Similarly, with the second statement, plaintiffs maintain that Kriebel's implication about the new expedited FDA process was to lead the investing public to a belief that Kriebel expected early approval. Plaintiffs allege that this was false and misleading because Kriebel knew that early approval was unlikely. Plaintiffs' claim that this statement has a deceptive air seems to us to grasp at a straw. At this early stage of the proceedings, however, we feel compelled to leave the complaint intact. The plaintiffs will have the opportunity to establish the statement's falsity and materiality through discovery, and if they cannot do so, the defendants can renew their request in a motion for summary judgment.
D. Securities Analysts' Statements
As for the statements of the securities analysts that defendants claim are immaterial under Rule 12(f),
tr. of oral argument at 10, we are also inclined to leave them in the complaint. The statements cited are various reactions of securities analysts to the information that the FDA had not approved Ethyol. The analysts believed that the news had "severely undermined the credibility of both the drug and [Bioscience]." Complaint P 109. "Most shockingly," Kidder Peabody said, "the FDA revealed that Ethyol's much-heralded 'fast-track' review arose from the company's own attempt to gain approval based on interim Phase III data, rather than any special FDA interest in the drug." Id.
While these statements themselves may be immaterial, plaintiffs included them in the complaint in order to establish the materiality of the other allegedly false and misleading statements. The securities analysts' reactions to Bioscience's allegedly false and misleading statements regarding Ethyol are indicia, albeit not dispositively, of the materially misleading nature of the statements. They therefore have a role to play in the complaint and should not be stricken.
As noted at the outset of this Memorandum, we believe defendants' motions raise serious questions about the extent of outside directors' vicarious liability for the statements (or omissions) that others make. At this early stage of the proceedings, however, we regard it as premature to prune either parties or claims in the perhaps unusual context here. Given the complaint's allegations about the defendants, and given our duty under Craftmatic to make every inference in plaintiffs' favor, we do not feel at liberty to follow the path defendants and the district court in Xoma illuminate for us. This is particularly so given the extent of alleged insider selling, and the familiarity with the pharmaceutical industry that the defendants share.
For all of these reasons, we are constrained to deny defendants' motions to dismiss.
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 806 F. Supp. 1197.
AND NOW, this 10th day of November, 1992, upon consideration of the pending motions in this consolidated proceeding, it is hereby ORDERED that:
1. For the reasons stated in the foregoing Memorandum, defendants' motions to dismiss are DENIED;
2. Based upon the stipulations previously submitted to the Court, plaintiffs' motion for class action certification is GRANTED in conformity with the stipulations of October 16 and November 3, 1992; and
3. Counsel shall submit their proposed class action notice(s) on or before November 30, 1992.
BY THE COURT:
Stewart Dalzell, J.