Litigation Team Wins Dismissal of Securities Fraud Class Action against Abiomed

On April 10, 2014, a Ropes & Gray litigation team won dismissal of Simon v. Abiomed, Inc., a securities fraud class action alleging that Abiomed and top executives made materially false and misleading statements regarding the company’s marketing practices and related warning letters from the Food and Drug Administration (“FDA”). The case, brought in the United States District Court for the District of Massachusetts, was decided on the grounds that the Simon plaintiffs had failed to adequately plead that any of the allegedly false or misleading statements were made intentionally or recklessly.   

Abiomed manufactures miniaturized heart pumps that provide partial circulatory support during heart procedures. Between 2010 and 2012, Abiomed was informed by the FDA that the agency was concerned with certain allegedly “off-label” promotional materials regarding the company’s medical devices. Abiomed promptly disclosed those FDA inquiries to investors and stated in its SEC filings that the company “hope[d] to be able to resolve this matter without incurring penalties,” but in November 2012, the U.S. Attorney’s Office for the District of Columbia served a separate administrative subpoena regarding Abiomed’s alleged off-label marketing practices. The Simon plaintiffs alleged that upon announcement of the USAO subpoena, the company’s stock price dropped 33%, resulting in a loss of $250 million in market capitalization. The plaintiffs alleged that various statements regarding the FDA correspondence, as well as statements regarding Abiomed’s revenues and marketing practices, were materially false and misleading because the company had not disclosed the full extent of its off-label marketing practices or the scope of the FDA’s inquiry. 

On behalf of Abiomed, Ropes & Gray argued that Abiomed’s disclosures about the FDA inquiry, as well as its statements regarding revenues and marketing practices, were not misleading, and that the mere existence of a separate USAO subpoena was not evidence of any wrongdoing. Further, Ropes & Gray argued that the plaintiffs had failed to adequately allege scienter under the exacting standard imposed by the Private Securities Litigation Reform Act and jurisprudence requiring plaintiffs to plead a “cogent and compelling” case for scienter. The Court dismissed the case on the grounds that the plaintiffs had failed to plead the requisite degree of scienter, calling it a “circumstantial case” that was “not compelling.” 

In June 2013, Ropes & Gray won dismissal of a related shareholder derivative action alleging breach of fiduciary duties by Abiomed’s board of directors predicated on the same facts. That case is on appeal in the First Circuit.

The team was led by securities and shareholder litigation partner John Donovan (Boston).