Drug Company's Libel Lawsuit Against Scientists Dismissed

From yesterday's decision by Judge Gregory Woods (S.D.N.Y.) in Cassava Sciences, Inc. v. Bredt:

Cassava Sciences, Inc. ("Cassava") is a biotechnology company that is conducting clinical trials for an Alzheimer's drug called simufilam. Following the second phase of the simufilam clinical trials, multiple short sellers, most of them scientists, published concerns about the integrity of the clinical trials and other studies related to simufilam. They sent letters to the Food and Drug Administration (the "FDA") that painstakingly analyzed published results, data, and methodology, published presentations aimed at investors that summarized the letters and analyzed Cassava's public representations, and posted hundreds of tweets, which were, by their nature, much less rigorous.

Cassava vigorously disagreed with the concerns expressed by the short sellers. Members of the scientific community in Cassava's position have a variety of options. They can publish a thorough, factually supported rebuttal. They can facilitate replication of their results by a neutral, unaffiliated lab. They can invite the scientists expressing concerns to review their unpublished underlying data. Here, Cassava is pursuing another approach: a lawsuit against the people who have critiqued its scientific findings….

Because the Court finds that the majority of the defendants' statements were protected under the First Amendment as statements of opinion or scientific debate, and that the fraction of statements that were adequately alleged to be defamatory were not published with actual malice, it dismisses Plaintiff's claims against all of the defendants.

The opinion is long, and I can't do it justice in this post, but you can read it here. Here's one item, though, that goes beyond the normal analysis of the facts:

Plaintiff claims that Defendants' short positions in Plaintiff's stock gave them an improper motive to make defamatory statements about Plaintiff. But the short positions on their own do not support a showing of actual malice. The short positions could be viewed to support the contrary inference of Defendants' genuine conviction that Plaintiff's stock was overvalued rather than undermine it. While the short position plausibly created a profit motive to publicize the short seller's critiques, that does not lead the Court to infer that they did not subjectively believe those critiques. After all, by shorting the stock, Defendants put their money behind their belief that the stock is overvalued.

Plaintiff also asserts a variety of reasons why Defendants' sources, including Dr. Bredt and various consultants hired by Defendants, may have been biased. Plaintiff asserts that "Dr. Bredt is the named inventor on a neurobiology patent that may compete with Cassava …." and that "Dr. Bredt has also been affiliated with companies … that directly compete with Cassava." Such tenuous allegations are insufficient to raise an inference that at the time he published his statements, Defendant Bredt stood to personally benefit from the depreciation of Plaintiff's stock or that he harbored bias against Plaintiff, and therefore they have little bearing on the Court's analysis of actual malice. For the same reason, Plaintiff's allegations that some of Defendants' sources acted as consultants for "competitor" drug pharmaceutical companies at unspecified times also does not raise an inference that they had a bias against Plaintiff when they provided their critiques of Plaintiff's research.

Plaintiff also alleges that "one or more" of the donors to a website run by one consultant, Dr. Bik, that is funded by reader donations and that investigates scientific fraud "is a Defendant, affiliated with a Defendant, and/or affiliated with other short sellers of Cassava stock." Plaintiff does not plead that Dr. Bik was aware of the donation or the donor's identity, and this allegation is too vague to raise an inference of bias. Moreover, "biases do not establish actual malice without additional facts to suggest the speaker acted pursuant to that bias." Plaintiff does not allege such facts here. Accordingly, Plaintiff's allegations do not suffice to support an inference of actual malice.

See also Magistrate Judge/Zoologist Recommends Dismissal of Drug Company's Libel Claim Against Scientists, which discusses one of the Magistrate Judge's reports and recommendations in this case.