American Bar Association
Media Alerts
Media Alerts - In re Pfizer Inc. Securities Litigation - Second Circuit
Decrease font size
Increase font size
April 13, 2016
  In re Pfizer Inc. Securities Litigation - Second Circuit
Headline: Second Circuit Vacates Summary Judgment Dismissal of Pfizer Securities Class Action Suit Back to District Court

Area of Law: Securities Law; Evidence

Issue(s) Presented: Whether the district court erred by excluding plaintiffs' expert on loss causation and damages from testifying at trial.

Brief Summary:
Plaintiffs-Appellants, Teachers' Retirement System of Louisiana and other investors, brought a class action against Pfizer, Inc. and several of its directors and officers, pursuant to the Securities Exchange Act, for making fraudulent misrepresentations and fraudulently omitting to disclose information regarding the safety of two of its drugs, Celebrex (celecoxib) and Bextra (valdecoxib). Plaintiffs allege that when the market eventually learned of the cardiovascular risks associated with these drugs, the value of Pfizer's shares fell, harming shareholders in the process.

The United States District Court for the Southern District of New York granted Pfizer's motion in limine to exclude Plaintiffs' expert on loss causation and damages from testifying at trial. Left with no testimony on these issues, Plaintiffs could not establish key elements of their claims, and the district court granted Pfizer's motion for summary judgment. The Second Circuit vacated summary judgment and remanded the case back to the district court, holding that the district court abused its discretion in precluding the expert's testimony about loss causation and damages in its entirety, rather than prohibiting only testimony about certain price adjustments made to calculate loss.

To read the full opinion, visit:

Extended Summary: Celebrex and Bextra are part of a broad class of medicines known as non-steroidal anti-inflammatory drugs, which are used to treat chronic pain and inflammation. Before 1999, this class of drugs had a common problem; patients who used the drugs over a long period of time often developed stomach ulcers and other gastrointestinal problems. As a result, two pharmaceutical manufacturers - Merck & Co., Inc. and Searle - began researching a type of non-steroidal anti-inflammatory drug, known as a Cyclooxygenase 2 ("COX-2") inhibitor, which could reduce pain and inflammation without causing gastrointestinal distress. Both companies ultimately succeeded, with Merck creating a drug called Vioxx, and Searle creating Celebrex.

Pfizer, a research-based, global pharmaceutical company that develops, manufactures and markets prescription medicines first became involved with COX-2 inhibitors through Searle. In February 1998, Pfizer signed a series of agreements with Searle in which it agreed to, among other things, help market Celebrex. Searle later transferred control over Celebrex to Pharmacia through a merger in early 2000. Pfizer continued to fulfill its obligations until April 16, 2003, when it obtained the exclusive rights to manufacture, promote, and sell Celebrex and Bextra by purchasing Pharmacia.

Plaintiffs contend that, while Celebrex and Bextra eliminated the gastrointestinal issues associated with non-steroidal anti-inflammatory drugs, the drugs presented a different, dangerous side effect. As early as 1998, they claim, Pfizer and Searle knew about studies linking the COX-2 inhibitors to cardiovascular problems in patients, but because Celebrex was an enormous commercial success, Searle issued press releases and other public statements denying that the drugs presented such risks. When ownership of Celebrex passed to Pharmacia, and later to Pfizer, both companies continued to tout its safety, as well as the safety of Bextra, notwithstanding the discovery of additional medical evidence tying the drugs' use to heightened cardiovascular risks.

According to Plaintiffs, the press releases and public statements that Pharmacia and Pfizer issued during the class period had the effect of maintaining the public's misperception about the safety of Celebrex and Bextra. Plaintiffs claim that once information about studies linking the drugs to cardiovascular risks reached the public eye, Pfizer's share prices fell as investors reassessed the value of Celebrex and Bextra in light of the newly discovered risks. Plaintiffs brought a class action claiming Pfizer and several of its officers and directors misstatements concerning the cardiovascular risks associated with these drugs violated ยงยง 10(b), 20(a), and 20A of the Securities Act of 1934.

Plaintiffs retained Daniel R. Fischel, Professor Emeritus of Law and Business at the University of Chicago Law School and a former dean of that institution, to issue an expert report, based upon an "event study," regarding Pfizer's stock price change after the market learned about the cardiovascular risks associated with Celebrex and Bextra to establish loss causation and Plaintiffs' damages. Following discovery, the United States District Court for the Southern District of New York issued an order pursuant to Federal Rule of Evidence 702 excluding Fischel from testifying at trial. The district court reasoned that Fischel's failure to disaggregate the impact of Pfizer's alleged misrepresentations and those made by Searle and Pharmacia in his loss causation analysis rendered "his opinions unhelpful to the jury" in calculating damages caused by Pfizer alone. The court additionally rejected the methodology applied by Fischel in a supplement to his opinion adjusting his findings to account for the district court's determination in an earlier summary judgment ruling that stock-price declines on two particular dates could not reasonably be attributed to Pfizer's alleged misrepresentations. Plaintiffs could not establish essential elements of their claims without Fischel's testimony and, accordingly, the district court granted summary judgment in favor of Pfizer.

The Second Circuit vacated summary judgment, holding that the district court's rationale for excluding the testimony was inadequate to justify excluding it in its entirety. The Second Circuit held that, even assuming without deciding that Pfizer lacked authority over Searle and Pharmacia statements as Pfizer contends, Fischel's opinion did not need to account for the impact of the other companies' alleged misrepresentations to be helpful to the jury. The court reasoned that Fischel did not need to disaggregate the impact of the other companies' statements because Plaintiffs' "inflation maintenance theory" alleged that Pfizer concealed the same information as Searle and Pharmacia and, thus, is liable for the full extent of Plaintiffs' losses. The Second Circuit further held that, although the district court did not abuse its discretion in rejecting Fischel's methodology for adjusting his findings to account for stock-price fluctuation on two dates not attributable to alleged fraud, the court should have allowed Fischel to present his other findings. Holding that the district court abused its discretion in excluding the expert testimony in its entirety, the Second Circuit vacated the judgment and remanded to the district court for further proceedings.

To read the full opinion, visit:

Panel (if known): Circuit Judges Kearse, Pooler, and Livingston

Argument Date: 5/26/2015

Date of Issued Opinion:

Docket Number:
No. 14-2853-cv

Decided: Vacated and Remanded

Case Alert Author:
Nigyar Alieva

Gregory P. Joseph, Douglas J. Pepe, Sandra M. Lipsman, Joseph Hage Aaronson LLC, Jay W. Eisenhofer, James J. Sabella, Charles T. Caliendo, Grant & Eisenhofer P.A., Jonathan S. Massey, Massey & Gail LLP, David Kessler, Andrew L. Zivitz, Matthew L. Mustokoff, Kessler Topaz Meltzer & Check, LLP, for Plaintiff-Appellants; Miguel A. Estrada, Mark A. Perry, Gibson, Dunn & Crutcher LLP, Beth A. Wilkinson, Charles E. Davidow, Alexandra M. Walsh, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Andrew J. Ehrlich, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Lynn K. Neuner, George S. Wang, Simpson, Thacher & Bartlett LLP, John R. Wellschlager, DLA Piper LLP (US), Jennifer L. Spaziano, Skadden, Arps, Slate, Meagher & Flom LLP, George A. Stamboulidis, Baker & Hostetler LLP, Pamela R. Chepiga, Allen & Overy LLP, Michael L. Calhoon, Julie B. Rubenstein, Baker Botts LLP, for Defendant-Appellees

Author of Opinion:
Judge Livingston

Case Alert Circuit Supervisor:
Professor Elyse Diamond Moskowitz

    Posted By: Elyse Diamond @ 04/13/2016 07:53 AM     2nd Circuit  

FuseTalk Enterprise Edition - © 1999-2018 FuseTalk Inc. All rights reserved.

Discussion Board Usage Agreement

Back to Top