K&L Gates Secures Second Circuit Victory Affirming Dismissal of Securities Class Action Against Anavex Life Sciences

Global law firm K&L Gates LLP successfully secured a decision from the US Court of Appeals for the Second Circuit affirming the dismissal of a putative securities class action against Anavex Life Sciences Corporation and its chief executive officer.

The case concerned communications regarding clinical trial design and results for a neurodevelopmental drug. The team previously obtained an order dismissing the case with prejudice in the US District Court for the Southern District of New York. The district court agreed with the defendants’ arguments that the plaintiff failed to plead that several of the alleged misstatements were false and failed to establish loss causation.

On appeal, the Second Circuit upheld that decision, agreeing that the plaintiff failed to adequately allege loss causation under the federal securities laws. In particular, the plaintiff did not plead allegations to support a plausible causal connection between the purported misstatements and investor losses when Anavex’s stock price increased following the company’s disclosure.

In affirming dismissal, the Second Circuit published an opinion providing important guidance on the pleading requirements for loss causation. The appellate court also affirmed the denial of the plaintiff’s request to amend the complaint.

The K&L Gates team was led by Washington, DC partners Steve Topetzes and Ted Kornobis, with assistance from associate Paul Andersen.
 
Topetzes commented: “This is a very gratifying result for our clients, who promptly disclosed additional facts after the alleged misleading statement. In a comprehensive analysis of the fact-intensive loss causation element, the Second Circuit highlights that while pleading rules may not impose a high burden on plaintiffs, it is insufficient for plaintiffs merely to point to a subsequent drop in stock price. Where the stock price initially rises following corrective disclosure and drops one or two days later, plaintiffs must plausibly allege why the alleged investor losses were delayed. Plaintiff could not do so.”