Willa Rosenbloom v. David Pyott

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILLA ROSENBLOOM, derivatively No. 12-55516 on behalf of Allergan, Inc.; DANIEL HIMMEL; POMPANO BEACH POLICE D.C. No. & FIREFIGHTERS RETIREMENT 8:10-cv-01352-

SYSTEM; WASHINGTON LABORERS- DOC-MLG

EMPLOYERS PENSION TRUST, AKA

Western Washington Laborers Employers Pension Trust, OPINION Plaintiffs-Appellants,

v.

DAVID E. I. PYOTT; HERBERT W.

BOYER, AKA Herbert W. Boyer,

M.D.; LOUIS J. LAVIGNE, JR.; GAVIN

S. HERBERT; STEPHEN J. RYAN,

AKA Stephen J. Ryan, M.D.;

LEONARD D. SCHAEFFER; MICHAEL

R. GALLAGHER; ROBERT A. INGRAM;

TREVOR M. JONES, AKA Trevor M. Jones, Ph.D.; DAWN E. HUDSON;

RUSSELL T. RAY; DEBORAH

DUNSIRE, AKA Deborah Dunsire, M.D.; ALLERGAN, INC., a Delaware corporation; HANDEL E. EVANS;

RONALD M. CRESSWELL; LOUIS T.

ROSSO; KAREN R. OSAR; ANTHONY

H. WILD,

Defendants-Appellees. Appeal from the United States District Court for the Central District of California David O. Carter, District Judge, Presiding

Argued and Submitted June 2, 2014—Pasadena, California

Filed September 2, 2014

Before: Stephen Reinhardt,…

specially concurring:

Because it is not necessary to decide the question of the applicable standard of review in our opinion, I write separately to set forth my view that the proper standard is de novo.

The arguments that Plaintiffs advance against the rule of Potter v. Hughes, 546 F.3d 1051 (9th Cir.2008), and In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970 (9th Cir.1999), are compelling. The issue is an important and controversial one, as evidenced by the fact that the Supreme Court granted certiorari to resolve a circuit split on this exact point of law just one year ago (although that case settled before oral argument). See UBS Fin. Servs. Inc. of Puerto Rico v. Union de Empleados de Muelles de Puerto Rico PRSSA Welfare Plan, — U.S. —, 134 S.Ct. 40 , 186 L.Ed.2d 954 (2013).

The problem with Potter and In re Silicon Graphics is simply stated: Courts of Appeals ordinarily review the sufficiency of a complaint’s allegations de novo, and there is no reason why that general rule is not fully applicable to motions to dismiss on the pleadings under Federal Rule of *1160 Civil Procedure 23.1. Recognizing the problems with abuse of discretion review of motions to dismiss for…

Allergan, a specialty pharmaceutical manufacturer, produces Botox, a well-known cosmetic and therapeutic drug. In 2010, faced with allegations that it had acted illegally in marketing and labeling Botox, Allergan settled several qui tom suits and pled guilty in a criminal ease. Allergan ultimately paid a total of $600 million in part for civil settlements and in part as a criminal fíne. Shortly afterward, Plaintiffs, all Allergan shareholders, filed a derivative action alleging that Allergan’s directors are liable for violations of various state and federal laws, as well as for breaches of their fiduciary duties to Aller-gan. Plaintiffs did not, however, first *1141 make a demand on Allergan’s board requesting that Allergan bring the derivative claims in its own name. The district court dismissed their action on the ground that Plaintiffs failed to allege particularized facts showing that demand was excused, as Federal Rule of Civil Procedure 23.1 requires. In so doing, however, it misapplied governing Delaware law and improperly drew inferences against Plaintiffs rather than in their favor. We conclude that Plaintiffs’ particularized allegations establish a reasonable…