Skiadas v. Acer Therapeutics Inc.

Background

In an earlier decision, the court denied defendants’ motion to dismiss the second amended complaint. The court held that Nicholas Skiadas had plausibly alleged securities-fraud claims. Acer Therapeutics Inc., Chris Schelling, and Harry Palmin moved for reconsideration of that decision, and Skiadas opposed the motion.

Legal standard

The court applied Local Rule 6.3. A motion for reconsideration is an extraordinary request to revisit an earlier order and ordinarily requires the moving party to identify an intervening change in controlling law, new evidence, or a clear error or manifest injustice. The court noted that reconsideration is discretionary and should be used sparingly.

Falsity allegations

The defendants challenged the court’s earlier conclusion that statements in Acer’s offering documents and annual filings were plausibly false or misleading. Those statements said that the Food and Drug Administration had agreed that additional clinical development was not needed, or that an additional clinical trial was not likely needed, and that Acer could submit a regulatory application for EDSIVO to treat vascular Ehlers-Danlos syndrome.

The court explained that the challenged statements could reasonably be understood in two ways: as referring to submission of the application or to FDA approval. At the motion-to-dismiss stage, the court must draw reasonable inferences in the plaintiff’s favor. Because a reasonable investor could have understood the statements as referring to approval, the court again declined to dismiss the falsity allegations. The court rejected the defendants’ argument that ambiguity alone made the allegations inadequate, explaining that the statements had two reasonably possible meanings rather than no definite meaning.

Scienter allegations

“Scienter” means the required state of mind for securities fraud, such as intent to deceive or recklessness. The court reaffirmed its earlier conclusion that Skiadas had adequately alleged scienter based on the allegations considered together. The court relied on, among other things, the defendants’ statements about FDA approval, changes in the wording of those statements, Acer’s need to raise funds to remain viable, the defendants’ access to contrary information, and the circumstances in which the statements were made.

The court rejected the argument that Acer’s need to raise money could not support scienter. It said that financial pressure was one factor among several and that the defendants’ alleged motive was not merely an ordinary corporate motive if the company was at risk of failing. The court also rejected the argument that the earlier decision had applied only a general plausibility standard to scienter. It concluded that the allegations raised an inference of fraudulent intent that was “cogent and at least as compelling” as an opposing innocent inference.

Ruling

Judge Gregory H. Woods held that the defendants had not shown clear error in the earlier decision. The defendants’ motion for reconsideration was DENIED. The clerk was directed to terminate the motion at Docket Number 58.