United States District Court, S.D. California
ORDER (1) DENYING LEAD PLAINTIFF'S MOTION TO
COMPEL AND (2) GRANTING DEFENDANTS' MOTION TO COMPEL [ECF
Nos. 113, 117]
Barbara L. Major United States Magistrate Judge
before the Court is Lead Plaintiff's “Motion to
Compel” [ECF No. 117-1 (“Pl.'s MTC”)],
Defendants' “Motion to Compel Response to
Interrogatory No. 8 Relating to Confidential Witnesses”
[ECF No. 113-1 (“Defs.' MTC”)],
Defendants' opposition to Lead Plaintiff's motion
[ECF No. 120 (“Defs.' Oppo.”)], and Lead
Plaintiff's opposition to Defendants' motion [ECF No.
121 (“Pl.'s Oppo.”)]. For the reasons set
forth below, Lead Plaintiff's motion is
DENIED and Defendants' motion is
facts set forth are taken from the Consolidated Amended Class
Action Complaint [ECF No. 43 (“Compl.”)] and
Second Amended Complaint [ECF No. 59 (“SAC”)] or
documents incorporated therein. The Consolidated Amended
Class Action Complaint and the SAC allege that Arena
Pharmaceuticals, Inc. (“Arena”) and its senior
executives violated Section 10(b) and 20(a) of the Securities
and Exchange Act of 1934 (“Exchange Act”) and
Rule 10b-5 promulgated thereunder by making materially false
statements and/or omitting to disclose material facts
concerning the safety and the completeness of the data needed
for the U.S. Food and Drug Administration's
(“FDA”) approval of Arena's developmental
weight loss drug, Lorcaserin.Compl.; SAC; see also
Schueneman v. Arena Pharms., Inc., 840 F.3d 698, 709
(9th Cir. 2016) (finding that Lead Plaintiff's theory is
that “Defendants intentionally withheld information
material to the market's assessment of whether and when
the FDA would likely approve [L]orcaserin”).
obtain FDA approval to market Lorcaserin, Arena had to
demonstrate Lorcaserin's safety and efficacy based on
non-clinical/pre-clinical animal studies and clinical trials
on humans. Compl. at 12-13. As part of Lorcaserin's new
drug application to the FDA, Arena was required to conduct a
long-term study of the potential carcinogenesis on rats
(“Rat Study”). Id. at 14. The Rat Study
was a two-year non-clinical/pre-clinical carcinogenicity
study on rats that began in 2007 and was designed to
approximate a lifetime of human use and to assess the risk to
humans. SAC at 5, 17.
February 2007, the Rat Study indicated that Lorcaserin caused
mammary, brain, skin, and nerve-sheath tumors, including
lethal, malignant mammary and brain tumors. Id. at
6. In September 2007, the FDA told Arena it was concerned
that the Rat Study data reflected potential effects in humans
and that Arena needed to dispel this concern with data on
animals and humans exposed to Lorcaserin. ECF No. 61-5 at 7,
April 2008, the FDA and Arena representatives met to discuss
the causes of mammary tumors in rats and the FDA's
concern about the tumors' significance to humans. ECF No.
61-5 at 8. The FDA approved Arena's written warning to
humans in the clinical trials and told Arena that animal
mechanistic studies and continued clinical studies of humans
exposed to Lorcaserin could dispel its concern about the Rat
Study data. Id. At that time, Arena representatives
hypothesized that the tumors were attributable to a
rodent-specific mechanism. Id. The FDA did not halt
Lorcaserin's ongoing human clinical trials, but did
request bi-monthly updates. SAC at 7-9, 18-20.
provided the bi-monthly updates until completion of the Rat
Study and submission of the draft report on the Rat Study to
the FDA on February 3, 2009. ECF No. 61-4 at 14, Exhibit C.
Arena's bi-monthly updates included “initial
reads” of data that were not reviewed by outside
pathologists. Compl. at 20-22. The Rat Study concluded that
“breast tumors developed at all doses, and that
Lorcaserin caused brain tumors as well as many other
malignant tumors.” SAC at 9, 22. Arena's final
report to the FDA included a peer-reviewed analysis by
“three [non-Arena] veterinary pathologists” who
concluded there were fewer malignant tumors than Arena
initially reported to the FDA, but there was an
“apparent increase in aggressiveness of adenocarcinoma
in rats administered Lorcaserin.” Compl. at 5, 8.
Plaintiffs allege that the data submitted to the FDA failed
to show that the results of the Rat Study were irrelevant to
humans. SAC at 22.
December 2009, Defendants filed Lorcaserin's New Drug
Application (“NDA”) and the FDA appointed the
Advisory Committee, comprised of physicians and scientists,
to discuss and vote on whether to recommend FDA approval for
Lorcaserin. Compl. at 7. The Advisory Committee was scheduled
to meet on September 16, 2010. Id. Investors first
learned about the Rat Study data in September 2010, when the
Advisory Committee voted 9-5 against recommending approval
for Lorcaserin. Id. at 6-8.
October 2010, Arena publicly disclosed that the FDA completed
its review of the NDA and found that it could not approve the
NDA “in its present form” because it failed to
demonstrate that the Rat Study was irrelevant to humans.
Id. at 19-22.
allege that Defendants knew by the beginning of the Class
Period (March 17, 2008 through January 27, 2011) that the Rat
Study indicated that Lorcaserin caused cancer and yet failed
to disclose that information to investors. Compl. at 14.
Plaintiffs further allege that the negative results of the
Rat Study and the FDA's concerns over the data
constituted material facts that should have been, but were
not, disclosed to investors and that instead of disclosing
this information, Defendants repeatedly falsely represented
that Lorcaserin was safe and made materially false and
misleading representations about non-clinical study results.
Id. at 54-55. Additionally, Plaintiffs allege that
when the misrepresentations were disclosed and became
apparent on the market, Arena's securities declined
precipitously. Id. Plaintiffs allege that as a
result of their purchases of Arena securities during the
Class Period, they suffered economic loss. Id.
The scope of discovery under the Federal Rules of Civil
Procedure is defined as follows: Parties may obtain discovery
regarding any nonprivileged matter that is relevant to any
party's claim or defense and proportional to the needs of
the case, considering the importance of the issues at stake
in the action, the amount in controversy, the parties'
relative access to relevant information, the parties'
resources, the importance of discovery in resolving issues,
and whether the burden or expense of the proposed discovery
outweighs the likely benefit. Information within this scope
of discovery need not be admissible in evidence to be
Fed. R. Civ. P. 26(b)(1).
courts have broad discretion to determine relevancy for
discovery purposes. See Hallet v. Morgan, 296 F.3d
732, 751 (9th Cir. 2002). District courts also have broad
discretion to limit discovery to prevent abuse. See
Fed.R.Civ.P. 26(b)(2) (instructing that courts must limit
discovery where the party seeking the discovery “has
had ample opportunity to obtain the information by discovery
in the action” or where the proposed discovery is
“unreasonably cumulative or duplicative, ”
“obtain[able] from some other source that is more
convenient, less burdensome, or less expensive, ” or
where it “is outside the scope permitted by Rule
26(b)(1)”). Pursuant to Federal Rule of Civil Procedure
37, “a party may move for an order compelling
disclosure of discovery.” Fed.R.Civ.P. 37(a)(1). The
party seeking to compel discovery has the burden of
establishing that its request satisfies the requirements of
Rule 26. Soto v. City of Concord, 162 F.R.D. 603,
610 (N.D. Cal. July 17, 1995). Thereafter, the party opposing
discovery has ...