NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________
No. 18-2474 _____________
GREGORY VIZIRGIANAKIS; PHONG THOMAS DINH; JAMSHID KHODAVANDI
v.
AETERNA ZENTARIS, INC.; JUERGEN ENGEL; DAVID A. DODD; PAUL BLAKE; NICHOLAS J. PELLICCIONE
Appellants ____________
On Appeal from the United States District Court for the District of New Jersey (No. 3:14-cv-07081) District Judge: Hon. Peter G. Sheridan
Submitted under Third Circuit L.A.R. 34.1(a) April 2, 2019
Before: CHAGARES, HARDIMAN, and SILER, JR.,* Circuit Judges
(Filed: May 30, 2019)
____________
OPINION ____________
* The Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Court of Appeals for the Sixth Circuit, sitting by designation. This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not constitute binding precedent. SILER, Circuit Judge.
Pursuant to Federal Rule of Civil Procedure 23(f), defendants Aeterna Zentaris,
Inc., and its named former employees,1 appeal the district court’s order granting class
certification in this securities action. We will affirm the decision of the district court.
I.
We write for the parties and relate only the necessary facts. In 2009, the
biopharmaceutical company Aeterna acquired the rights to AEZS-130, a drug in
development it sought to have approved for commercialization by the Food and Drug
Administration (“FDA”). To this end, Aeterna agreed to continue an ongoing study of
the drug according to the terms of a Special Protocol Assessment (“SPA”), an agreement
between Aeterna and the FDA regarding how the study should be completed to show the
drug’s safety and efficacy.
According to the complaint, Aeterna issued numerous press releases and other
statements indicating that the study showed the drug was effective in accordance with the
protocol agreed to by the FDA in the SPA. Based on the strength of the “successful”
study, Aeterna sold nearly $75 million of its common stock to the investing public.
In reality, says the complaint, AEZS-130 failed to show efficacy. And in
November 2014, the FDA denied Aeterna’s application to market AEZS-130 publicly,
1 These former employees are: David A. Dodd, Juergen Engel, Nicholas J. Pelliccione, and Paul Blake. 2 because the planned analysis of Aeterna’s “pivotal trial did not meet its stated primary
efficacy objective as agreed to in the Special Protocol Assessment agreement letter
between [Aeterna] and the FDA.”
The current action was filed by Aeterna shareholders. The class action complaint
alleges Aeterna violated Section 10(b) of the Exchange Act and Rule 10b-5 by carrying
out a plan to deceive the investing public and cause class members to purchase Aeterna
stock at artificially inflated prices. It further alleges that several former Aeterna
employees are liable under Section 20(a) of the Exchange Act by virtue of their influence
and control over the false and misleading statements by Aeterna. The district court
granted plaintiffs’ motion for class certification under Federal Rule of Civil Procedure
23(b)(3). Pursuant to Rule 23(f), Aeterna timely appealed.
II.2
“We review a class certification order for abuse of discretion.” Neale v. Volvo
Cars of North America, LLC, 794 F.3d 353, 358 (3d Cir. 2015) (quoting Grandalski v.
Quest Diagnostics Inc., 767 F.3d 175, 179 (3d Cir. 2014)). We bear in mind “[t]he trial
court, well-positioned to decide which facts and legal arguments are most important to
each Rule 23 requirement, possesses broad discretion to control proceedings and frame
issues for consideration under Rule 23.” In re Hydrogen Peroxide Antitrust Litigation,
552 F.3d 305, 310 (3d Cir. 2008) (citation omitted).
2 The district court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1292(e) and Rule 23(f). 3 III.
In a § 10(b) private action, a plaintiff must prove reliance upon the alleged
misrepresentation or omission. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552
U.S. 148, 157 (2008) (citing Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341-
42 (2005)). The district court found that plaintiffs could proceed under a fraud-on-the-
market theory of reliance. This theory “accords plaintiffs in Rule 10b-5 class actions a
rebuttable presumption of reliance if plaintiffs bought or sold their securities in an
efficient market.” In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410,
1419 n.8 (3d Cir. 1997) (internal quotation omitted).
Here, plaintiffs provided an expert report completed by Dr. Adam Werner to prove
market efficiency; the report relied on four dates on which information related to the
development of AEZS-130 was disseminated to conclude that Aeterna stock reflected
publicly available information. On appeal, Aeterna does not contest that plaintiffs raised
the presumption of an efficient market, and therefore class-wide reliance. It argues the
district court erred in finding that it had not rebutted the presumption.
Aeterna’s hired expert, Dr. David Tabak, responded to the declaration of
plaintiffs’ expert, pointing out that Dr. Werner had not proven—to a 95% confidence
level—that the alleged misrepresentations made on August 30, 2011 impacted the price
of Aeterna’s common stock. The district court found this evidence insufficient to rebut
the presumption. It aptly noted that plaintiffs do not have the burden to prove price
impact (or lack thereof), so it was not surprising that their expert’s report did no such
thing. And even were plaintiffs’ study attempting to demonstrate a price impact, the
4 district court reasoned that its failure to do so is not necessarily proof of the opposite.
This conclusion is consistent with the opinion of Dr. Werner and other district courts
weighing similar event studies, including two in this circuit. See West Palm Beach Police
Pension Fund v. DFC Global Corp., No. 13-6731, 2016 WL 4138613, *14 (E.D. Pa.
Aug. 4, 2016) (“[I]t does not necessarily follow from the mere absence of a statistically
significant change in the stock price that there was no price impact” (internal quotation
omitted)); City of Sterling Heights Gen. Empl. Ret. Syst. v. Prudential Finan., Inc., No.
12-5275, 2015 WL 5097883, *12 (D.N.J. Aug. 31, 2015) (failure of statistical
significance on one of six alleged misstatement dates did not show a lack of price impact
sufficient to rebut presumption of reliance).
Further, Dr. Werner found abnormal stock return to a 95% confidence level for the
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________
No. 18-2474 _____________
GREGORY VIZIRGIANAKIS; PHONG THOMAS DINH; JAMSHID KHODAVANDI
v.
AETERNA ZENTARIS, INC.; JUERGEN ENGEL; DAVID A. DODD; PAUL BLAKE; NICHOLAS J. PELLICCIONE
Appellants ____________
On Appeal from the United States District Court for the District of New Jersey (No. 3:14-cv-07081) District Judge: Hon. Peter G. Sheridan
Submitted under Third Circuit L.A.R. 34.1(a) April 2, 2019
Before: CHAGARES, HARDIMAN, and SILER, JR.,* Circuit Judges
(Filed: May 30, 2019)
____________
OPINION ____________
* The Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Court of Appeals for the Sixth Circuit, sitting by designation. This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not constitute binding precedent. SILER, Circuit Judge.
Pursuant to Federal Rule of Civil Procedure 23(f), defendants Aeterna Zentaris,
Inc., and its named former employees,1 appeal the district court’s order granting class
certification in this securities action. We will affirm the decision of the district court.
I.
We write for the parties and relate only the necessary facts. In 2009, the
biopharmaceutical company Aeterna acquired the rights to AEZS-130, a drug in
development it sought to have approved for commercialization by the Food and Drug
Administration (“FDA”). To this end, Aeterna agreed to continue an ongoing study of
the drug according to the terms of a Special Protocol Assessment (“SPA”), an agreement
between Aeterna and the FDA regarding how the study should be completed to show the
drug’s safety and efficacy.
According to the complaint, Aeterna issued numerous press releases and other
statements indicating that the study showed the drug was effective in accordance with the
protocol agreed to by the FDA in the SPA. Based on the strength of the “successful”
study, Aeterna sold nearly $75 million of its common stock to the investing public.
In reality, says the complaint, AEZS-130 failed to show efficacy. And in
November 2014, the FDA denied Aeterna’s application to market AEZS-130 publicly,
1 These former employees are: David A. Dodd, Juergen Engel, Nicholas J. Pelliccione, and Paul Blake. 2 because the planned analysis of Aeterna’s “pivotal trial did not meet its stated primary
efficacy objective as agreed to in the Special Protocol Assessment agreement letter
between [Aeterna] and the FDA.”
The current action was filed by Aeterna shareholders. The class action complaint
alleges Aeterna violated Section 10(b) of the Exchange Act and Rule 10b-5 by carrying
out a plan to deceive the investing public and cause class members to purchase Aeterna
stock at artificially inflated prices. It further alleges that several former Aeterna
employees are liable under Section 20(a) of the Exchange Act by virtue of their influence
and control over the false and misleading statements by Aeterna. The district court
granted plaintiffs’ motion for class certification under Federal Rule of Civil Procedure
23(b)(3). Pursuant to Rule 23(f), Aeterna timely appealed.
II.2
“We review a class certification order for abuse of discretion.” Neale v. Volvo
Cars of North America, LLC, 794 F.3d 353, 358 (3d Cir. 2015) (quoting Grandalski v.
Quest Diagnostics Inc., 767 F.3d 175, 179 (3d Cir. 2014)). We bear in mind “[t]he trial
court, well-positioned to decide which facts and legal arguments are most important to
each Rule 23 requirement, possesses broad discretion to control proceedings and frame
issues for consideration under Rule 23.” In re Hydrogen Peroxide Antitrust Litigation,
552 F.3d 305, 310 (3d Cir. 2008) (citation omitted).
2 The district court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1292(e) and Rule 23(f). 3 III.
In a § 10(b) private action, a plaintiff must prove reliance upon the alleged
misrepresentation or omission. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552
U.S. 148, 157 (2008) (citing Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341-
42 (2005)). The district court found that plaintiffs could proceed under a fraud-on-the-
market theory of reliance. This theory “accords plaintiffs in Rule 10b-5 class actions a
rebuttable presumption of reliance if plaintiffs bought or sold their securities in an
efficient market.” In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410,
1419 n.8 (3d Cir. 1997) (internal quotation omitted).
Here, plaintiffs provided an expert report completed by Dr. Adam Werner to prove
market efficiency; the report relied on four dates on which information related to the
development of AEZS-130 was disseminated to conclude that Aeterna stock reflected
publicly available information. On appeal, Aeterna does not contest that plaintiffs raised
the presumption of an efficient market, and therefore class-wide reliance. It argues the
district court erred in finding that it had not rebutted the presumption.
Aeterna’s hired expert, Dr. David Tabak, responded to the declaration of
plaintiffs’ expert, pointing out that Dr. Werner had not proven—to a 95% confidence
level—that the alleged misrepresentations made on August 30, 2011 impacted the price
of Aeterna’s common stock. The district court found this evidence insufficient to rebut
the presumption. It aptly noted that plaintiffs do not have the burden to prove price
impact (or lack thereof), so it was not surprising that their expert’s report did no such
thing. And even were plaintiffs’ study attempting to demonstrate a price impact, the
4 district court reasoned that its failure to do so is not necessarily proof of the opposite.
This conclusion is consistent with the opinion of Dr. Werner and other district courts
weighing similar event studies, including two in this circuit. See West Palm Beach Police
Pension Fund v. DFC Global Corp., No. 13-6731, 2016 WL 4138613, *14 (E.D. Pa.
Aug. 4, 2016) (“[I]t does not necessarily follow from the mere absence of a statistically
significant change in the stock price that there was no price impact” (internal quotation
omitted)); City of Sterling Heights Gen. Empl. Ret. Syst. v. Prudential Finan., Inc., No.
12-5275, 2015 WL 5097883, *12 (D.N.J. Aug. 31, 2015) (failure of statistical
significance on one of six alleged misstatement dates did not show a lack of price impact
sufficient to rebut presumption of reliance).
Further, Dr. Werner found abnormal stock return to a 95% confidence level for the
other three events in his study, one of which was Aeterna’s June 26, 2012 representation
regarding AEZS-130. Dr. Tabak’s contention that plaintiffs’ legal theory precludes them
from relying on the 2012 representation is a legal conclusion, which the district court
could reject. See Berckeley Inv. Grp. Ltd. v. Colkitt, 455 F.3d 195, 217 (3d Cir. 2006)
(explaining that “an expert witness is prohibited from rendering a legal opinion”). Dr.
Tabak’s contention that the 2012 representation did not provide any new, market-relevant
information conflicts with Dr. Werner’s opposite conclusion. Weighing conflicting
expert testimony is a normal task of the district court at the certification stage and
Aeterna has not shown the district court abused its discretion weighing it here. See In re
DVI, Inc. Sec. Lit., 639 F.3d 623, 633 (3d Cir. 2011), abrogated on other grounds by
Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455 (2013).
5 Finally, Aeterna misreads the district court opinion when it contends the district
court required it to rebut the presumption by proving “with scientific certainty” that the
alleged misrepresentation caused no price movement, a burden it deems “impossible” and
unknown to science and law. Given that the bulk of the reliance challenge centered on
statistical analysis, and a certainty level agreed to by both parties, it is hollow indeed that
Aeterna would read the opinion and believe it divorced from this context.
IV.
In sum, the district court considered the expert report tendered by Aeterna. In
light of plaintiffs’ expert and caselaw concluding otherwise, it rejected Dr. Tabak’s
conclusion that lack of price impact was proven by Dr. Werner’s failure to prove price
impact in his report on market efficiency. The district court also credited Dr. Werner’s
conclusion that the 2012 statement conveyed new, valuation-relevant information, despite
Dr. Tabak’s concluding the opposite. Weighing conflicting expert testimony and making
factual findings are normal functions of the district court at this stage. DVI, 639 F.3d at
633. Aeterna has not shown that either decision was an abuse of discretion.
We will affirm.