Hull Leavitt v. Alnylam Pharmaceuticals, Inc. et al
Filing
40
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: For the foregoing reasons, 1) the motion to appoint Tunc Toker as lead plaintiff and to approve his selection of lead counsel and liaison counsel (Docket No. 17) is ALLOWED;< p>2) the motion to appoint Caryl Hull Leavitt as lead plaintiff and to approve her selection of lead counsel and liaison counsel (Docket No. 20) is DENIED;3) the motion to appoint Frederick Edwards as lead plaintiff and to approve his selec tion of lead counsel (Docket No. 23) is DENIED; and4) the motion to appoint Charles Iappini as lead plaintiff and to approve his selection of lead counsel (Docket No. 24) is DENIED.So ordered. (Vieira, Leonardo) (Additional attachment(s) added on 5/8/2019: # 1 Signed Order) (Vieira, Leonardo).
Case 1:18-cv-12433-NMG Document 40 Filed 05/08/19 Page 1 of 13
United States District Court
District of Massachusetts
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CARYL HULL LEAVITT, individually )
and on behalf of all others
)
similarly situated,
)
)
Plaintiff,
)
)
v.
)
)
ALNYLAM PHARMACEUTICALS, INC.,
)
JOHN M. MARAGANORE and MANMEET
)
S. SONI,
)
)
Defendants.
)
)
TUNC TOKER, FREDERICK EDWARDS
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and CHARLES IAPPINI,
)
)
Movants.
)
)
Civil Action No.
18-12433-NMG
MEMORANDUM & ORDER
GORTON, J.
This putative securities fraud class action is brought by
Caryl Hull Leavitt (“Leavitt”) on behalf of herself and other
similarly situated investors against Alnylam Pharmaceuticals,
Inc., its Chief Executive Officer and its Chief Financial
Officer (collectively “Alnylam”, “the Company” or “defendants”).
Leavitt alleges that defendants made false and/or misleading
statements regarding the efficacy and marketability of its
therapeutic injection for the treatment of hereditary ATTR
amyloidosis during the class period.
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Leavitt bring this putative class action pursuant to the
Private Securities Litigation Reform Act (“the PSLRA”), 15
U.S.C. § 78u-4.
That statute establishes a specific procedure
for the appointment and approval of lead plaintiff and lead
counsel in a private securities class action. See § 78u-4(a)(3).
Pending before this Court are the competing motions of Leavitt,
Tunc Toker (“Toker”), Frederick Edwards (“Edwards”) and Charles
Iappini (“Iappini”) to be appointed as lead plaintiff and to
have their respective counsel approved as lead counsel.
For the
following reasons, Toker will be appointed as lead plaintiff and
his selected lead counsel and liaison counsel will be approved.
I.
Background
A.
The Facts
Alnylam is a biopharmaceutical company incorporated in
Delaware with its principal place of business in Cambridge,
Massachusetts.
The Company develops and commercializes
treatments for hereditary ATTR amyloidosis which is a gene
mutation that causes the build-up of certain proteins in the
body’s nerves and organs.
That build-up can harm the
functioning of nerves and organs.
The Company developed its
therapeutics based on RNA interference (“RNAi”) which inhibits
the formation of those disease-causing proteins.
In December,
2017, Alnylam submitted to the FDA a new drug application and a
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marketing authorization application for Onpattro (patisiran)
which is administered by intravenous injection.
Alnylam’s stock trades on the NASDAQ Stock Market.
The
Complaint alleges that between February 15, 2018, and September
12, 2018 (“the Class Period”), defendants made false and/or
misleading statements and/or failed to disclose that: 1)
“Alnylam overstated the efficacy and safety of its Onpattro
(patisiran) lipid complex injection” and 2) “as a result,
Alnylam’s public statements were materially false and misleading
at all relevant times”.
In August, 2018, Onpattro was approved by the FDA.
On
September 12, 2018, an analyst from an institutional broker,
Nomura/Instinet, reported that a document released by the FDA’s
Center for Drug Evaluation and Research revealed a greater risk
with respect to certain trials of Onpattro and a more limited
market opportunity for the drug than previously contemplated.
Specifically, the analyst indicated that the document showed the
FDA’s concerns over cardiac deaths in patients treated with
Onpattro and suggested that the drug be limited to the treatment
of patients with polyneuropathy.
Finally, the analyst stated
that some comments in the document call into question the
accuracy of certain claims made by Alnylam.
After that report was published, Alnylam’s stock price fell
by over 5%, from $100.35 to $94.75 per share.
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The Complaint
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alleges that as a result of that decline in market value,
investors who purchased Alnylam stock during the Class Period in
reliance on defendants’ false and/or misleading statements
suffered significant losses.
B.
Procedural History
In September, 2018, Leavitt filed this Complaint in the
United States District Court for the Southern District of New
York.
Shortly thereafter, notice of this putative securities
fraud class action was published pursuant to the PSLRA on
GlobeNewswire, a global business-oriented press release
distribution service with substantial operations in North
America. 15 U.S.C. § 78u-4(a)(3)(A)(i).
In late November, 2018,
the case was transferred to this Court.
A few days later,
putative class members Toker, Leavitt, Edwards and Iappini filed
their respective motions to be appointed lead plaintiff pursuant
to the PSLRA. Id.
In December, 2018, Toker and Edwards filed oppositions to
the motions of the other putative class members.
Iappini filed
a notice in support of Toker as presumptively the most adequate
plaintiff under the PSLRA and in opposition to Edwards’s motion
for appointment as lead plaintiff.
Leavitt filed no opposition
to the motions of the other putative class members, thereby
ostensibly conceding that she is not presumptively the most
adequate plaintiff under the PSLRA.
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The Court therefore
Case 1:18-cv-12433-NMG Document 40 Filed 05/08/19 Page 5 of 13
analyzes only whether Toker or Edwards should be appointed as
lead plaintiff in this matter.
II.
Motion to Appoint Lead Plaintiff Under the PSLRA
A.
Legal Standard
Under the PSLRA, the Court must appoint as lead plaintiff
the purported class member or class members that it determines
“to be most capable of adequately representing the interests of
[the class]”. 15 U.S.C. § 78u-4(a)(3)(B)(i).
The PSLRA establishes a rebuttable presumption for
determining which purported class member is the so-called “most
adequate plaintiff”. § 78u-4(a)(3)(B)(iii).
The Court shall
adopt the presumption that an individual is the most adequate
plaintiff where he or she 1) “has either filed the complaint or
made a motion in response to a notice under [the statute]”, 2)
“in the determination of the court, has the largest financial
interest in the relief sought by the class” and 3) “otherwise
satisfies the requirements of [Fed. R. Civ. P. 23]”. § 78u4(a)(3)(B)(iii)(I).
Once established, that presumption may be
rebutted only upon proof by another class member that the
originally chosen plaintiff 1) “will not fairly and adequately
protect the interests of the class” or 2) “is subject to unique
defenses that render such plaintiff incapable of adequately
representing the class”. § 78u-4(a)(3)(B)(iii)(II).
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Although the PSLRA does not prescribe how to determine
which putative class member has the largest financial interest,
courts in this district and others have considered the following
factors in making that determination: 1) “the number of shares
purchased during the class period”; 2) “the number of net shares
purchased during the class period”; 3) “the total net funds
expended during the class period”; and 4) “the approximate
losses suffered during the class period”. Ark. Teacher Ret. Sys.
v. Insulet Corp., 177 F. Supp. 3d 618, 622 (D. Mass. 2016)
(citing In re Olsen Corp. Sec. Litig., 3 F. Supp. 2d 286, 295
(E.D.N.Y. 1998)).
Courts consider the approximate losses
allegedly suffered to be the most important factor in
determining the largest financial interest. Id.
So-called “in-and-out transactions” (those securities both
bought and sold within the class period) are excluded from the
calculation of approximate losses because any losses from those
transactions lack a causal link to the allegedly false or
misleading statements or omissions. Topping v. Deloitte Touche
Tohmatsu CPA, Ltd., No. 14 Civ. 2814(ER), 2015 WL 1499657, at
*6-7 (S.D.N.Y. Mar. 27, 2015) (“[W]hen calculating movants’
financial interests on a lead plaintiff motion, courts should
not include losses result[ing] from ‘in-and-out’ transactions,
which took place during the class period, but before the
misconduct identified in the complaint was ever revealed to the
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public.” (internal quotation marks omitted) (alteration in
original)); see also Dura Pharms., Inc. v. Broudo, 544 U.S. 336,
342, 346-47 (2005) (holding that the payment of an inflated
purchase price is insufficient to establish the necessary
causation between the alleged misconduct and the relevant
economic loss but rather the purchaser generally must show that
the stock price fell significantly after the truth became
known).
To establish that a purported class member otherwise
satisfies the requirements of Fed. R. Civ. P. 23 for purposes of
a lead plaintiff motion, the movant need only make a prima facie
showing that he or she satisfies the typicality and adequacy
requirements. Ark. Teacher Ret. Sys., 177 F. Supp. 3d at 622.
A
plaintiff’s claim is typical if it arises from the “same events
or course of conduct” and involves the same legal theory as the
claims of the rest of the class members. In re Lernout & Hauspie
Sec. Litig., 138 F. Supp. 2d 39, 46 (D. Mass. 2001).
A
plaintiff is adequate if 1) he or she has common interests and
an absence of conflict with the other class members and 2) his
or her attorneys are qualified, experienced and able vigorously
to conduct the litigation. Id.
Once the court has determined the most adequate plaintiff,
that individual must retain counsel to represent the class,
subject to the approval of the court. 15 U.S.C. § 78u-7-
Case 1:18-cv-12433-NMG Document 40 Filed 05/08/19 Page 8 of 13
4(a)(3)(B)(v).
While the court need not simply rubberstamp the
plaintiff’s choice of class counsel, the plaintiff’s choice
should be given some weight especially where counsel is
experienced in securities fraud class actions and able to
litigate the matter effectively. See In re Lernout, 138 F. Supp.
2d at 46-47.
B.
Application
The presumptively most adequate plaintiff will be
determined here by reference to the established statutory
criteria.
1.
Timely Motion
The motions of both Toker and Edwards are timely.
A notice
of the lawsuit was published on GlobeNewswire on September 26,
2018.
Toker and Edwards filed their respective lead plaintiff
motions 60 days later on November 26, 2018. See § 78u4(a)(3)(A)(i)(II) (providing that “not later than 60 days after
the date on which the notice is published, any member of the
purported class may move the court to serve as lead plaintiff of
the purported class”).
They therefore both satisfy the first
prong of the rebuttable presumption.
2.
Largest Financial Interest
The primary dispute is whether Toker or Edwards has the
largest financial interest in the relief sought by the class.
Edwards alleges that he suffered losses of over $113,500 while
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Toker claims that he suffered losses of about $89,700.1
Toker
contends, however, that Edwards has substantially overstated his
losses by including in-and-out transactions.
Toker submits
that, based on his own calculations using various accounting
methods, Edwards has suffered, at most, $51,000 in losses and as
little as $25,100.
In support of Toker’s motion to be named
lead plaintiff, Iappini confirms Toker’s analysis and maintains
that Edwards’s losses are no more than $49,300, less than half
of what he initially claimed.
After reviewing the financial figures and calculations of
both Toker and Edwards, the Court finds that Edwards has indeed
overstated his losses.
In his calculation, Edwards includes the
sales of many securities that were consummated before the
relevant disclosure date of September 12, 2018, and thus are not
causally linked to the alleged misconduct.
Notably, Edwards
does not contest any of the figures submitted by Toker or
Iappini with respect to his recoverable losses.
On the other
hand, all the relevant sales of Toker’s stock occurred after the
disclosure date and thus the amount of approximate recoverable
losses he declares ($89,700) appears to be accurate.
Even the
largest amount of Edwards’s losses (as attributed by Toker) is
less than the apparent losses suffered by Toker.
Toker
Iappini asserts that his losses were about $40,500 and Leavitt claims to
have lost only about $2,300.
1
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therefore has the largest financial interest in the relief
sought by the class.
Aside from having incurred the greatest approximate losses,
Toker also appears to have the largest financial interest based
upon the other three factors to be considered.
Toker asserts
that he purchased 7,400 shares of Alnylam stock during the Class
Period while Edwards allegedly bought 3,443 shares.
Furthermore, Toker contends that he bought 7,400 shares more
than he sold during the Class Period while Edwards was actually
a net seller of 168 shares during that time frame.
Finally,
Toker submits that he paid $761,700 more for stock than he
realized from the sale of such stock during the Class Period
while Edwards’s differential during the same time frame was only
$3,100.
Again, Edwards does not contest any of Toker’s
calculations.
The Court therefore finds that Toker has the
largest financial interest in the relief sought under the
relevant factors.
3.
Requirements of Fed. R. Civ. P. 23
Toker otherwise satisfies the requirements of Fed. R. Civ.
P. 23.
First, his claims are typical of those of the other class
members because he has suffered the same injuries as a result of
the same course of conduct by defendants.
Moreover, his claims
are based on the same legal theory as those of the other class
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Case 1:18-cv-12433-NMG Document 40 Filed 05/08/19 Page 11 of 13
members because he 1) purchased shares of Alnylam stock 2) in
reliance upon 3) allegedly false and/or misleading statements
and/or omissions 4) knowingly made by defendants and 5)
thereafter suffered economic losses 6) when the truth became
public and Alnylam’s stock price dropped precipitously.
Second, Toker is an adequate lead plaintiff because 1) he
and the other class members have the same interest in maximizing
the recovery from defendants for the alleged fraud, 2) he has a
substantial financial stake in the litigation that will ensure
his vigorous prosecution of the claims and 3) he has chosen
qualified and experienced counsel.
Toker is therefore presumptively the most adequate
plaintiff and will be appointed as lead plaintiff unless one of
the other movants timely demonstrates that he is inadequate.
4.
Rebuttal Evidence
Edwards has not attempted to show that Toker is either
unable to protect, fairly and adequately, the interests of the
class or is subject to unique defenses that render him incapable
of adequately representing the class.
Furthermore, Iappini has
conceded that Toker is the most adequate plaintiff and Leavitt
has submitted no opposition to Toker’s appointment as lead
plaintiff in this case.
The Court independently finds that
Toker can fairly and adequately represent the interests of the
class for the reasons already stated.
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Toker will therefore be appointed as lead plaintiff and the
competing motions will be denied.
5.
Selection of Lead Counsel and Liaison Counsel
The Court approves Toker’s selection of Berstein Liebhard
as lead counsel and Berman Tabacco as liaison counsel for the
purported class.
Both firms appear to have extensive experience
in the area of securities class actions and have secured
favorable dispositions for their respective clients.
There is
no apparent reason why both firms cannot adequately represent
the class together, particularly if Berman Tabacco is serving in
a largely administrative role and an arrangement is made to
avoid the incurrence of duplicate fees. See Soto v. Hensler, 235
F. Supp. 3d 607, 624 (D. Del. 2017).
Moreover, none of the
other movants opposes Toker’s choice of counsel.
Accordingly, Toker’s motion to approve his selection of
lead counsel and liaison counsel will be allowed.
ORDER
For the foregoing reasons,
1) the motion to appoint Tunc Toker as lead plaintiff and to
approve his selection of lead counsel and liaison counsel
(Docket No. 17) is ALLOWED;
2) the motion to appoint Caryl Hull Leavitt as lead
plaintiff and to approve her selection of lead counsel
and liaison counsel (Docket No. 20) is DENIED;
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Case 1:18-cv-12433-NMG Document 40 Filed 05/08/19 Page 13 of 13
3) the motion to appoint Frederick Edwards as lead plaintiff
and to approve his selection of lead counsel (Docket No.
23) is DENIED; and
4) the motion to appoint Charles Iappini as lead plaintiff
and to approve his selection of lead counsel (Docket No.
24) is DENIED.
So ordered.
/s/ Nathaniel M. Gorton______
Nathaniel M. Gorton
United States District Judge
Dated May 8, 2019
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