As securities class action filings continue to rise in the First Circuit, courts in the District of Massachusetts are setting a high bar for pleadings—especially when it comes to alleged material misrepresentations.

This second installment in our three-part series examines how recent decisions in the District of Massachusetts have applied the PSLRA’s safe harbor provision, Rule 9(b)’s particularity requirement, and the “reasonable investor” standard to dismiss securities fraud claims at the pleading stage.

We analyze three key cases—Paice v. Aldeyra Therapeutics, Premca v. iRobot, and Celano v. Fulcrum Therapeutics—that demonstrate how plaintiffs have struggled to overcome these legal thresholds, and what these decisions signal for litigants on both sides of future securities class action filings.

Safe Harbor for Forward-Looking Statements Under the PSLRA

Recent securities class action pleadings have failed to meet the heightened standards for the material misrepresentation element for three main reasons.  First, the PSLRA’s “safe harbor” provisions limit the liability of companies and management for certain “forward-looking” statements, which often refers to statements regarding the company’s plans and goals for specific operations or products.

In Paice v. Aldeyra Theraputics, Inc., No. 23-cv-11737 (D. Mass. Mar. 14, 2025) (Casper, J.) the defendant’s statements of anticipation regarding FDA approval of two New Drug Applications were protected under the PSLRA’s safe harbor provisions, even after the FDA denied both New Drug Applications (NDAs), which led to investor losses. Throughout the class period, the defendant repeatedly disclosed the risk the FDA might not approve the NDAs and the challenged statements, were considered forward-looking statements because they discussed the anticipated outcome of the FDA approval process—even though they were phrased in the present tense.

The Court cited a long history of authority concerning the PSLRA safe harbor indicating that statements anticipating future FDA approval are “typical forward-looking statements” even when phrased in the present tense, and further noted that the defendant gave adequate cautionary statements regarding the potential for FDA denial. For failure to plead the element of a misleading statement, as well as other grounds, the motion to dismiss the complaint was granted in its entirety.

Particularity and Confidential Witness Allegations

Second, many pleadings lack the details required by Rule 9(b)’s heightened pleading standard. In Premca Extra Income Fund LP v. iRobot Corp., 763 F. Supp. 3d 121 (D. Mass. Jan. 27, 2025) (Young, J.) plaintiff offered the statements of two confidential witnesses to support their allegation that defendant iRobot knew, yet failed to disclose, that its acquiror allegedly refused to cooperate with regulatory requests during its proposed merger with iRobot.

Both confidential witness statements described instances where the defendant’s Chief Legal Officer allegedly informed other executives of the acquiror’s strategy to obstruct and refuse cooperation with regulatory requests. The Court closely scrutinized these accounts, concluding that they were “untethered from the time, duration, and scope of the purported lack of cooperation,” and therefore failed to support the allegation.

The complaint’s efforts to supplement “sparse” factual allegations with “surmise and conjecture” fell short of the particularized pleading requirements, and the Court faulted the plaintiff’s conflation of facts and characterization. Because the plaintiff’s complaint failed to adequately allege an actionable false or misleading statement, and on other bases, the Court granted the defendants’ motion to dismiss in its entirety.

Puffery and the Reasonable Investor Standard

Third, the Court’s application of the “reasonable investor” standard has resulted in the dismissal of securities fraud claims where statements framed as misleading are nonetheless non-actionable under securities law.  In Celano v. Fulcrum Therapeutics, Inc., No. 1:23-cv-11125-IT (D. Mass. Mar. 27, 2025) (Talwani, J.) the Court concluded that many of defendant’s optimistic statements regarding a drugs likelihood of FDA approval fell under the category of “puffery,” or facts that would not have influenced a reasonable investor’s decision because they did not materially change the overall body of information available about the company.

The Court stated that “‘[u]pbeat statements of optimism and puffing about [a] company’s prospects’ are not actionable,” as a reasonable investor would not consider such statements in their decision to invest. In Celano, the Court identified thirteen challenged statements as puffery concerning “strategic refocus,” “tremendous potential,” “significant progress,” and “major strides.” Based on its finding that all alleged misstatements but for one were non-actionable, as well as other deficiencies, the Court dismissed the plaintiff’s complaint in its entirety and denied his request for leave to amend.

Key Takeaway: the Bar for Pleading Material Misrepresentations High in the First Circuit

The Paice, Premca and Celano decisions illustrate the strict pleading standards courts apply when evaluating allegedly misleading statements in securities fraud class actions, particularly in the District of Massachusetts. These decisions also highlight common vulnerabilities that defendants can attack, and plaintiffs must attempt to overcome, when litigating securities fraud class action claims.

Part three of this three-part series will examine the District of Massachusetts’ approach to analyzing the scienter element in recent securities fraud class action cases, and will highlight the key takeaways from the District of Massachusetts’ recent rulings.

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Thank you to firm summer associate Jeff Supple for his contribution to this post.