April 13, 2009

Get Your Own Little Birdy

A plaintiff can rely on an anonymous source to plead securities fraud, but can he rely on someone else's anonymous source? In Vladimir v. Bioenvision Inc., 2009 WL 857552 (S.D.N.Y. March 31, 2009), the plaintiffs alleged that Bioenvision had entered into a merger agreement as of January 2007, but failed to disclose it to the market. The factual basis for the allegation was a state employment action brought by a former Bioenvision officer. In his complaint, the former officer alleged that he had "been informed” that the merger was agreed to at a January 2007 “secret” meeting. The court found that the plaintiffs in the securities class action could not rely upon allegations from the former officer's anonymous source to satisfy their pleading obligations.

Holding: Motion to dismiss granted.

Quote of note: "Plaintiffs have not alleged anything at all about [the former officer's] alleged anonymous source, let alone describing him with any particularity whatsoever, and the Court is wholly unable to determine whether this source was in a position to know what he is alleged to have told [the former officer], or, in fact, whether or not this alleged anonymous source even exists. The Court therefore cannot credit any of these allegations that come from an alleged anonymous source of [the former officer's], which were adopted wholesale and relied upon by plaintiffs here to make serious charges of fraud."

Posted by Lyle Roberts at April 13, 2009 10:06 PM | TrackBack
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