Degulis v. LXR Biotechnology, Inc.
| Decision Date | 06 June 1996 |
| Docket Number | 95 Civ. 6422 (RWS) and 95 Civ. 7215 (RWS).,No. 95 Civ. 4204 (RWS),95 Civ. 4299 (RWS),95 Civ. 4298 (RWS),95 Civ. 4204 (RWS) |
| Citation | 928 F. Supp. 1301 |
| Parties | Joseph DEGULIS, Plaintiff, v. LXR BIOTECHNOLOGY, INC., Mark S. Germain, L. Scott Minick, Mark J. Tomei, James D. Coombes, David Blech, D. Blech & Company, Inc. and Shoenberg Hieber, Inc., Defendants. George KOZLOSKI, Plaintiff, v. INTELLIGENT SURGICAL LASERS, Heinz R. Gisel, Ted G. White, Edward M. Lake, Robert J. Feeney, Jr., Anthony B. Envin, Robert J. Kunze, Ann H. Lamont, C. Christian Von Weizsacker, David Blech, and D. Blech & Co., Inc., Defendants. John DEGULIS, Plaintiff, v. ARIAD PHARMACEUTICALS, INC., Harvey J. Berger, Edgar Haber, David Blech, D. Blech & Co., Inc. and Shoenberg Hieber, Inc., Defendants. Bernard WEISS, et al., Plaintiffs, v. David BLECH, Texas Biotechnology Corporation, John M. Pietruski, David B. McWilliams, Richard A.F. Dixon, Stephen L. Mueller, John R. Plachetka, Joseph M. Welch, James T. Willerson, D. Blech & Co., Inc. and Issac Blech, Defendants. Robert KATZ, on behalf of himself and all others similarly situated, Plaintiffs, v. David BLECH, LXR Biotechnology, Inc., Mark S. Germain, L. Scott Minick, Mark J. Tomei, James D. Coombes and Christopher S. Henney, Defendants. |
| Court | U.S. District Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Milberg Weiss Bershad Hynes & Lerach, New York City (David J. Bershad, Richard H. Weiss, Brad N. Friedman, of counsel), Chair of Plaintiffs' Executive Committee, Kaplan, Kilsheimer & Fox, New York City (Robert N. Kaplan, Richard J. Kilsheimer, of counsel), Gilman and Pastor, Boston, MA (Kenneth G. Gilman, Peter Lagoria, of counsel), Bernstein Liebhard & Lifshitz, New York City (Sandy A. Liebhard, of counsel), Members of Plaintiffs' Executive Committee, for Plaintiffs.
Michael J. Pucillo, Wendy H. Zoberman, West Palm Beach, FL, Sullins, Johnston, Rohrbach & Magers, Houston, TX (Herbert T. Schwartz, of counsel), Kipnis, Tescher, Lippman, Valinsky & Kain, Ft. Lauderdale, FL (Howard Tescher, of counsel), for Bernard Weiss.
Zwerling, Schachter, Zwerling & Koppell, New York City (Robert S. Schacter, Mary E. Neu, of counsel, Berman DeValerio, Pease & Tabacco, San Francisco, CA (Joseph J. Tabacco, Jr., Nicole Lavallee, of counsel), Goodkind Labaton Rudoff & Sucharow, New York City (Joel H. Bernstein, of counsel), for Robert Katz.
Robinson Silverman Pearce Aronsohn & Berman, New York City (Eric Rieder, Noah M. Weissman, of counsel), for Defendant Mark S. Germain.
Paul, Weiss, Rifkind, Wharton & Garrison, New York City (Max Gitter, of counsel), for Defendants Ariad Pharmaceuticals, Inc., Harvey J. Berger and Edgar Haber.
Morgan, Lewis & Bockius, New York City (Michele Connaughton, of counsel), for Defendants Intelligent Surgical Lasers, Inc., Heinz R. Gisel, Ted G. White, Edward M. Lake, Robert J. Fenney, Jr., Anthony B. Envin, Robert J. Kunze, Ann H. Lamont and C. Christian Von Weizsacker.
Thelen, Marrin, Johnson & Bridges, New York City (Jonathan E. Polonsky, of counsel), for Defendants LXR Biotechnology, Inc., Mark J. Tomei, James D. Coombes, L. Scott Minick and Christopher S. Henry.
Porter & Hedges, Houston, TX (Mark K. Glasser, of counsel), Miller & Wrubel, New York City (Martin D. Edel, of counsel), for Defendants Texas Biotechnology Corp., John M. Pietruski, David B. McWilliams, Richard A.F. Dixon, Stephen L. Mueller, John R. Plachetka, Joseph M. Welch and James T. Willerson.
Defendants in four related cases arising under Sections 11, 12(2) and 15 of the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77k(a), 77l(a)(2), 77o, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§ 78j(b), 78t(a), have moved to dismiss the claims against them pursuant to Federal Rule of Civil Procedure Rule 9(b) on the ground that the Complaints fail to plead fraud with particularity, and pursuant to Federal Rule of Civil Procedure 12(b)(6), on the ground that the Complaints fail to state a claim upon which relief may be granted. In Katz v. Blech, 95 Civ. 7215 (RWS), ("Katz" or the "Katz Action"), those motions have been made by Defendants L. Scott Minick ("Minick"), Mark J. Tomei ("Tomei"), James D. Coombes ("Coombes") and Christopher S. Henney ("Henney") (collectively, the "Individual LXR Defendants") and LXR Biotechnology, Inc. ("LXR") (collectively the "LXR Defendants"), and Mark S. Germain ("Germain"). In Degulis v. LXR Biotechnology, 95 Civ. 4204 (RWS) ("LXR" or the "LXR Action"), the motions have been made by LXR, Tomei, Coombes and Germain. In Degulis v. Ariad, 95 Civ. 4298 (RWS), ("Ariad" or the "Ariad Action"), the motions have been made by defendants Harvey J. Berger ("Berger") and Edgar Haber ("Haber") (collectively, the "Individual Ariad Defendants") and Ariad Pharmaceuticals, Inc. ("Ariad") (collectively, the "Ariad Defendants"). In Kozloski v. Intelligent Surgical Lasers, 95 Civ. 4299 (RWS), ("ISL" or the "ISL Action"), the motions have been brought by defendants Heinz R. Gisel ("Gisel"), Ted G. White ("White"), Edward M. Lake ("Lake"), Robert J. Feeney, Jr. ("Feeney"), Anthony B. Evnin ("Evnin"), Robert J. Kunze ("Kunze"), Ann H. Lamont ("Lamont") and C. Christian Von Weizsacker ("Von Weizsacker") (collectively, the "Individual ISL Defendants") and Intelligent Surgical Lasers, Inc. ("ISL") (collectively, the "ISL Defendants"). For the reasons set forth below, those motions will be denied.
Defendants in a fifth related case, Weiss v. Blech, 95 Civ. 6422 (RWS), brought pursuant to Sections 11, 12 and 15 of the Securities Act, John M. Pietruski ("Pietruski"), David B. McWilliams ("McWilliams"), Richard A.F. Dixon ("Dixon"), Stephen L. Mueller ("Mueller"), John R. Plachetka ("Plachetka"), Joseph M. Welch ("Welch") and James T. Willerson ("Willerson") (the "Individual TBC Defendants") and Texas Biotechnology Corporation ("TBC") (collectively, the "TBC Defendants") have moved for reconsideration pursuant to Federal Rule of Civil Procedure 54(b) of the Order dated August 4, 1995, of the Honorable Kenneth M. Hoyt, United States District Judge for the United States District Court for the Southern District of Texas, Houston Division, denying their motion to dismiss under Fed.R.Civ.P. 9(b) and 12(b)(6) (the "Texas Order"), and, on reconsideration, for dismissal, pursuant to Fed. R.Civ.P. 9(b) and 12(b)(6). (The Individual Ariad Defendants, the Individual ISL Defendants, the Individual LXR Defendants and the Individual TBC Defendants are collectively referred to as the "Individual Defendants".)
For the reasons set forth below, the motion to reconsider will be granted, and, on reconsideration, the motions to dismiss will be denied.
Ariad and LXR Plaintiff Joseph Degulis purchased units, including common stock and warrants, in the initial public offerings ("IPOs") of Ariad and LXR. ISL Plaintiff George Kozloski purchased shares of ISL in its IPO. Katz plaintiff Robert Katz purchased shares in LXR's IPO. Weiss Plaintiffs Bernard Weiss and Richard Hunt purchased stock and warrants in TBC's IPO. Degulis, Kozloski, Weiss and Hunt (collectively, "Plaintiffs") seek to bring this action on behalf of themselves and others similarly situated.
David Blech, a defendant in all of these actions, was managing director and sole shareholder of Blech & Co. Blech served at various times on the boards of directors of Ariad, ISL, LXR and TBC (collectively, the "Companies").
Blech & Co., a defendant in Ariad, ISL, LXR and Weiss, was a registered brokerdealer. It acted as the underwriter for several companies, primarily in the biotechnology field, including — as sole underwriter — for each of the Companies. Blech & Co. ceased operations in September 1994.
Weiss Defendant Isaac Blech is David Blech's brother.
Katz and LXR Defendant Germain was a managing director of Blech & Co. until it ceased operations. Germain served as a director of LXR from April 1993 through October 1994 and served as Chairman of the Board from December 1993 through the end of his tenure as director.
Ariad is a biotechnology company engaged in the research and development of pharmaceuticals.
Berger is Chairman, President and CEO of Ariad. Haber, an outside director, is Vice Chairman of the Ariad board. Both hold stock in Ariad. Berger and Haber signed the 1994 Ariad Registration Statement.
Non-movant Shoenberg is a registered broker-dealer. It served as the "qualified independent underwriter" in connection with the Ariad and LXR IPOs. Shoenberg was engaged to deliver an opinion on the offering price of those stocks in light of Blech's and Blech & Co.'s relations with Ariad and LXR.
ISL is a biotechnology company engaged in the research and development of pharmaceuticals.
Gisel, White, Lake, Feeney, Evnin, Kunze, Lamont, Von Weizsacker are officers and directors who signed the Registration Statement for ISL's initial public offering.
Minick, Tomei, Coombes and Henney were officers and/or directors of LXR at the time of the IPO. Minick was the President and Chief Executive Officer and a director of the Company. Tomei was the Chief Operating Officer, Chief Financial Officer, secretary and director of the Company. Coombes was a member of the Board of Directors and the Company's audit committee and a consultant to LXR. Henney was a member of the Board of Directors and the audit committee. Minick, Tomei, Coombes and Henney signed the Registration Statement. Minick, Tomei and Coombes owned LXR stock at the time of the IPO.
TBC is a biopharmaceutical company engaged in the research and development of molecular drugs.
Pietruski was, at the time of the Company's IPO, the Chairman of the Board of Directors of TBC. McWilliams was TBC's President and Chief Executive Officer and a member of the Board of...
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