Friday, December 12, 2008

Friday Class Actions Update: Schering has filed Several Motions to Dismiss. . . .

All of them are rather pedestrian, and make all the typical suggestions. So I'll not bother with them, for now.

By far the most interesting motion Lowenstein Sandler has filed, on behalf of Schering, appears in the putative ENHANCE securitites class action, originally called Manson v. Schering, et al. (Case No. 08-397) -- it suggests, improbably, that all the allegations about early scienter (and thus, early, and unlawful, common stock sales by Carrie Cox, and others, presumably including GC Tom Sabatino) ought to be stricken -- because the allegations in those counts of the amended complaint rely, at least in part (but importantly, only in part), on anonymous postings at CaféPharma for support. Let me quote a little of this line of argument from the motion, to give you a flavor:

. . . .CaféPharma is designed for use by sales representatives at competing drug companies. Messages left there are anonymous and, according to CaféPharma itself, their authors can never be traced. With that license of complete anonymity, CaféPharma is a haven for racism, misogyny, wild speculation, and misinformation. Crude comments about the physical appearance of female executives and sales representatives, as well as the sexual prowess of their male counterparts, flood the site. Minorities are denigrated and pilloried. Individuals pose as “insiders” at competing drug companies for the purpose of smearing their products, in the apparent hope of securing a competitive edge in the marketplace.

Rumormongering abounds on the board; indeed, if the messages were to be believed, then Schering should have long ago disappeared through a corporate merger or acquisition.

CaféPharma is, literally, the cyberspace equivalent of scrawls left on a men’s room wall. And it is from this source that plaintiffs draw allegations of so called “facts” to suggest the scienter and knowledge required to support their claims of securities fraud in this case. . . .

Odd -- this motion to strike seems to assume that the sole support for the insider trading allegations is the CaféPharma postings. That is simply not the case. There are also, as we much-earlier noted, here, "confidential" witnesses to these matters. My prediction? This will not fool Judge Cavanaugh.

Moreover, this line of argument smacks of "soft elitism" -- to suggest that statements ought to be stricken simply because they are often surrounded by offensive, or profane writings or speech -- is not logical. I suppose Lowenstein Sandler -- and CEO Hassan -- would also suggest that each has never heard a true word uttered on a ship-yard loading dock, construction site or in the dark under-belly of a coal mine. Actually, it is a fair bet Hassan hasn't spent any real, meaningful time in any of these places. Perhaps the same is true of these white-shoe lawyers at Lowenstein. I dunno.

In any event, this is exactly the role, at trial, a jury ought to play -- to decide how much credibilty any given statement ought to be accorded -- so, this is simply a rather-sophisticated attempt to keep some pretty damaging, but apparently accurate, evidence from ever reaching the jury. It ought to be resisted. [If Lowenstein were going to prove its proposition, it ought to have submitted proof that almost all of what appears on CaféPharma is false. And that, they know, 'tis too tall an order. Most of it is generally true -- but entirely unauthorized.]

Back to the chase, then -- note that these CaféPharma statements in question turned out to be particularly "reliable" -- in the parlance of the federal Rules of Evidence -- in that each was posted many months before Schering ever admitted there was a problem with ENHANCE -- and at least some of them accurately described the nature of the problem.

If a public, anonymous, but virtual "men's room wall scrawl" contains supposedly treasured, "secret, non-public, inside information" that turns-out to be exceedingly-accurate, months in advance -- is it such a stretch to infer that the actual Schering insiders who avoided massive losses by trading well in advance of the "official-Schering" disclosure (but after the CaféPharma postings) of those "secrets" -- might also have had access to the information, and more importantly, used it?

Evidence often appears in the most unlikely of places.

In fact, just ask Rod Blagojevich about that proposition -- I bet he agrees with it, now. Heh. Much more to come on this -- I need to attend to other matters now.


Anonymous said...

what a dweeb!

Condor said...

Um. . . thanks!

Marilyn said...

Agree. The fact that some (well, many) of the postings on cafepharma are offensive in various ways seems irrelevant.

Condor said...

I was pretty sure that was you M, on CP. Heh. Thanks!

Anonymous said...

Either they planned this way in advance or they got the idea from somewhere else.

See Ed's article from Aug 2007.