Evanston Police Pension Fund v. McKesson Corporation

Background

The court had previously denied McKesson Corporation’s motion to dismiss. McKesson then requested permission to file a motion asking the court to reconsider that interlocutory order and to clarify its ruling.

Under Northern District of California Civil Local Rule 7-9(b), permission to seek reconsideration requires a showing of a material difference in fact or law that could not previously have been found through reasonable diligence, newly emerging material facts or a change in law, or a manifest failure to consider material facts or dispositive legal arguments previously presented.

McKesson’s Arguments

McKesson appeared to rely on the rule’s third basis. It argued that the court had misunderstood or misstated the use of the “core operations” theory of scienter, which concerns allegations that company executives knew or recklessly disregarded information relevant to alleged misstatements. McKesson also challenged the court’s recklessness analysis, argued that the plaintiffs had not met the specificity requirement of the Private Securities Litigation Reform Act, and asserted that the court’s decision conflicted with Fleming v. Impax Laboratories Inc.

Court’s Analysis

The court concluded that McKesson had not identified any material facts or dispositive legal arguments that the court failed to consider. The court explained that the executives’ repeated statements attributing generic-drug price increases to legitimate causes, together with their claimed knowledge of the generic-drug market and pricing, supported at least a factual question about whether they knew those explanations were unsupported.

The court also rejected McKesson’s argument that the plaintiffs had not adequately alleged recklessness. It stated that the plaintiffs adequately alleged that the executives were at least reckless about whether their explanations for the price increases were false. The court further stated that the plaintiffs had alleged specific, direct evidence of unlawful agreements between executives of generic-drug companies, and it repeated that the cited Impax decision was distinguishable.

Loss Causation Clarification

Loss causation is the required connection between an alleged wrongful act and an investor’s loss. The court clarified that its earlier ruling found loss causation adequately pleaded only for the January 11, 2016, and November 3, 2016, disclosures. It stated that the October 27, 2016, and January 25, 2017, disclosures did not reveal new material information to the market.

Disposition

The court denied McKesson’s request for leave to move for reconsideration and clarified its earlier order denying McKesson’s motion to dismiss. The opinion states that disagreement with the court’s conclusions, or repeating arguments the court had already rejected, did not justify reconsideration.