The Eighth Circuit Court of Appeals held in favor of investors earlier this week, saying that the investors could pursue claims against KV Pharmaceutical Corporation for its false and misleading statements made to the U.S. Food and Drug Administration, reports Reuters.
The case had been dismissed in 2010 by a district court.
The lawsuit alleges that the class of investors suffered over $1 billion in losses due to the fact that the generic drug maker made false claims to the FDA in compliance reports and subsequently shut down its manufacturing operations.
The company has been under fire and criminal investigation for the production and sale of over-sized morphine pills.
The securities class action suit didn't focus as much on that issue as it did on the FDA inspections of the pharmaceutical company's facilities over the course of six years. The results of those findings are at the center of the lawsuit.
The lawsuit alleges that the results of those findings, as reported on Form 483, were not in line with the statements made to shareholders and investors.
The main problem was that the Form 483 showed that KV was not in compliance with FDA regulations. According to KV, however, those forms were not representative of the FDA's final determination on compliance.
A federal district judge agreed with KV on the argument, dismissing the case in favor of KV. The
Eighth Circuit Court of Appeals, however, disagreed with the district court on that issue, finding that a prudent investor would find the information important, regardless of whether or not the information represented a final determination.