United States District Court, S.D. New York
Julio Perez, Plaintiff, Pro se, Tarrytown, NY.
For Defendant: Eric David Raphan, Esq, Jonathan Stoler, Esq., Sheppard, Mullin, Richter & Hampton, LLP, New York, NY.
OPINION AND ORDER
KENNETH M. KARAS, UNITED STATES DISTRICT JUDGE.
Plaintiff Julio Perez (" Plaintiff" ), proceeding pro se, brings this Action against Defendant Progenics Pharmaceuticals, Inc. (" Defendant" ), alleging that Defendant violated the Sarbanes-Oxley Act of 2002 (" Sarbanes-Oxley" ), 18 U.S.C. § 1514A, by terminating Plaintiff's employment in retaliation for a memorandum he wrote regarding a press release about a pharmaceutical drug. In an Opinion & Order dated July 24, 2013, the Court denied Defendant's Motion for Summary Judgment. Defendant now moves for reconsideration of that Opinion & Order. For the following reasons, Defendant's Motion for Reconsideration is denied.
The Court assumes the Parties' familiarity with the factual and procedural history of this case, as described in Perez v. Progenics Pharmaceuticals, Inc., 965 F.Supp.2d 353 (S.D.N.Y. 2013). Accordingly, the Court will summarize the relevant factual and procedural history here only briefly.
A. Factual Background
Defendant is a biotechnology company that has been publicly traded on the NASDAQ stock exchange since 1997. Plaintiff, who holds a Ph.D. and a master's degree in organic chemistry, worked for approximately eleven years as a chemist at two pharmaceutical companies prior to his employment at Defendant, which employment Plaintiff began in May 2004 as Senior Manager of Pharmaceutical Chemistry. Plaintiff's primary responsibility was to support development of Relistor, a pharmaceutical drug designed to treat patients suffering from postoperative bowel dysfunction or opioid-induced constipation. Plaintiff's specific responsibilities included working on Relistor's oral, subcutaneous, and intravenous formulations to figure out ways that the oral form of Relistor could be better absorbed by the human body, working on supply of the active pharmaceutical ingredient in Relistor, and supporting activities related to clinical trials, although Plaintiff himself did not perform the clinical trials.
In December 2005, Defendant and another pharmaceutical company, Wyeth Pharmaceuticals Division (" Wyeth" ), entered into a License and Co-Development Agreement (the " Progenics-Wyeth Agreement" ) to co-develop and jointly commercialize Relistor. Pursuant to the Progenics-Wyeth Agreement, the companies agreed to a Joint Development Plan to govern all aspects of development of the products worldwide. The Joint Development Plan included draft Target Product Profiles (the " TTP" ), representing the technical and commercial targets. According to Defendant, the TPP was merely a wish list and a marketing concept intended to help assess the commercial viability of the drug and its performance against competitive products. But according to Plaintiff, the TPP was more significant than a wish list, as it specified the labeling concepts that were the goals of the drug development program and documented the specific studies intended to support the labeling concepts.
In order to gain FDA approval for public sales of oral Relistor, Defendant and Wyeth were required to conduct several phases of clinical trials demonstrating its safety and efficacy. Each clinical trial phase had written protocols with primary and secondary endpoints. From October 2007 until April 2008, the companies conducted
a Phase 2 clinical trial on a tablet formulation of oral Relistor (the " 2201 Study" ). According to the written protocol, the 2201 Study was a hypothesis-generating trial, and the endpoints that would drive decision-making were the proportion of subjects having a spontaneous bowel movement within three hours of the first dose of test article and the proportion of subjects discontinuing prematurely during the first week of active dosing for efficacy and tolerability. The 2201 Study demonstrated that the tablet formulation of oral Relistor showed statistically significant activity for some dosages, but to date, there has been no Phase 3 clinical trial of this formulation. Plaintiff claims that the 2201 Study did not show clinically important activity.
On May 22, 2008, Wyeth and Progenics issued a joint press release (" the Joint Press Release" ), stating that " a [P]hase 2 trial evaluated the effects of an oral formulation of Relistor," which " showed positive activity," and " statistically significant activity as assessed by the occurrence of spontaneous bowel movements and other efficacy measures." The Joint Press Release also included a quote from the CEO of Progenics at the time, Dr. Paul J. Maddon: " We are pleased by the preliminary findings of this oral formulation."
On July 16, 2008, executives in Wyeth's commercial operations and research development groups presented the Relistor Development Strategy Update (the " Wyeth Update" ) to Wyeth's Executive Development Council. The Wyeth Update assessed various oral formulations under development, specifically noting that " [r]esults from oral Phase 2 studies demonstrated that neither the tablet nor the capsule formulations had sufficient activity to satisfy the Confirm advancement criteria specified in the approved target product profile." The Wyeth Update formally recommended that the tablet formulation not advance to Phase 3 clinical trials. Although some dosages of the tablet formulation demonstrated statistically significant results, and " rapid and predictable results" occurred with the first dose, other targets for the drug were " not met." According to Defendant, Wyeth decided to engage in further discussions with Defendant and review additional data before making a decision about advancing to Phase 3, but Plaintiff claims that Wyeth endorsed the recommendation not to advance at the July 16, 2008 meeting.
In or around late July 2008, Mark Baker (" Baker" ), Defendant's general counsel, received a copy of the Wyeth Update from Dr. Richard Krawiec, another employee of Defendant. Baker then distributed the Wyeth Update to five members of Defendant's senior management team, not including Plaintiff. Plaintiff claims that towards the end of July 2008, he received the Wyeth Update via interoffice mail. Following his receipt of the Wyeth Update, Plaintiff delivered a memorandum (" the August 4, 2008 Memorandum" ), entitled " Comments on oral Relistor [P]hase 2 clinical trial results," to Baker and Dr. Thomas Boyd (" Dr. Boyd" ), Senior Vice-President of Product Development at Defendant, identifying statements in Joint Press Release. In the August 4, 2008 Memorandum, Plaintiff wrote: " [Wyeth and Defendant] are committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and [Plaintiff] think[s] this is illegal." Plaintiff attached three items to the August 4, 2008 Memorandum: selected slides from the Wyeth Update, the Joint Press Release, and an article entitled " Learn and Confirm," written by Wyeth managers. For the most part, subsequent events are not relevant to Defendant's Motion
for Reconsideration. Suffice to say that, after several interactions with Baker and Robert McKinney (" McKinney" ), Defendant's CFO at the time, Plaintiff's employment with Defendant was terminated.
B. Procedural Background
Approximately two years after his termination, on November 2, 2010, Plaintiff filed a Complaint in this Court, ( see Dkt. No. 1), which he amended on November 29, 2010, ( see Dkt. No. 6). In his Amended Complaint, Plaintiff alleges that Defendant violated Sarbanes-Oxley by firing him in retaliation for the actions that Plaintiff took in regard to the August 4, 2008 Memorandum. ( See Am. Compl. ¶ ¶ 66-70.) Plaintiff alleges that those actions constituted activity protected by Sarbanes-Oxley. ( See id. ¶ ¶ 66-67.)
On February 8, 2013, Defendant moved for summary judgment. ( See Dkt. No. 58.) The Court heard oral argument on Defendant's Motion on June 26, 2013. ( See Dkt. (minute entry for June 26, 2013).) On July 24, 2013, the Court denied Defendant's Motion, rejecting all three of the arguments that Defendant put forward. ( See Opinion & Order (July 24, 2013) (" Opinion & Order" ) (Dkt. No. 107).) On September 6, 2013, Defendant moved for reconsideration. ( See Dkt. No. 111.)
A. Standard of Review
" Motions for reconsideration are governed by Federal Rule of Civil Procedure 59(e) and Local Civil Rule 6.3, which are meant to ensure the finality of decisions and to prevent the practice of a losing party examining a decision and then plugging the gaps of a lost motion with additional matters." Pla v. Renaissance Equity Holdings LLC, No. 12-CV-5268, 2013 WL 3185560, at *1 (S.D.N.Y. June 24, 2013) (internal quotation marks omitted). " The standard for granting a motion for reconsideration under Local Rule 6.3 is strict, so as to avoid repetitive arguments on issues that have been considered fully by the Court." Sampson v. Robinson, No. 07-CV-6890, 2008 WL 4779079, at *1 (S.D.N.Y. Oct. 31, 2008) (internal quotation marks omitted). Furthermore, a " motion for reconsideration is not an opportunity for a losing party to advance new arguments to supplant those that failed in the prior briefing of the issue." VR Global Partners, L.P. v. Bennett (In re Refco Capital Mkts., Ltd. Brokerage Customer Sec. Litig.), Nos. 06-CV-643, 07-CV-8686, 07-CV-8688, 2008 WL 4962985, at *1 (S.D.N.Y. Nov. 20, 2008). " Rather, to be entitled to reconsideration, a movant must demonstrate that the Court overlooked controlling decisions or factual matters that were put before it on the underlying motion, which, had they been considered might reasonably have altered the result reached by the court." Id. (internal quotation marks omitted); see also Pla, 2013 WL 3185560, at *1 (" Such a motion is appropriate where the moving party can point to controlling decisions or data that the court overlooked--matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." (internal quotation marks omitted)). In other words, " [r]econsideration is appropriate only where there is an intervening change of controlling law, newly available evidence, or the need to correct a clear error or prevent manifest injustice." In re Refco, 2008 WL 4962985, at *1 (internal quotation marks omitted).
In its Motion for Reconsideration, Defendant challenges only that part of the Court's Opinion & Order in which the Court rejected the first argument that Defendant made in its Summary Judgment
Motion: that Plaintiff did not engage in protected activity, because he did not " reasonably believe" that the Joint Press Release was fraudulent. ( See Def.'s Mem. of Law in Supp. of Mot. for Reconsideration (" Def.'s Mem." ) 1 (" While [Defendant] respectfully disagrees with the Court's Order in its entirety, [Defendant] does not seek reconsideration of the entire Order. Rather, [Defendant] submits that the Court committed 'clear error' warranting reconsideration of that portion of the Order wherein the Court found that there was a genuine issue of material fact regarding whether Plaintiff had engaged in protected activity." ) (Dkt. No. 113).) The relevant portion of the Opinion & Order reads as follows:
Defendant claims that Plaintiff's belief was unreasonable, because Plaintiff relied on selective quotations from five Wyeth Update slides and merely " glanced" at the full version of the Wyeth Update before submitting the August 4, 2008 Memorandum. Defendant also argues that the Wyeth Update actually supports the May 20, 2008 Press Release and cites Slide 23 and 25 (statistically significant results for 450 mg dosage), Slide 32 (" rapid and predictable" results on the first dose); Slide 34 (a " 95% CI for increase in weekly spontaneous bowel movement over placebo is 0.0-2.2" for specific doses), and Slide 37 (listing different formulations of Relistor).
In evaluating Plaintiff's training and experience, it is undisputed that Plaintiff holds a Ph.D. and master's degree in chemistry and worked at Progenics for approximately four years, primarily on chemical formulations of Relistor. Moreover, there is ample evidence that Plaintiff relied on more than just five slides from the Wyeth Update in forming his belief. In his deposition, Plaintiff explained that he based his opinion, in part, on conversations with Peter Lukacsko and Vivien Wong, other Progenics employees on the Relistor team, in which they discussed " the failed clinical trials," as well as Plaintiff's work on a new salt formulation that he had been directed " urgently" to prepare. Plaintiff stated that he reviewed " some" of the Wyeth Update slides " thoroughly," took a " general glance" at other slides, and ultimately chose to attach five slides to his August 4, 2008 Memorandum, " [b]ecause they summarize the clinical trial results and the formulation work that [Plaintiff] was involved with." In the five slides that he attached to the August 4, 2008 Memorandum, Plaintiff marked several statements: a statement that " Results from oral Phase 2 studies demonstrated that neither the tablet nor the capsule formulations had sufficient activity to satisfy the Confirm advancement criteria" ; a chart stating that " efficacy vs. competition" was " not met" ; and the conclusion that it is " [u]nlikely that either formulation will demonstrate consistent and clinically meaningful effect in Confirm."
In light of Plaintiff's training, education, and experience, a reasonable jury could find that it was objectively reasonable for Plaintiff to rely on conversations with colleagues, his review of the Wyeth Update, as well as his own work to form his belief that the May 22, 2008 Press Release--which reported " positive activity" and stated that " [w]e are pleased by the preliminary findings" --was " misleading" and not " a true reflection of what [was] being discussed behind closed doors." Further, because Plaintiff does not appear to have any knowledge or training in securities law, a jury could find that it was reasonable for Plaintiff to conclude that a press release that he found to be misleading could be
securities fraud, or a violation of an SEC rule or regulation or a law relating to fraud against shareholders. Therefore, the Court finds that Plaintiff has presented sufficient evidence to establish a genuine issue of material fact as to this element.
Perez, 965 F.Supp.2d at 364-66 (citations and footnotes omitted).
Specifically, Defendant " asserts that reconsideration is appropriate here" because " [t]he Court's conclusion in the Order that there is a genuine issue of material fact regarding whether Plaintiff engaged in protected activity was clearly erroneous." (Def.'s Mem. 5.) Defendant argues that the Court's conclusion was clearly erroneous for three reasons: " (1) the May 22 Joint Press Release did not contain any material omissions; (2) the Court improperly relied upon Plaintiff's alleged conversations with Mr. Lukacsko and Dr. Wong; and (3) Plaintiff could not have reasonably believed that the press release's reference to 'positive activity' was fraudulent." ( Id.) The Court will address each of these arguments in turn.
1. Defendant's Omission of Information Regarding Phase 3 Clinical Trials
Defendant's first argument is confusing. It states that, " [t]hroughout this litigation, Plaintiff has argued that he reasonably believed that the May 22 Joint Press Release was fraudulent because it failed to state whether the Tablet Formulation would be advanced to Phase 3 clinical trials." ( Id. at 6.) But according to Defendant, " omitting this information from the press release fails to establish Plaintiff's reasonable belief because such omission does not satisfy the materiality standard." ( Id.) Which is to say, Plaintiff cannot have formed an objectively reasonable belief that the Joint Press Release was fraudulent based on its failure to state whether the Tablet Formulation would be advanced to Phase 3 clinical trials, because that information was immaterial.
However, as the portion of the Court's Opinion & Order reproduced above makes clear, the Joint Press Release's omission of information regarding Phase 3 clinical trials played no part in the Court's determination that a genuine issue of material fact exists as to whether Plaintiff reasonably believed that the Joint Press Release was fraudulent. In fact, the Opinion & Order barely discussed Phase 3 clinical trials in any capacity. In other words, the only relevant holding in the Opinion & Order is that " a reasonable jury could find that it was objectively reasonable for Plaintiff . . . to [have] form[ed] [a] belief" that the Joint Press Release was fraudulent because it " reported 'positive activity' and stated that '[w]e are pleased by the preliminary findings.'" Perez, 965 F.Supp.2d at 365. The Court never held that a reasonable jury could find that it was objectively reasonable for Plaintiff to have formed a belief that the Joint Press Release was fraudulent because it failed to state whether the Tablet Formulation would be advanced to Phase 3 clinical trials.
The distinction reflected by the Court's holding makes sense. In the August 4, 2008 Memorandum, Plaintiff never suggested that the Joint Press Release was fraudulent because it omitted information; rather, Plaintiff repeatedly directed its recipients' attention to affirmative representations contained therein, which representations Plaintiff claimed were fraudulent:
It is my moral duty to alert both Wyeth and Progenics that with the May 22, 2008 press release both companies are committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and I think this is illegal. I believe that the false information in the May 22, 2008
press release constitutes violations of section 1348 (Securities Fraud), rules and regulations of the Securities and Exchange Commission, and provisions of Federal law relating to fraud against shareholders. The information presented in the May 22, 2008 press release is a fraudulent representation of the results of the relevant clinical trial of Relistor that impairs shareholders' ability to make an educated decision about the purchase or sale of Wyeth's and Progenics's securities. Shareholders are being misled about Wyeth's and Progenics's stream of upcoming products.
(Decl. of Jonathan Stoler Ex. X (" August 4, 2008 Mem." ) 2 (emphasis added) (Dkt. No. 62).) Plaintiff specifically identified the affirmative representations to which he was referring:
[O]n page 1 it says: " This study showed positive activity." On page 2 it says: " RELISTOR showed statistically significant activity as assessed by the occurrence of spontaneous bowel movements and other efficacy measures." Also on page 2: " We are pleased by the preliminary findings of this oral formulation." The rosy picture in the press release is in sharp contrast with the assessment of this same trial in the " Relistor Development Strategy Update," which shows that this formulation had no positive activity, efficacy was not met, and there is no reason to be pleased with this oral formulation that is deemed not worth pursuing further. As a consequence of this failure new formulations are being explored.
(Id. at 1.) In short, in his August 4, 2008 Memorandum, Plaintiff accused Defendant and Wyeth of making false statements, not refraining from making true ones.
This distinction is also supported by the law. Sarbanes-Oxley provides, in part, that publicly traded companies may not " discharge . . . an employee . . . because of any lawful act done by the employee . . . to provide information . . . regarding any conduct which the employee reasonably believes constitutes a violation of [certain laws, rules, and regulations] . . ., when the information . . . is provided to . . . a person with supervisory authority over the employee." 18 U.S.C. § 1514A. The law thus clearly links the discharge of the employee to the allegedly wrongful conduct about which the employee provided information. Indeed, to make out a successful Sarbanes-Oxley claim, a plaintiff must " identify specific conduct [he] believed to be illegal." Yang v. Navigators Grp., Inc., F.Supp.2d, 18 F.Supp.3d 519, 2014 WL 1870802, at *9 (S.D.N.Y. May 8, 2014) (emphasis added); see also Sharkey v. J.P. Morgan Chase & Co., No. 10-CV-3824, 2011 WL 135026, at *6 (S.D.N.Y. Jan. 14, 2011) (" A whistleblower need not cite a code section he believes was violated in his communication to his employer, but the employee's communications must identify the specific conduct that the employee believes to be illegal." (emphasis added) (internal quotation marks omitted) (quoting Welch v. Chao, 536 F.3d 269, 276 (4th Cir. 2008))); Fraser v. Fiduciary Trust Co. Int'l, No. 04-CV-6958, 2009 WL 2601389, at *5 (S.D.N.Y. Aug. 25, 2009) (" General inquiries do not constitute protected activity. In order for the whistleblower to be ...