Ziegler v. GW Pharmaceuticals, PLC

• Court: District Court, S.D. California
• Decided: January 18, 2022
• Docket: 3:21-cv-01019
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 KURT ZIEGLER, Case No. 21-cv-01019-BAS-MSB

12 Plaintiff, ORDER: 13 v. (1) APPOINTING LEAD 14 GW PHARMACEUTICALS, PLC, et al., PLAINTIFF; AND 15 Defendants. (2) APPROVING SELECTION OF 16 LEAD COUNSEL 17 (ECF No. 7) 18

19 20 21 22 23 24 This is a federal securities class action pertaining to allegedly false and misleading 25 statements made by Defendant GW Pharmaceuticals, PLC (“GW”), and its officers, 26 regarding a merger agreement between GW and Jazz Pharmaceuticals, PLC (“Jazz”), 27 which closed on May 5, 2021. Pending before the Court is a motion for appointment of 28 Lead Plaintiff and Lead Counsel in this litigation. (ECF No. 7.) For the reasons herein, 1 the Court appoints Kurt Ziegler and Daniel Brady as Lead Plaintiff and approves their 2 selection of Lead Counsel. 3 4 I. APPOINTMENT OF LEAD PLAINTIFF 5 Pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”), the 6 district court “shall appoint as lead plaintiff the member or members of the purported class 7 that the court determines to be the most capable of adequately representing the interest of 8 the class members[.]” 15 U.S.C. § 78u-4(a)(3)(B)(i). “[A] ‘group of persons’ can 9 collectively serve as a lead plaintiff.” In re Cavanaugh, 306 F.3d 726, 731 n.8 (9th Cir. 10 2002). The PSLRA creates a rebuttable presumption that the most adequate plaintiff 11 should be the plaintiff who: (1) has filed the complaint or brought the motion for 12 appointment of lead counsel in response to the publication of notice, (2) has the “largest 13 financial interest” in the relief sought by the class, and (3) otherwise satisfies the 14 requirements of Federal Rule of Civil Procedure 23. 15 U.S.C. § 78u- 15 4(a)(3)(B)(iii)(I)(aa)–(cc). The presumption may be rebutted only upon proof that the 16 presumptive lead plaintiff: (1) will not fairly and adequately protect the interests of the 17 class or (2) is subject to “unique defenses” that render such plaintiff incapable of adequately 18 representing the class. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa)–(bb). 19 By its terms, the PSLRA “provides a simple three-step process for identifying the 20 lead plaintiff” in a private securities class action litigation. In re Cavanaugh, 306 F.3d 726, 21 729 (9th Cir. 2002). “The first step consists of publicizing the pendency of the action, the 22 claims made and the purported class period.” Id. At the second step, “the district court 23 must consider the losses allegedly suffered by the various plaintiffs,” and select as the 24 “presumptively most adequate plaintiff . . . the one who has the largest financial interest in 25 the relief sought by the class and otherwise satisfies the requirements of Rule 23 of the 26 Federal Rules of Civil Procedure.” Id. at 729–30 (internal citations omitted). Finally, at 27 the third step, the district court “give[s] other plaintiffs an opportunity to rebut the 28 presumptive lead plaintiff’s showing that it satisfies Rule 23’s typicality and adequacy 1 requirements.” Id. at 730. The Court undertakes each of these steps for the consolidated 2 action. 3 4 A. Preliminary Procedural Requirements 5 Pursuant to the PSLRA, a plaintiff who files a securities litigation class action must 6 provide notice to class members via publication in a widely-circulated national business- 7 oriented publication or wire service within 20 days of filing the complaint. 15 U.S.C. 8 § 78u-4(a)(3)(A)(I). The notice must: (1) advise class members of the pendency of the 9 action, the claims asserted therein, and the purported class period; and (2) inform potential 10 class members that, within 60 days of the date on which notice was published, any members 11 of the purported class may move the court to serve as lead plaintiff in the purported class. 12 15 U.S.C. § 78u-4(a)(3)(A)(i)(I)–(II). 13 This action was filed in this District on May 27, 2021. (ECF No. 1.) Notice was 14 published in PRNewswire on June 4, 2021, by the law firm Monteverde & Associates PC. 15 (Bower Decl. Ex. A, ECF No. 7-1; Bower Decl. ¶ 2, ECF No. 7-8.) The notice was timely 16 published within 20 days after the filing of the complaint, it lists the claims and the class 17 period, and it advises putative class members that they had 60 days from the date of the 18 notice to file a motion to seek appointment as lead plaintiff in the lawsuit. See 15 U.S.C. 19 § 78u-4(a)(3)(A). Ziegler and Brady filed a motion for appointment as lead plaintiff within 20 the allotted period. Thus, notice in this action is proper and the movants have satisfied the 21 statutory procedural requirements for moving to be appointed as Lead Plaintiff. 22 23 B. Financial Interest 24 The PSLRA mandates that the district “court shall consider any motion made by a 25 purported class member in response to the notice . . . and shall appoint as lead plaintiff the 26 member or members of the purported plaintiff class that the court determines to be most 27 capable of adequately representing the interest of class members.” 15 U.S.C. § 78u- 28 4(a)(3)(B)(i). The PSLRA creates a presumption that the most capable plaintiff is the one 1 who “has filed the complaint or brought the motion for appointment of lead counsel in 2 response to the publication of notice” and “in the determination of the court, has the largest 3 financial interest in the relief sought by the class.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb); 4 see also Inchen Huang v. Depomed, Inc., 289 F. Supp. 3d 1050, 1052 (N.D. Cal. 2017). In 5 practice, district courts “equate financial interest with actual economic losses suffered” or 6 “with potential recovery.” Perlmutter v. Intuitive Surgical, Inc., No. 10-cv-3451-LHK, 7 2011 WL 566814, at *3 (N.D. Cal. 2011) (citations omitted); see also Inchen Huang, 289 8 F. Supp. 3d at 1052 (“[A]pproximate losses in the subject securities is the preferred 9 measure.”) (quoting Bruce v. Suntech Power Holdings Co., No. CV 12-04061 RS, 2012 10 WL 5927985, at *2 (N.D. Cal. Nov. 13, 2012)). 11 Here, Ziegler is the one who has filed the Complaint, and Ziegler and Brady together 12 move for appointment of lead plaintiff and lead counsel. Ziegler submits that he held 100 13 American Depositary Shares (“ADS”) of GW before the merger, and Brady submits that 14 he held 250 ADS of GW during the relevant period. (Exs. B, C to Bower Decl., ECF Nos. 15 7-2, 7-3.) No one else has filed a competing motion for appointment of lead plaintiff. 16 Where, as here, the movants “are the sole parties seeking to be appointed as Lead 17 Plaintiffs,” they are “entitled to the presumption that [they hold] the largest financial 18 interest.” Siegall v. Tibco Software, Inc., No. C 05-2146 SBA, 2006 WL 1050173, at *4 19 (N.D. Cal. Feb. 24, 2006). 20 Accordingly, the Court concludes that Ziegler and Brady are members of the 21 purported class who are most capable of adequately representing the interest of class 22 members. 23 24 C. Typicality and Adequacy Requirements 25 In addition to possessing the largest financial interest, the PSLRA requires a 26 proposed lead plaintiff to satisfy the requirements of Rule 23. 15 U.S.C. § 78u- 27 4(a)(3)(B)(iii)(I)(cc). Once a court determines which plaintiff has the largest financial 28 interest, generally “the court must appoint that plaintiff as lead, unless it finds that 1 [plaintiff] does not satisfy the typicality or adequacy requirements” of Rule 23(a). In re 2 Cavanaugh, 306 F.3d at 732. The movant “need only make a prima facie showing of its 3 typicality and adequacy.” Hessefort, 317 F. Supp. 3d at 1056. Ziegler and Brady satisfy 4 both requirements. 5 First, Ziegler and Brady’s claims are typical of the class. The typicality requirement 6 asks whether the presumptive lead plaintiff has suffered the same or similar injuries as 7 absent class members as a result of the same conduct by the defendants and are founded on 8 the same legal theory. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). 9 “[R]epresentative claims are ‘typical’ if they are reasonably co-extensive with those of 10 absent class members; they need not be substantially identical.” Castillo v. Bank of Am., 11 NA, 980 F.3d 723, 729 (9th Cir. 2020) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 12 1020 (9th Cir. 1998), overruled on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 13 U.S. 338 (2011)). The record shows that Ziegler and Brady raise allegations and claims 14 identical to the purported class: that is, they suffered losses because Defendants violated 15 Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934, and Securities and 16 Exchange Commission Rule 14a-9 by issuing a materially false and misleading Definitive 17 Proxy Statement to persuade GW’s shareholders to vote in favor of its merger with Jazz. 18 (Compl. ¶¶ 1–9; Ex. B to Bower Decl. ¶ 1, ECF No. 7-2 (Ziegler Cert.); Ex. C to Bower 19 Decl. ¶ 1, ECF No. 7-3 (Brady Cert.).) The Court finds that Ziegler and Brady’s claims 20 are typical of those of the absent class members. 21 Second, Ziegler and Brady also satisfy the adequacy requirement. This requirement 22 concerns whether “the representative parties will fairly and adequately protect the interests 23 of the class.” Fed. R. Civ. P. 23(a)(4). The two primary adequacy inquiries are (1) whether 24 there are conflicts of interest between the proposed lead plaintiff and the class and 25 (2) whether plaintiff and counsel will vigorously fulfill their duties to the class. Ellis v. 26 Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011). Ziegler and Brady’s interests 27 in prosecuting this case are aligned with those of the class because they seek to recover for 28 Defendants’ allegedly false and misleading statements about GW’s proxy statements. See 1 Schonfield, 2007 WL 2916533, at *4. Their losses, tied to the ownership of GW’s ADS 2 shares, demonstrate to the Court that they have a “sufficient interest in the outcome of the 3 case to ensure vigorous advocacy.” Yanek v. Staar Surgical Co., Nos. CV 04-8007 SJO 4 (CWx), CV 04-8263 SJO (CWx), CV 04-8613 SJO (CWx), 2004 WL 5574358, at *6 (C.D. 5 Cal. Dec. 15, 2004) (citation omitted). In addition, the firms proposed to serve as Ziegler 6 and Brady’s proposed counsel, Monteverde & Associates PC (“Monteverde”) and Kahn 7 Swick & Foti LLC (“KSF”), are experienced and qualified to prosecute securities class 8 action litigation. (Ex. F to Bower Decl., ECF No. 7-6 (Monteverde Firm Résumé); Ex. G 9 to Bower Decl., ECF No. 7-7 (KSF Firm Résumé).) Accordingly, Ziegler and Brady are 10 entitled to the PSLRA’s presumption that they are the most adequate plaintiffs, and that 11 presumption has not been rebutted by any member of the proposed plaintiff class. 12 Therefore, the Court appoints Ziegler and Brady as Lead Plaintiff in this case. See In re 13 Cavanaugh, 306 F.3d at 732 (holding that absent proof that the proposed lead plaintiff with 14 the largest financial interest does not satisfy the requirements of Rule 23, this plaintiff is 15 “entitled to lead plaintiff status”). 16 17 II. APPROVAL OF SELECTION OF LEAD COUNSEL 18 Once the court has appointed a lead plaintiff, the lead plaintiff “shall, subject to the 19 approval of the court, select and retain counsel to represent the class.” 15 U.S.C. § 78u- 20 4(a)(3)(B)(v). A court generally accepts the appointed lead plaintiff’s choice of counsel 21 unless it appears necessary to appoint different counsel to “protect the interests of the 22 class.” 15 U.S.C. § 78u—4(a)(3)(B)(iii)(II)(aa). Ziegler and Brady have selected 23 Monteverde and KSF as Lead Counsel. (ECF No. 7.) Because they have made a 24 “reasonable choice of counsel,” the Court “defer[s] to that choice.” See Cohen v. U.S. Dist. 25 Court for N. Dist. of Cal., 586 F.3d 703, 712 (9th Cir. 2009). 26 // 27 // 28 // 1 |}IV. CONCLUSION 2 The Court APPOINTS Ziegler and Brady as Lead Plaintiff and Monteverde & 3 || Associates PC and Kahn Swick & Foti LLC as Lead Counsel in this action. 4 5 IT IS SO ORDERED. 6 A , 7 || DATED: January 18, 2022 Ypilag (Lyohaa 6 g United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28