Duty to Disclose. Orphan Medical, Inc., was a pharmaceutical company that focused on central nervous system disorders.

Its major product was the drug Xyrem. In June 2004, Orphan merged with Jazz, and Orphan shareholders received

$10.75 per share for their stock. Before the merger was fi nal, Orphan completed a phase of testing of Xyrem that indicated that the U.S. Food and Drug Administration (FDA) would allow the drug to go to the next stage of testing, which was necessary for the drug to be widely marketed. If that happened, the value of the drug and Orphan would go up, and the stock would have been worth more than $10.75. Little Gem Life Sciences, LLC, was an Orphan shareholder that received $10.75 a share. It sued, claiming violations of federal securities laws because shareholders were not told, during the merger process, that the current stage of FDA tests had been successful. Little Gem claimed that if the information had been public, the stock price would have been higher.

The district court dismissed the suit, holding that it did not meet the standards required by the Private Securities Litigation Reform Act. Little Gem appealed. Did Orphan’s directors have a duty to reveal all relevant drug-testing information to shareholders? Why or why not? [Little Gem Life Sciences, LLC v. Orphan Medical, Inc., 537 F.3d 913 (8th Cir. 2008)]