Articles Posted in US Court of Appeals for the Sixth Circuit

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Esperion has never generated any revenue, relying solely upon investor funding. Esperion’s sole focus is the development of ETC-1002, a first-in-class oral medication for lowering LDL “bad cholesterol,” a significant risk factor in cardiovascular disease. Esperion hopes to market ETC-1002 as an alternative treatment for statin-intolerant patients and as an add-on for patients are unable to reach their recommended levels using statins alone. In 2015, Esperion had completed several clinical studies and reported that ETC-1002 was well-tolerated and demonstrated significant average LDL-cholesterol reductions. After a meeting with FDA officials regarding Phase 3 of the approval process, Esperion published a press release, stating that “[b]ased upon feedback from the FDA, approval of ETC-1002 in [specific] patient populations will not require the completion of a cardiovascular outcomes trial,” with cautionary language, suggesting that “Esperion may need to change the design of its Phase 3 program once final minutes from the FDA meeting are received.” Market reaction was mostly positive. Following its receipt of the final FDA minutes, Esperion published another press release, indicating that the “FDA has encouraged the Company to initiate a cardiovascular outcomes trial promptly.” Esperion’s stock dropped 48% the next day. Plaintiffs, the purchasers of Esperion common stock between the two press releases, brought a class action under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5. The Sixth Circuit reversed the district court holding that Plaintiffs failed to adequately plead a strong inference that Esperion’s CEO willfully or recklessly made misleading statements. Plaintiffs adequately alleged scienter. View "Dougherty v. Esperion Therapeutics, Inc." on Justia Law

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Community, the nation’s largest for-profit hospital system, obtained about 30 percent of its revenue from Medicare reimbursement. Instead of using one of the systems commonly in use for determining whether Medicare patients need in-patient care, Community used its own system, Blue Book, which directed doctors to provide inpatient services for many conditions that other hospitals would treat as outpatient cases. Community paid higher bonuses to doctors who admitted more inpatients and fired doctors who did not meet quotas. Community’s internal audits found that its hospitals were improperly classifying many patients; its Medicare consultant told management that the Blue Book put the company at risk of a fraud suit. Community attempted a hostile takeover of a competitor, Tenet. Tenet publicly disclosed to the SEC, expert analyses and other information suggesting that Community’s profits depended largely on Medicare fraud. Community issued press releases, denying Tenet’s allegations, but ultimately corroborated many of Tenet’s claims. Community’s shareholders sued Community and its CFO and CEO, alleging that the disclosure caused a decline in stock prices. The district court rejected the claim. The Sixth Circuit reversed. The Tenet complaint at least plausibly presents an exception to the general rule that a disclosure in the form of a complaint would be regarded, by the market, as comprising mere allegations rather than truth. The plaintiffs plausibly alleged that the value of Community’s shares fell because of revelations about practices that Community had previously concealed. View "Norfolk County Retirement System v. Community Health Systems, Inc." on Justia Law