Tuesday, August 30, 2005

Confidential Sources Not Identified With Particularity

Judge Jose L. Linares (D. N.J.) has ruled that Defendants’ motions to dismiss in the PDI securities class action will be granted in part and denied in part. Of course, reading the decision, at the end you might be wondering what portion of the motions were denied. Well, many of the statements were forward looking, but Judge Linares found that the safe harbor defense could not rescue defendants, saying "the adequacy of the warnings is not so obvious to this Court." Of course, that doesn’t help too much when the next thing the court says is that your complaint "does not plead any particularized facts to support an inference that Defendants had actual knowledge of their statement's falsity."

The decision is quite fact specific and analyzes each of the alleged false statements in depth, but of note is the court’s discussion of confidential sources. The court said "Plaintiffs fail to plead falsity of Defendants' statements with the particularity demanded by the Reform Act because the confidential sources relied upon by Plaintiffs are not accompanied by corroborative facts. Notably, Plaintiffs have failed to provide supporting facts that explain what department the ‘former senior PDI employee’ worked in, what Saldarini actually said, and what other parties were present. Similarly, Plaintiffs have not provided any details on how the ‘former PDI regional manager’ determined that it was allegedly ‘common knowledge at PDI’ that Evista was guaranteed to lose money -- that is, to whom was this language common, and when and how did this knowledge become common. In light of the foregoing, this Court finds that Plaintiffs' sources have not been described with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged, and therefore, Plaintiffs have failed to plead the falsity of Defendants' statements with the particularity demanded by the Reform Act."

You can read In re PDI Securities Litigation, issued August 17, 2005, at 2005 U.S. Dist. LEXIS 18145.

Nugget: "The Court does not see any basis to justify denying Plaintiffs leave to amend. Accordingly, this request is granted, and Plaintiffs are hereby granted leave to amend the Second Amended Complaint."

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