Dougherty v. Esperion Therapeutics, Inc. et al

Filing 193

ORDER Adopting 152 Report and Recommendation and granting 66 SEALED MOTION Class Certification, Appoint Class Representatives, and Appoint Class Counsel by Walter J Minett, Ronald E filed by Walter J Minett, Ronald E Wallace and overruling 159 Objection, filed by Tim M Mayleben, Esperion Therapeutics, Inc. Signed by District Judge Arthur J. Tarnow. (MLan)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
KEVIN L. DOUGHERTY, ET AL.,
Case No. 16-10089
Plaintiffs,
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW

v.
ESPERION THERAPEUTICS, INC., ET AL.,

U.S. MAGISTRATE JUDGE
R. STEVEN WHALEN

Defendants.
/
ORDER OVERRULING DEFENDANTS’ OBJECTIONS [159] AND ADOPTING
MAGISTRATE JUDGE WHALEN’S REPORT & RECOMMENDATION [152]
This is a securities fraud case brought pursuant to sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (“SEA”), 15 U.S.C. §§ 78j(b), 78t(a), and
Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240. On
May 31, 2020, Magistrate Judge R. Steven Whalen granted Plaintiffs’ Motion for
Class Certification and to Appoint Class Representatives and Class Counsel [66].
(ECF No. 152). On June 19, 2020, in response to a Joint Motion to Amend/Correct
[154], Magistrate Judge Whalen issued a follow-up Order [157] designating the
original Order [152] a Report and Recommendation (“R&R”) pursuant to 28 U.S.C.
§ 636(b)(1)(B). (ECF No. 157, PageID.7502). Defendants filed Objections to the
R&R on July 6, 2020. (ECF No. 159). Plaintiffs responded on July 20, 2020. (ECF
No. 161). Defendants filed a reply on July 27, 2020. (ECF No. 162). The Court heard
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arguments on October 6, 2020.
For the reasons stated below, the Court OVERRULES Defendants’
Objections [159] and ADOPTS the R&R [152].
FACTUAL BACKGROUND
Defendant, Esperion Therapeutics, Inc. (“Esperion”), is a pharmaceutical
company whose “sole focus is the development of ECT-1002, a first-in-class oral
medication designed to lower LDL-cholesterol, also known as ‘bad cholesterol.’”
Dougherty v. Esperion Therapeutics, Inc., 905 F.3d 971, 975 (6th Cir. 2018).
“Defendant Tim M. Mayleben is Esperion’s CEO and a member of its Board of
Directors. As such, he was heavily involved in Esperion’s efforts to secure Food and
Drug Administration (‘FDA’) approval for ETC-1002.” (ECF No. 152,
PageID.7462). “Plaintiffs, the purchasers of Esperion common stock between
August 18 and September 28, [2015,] brought this class action against Esperion and
Mayleben for violating §§ 10(b) and 20(a) of the [SEA], as well as SEC Rule 10b5.” Dougherty, 905 F.3d at 977.
The thrust of Plaintiffs’ claim is that, following an August 2015 meeting
between Esperion executives and FDA officials, Esperion and Mayleben made false
statements about ETC-1002’s approval trajectory, misleading investors and “causing
Esperion stock to trade at artificially inflated levels during the class period.” Id. at
976, 978. Specifically, Esperion issued a press release on August 17, 2015, stating
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1) that “[t]he FDA [had] confirmed that LDL-C remain[ed] an acceptable clinical
surrogate endpoint for the approval of an LDL-C lowering therapy such as ETC1002 in patient populations [with HeFH or ASCVD],” and 2) that “[b]ased upon
feedback from the FDA, approval of ETC-1002 in the HeFH and ASCVD patient
populations [would] not require the completion of a cardiovascular outcomes trial.”
(ECF No. 152, PageID.7462). Additionally, in a conference call with market analysts
that same day, Mayleben stated that “[ETC-]1002 will not require a CV outcomes
trial to be completed prior to approval in patients with [HeFH] and ASCVD.”
Dougherty, 905 F.3d at 976-77 (alterations in original).
As the Sixth Circuit noted in its order reversing this Court’s initial dismissal
of Plaintiffs’ complaint:
These statements require some explanation to be fully understood in
context. A cardiovascular outcomes trial (CVOT) is a costly, lengthy
study that measures a drug’s effectiveness in reducing cardiovascular
risk over several years. Because lower LDL-cholesterol is presumed to
improve overall heart health, the FDA does not typically require
companies seeking approval of a new cholesterol-lowering drug to
complete a CVOT and prove that the drug actually reduces
cardiovascular risk. Instead, the FDA treats LDL-cholesterol as a
“surrogate endpoint,” or proxy, for cardiovascular risk. In other words,
if a new drug is shown to lower LDL-cholesterol, the FDA assumes that
it also improves overall cardiovascular health. By saying that the FDA
would continue to use LDL-cholesterol as a proxy for cardiovascular
risk, and that the FDA would not require a completed CVOT prior to
approving ETC-1002, Esperion was essentially telling its investors that
ETC-1002 had a clear path to regulatory approval.
Id. at 976.
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The problem, however, was that the FDA’s minutes of the August 11, 2015
meeting—the official record—were contrary to Esperion’s and Mayleben’s
assertions. (ECF No. 152, PageID.7464). As Magistrate Judge Whalen explained:
When the minutes were released [publicly], Esperion issued another
press release . . . stating, contrary to its earlier position, that the “FDA
ha[d] encouraged the Company to initiate a cardiovascular outcomes
trial promptly . . . since any concern regarding the benefit/risk
assessment of ETC-1002 could necessitate a completed cardiovascular
outcomes trial before approval.” In a subsequent conference call,
Mayleben characterized Esperion’s latest press release as “slightly
different” than the language used in the August release. As the Sixth
Circuit observed, “Market analysts seized on this change in position,
and Esperion’s stock dropped 48% the next day, from $35.09 per share
to $18.33 per share.” Dougherty, 905 F.3d at 977.
(Id.).
Plaintiffs thus filed this suit for damages on January 12, 2016. (ECF No. 1).
The Court appointed Ronald E. Wallace and Walter J. Minett as Lead Plaintiffs on
April 5, 2016. (ECF No. 25). Plaintiffs amended their complaint on May 20, 2016,
and on July 5, 2016, Defendants moved to dismiss. (ECF No. 29; ECF No. 30). On
December 27, 2016, the Court granted Defendants Motion to Dismiss [30]. (ECF
No. 38). The Sixth Circuit reversed on September 27, 2018 and remanded the case
back to this Court. Daugherty, 905 F.3d at 984.
LEGAL STANDARD
Plaintiffs argue that “Defendants’ Objections simply regurgitate their class
certification Opposition” and that, consequently, a “clear error” standard of review
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is appropriate. (ECF No. 161, PageID.7665). While it is true that “[a] district court
need not provide de novo review where the objections are ‘frivolous, conclusive or
general,’” that exception does not apply here. Mira v. Marshall, 806 F.2d 636, 637
(6th Cir. 1986) (quoting Nettles v. Wainwright, 677 F.2d 404, 410 n.8 (5th Cir.
1982)). Defendants’ Objections each point to specific, allegedly defective, sections
of the R&R. Accordingly, the Court reviews them de novo pursuant to 28 U.S.C. §
636(b)(1). See, e.g., DiPonio Constr. Co. v. Int’l Union of Bricklayers & Allied
Craftworkers, Local 9, 739 F. Supp. 2d 986, 992 (E.D. Mich. 2010).
ANALYSIS
OBJECTION I: THE FRAUD-ON-THE MARKET PRESUMPTION OF RELIANCE DOES NOT
APPLY BECAUSE PLAINTIFFS HAVE FAILED TO PROVE THAT THE MARKET FOR
ESPERION STOCK WAS EFFICIENT DURING THE CLASS PERIOD.
A. Context: The Fraud-on-the-Market Theory and the Role of Efficiency
In order for Plaintiffs seeking class certification to satisfy the predominance
requirement of FED. R. CIV. P. 23(b)(3), they must demonstrate that “questions of
law or fact common to class members predominate over any questions affecting only
individual members.” This inquiry “begins . . . with the elements of the underlying
cause of action.” Erica P. John Fund, Inc. v. Halliburton Co. (Halliburton I), 563
U.S. 804, 809 (2011). The element at issue here is Plaintiffs’ reliance upon
Defendants’ alleged misrepresentations and/or omissions. See Halliburton Co. v.
Erica P. John Fund, Inc. (Halliburton II), 573 U.S. 258, 267 (2014) (listing elements
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of claim). To satisfy the predominance inquiry with respect to reliance, Plaintiffs
have invoked the “fraud-on-the-market” presumption, endorsed by the Supreme
Court in Basic Inc. v. Levinson, 485 U.S. 224, 250 (1988), and reaffirmed in
Halliburton II, 573 U.S. at 266.
In Basic, the Supreme Court explained that “[b]ecause most publicly available
information is reflected in market price, an investor’s reliance on any public material
misrepresentations . . . may be presumed” in a securities fraud claim such as the one
at issue here. 485 U.S. at 247. “The Court based [this] presumption on what is known
as the ‘fraud-on-the-market’ theory, which holds that ‘the market price of shares
traded on well-developed markets reflects all publicly available information, and,
hence, any material misrepresentations.’” Halliburton II, 573 U.S. at 258 (quoting
Basic, 485 U.S. at 247). Thus, “to demonstrate that the presumption of reliance
applies in a given case,” a plaintiff must show: “(1) that the alleged
misrepresentations were publicly known, (2) that they were material, (3) that the
stock traded in an efficient market, and (4) that the plaintiff traded the stock between
the time the misrepresentations were made and when the truth was revealed.” Id. at
268 (citing Basic, 485 U.S. at 248, n.27). Importantly, this presumption is
“rebuttable rather than conclusive.” Id. at 268-69.
Defendants’ first objection focuses on the applicability of the fraud-on-themarket presumption, and specifically, the Magistrate Judge’s analysis of whether
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Esperion’s common stock traded in an efficient market during the class period. (ECF
No. 159, PageID.7557). While there is no bright-line test for market efficiency, the
Sixth Circuit has cited with approval the five-factor test laid out in Cammer v.
Bloom, 711 F. Supp. 1264 (D.N.J. 1989). See Freeman v. Laventhol & Horwath, 915
F.2d 193, 199 (6th Cir. 1990). These factors are:
(1) a large weekly trading volume; (2) the existence of a significant
number of reports by securities analysts; (3) the existence of market
makers and arbitrageurs in the security; (4) the eligibility of the
company to file an S-3 Registration Statement; and (5) a history of
immediate movement of the stock price caused by unexpected
corporate events or financial releases.
Id. (citing Cammer, 711 F. Supp at 1286-87).
In addition to the Cammer factors, many courts, including several in this
circuit, have also considered the three factors enumerated in Krogman v. Sterritt,
202 F.R.D. 467, 478 (N.D. Tex. 2001). See, e.g., Norfolk Cnty. Ret. Sys. v. Cmty.
Health Sys., 332 F.R.D. 556, 575-76 (M.D. Tenn. 2019). These include: (1) market
capitalization (“the number of shares multiplied by the prevailing share price”); (2)
bid-ask spread (“the difference between the price at which investors are willing to
buy the stock and the price at which current stockholders are willing to sell their
shares”); and (3) float (“the percentage of shares held by the public, rather than
insiders”). Krogman, 202 F.R.D. at 478.
B. Failing to Satisfy the Fifth Cammer Factor Is Not a Per Se Bar
Defendants’ principal objection to the R&R is that it failed to give proper
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weight to the fifth Cammer factor. (ECF No. 159, PageID.7557). Defendants argue
that, as a matter of law, a positive showing under the fifth Cammer factor must be
made in order for a plaintiff to benefit from the fraud-on-the-market presumption,
regardless of whether other indirect indicia of efficiency are present. (ECF No. 159,
PageID.7556). In making this argument, Defendants rely heavily on OPERS, a case
in which the court declined to find efficiency in spite of the first three Cammer
factors being satisfied. See Ohio Pub. Emps.’ Ret. Sys. v. Fed. Home Loan Mortg.
Corp. (OPERS), No. 4:08CV0160, 2018 U.S. Dist. LEXIS 137229 (N.D. Ohio Aug.
14, 2018), perm. app. denied sub nom., In re Ohio Pub. Emps.’ Ret. Sys., No. 180310, 2019 U.S. App. LEXIS 2337 (6th Cir. Jan. 23, 2019).
The Sixth Circuit has not addressed the question of whether the fifth Cammer
factor is dispositive and district courts in this circuit have come out both ways.
Compare, e.g., OPERS, 2018 U.S. Dist. LEXIS 137229, at *47 (“The [first four]
Cammer factors are not enough, alone, to establish market efficiency.”), with, e.g.,
In re Accredo Health, Inc. Sec. Litig., No. 03-2216 DP, 2006 U.S. Dist. LEXIS
97621, at *33 (W.D. Tenn. Mar. 7, 2006) (“In order for the court to conclude that a
market is efficient, ‘it is not necessary that a stock satisfy all five factors.’” (quoting
Simpson v. Specialty Retail Concepts, Inc., 823 F. Supp. 353, 355 (M.D.N.C.
1993))), R&R adopted, 2006 U.S. Dist. LEXIS 97620.

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Ultimately, while Defendants are correct that several courts have found the
fifth Cammer factor to provide the best evidence of efficiency, most do not treat it
as strictly necessary in making the market efficiency determination. See, e.g.,
Waggoner v. Barclays PLC, 875 F.3d 79, 97 (2d Cir. 2017); Local 703, I.B. of T.
Grocery & Food Emps. Welfare Fund v. Regions Fin. Corp., 762 F.3d 1248, 1256
(11th Cir. 2014); Weiner v. Tivity Health, Inc., 334 F.R.D. 123, 133 (M.D. Tenn.
2020) (“[T]he Sixth Circuit has not mandated use of [the Cammer] factors, and even
in those cases where the factors are utilized, they are generally deemed to be an
analytical tool rather than a checklist.”); Monroe Cnty. Emps.’ Ret. Sys. v. S. Co.,
332 F.R.D. 370, 385 n.8 (N.D. Ga. 2019) (collecting cases). Against this backdrop,
OPERS, on which Defendants so heavily rely, appears to be an outlier.
C. Plaintiffs Have Demonstrated Efficiency
The Court now examines whether Plaintiffs have provided sufficient evidence
of efficiency to invoke the fraud-on-the-market presumption of reliance. They have.
The Sixth Circuit has noted that “securities traded in national secondary
markets . . . are well suited for application of the fraud on the market theory.”
Freeman, 915 F.2d at 199. Thus, the fact that Esperion’s common stock traded on
the NASDAQ during the Class Period is persuasive, though not conclusive, evidence
of market efficiency. (ECF No. 66-11, PageID.1787).

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The Krogman factors point in the same direction. During the Class Period,
Esperion’s market capitalization averaged $1.08 billion, its bid-ask spread averaged
between 0.22% and 0.29%, and 97% of its outstanding shares stock were held by
outsiders. (ECF No. 66-11, PageID.1800-02). These figures all suggest an efficient
market. See, e.g., Norfolk, 332 F.R.D. at 576; Cheney v. Cyberguard Corp., 213
F.R.D. 484, 501 (S.D. Fla. 2003).
As to the Cammer factors, Defendants do not dispute that Esperion’s stock
satisfies the first four. (ECF No. 161-2, PageID.7716). Defendants also admit “that
the volume of trading in Esperion’s common stock supports a finding that the market
was efficient.” (ECF No. 66-10, PageID.1765). Indeed, this is an understatement.
During the Class Period, the average weekly trading volume was 29.76% and there
were sixty market makers. (ECF No. 66-11, PageID.1782, 1788). This Court has
previously found a “substantial presumption” of efficiency where, during the class
period, the stock at issue had an average weekly trading volume above 1% and more
than ten market makers. Wilkof v. Caraco Pharm. Lab’ys, Ltd., 280 F.R.D. 332, 343
(E.D. Mich. 2012); see Cammer, 711 F. Supp. at 1293 (noting that an even stronger
presumption would apply to a trading volume above 2%). Consequently, even if
Plaintiffs lacked direct evidence of cause and effect under the fifth Cammer factor,
they would have, at this point, presented sufficient evidence of efficiency to invoke
the fraud-on-the-market presumption.
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Plaintiffs do have direct evidence of cause and effect, however. Plaintiffs’
expert, Chad Coffman, performed an event study examining the response of
Esperion’s common stock to earnings announcements and press releases (“news”)
in the year leading up to the Class Period, during the class period, and in the year
following the class period. (ECF No. 66-11, PageID.1780 n.25). Coffman then
compared the stock’s post-news movement with the stock’s movement following
days without news. (ECF No. 66-11, PageID.1790). After controlling for market and
industry factors, Coffman found that “[t]he earnings announcement and press release
days had a much greater percentage of significant price movements, higher daily
trading volume on average, and statistically significant larger price changes than
those found on days with no news.” (ECF No. 66-11, PageID.1799). This, he
concluded, “demonstrate[s] a clear cause-and-effect relationship between new
material news and changes in the market price of Esperion common stock.” (Id.).
Defendants challenge this conclusion, not with an independent study, but rather by
arguing that Coffman’s analysis was flawed. (ECF No. 159, PageID.7559-60).
The Court finds these arguments unpersuasive. Coffman’s analysis of the
corrective disclosure date does not undermine the reliability of his findings. See
Wilkof, 280 F.R.D. at 346; Willis v. Big Lots, Inc., No. 2:12-cv-604, 2017 U.S. Dist.
LEXIS 38933, at *12 (S.D. Ohio Mar. 17, 2017). Additionally, the Court’s
confidence as to market efficiency is not diminished by the fact that two of the
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statistically significant price movements Coffman noted were declines following
positive news. See Willis, 2017 U.S. Dist. LEXIS 38993 at *14; see also In re
Accredo, 2006 U.S. Dist. LEXIS 97621, at *29-30. Nor is it diminished by the fact
that some of the price movements Coffman noted were on the second trading day.
See Wilkof, 280 F.R.D. at 345-46 (analyzing price movements over two-day
periods). Indeed, even assuming the validity of Defendants’ concerns, Coffman’s
analysis would still demonstrate that approximately twenty-six percent of news days
resulted in statistically significant movements, which Courts have found to be
indicative of efficiency. (ECF No. 161, PageID.7671); see, e.g., Angley v. UTI
Worldwide Inc., 311 F. Supp. 3d 1117, 1123 (C.D. Cal. 2018); McIntire v. China
Media Express Holdings, Inc., 38 F. Supp. 3d 415, 430, 433 (S.D.N.Y. 2014).
Accordingly, the Court finds that, at least for class-certification purposes, Coffman’s
results are sound, and Plaintiffs have provided sufficient evidence of efficiency for
the fraud-on-the-market presumption to apply.
OBJECTION II: DEFENDANTS
UNDER HALLIBURTON II.

HAVE REBUTTED THE PRESUMPTION OF RELIANCE

As discussed above, the fraud-on-the-market presumption is rebuttable. See
Basic, 485 U.S. at 248; see also Halliburton II, 573 U.S. at 269. In their second
objection, Defendants argue that even if the fraud-on-the-market presumption
applies, it has been rebutted, and that “[t]he R&R treated the presumption . . . as if

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it were irrebuttable.”1 (ECF No. 159, PageID.7562). Specifically, Defendants point
to the fact that Coffman’s report shows a statistically significant decrease in the price
of Esperion common stock immediately following the August 17, 2015 statements.
(ECF No. 159, PageID.7563).
Halliburton II makes clear that defendants can rebut the fraud-on-the-market
presumption at the class-certification stage by showing “evidence that the asserted
misrepresentation (or its correction) did not affect the market price.” 573 U.S. at 280.
The Sixth Circuit has clarified, however, that “price impact may be demonstrated
either at the time that the alleged misrepresentations were made, or at the time of
their correction.” In re BancorpSouth, Inc., No. 17-0508, 2017 U.S. App. LEXIS
18044, at *4 (6th Cir. Sep. 18, 2017) (emphasis added). Defendants entirely skip
over this precedent in their briefing, despite the fact that the vast majority of local
courts have consistently followed this approach. See, e.g., Willis, 242 F. Supp. 3d at
656, 659; see also Kasper v. AAC Holdings, Inc., No. 15-cv-00923-JPM-jsf, 2017
U.S. Dist. LEXIS 109608, at *35 (M.D. Tenn. July 14, 2017) (“Price impact can be
shown either by an increase in price following a fraudulent public statement or a
decrease in price following a revelation of the fraud.” (emphasis added) (quoting
Erica P. John Fund, Inc. v. Halliburton Co., 718 F.3d 423, 434 (5th Cir. 2013),

1

While Defendants are correct that the R&R did not specifically address the issue of rebuttal, the
Magistrate Judge’s comments at the hearing make clear that he understood and considered this
argument. (ECF No. 161-2, PageID.7703).

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vacated and remanded on other grounds by Halliburton II, 573 U.S. 258)).
As there is no dispute that the prices of Esperion common stock fell
precipitously following the corrective disclosure on September 28, 2015, the Court
finds that Defendants have failed to rebut the fraud-on-the-market presumption by
showing lack of price-impact. (ECF No. 161-2, PageID.7700). Accordingly, the
issue of reliance is common to all Plaintiffs.
OBJECTION III: PLAINTIFFS HAVE NOT ARTICULATED A DAMAGES METHODOLOGY
SATISFYING RULE 23(B)(3).
In Comcast Corp. v. Behrend, the Supreme Court elaborated upon the
predominance requirement of FED. R. CIV. P. 23(b)(3) as it pertains to theories of
damages at the class-certification stage. 569 U.S. 27, 34-35 (2013). Specifically, the
Court explained that in order to satisfy predominance, plaintiffs must establish that
“damages are capable of measurement on a class-wide basis” and that “[the] model
purporting to serve as evidence of damages . . . measure[s] only those damages
attributable to [the plaintiff’s] theory [of liability].” Id. at 34-35. The Sixth Circuit
has since clarified, however, that Comcast “breaks no new ground on the standard
for certifying a class action.” In re Whirlpool Corp. Front-Loading Washer Prods.
Liab. Litig., 722 F.3d 838, 860 (6th Cir. 2013) (quoting Comcast, 568 U.S. at 41
(Ginsburg, J., dissenting)).
Defendants’ third objection to the R&R is that it incorrectly concluded that
Coffman’s proposed damages model satisfied Comcast “merely because similar
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models have been consistent with theories of liability in other cases.” (ECF No. 159,
PageID.7564). According to Defendants, Plaintiffs’ proposed model fails to satisfy
Comcast because it measures damages that are attributable to “confounding
information” and uses “copied-and-pasted” language. (ECF No. 159, PageID.756566). These arguments are unpersuasive.
As the Magistrate Judge explained, Plaintiffs’ sole theory of liability is that
“Defendants’ fraudulent misstatements and omissions concerning the EOP2
Meeting artificially inflated Esperion’s stock price, causing Class members out-ofpocket damages when that inflation was removed as the truth emerged.” (ECF No.
152, PageID.7474) (quoting ECF No. 98, PageID.3563). The essence of Plaintiffs’
damages methodology, as articulated by Coffman in his initial report, is as follows:
[T]he standard and well-settled formula for assessing damages for each
class member seeking relief under Section 10(b) and Rule 10b-5 is the
“out-of-pocket” method which measures damages as the artificial
inflation per share at the time of purchase less the artificial inflation at
the time of sale . . . . [T]he most common methodology to quantify
artificial inflation is to perform an event study that measures price
reactions to disclosures that revealed the relevant truth concealed by the
alleged material omissions and/or misrepresentations. This analysis,
and the evidence supporting it, would be common to the class. Damages
for any individual class member could then be calculated formulaically
based upon information collected in the claims process (i.e., the
investor’s purchase and sale history for the security, which is routinely
available from brokerage statements and/or other documents that
provide evidence of securities transactions).
(ECF No. 66-11, PageID.1805-06).

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Measuring damages using “the artificial inflation per share at the time of
purchase less the artificial inflation at the time of sale” matches precisely with
Plaintiffs’ out-of-pocket theory of liability. (ECF No. 66-11, PageID.1805-06).
Moreover, because “there is no chance of aggregated damages attributable to
rejected liability theories, the Supreme Court’s concerns [from Comcast] do not
apply.” In re VHS of Mich., Inc., 601 F. App’x 342, 344 (6th Cir. 2015). Indeed, as
the R&R correctly noted, numerous courts in the Sixth Circuit (and beyond) have
found Plaintiffs’ proposed methodology sufficient in securities fraud claims based
on misstatements or omissions. See, e.g., Weiner, 334 F.R.D. at 137-38; Kasper,
2017 U.S. Dist. LEXIS 109608, at *39-40; see also, e.g., Rooney v. EZCORP, Inc.,
330 F.R.D. 439, 451 (W.D. Tex. 2019).
While Defendants are correct that confounding information (other negative
information released alongside the corrective disclosure) cannot be disaggregated
using only an event study, their framing of Coffman’s deposition testimony is highly
misleading. Coffman does not concede that his event study precludes disaggregation.
(ECF No. 87-3, PageID.2827, 2865). Moreover, Defendants’ argument is really a
merits inquiry into loss causation, an element of Plaintiffs’ claim under SEA § 10(b)
and SEC Rule 10b-5. See Halliburton II, 573 U.S. at 265 (defining loss causation).
Such an inquiry is not required for class certification. Halliburton I, 563 U.S. at 813;
see, e.g., Weiner, 334 F.R.D. at 137-38 (“Plaintiffs must prove that the portion of the
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price fall they seek in damages is directly attributable to the misrepresentation, . . .
[but] they do not need to prove it at the certification stage.” (alteration in original)
(emphasis added) (quoting Ludlow v. BP, P.L.C., 800 F.3d 674, 687-88 (5th Cir.
2015))). Indeed, even if Defendants are correct that other negative information in the
September 27, 2015 disclosure was partially responsible for the decline in Esperion’s
stock price, the extent to which damages would need to be disaggregated is an issue
common to all class members. (ECF No. 98-2, PageID.3636).
Finally, Defendants’ “copied-and-pasted” argument is grasping at straws.
(ECF No. 159, PageID.7565). Defendants cite no authority for this proposition, and
other courts have rejected similar arguments. See, e.g., Pub. Emps.’ Ret. Sys. of Miss.
v. TreeHouse Foods, Inc. (PERSM), No. 16-cv-10632, 2020 U.S. Dist. LEXIS
32586, at *25-26 (N.D. Ill. Feb. 26, 2020). Accordingly, the Court finds that
Plaintiffs’ have satisfied predominance under FED. R. CIV. P. 23(b)(3).
OBJECTION IV: THE PSLRA FOCUSES ON THE ADEQUACY OF PLAINTIFFS, NOT
THEIR COUNSEL, AND PLAINTIFFS HAVE FAILED TO ESTABLISH ADEQUACY UNDER
RULE 23(A)(4).
FED R. CIV. P. 23(a)(4) requires that “[t]he representative parties [to a class
action] . . . fairly and adequately protect the interests of the class.” In the Sixth
Circuit, courts determine whether class representatives have met this requirement
using a two-part test: “1) [T]he representative[s] must have common interests with
unnamed members of the class, and 2) it must appear that the representatives will
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vigorously prosecute the interests of the class through qualified counsel.” In re Am.
Med. Sys., Inc., 75 F.3d 1069, 1083 (6th Cir. 1996) (quoting Senter v. Gen. Motors
Corp., 532 F.2d 511, 525 (6th Cir. 1976)). “Put another way, [courts] ‘review[] the
adequacy of class representation to determine whether class counsel are qualified,
experienced and generally able to conduct the litigation, and to consider whether the
class members have interests that are not antagonistic to one another.’” Pelzer v.
Vassalle, 655 F. App’x 352, 364 (6th Cir. 2016) (second alteration in original)
(quoting Stout v. J.D. Byrider, 228 F.3d 709, 717 (6th Cir. 2000)).
The Private Securities Litigation Reform Act (“PSLRA”) does not alter this
general approach. “Although Congress made several important changes in the
[PSLRA], it pointedly did not change the requirements of Rule 23. Indeed, it . . .
enacted language that is identical to Rule 23’s typicality and adequacy
requirements . . . .” In re Cavanaugh, 306 F.3d 726, 738-39 (9th Cir. 2002) (citing
15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)). Consequently, “where the class is represented
by competent and zealous counsel, . . . a perceived lack of . . . interest on the part of
the named plaintiffs [does not preclude certification] unless their participation is so
minimal that they virtually have abdicated to their attorneys the conduct of the case.”
Ross v. Abercrombie & Fitch Co., 257 F.R.D. 435, 451 (S.D. Ohio 2009) (quoting
Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 727 (11th Cir. 1987)).

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Defendants argue in their fourth objection that the Magistrate Judge focused
too heavily on the adequacy of Class Counsel without sufficiently “consider[ing] the
adequacy of . . . Lead Plaintiffs themselves.” (ECF No. 159, PageID.7569).
Specifically, Defendants contend that Lead Plaintiffs are inadequate for failing to
sufficiently supervise class counsel, as evidenced by their allegedly insufficient
knowledge of the litigation. (ECF No. 159, PageID.7569, 7572). Defendants attempt
to support these claims by invoking “Congress’s emphatic command [in the PSLRA]
that competent plaintiffs, rather than lawyers, direct [securities] cases.” (ECF No.
159, PageID.7568 (quoting Berger v. Compaq Comput. Corp., 257 F.3d 475, 484
(5th Cir. 2001)). But these arguments ignore the Sixth Circuit’s two-factor test.
Under this Circuit’s standard, the Magistrate Judge arrived at the correct conclusion:
Lead Plaintiffs satisfy FED. R. CIV. P. 23(a)(4). (ECF No. 152, PageID.7469).
First, Lead Plaintiffs plainly have “common interests with unnamed members
of the class.” In re Am. Med. Sys., Inc., 75 F.3d at 1083 (quoting Senter, 532 F.2d at
525). Both Walter and Minett purchased Esperion common stock during the Class
Period and suffered major losses following the corrective disclosure. (ECF No. 242, PageID.520). Second, Lead Plaintiffs have “vigorously prosecute[d] the interests
of the class through qualified counsel.” In re Am. Med. Sys., Inc., 75 F.3d at 1083
(emphasis added) (quoting Senter, 532 F.2d at 525). In March 2016, Lead Plaintiffs
selected, and this Court approved, Robbins Geller Rudman & Dowd LLP (“RGRD”)
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and Kahn Swick & Foti, LLC (“KSF”), to serve as Class Counsel. (ECF No. 18,
PageID.350; ECF No. 24-2, PageID.521; ECF No. 25, PageID.527). Both of these
firms, which “have significant collective experience in class [action] litigation,”
satisfy FED. R. CIV. P. 23(g). (ECF 152, PageID.7469). Moreover, since 2016, Lead
Plaintiffs, through Class Counsel, have filed an amended complaint, prevailed at the
Sixth Circuit, prepared and filed numerous pleadings, and pursued discovery. (Id.).
At bottom, by arguing that Lead Plaintiffs are inadequate for not having
detailed knowledge of the litigation and not exercising control over the day-to-day
management of the case, Defendants seek to apply a more rigorous standard to the
adequacy determination than courts in the Sixth Circuit typically do. See, e.g.,
Rankin v. Rots, 220 F.R.D. 511, 520 (E.D. Mich. 2004) (“The Sixth Circuit appears
to focus on the adequacy of plaintiff’s counsel and whether plaintiff has a conflicting
interest, not the personal qualifications of the named plaintiff.”); see also PERSM,
2020 U.S. Dist. LEXIS 32586, at *21 n.5 (describing the Fifth Circuit’s heightened
adequacy standard, which Defendants rely upon, as “idiosyncratic”).
While Lead Plaintiffs are not micromanaging all aspects of the litigation,
“their participation is [not] so minimal that they virtually have abdicated to their
attorneys the conduct of the case.” Ross, 257 F.R.D. at 451 (quoting Kirkpatrick,
827 F.2d at 727). Through their respective deposition transcripts, Lead Plaintiffs
demonstrate not only that they understand their fiduciary responsibilities as class
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representatives, but also that they have been adequately discharging those
responsibilities by reviewing case documents, communicating with Class Counsel
as necessary, and participating in discovery. (ECF No. 87-4, PageID.2916-17, 293738, 2944; ECF No. 87-5, PageID.2996, 3020-23). Courts in this circuit have found
plaintiffs adequate who do far less. See, e.g., Plumbers & Pipefitters Nat’l Pension
Fund v. Burns, 292 F.R.D. 515, 521 (N.D. Ohio 2013); see also Ballan v. UpJohn,
Co., 159 F.R.D. 473, 482 (E.D. Mich. 1994) (“To satisfy the adequacy test, the
named representative of a class need only be adequate and need not be the best of
all possible plaintiffs.”). Accordingly, despite the fact that Plaintiffs could be more
informed as to certain details of the litigation—for example, knowing the name of
their expert—the Court finds them adequate under FED. R. CIV. P. 23(a)(4).
OBJECTION V: WALLACE’S TRADING ACTIVITY IN ESPERION STOCK RENDERS HIM
AN ATYPICAL CLASS MEMBER UNDER RULE 23(A)(3).
“[A] plaintiff’s claim is typical if it arises from the same event or practice or
course of conduct that gives rise to the claims of other class members, and if his or
her claims are based on the same legal theory.” Wilkof, 280 F.R.D. at 338-39
(alteration in original) (quoting In re Am. Med. Sys., 75 F.3d at 1082). The “claim
need not always involve the same facts or law, provided there is a common element
of fact or law.” Id. at 339 (quoting Senter, 532 F.2d at 525 n.31). “The purpose of
the typicality requirement is to assure that the named representative’s interests align
with those of the class and that the plaintiff will advance the interest of the class.”
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Id. (citing In re Am. Med. Sys., 75 F.3d at 1082). One way a plaintiff might be found
atypical is if they are subject to “unique defenses.” O’Neil v. Appel, 165 F.R.D. 479,
492 (W.D. Mich. 1995) (citing Ballan, 159 F.R.D. at 479-81). However, “[t]he
presence of a unique defense will not automatically destroy typicality.” In re
Cardizem CD Antitrust Litig., 200 F.R.D. 297, 304 (E.D. Mich. 2001) (citing In re
Synthroid Mktg. Litig., 188 F.R.D. 287, 291 (N.D. Ill. 1999)). Rather, “[typicality]
is only [destroyed] when the defense will ‘skew the focus of the litigation’ and create
‘a danger that absent class members will suffer if their representative is preoccupied
with defenses unique to it.’” Id. at 304-05 (quoting Alaska v. Suburban Propane Gas
Corp., 123 F.3d 1317, 1321 (9th Cir. 1997)).
These principles provide helpful context to Defendants’ fifth and final
objection to the R&R. In this last objection, Defendants argue that the R&R failed
to consider whether Wallace’s trading of Esperion shares after the corrective
disclosure date subjects him to a unique defense sufficient to render him atypical.
(ECF No. 159, PageID.7574). Wallace purchased 7,500 shares of Esperion stock
during the Class Period at prices ranging between $41.80 and $64.84. (ECF No. 183, PageID.364). He also traded a significant number of Esperion shares following
the Class Period at prices ranging from $14.45 to $28.60. (ECF No. 61,
PageID.7683; ECF No. 87-4, PageID.2899). His final trade was on March 29, 2016,
two weeks after he requested to be lead plaintiff. (ECF No. 18; ECF No. 87-4,
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PageID.2952; ECF No. 100-18, PageID.448).
Though it is somewhat of a close question, the majority of courts appear to
hold that post-disclosure purchases, particularly those at lower prices, do not “skew
the focus of the litigation” to such an extent that the interests of unnamed class
members are endangered. In re Cardizem CD Antitrust Litig., 200 F.R.D. at 304-05
(quoting Alaska, 123 F.3d at 1321); see PERSM, 2020 U.S. Dist. LEXIS 32586, at
*14; see also Weiner, 334 F.R.D. at 130 (“[C]ourts routinely certify a class with
representatives who purchased stock during and after a class period.” (quoting In re
Select Comfort Corp. Sec. Litig., 202 F.R.D. 598, 607 (D. Minn. 2001))). Compare,
e.g., Ballan, 159 F.R.D. at 481 (finding plaintiff atypical in part because he had
“purchased [Defendant’s] stock at the same price both several months before and
shortly after [the alleged disclosure date]” (emphasis added)), with, e.g., Ross, 257
F.R.D. at 446 (finding “Plaintiff’s purchase of stock six days after the Class Period”
to be “irrelevant” and noting that “[i]t is not inconsistent with the pleadings for
Plaintiff to have purchased stock after its price had been deflated by curative
disclosures” (emphasis added)).
Against this backdrop, the cases cited by Defendants appear to reflect a
minority view. See Weiner, 334 F.R.D. at 130 (describing Rocco v. Nam Tai Elecs.,
Inc., 245 F.R.D. 131 (S.D.N.Y. 2007), on which Defendants lean, as “against ‘the
weight of authority,’ a ‘deviat[ion] from th[e] general rule,’ and ‘not generally
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accepted’” (alterations in original) (citations omitted) (first quoting In re Connetics
Corp. Sec. Litig., 257 F.R.D. 572, 577 (N.D. Cal. 2009); then quoting Local 703,
762 F.3d at 1260; and then quoting Feder, 429 F.3d at 137)). Accordingly, because
Wallace’s claims are based on the same legal theory as other Class members, and
because the unique defense against Wallace will not distract the litigation to the
detriment of those members, the Court finds Wallace typical under FED. R. CIV. P.
23(a)(3).
CONCLUSION
IT IS ORDERED that Defendants’ Objections [159] are OVERRULED.
IT IS FURTHER ORDERED that the R&R [152] is ADOPTED.
IT IS FURTHER ORDERED that Plaintiffs’ Motion for Class Certification
[66] is GRANTED. The Class is certified, and Class Representatives and Class
Counsel are appointed, as specified in the R&R. (ECF No. 152, PageID.7477).

SO ORDERED.

Dated: November 19, 2020

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge

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