Monday, March 16, 2015

Faruqi & Faruqi, LLP Wins Historic Appeal In Case Against Chelsea Therapeutics

MARCH 16, 2015

On March 16, 2015, the United States Court of Appeals for the Fourth Circuit determined that the claims asserted against Chelsea Therapeutics International, Ltd. should be remanded for further proceedings because the claims had been erroneously dismissed by the district court:
"Upon our review, we hold that the district court erred in taking judicial notice of the challenged documents filed with the SEC, because those documents did not relate to the contents of the complaint. We further hold that this error was not harmless, because the court incorrectly construed these documents as supporting its holding that the plaintiffs’ allegations of scienter were legally insufficient. Finally, we hold that based on the defendants’ failure to disclose critical information about the weaknesses of the new drug application, the plaintiffs’ allegations were sufficient to support a strong inference of scienter. We therefore vacate the district court’s judgment dismissing the plaintiffs’ complaint and remand the case for further proceedings."
See page 4 of the opinion which is linked below.
Since the enactment of the Private Securities Litigation Reform Act of 1995, this was the first time that the Fourth Circuit reversed a dismissal of a securities fraud suit where the district court had determined that the plaintiffs had failed to plead that the defendants acted with the requisite state of mind.
Plaintiff is represented by Richard W. Gonnello, Megan Sullivan, and Katherine Lenahan of Faruqi & Faruqi, LLP.


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