On August 5, WilmerHale scored a significant win for client Karyopharm Therapeutics when the First Circuit unanimously affirmed a decision from the District of Massachusetts dismissing a securities class action suit.

In July 2019, Karyopharm was sued on behalf of a putative class claiming that the company violated the Securities Exchange Act and Securities Act by artificially inflating its stock price through misleading statements and omissions about its leading drug candidate, selinexor, a breakthrough oral medication for the treatment of multiple myeloma. The plaintiff filed multiple amended complaints, which the WilmerHale team moved to dismiss.

On July 21, 2021, Judge Gorton of the District of Massachusetts granted the motion to dismiss. The court held that Karyopharm’s statements regarding the first of two clinical trials were not misleading, and that its statements regarding the second clinical trial, while arguably misleading, were not made with scienter. The court also rejected the Securities Act claim because the plaintiff failed to put forward sufficient facts to establish that his purchase was traceable to Karyopharm’s public offerings. In the decision, Judge Gorton rejected almost all of the plaintiff’s contentions and even incorporated portions of WilmerHale’s brief into his opinion.

Following dismissal, the plaintiff appealed the district court’s ruling with respect to the issue of scienter for the statements regarding the second clinical trial. WilmerHale completed appellate briefing in late 2021 and oral argument was held before the First Circuit on February 8, 2022. In  the briefing and at the hearing, WilmerHale contended that the complaint did not plausibly allege that Karyopharm knew or should have known its statements posed a danger of misleading investors. 

WilmerHale advanced an alternative argument—one that had been made throughout the briefing—that the challenged statements were not misleading in the first place and the court need not reach the scienter question.  On August 5, 2022, six months after the oral argument, the First Circuit affirmed dismissal on those grounds, adopting WilmerHale’s alternative argument that plaintiff had failed to plead any actionable false or misleading statement. Because it found there was no false statement, the Court did not need to reach the issue of scienter.

The WilmerHale team representing Karyopharm includes Peter Spaeth, Allyson Slater, Jocelyn Keider and Mike Bongiorno, who argued the case on appeal.