CA1: what is enough of a risk under the PSLRA to show scienter

New Jersey Carpenter v. Biogen Idec Inc., No. 07-2626 affirms the dismissal of a Private Securities Litigation Reform Act of 1995 ("PSLRA"), Pub. L. No. 104-67, 109 Stat. 737 case.  The underlying issue involves a drug company with a drug that did some bad things, and when voluntarily withdrawn the price of the stock went down.  The plaintiffs allege that the various insiders traded stock based on their knowledge of the drug and made false statements about the drug and the company.  So, the question comes down to one of whether the plaintiffs were plea scienter with enough particularity. 

The first says that knowledge of five adverse events doesn’t create the kind of knowledge necessary to know the drug is bad.  Essentially, the plaintiffs didn’t claim that the defendants knew enough of a significant risk.  The Court also dismisses a similar theory regarding a different period of time that insiders knew about these problems.