Published On: January 29, 2015Categories: Securities and Investor, Fraud

Judge Dismisses Securities Class Action Finding that Management “Genuinely Believed” Its Financial Projections

A New York federal court threw out two securities class actions against French Drug manufacturer Sanofi. Investors claimed they were misled by Sanofi’s optimistic financial projections stemming from its drug “Lemtrada”– which had been developed by Genzyme (recently acquired by Sanofi). The court found that Sanofi’s executives genuinely believed their projections because they had been unaware of latent regulatory concerns surrounding Lemtrada. Once those concerns came to Sanofi’s attention, the story goes, they corrected their disclosures.

Generally, under an SEC safe harbor provision, a company is allowed to make forward looking statements without the risk of liability if those statements are couched in terms that they are forward looking statements, subject to risks and unknown contingencies, even if the projection does not come to be. Sanofi hung its hat on this provision of the safe harbor and the judge apparently agreed. While negligence is not typically grounds for fraud under the securities laws, recklessness is–as is reckless avoidance of the truth. It is unclear whether plaintiffs had access to such evidence which otherwise might have kept the case alive (e.g., if they could show that Sanofi ‘should have known’ about the regulatory risks).

The case is In re Sanofi Securities Litigation, case numbers 1:13-cv-08806 and 1:14-cv-02211, in the U.S. District Court for the Southern District of New York. For more information, contact Dallas Securities class action attorney Mazin A. Sbaiti, Esq. at or at (214) 432-2899.