo T. Sorokin of the District of Massachusetts dismissed a proposed class action against Tesaro Inc. and two of its officers in LSI Design and Integration Corp. v. Tesaro, Inc. et al. The plaintiffs alleged that defendants had misled investors, including through statements made in SEC filings and at a healthcare conference, in order to hide the company’s “dismal” sales of Varubi, a chemotherapy-related nausea prevention drug.

The court held that the allegations demonstrated, at best, only that Tesaro and its officers knew the company had missed internal sales goals in the North American market over a short period of time. The court found that none of the alleged statements were false or misleading, nor was there evidence to show an intent to mislead investors.

Specifically, the court held that a statement that the company expected to meet cash flow requirements was not false or misleading even though the company knew it had failed to meet sales targets, as there was no indication that the failure to meet targets caused an unexpected shortage in cash. As for executives’ comments at a healthcare conference, the court held that a statement that the company was “well positioned to take this forward” amounted to no more than “corporate optimism” and non-actionable puffery, and that a statement regarding the company’s ability to pay its future expenses fell squarely within the PSLRA’s safe harbor provision for forward-looking statements. Finally, the court held that the plaintiffs had not adequately alleged scienter, as the defendants’ actual knowledge of the missed sales goals was not indicative of an intent to deceive investors, and the inference that the defendants believed their statements were accurate was “more cogent and compelling.”


On November 20, 2019 the DOJ revised its enforcement policy regarding the Foreign Corrupt Practices Act. The revisions address disclosure requirements for companies that seek credit for voluntary self-disclosure, cooperation, and remediation.

Under the previous version of the policy, a company that self-reported to the DOJ was expected to disclose “all relevant facts known to it,” including “all individuals” substantially involved in a “violation of law.” The revised policy removes the implication that a “violation of law” had been found by a company that self-reports, and instead requires that a company disclose “all relevant facts known to it at the time of the disclosure, including as to any individuals substantially involved in or responsible for the misconduct at issue.” (emphases added). The revised policy also includes a footnote that recognizes that companies “may not be in a position to know all relevant facts at the time of a voluntary self-disclosure, especially where only preliminary investigative efforts have been possible.”

In addition, the revised policy no longer requires that a company alert the DOJ when it “is or should be aware of opportunities” to obtain evidence outside of its possession, and instead requires a company to alert the DOJ when it “is aware” of evidence outside of its possession.