It is not as if the Wednesday slot is reserved for flakey stuff, but we’ll confess a weakness for cases from the Ninth Circuit, where we clerked. A lot of craziness percolates up through federal courts out there. We also have a soft spot for cases that are not exactly in the product liability heartland but involve areas of the law we practiced in years before we encountered drug and device litigation. Faithful readers know that we grab hold of criminal cases. That is because we worked in the U.S. Attorney’s Office (yes, we know you have heard it before – it is the best job a lawyer can have — well, it used to be). We also look for interesting tidbits from securities, M&A, and antitrust cases, which we worked on before we joined the prosecutorial ranks. That work forced us to pull many all-nighters, and it was by no means as much fun as trying bank robbery or wire fraud cases, but it was intellectually challenging, the stakes were high, and the clients paid handsomely. The problem with securities cases is that they almost never went to trial. Clients expected us to get rid of the cases before they ever got within sniffing distance of a jury.
The defendant in the securities case of Sneed v. Talphera, Inc., 2025 WL 2406424 (9th Cir. Aug. 20, 2025), managed at the pleading stage to get rid of this case brought under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. We do not usually blog about securities cases, but this to-be-published Ninth Circuit affirmance of the grant of a motion to dismiss involving a pharmaceutical company makes a couple of points that could come in useful in product liability/consumer protection litigation.
The claims focused on a “pithy” drug slogan (“tongue and done”) that prompted an FDA warning letter. The product was a sublingual (under the tongue) opioid drug. The slogan highlighted the ease of administration of the drug. The plaintiffs in the Sneed case contended that the slogan, which appeared in marketing materials as well as the company chief executive officer’s speech at a conference, was misleading via omission. What was omitted? According to the plaintiffs, the slogan left out that the drug’s approval by the Food and Drug Administration (FDA) was conditioned on compliance with a Risk Evaluation and Mitigation Strategy (REMS) that required patients to receive the painkiller in medically-supervised settings such as hospitals, surgical centers, and emergency departments. A patient could not simply pick up the drug at a drug store and self-administer at home. The purpose of the REMS was to prevent unauthorized distribution of the opioid.
The district court dismissed the case because the slogan, read in context, could not mislead a reasonable investor. Remember, this is a securities case, so the plaintiffs, and the audience for the allegedly misleading communications, were investors, not patients or their prescribers.
The plaintiffs appealed to the Ninth Circuit. Speaking of “pithy,” the appellate court’s opening lines in its opinion are pretty good: “Can a snappy slogan for a potent pharmaceutical be deceptive and lead to liability under our securities laws? Not in this case where the company provided additional disclosures alongside the slogan in materials intended for investors.”
Two points are of particular interest. First, the slogan could not have misled a “reasonable investor” – that is similar to the “reasonable consumer” standard in state product liability and consumer protection cases – and the decision draws that analogy. A reasonable investor would not have viewed the three-word slogan in isolation and would not have “blindly accepted a marketing slogan” in deciding to invest (just like reasonable consumers/prescribers would have looked past the slogan is deciding to use the product to treat a medical condition. “Indeed, even a reasonable consumer—who, unlike a reasonable investor, is not presumed to carefully scour all the fine print—understands that a slogan is just that.” The labeling for the drug discussed the REMS and a boxed warning. Context matters.
Second, the decision holds that a warning letter from the FDA is not dispositive of whether the information at issue was false. The FDA warning letter said that the drug was misbranded because the slogan did not provide a balanced description of the risks and benefits of the drug. (FYI, here is the FDA Law Blog’s reaction to the original warning letter back in 2012.) One could easily understand why the plaintiffs sought to exploit the FDA warning letter. But the court held that the “FDCA imposes different legal requirements and targets a different audience. FDA warning letters are thus not dispositive or even necessarily probative of falsity claims.” The same can be – and has been − said of warning letters in product liability litigation, but having a published Ninth Circuit case making the same point is helpful (particularly in that circuit).
To be sure, there are differences between securities and product liability cases, and those differences are – to use a key concept from securities litigation – “material.” But the Sneed court’s analysis of what is misleading and what a FDA warning letter means can be deployed to support the general thrust of defense arguments in the analogous product liability situation.
The Sneed court also addressed scienter, a crucial element in securities fraud cases. As with falsity, scienter must be considered in context (the court says “holistically”). Given the company’s disclosure of the REMS restrictions in various materials, the court interpreted the facts to suggest that the company and CEO “most likely made a good faith determination that the ‘Tongue and Done’ slogan would truthfully highlight [the drug’s] major selling point.”