PATEL v. REATA PHARMACEUTICALS, INC. et al

Filing 29

MEMORANDUM OPINION AND ORDER granting 7 MOTION Notice of Motion and Motion of Russell Francis, Sr. For Appointment As Lead Plaintiff and Approval of Lead Plaintiff's Selection of Counsel filed by Russell Francis, Sr., denying 13 MOTION FOR APPOINTMENT AS LEAD PLAINTIFF AND APPROVAL OF SELECTION OF COUNSEL filed by Waterford Township General Employees Retirement System, denying 11 MOTION of Jason Childs for Appointment as Lead Plaintiff and Approval of His Selection of Counsel filed by Jason Childs, endying 14 MOTION re 10 MOTION Memorandum of Law in Support of Motion of Luke G. Massar for Appointment as Lead Plaintiff and Approval as Lead Counsel filed by Luke G. Massar. Signed by District Judge Sean D. Jordan on 7/15/2021. (mem)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
TOSHIF PATEL, Individually and
On Behalf of All Others Similarly
Situated
v.
REATA PHARMACEUTICALS, INC.,
ET AL.

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CIVIL NO. 4:20-CV-796-SDJ

MEMORANDUM OPINION AND ORDER
Before the Court are the following competing motions for appointment as lead
plaintiff in this proposed securities class action: (1) Motion of Russell Francis, Sr. for
Appointment as Lead Plaintiff and Approval of Lead Plaintiff’s Selection of Counsel,
(Dkt. #7); (2) Motion of Jason Childs for Appointment as Lead Plaintiff and Approval
of His Selection of Counsel, (Dkt. #11); (3) Motion of Waterford Township General
Employees Retirement System as Lead Plaintiff and Approval of Selection of Counsel,
(Dkt. #13); and (4) Motion of Luke G. Massar for Appointment as Lead Plaintiff and
Approval of Lead Counsel, (Dkt. #14). For the following reasons, the Court GRANTS
Francis’s motion and DENIES the remaining motions.
I. BACKGROUND
Defendant Reata Pharmaceuticals, Inc. (“Reata”), headquartered in Plano,
Texas, is a “clinical stage biopharmaceutical company that develops novel
therapeutics for patients with serious or life-threatening diseases by targeting
molecular pathways that regulate cellular metabolism and inflammation.”
(Dkt. #1 ¶ 2).
1

In October 2019, Reata was, and currently is, developing a drug called
“omaveloxolone,” which was and remains in Phase Two1 clinical development to treat
Friedreich’s ataxia (“FA”) within the United States. On October 14, 2019, during
after-market hours, Reata issued a press release announcing positive outcomes from
its Phase Two “MOXIe” clinical trial of omaveloxolone. The statement provided, inter
alia, that patients treated with the drug experienced a “statistically significant . . .
improvement” in their condition and that “[t]he MOXIe trial . . . is the first study to
demonstrate a significant improvement in neurological function in patients with FA.”
(Dkt. #1 ¶ 21). The press release further indicated that Reata would seek marketing
approval for the drug in the United States and internationally.
On August 10, 2020, during pre-market hours, Reata issued a press release
that included the company’s second-quarter 2020 financial results and announced
that “the FDA is not convinced that the MOXIe Part Two results will support a single
study approval” and that Reata would “need to conduct a second pivotal trial that
confirms the mFARS results of the MOXIe Part 2 study with a similar magnitude of
effect.” (Dkt. #1 ¶¶ 5, 32). On the same day that Reata issued this press release,
Reata’s stock price fell nearly fifty-two dollars per share, or about thirty-three
percent. (Dkt. #1 ¶ 33).

The FDA administers a five-step process for drug development. The Drug
Development Process, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/patients/learn-aboutdrug-and-device-approvals/drug-development-process (Jan. 4, 2018). “Clinical Research or
Development”—the third step in the FDA’s process—in turn has four “phases.” Step 3:
Clinical Research, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/patients/drugdevelopment-process/step-3-clinical-research (Jan. 4, 2018). Phase Two involves up to several
hundred study participants suffering from the target condition and can last from several
months to two years. Id.
1

2

On October 15, 2020, Plaintiff Toshif Patel initiated this action against Reata,
its Chief Executive Officer, J. Warren Huff, and its Chief Financial Officer, Manmeet
S. Soni, on behalf of anyone who purchased or otherwise acquired Reata securities
between October 15, 2019, and August 7, 2020 (the “Class Period”). (Dkt. #1 ¶ 1).
First, Patel alleges that Defendants, in announcing Reata’s ostensibly positive Phase
Two clinical data, made “materially false and misleading statements regarding
[Reata’s] business, operational, and compliance policies,” in violation of Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 (“the Act”) and Rule 10b-5
promulgated thereunder. (Dkt. #1 ¶¶ 1, 4). Second, Patel claims that Defendants
violated the Act by failing to timely disclose that the MOXIe Part Two study results
were insufficient, without additional evidence, to win marketing approval of
omaveloxolone for the treatment of FA in the United States. (Dkt. #1 ¶ 4).
On October 15, 2020, the same day that Patel filed the Complaint, Patel issued
a Private Securities Litigation Reform Act (“PSLRA”) early notice via PRNewswire, a
widely circulated national business-oriented wire service. (Dkt. #11 at 5). The notice
served to advise other potential class members of the claims alleged in the Complaint
and announced that the deadline for class members to move for appointment as lead
plaintiff was December 14, 2020. (Dkt. #8-2). On December 14, 2020, four separate
movants sought appointment as lead plaintiff and approval of their respective choice
of lead counsel under the PSLRA: Russel Francis, Sr., Jason Childs, Waterford
Township General Employees Retirement System (“Retirement System”), and Luke
G. Massar. (Dkt. #7, #11, #12, #13). Francis is a New York resident and individual

3

investor with more than twenty-five years of investing experience. (Dkt. #8 at 5).
Childs is a Michigan resident and individual investor with over twenty years of
investing experience. (Dkt. #11 at 2). Retirement System is an institutional investor
and Michigan-based benefit plan providing benefits to current and former employees
of Waterford Township, Michigan. (Dkt. #13 at 6). Massar is an individual investor
and Wisconsin resident with thirty years of investing experience. (Dkt. #14-6 ¶ 2).
Childs filed a Notice of Non-Opposition, (Dkt. #20), on December 28, 2020,
conceding that he did not have the largest financial interest in the relief sought, as
required by the PSLRA. See 15 U.S.C. § 78u–4(a)(3)(B)(iii)(I).
II. LEGAL STANDARD
The PSLRA outlines the procedure for appointing a lead plaintiff in a private
securities action “that is brought as a plaintiff class action pursuant to the Federal
Rules of Civil Procedure.” 15 U.S.C. § 78u–4(a)(1). Within twenty days of filing a class
action complaint under the PSLRA, the plaintiff(s) must ensure publication of a
notice in a widely circulated business publication or wire service. 15 U.S.C. § 78u–
4(a)(3)(A)(i). The publication should advise members of the class of, inter alia: the
claims asserted in the complaint, the relevant class period, and the fact that not later
than sixty days after the date of publication, any member of the purported class may
move the Court to serve as lead plaintiff. Id. The Court must consider each motion
for appointment as lead plaintiff and appoint the movant that is “most capable of
adequately representing the interests of class members.” 15 U.S.C. § 78u–
4(a)(3)(B)(i).

4

Under the PSLRA, courts should adopt a presumption that the most adequate
plaintiff to represent the class is the person or group of persons that: (1) has filed the
complaint or made a timely motion in response to a notice; (2) by the Court’s
determination, has the largest financial interest in the relief sought by the class; and
(3) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil
Procedure. 15 U.S.C. § 78u–4(a)(3)(B)(iii)(I). This presumption may be rebutted if a
member of the purported class produces proof that the presumptive lead plaintiff: (1)
is subject to unique defenses; or (2) will not adequately and fairly represent the class’s
interest. 15 U.S.C. § 78u–4(a)(3)(B)(iii)(II). Once the Court determines the most
adequate plaintiff, it may approve the counsel selected and retained by the lead
plaintiff. 15 U.S.C. § 78u–4(a)(3)(B)(v).
III. DISCUSSION
A. Timeliness of the Notice and Lead-Plaintiff Motions
Notice of this PSLRA action was timely published on October 15, 2020, the
same day the Complaint was filed, in PRNewswire, a widely circulated national
business-oriented wire service. (Dkt. #11 at 5). The notice provided the required
information, including a description of the claims asserted, the proposed class, and
the right of any putative class member to move for appointment as lead plaintiff. Id.
No challenge to the adequacy of the October 15, 2020 notice has been raised. The
Court therefore finds that the initial notice requirement has been met.
The various competing motions for appointment as lead plaintiff have also
been timely filed within the PSLRA’s sixty-day deadline. 15 U.S.C. § 78u–

5

4(a)(3)(B)(iii)(I)(aa). Francis and Retirement System each moved for appointment as
lead plaintiff on December 14, 2020. (Dkt. #7, #13). Also on December 14, 2020,
Massar attempted to move for appointment as lead plaintiff, (Dkt. #10), but had to
refile due to failure to provide a Certificate of Conference, as required by Local Rule
CV-7(i). Massar’s refiled motion, (Dkt. #14), which complied with the Local Rule, was
made after the sixty-day deadline but is otherwise substantively identical to the
original motion made within the deadline. Because Massar’s technical error “does not
implicate concerns animating the PSLRA’s [deadline] requirement, such as litigants
‘jockeying’ for better position,” the Court will also consider Massar’s motion.
Micholle v. Ophthotech Corp., No. 17-CV-1758, 2018 WL 1307285, at *7 (S.D.N.Y.
Mar. 13, 2018) (quoting Khunt v. Alibaba Grp. Holding Ltd., 102 F.Supp.3d 523, 535
(S.D.N.Y. 2015)).
B. Largest Financial Interest
Under the PSLRA, courts are to presume that the plaintiff with the “largest
financial interest in the relief sought by the class” is the lead plaintiff, so long as he
or she otherwise satisfies the requirements of Rule 23. 15 U.S.C. § 78u–
4(a)(3)(B)(iii)(I)(bb). To determine the financial interest of a lead-plaintiff movant
under the PSLRA, courts in the Fifth Circuit have applied the factors set out in Lax v.
First Merchants Acceptance Corp., No. 97 C 2716, 1997 WL 461036, at *5 (N.D. Ill.
Aug. 11, 1997). See, e.g., Marcus v. J.C. Penney Co., No. 6:13-CV-736, 2014 WL
11394911, at *4 (E.D. Tex. Feb. 28, 2014); In re Waste Mgmt., Inc. Sec. Litig.,
128 F.Supp.2d 401, 414 (S.D. Tex. 2000); Brody v. Zix Corp., No. 3:04-CV-1931, 2005

6

WL 8158375, at *2 (N.D. Tex. July 11, 2005). The Lax factors include: (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 by the plaintiffs during the
class period; and (4) the approximate losses suffered by the plaintiffs. 1997 WL
461036, at *5. Courts have held that the fourth factor, the loss suffered, is the
determinative factor in this financial-interest analysis. Giovagnoli v. GlobalSCAPE,
Inc., No. SA-17-CV-753, 2017 WL 11220692, at *3 (W.D. Tex. Nov. 6, 2017) (collecting
cases).2
Of the lead-plaintiff movants, Massar sustained the largest overall financial
loss, totaling approximately $1,164,107.00. See (Dkt. #14-3). However, relevant to the
Rule 23 inquiry, Massar’s losses arose exclusively out of Reata option contracts that
he purchased during the Class Period. See, e.g., (Dkt. #14-3).3 As for Massar’s
common-stock transactions, Massar actually experienced a profit of approximately
$35,060.00, having sold his 2,000 shares of Reata common stock before the end of the
Class Period. See (Dkt. #14-3). Francis sustained the second largest loss, totaling

In fact, most courts, in conducting this financial-interest analysis, look exclusively
to “which potential lead plaintiff has suffered the greatest total losses.” Takara Tr. v. Molex,
Inc., 229 F.R.D. 577, 579 (N.D. Ill. 2005); see also, e.g., Giovagnoli, 2017 WL 11220692, at *3
(analyzing only the fourth factor). It is logical that courts would deem the fourth factor
conclusive because this factor is a function of the first three. In view of the foregoing, the
Court will proceed to analyze only the fourth Lax factor.
2

An option contract, in the securities context, is “[t]he right (but not the obligation) to
buy or sell a given quantity of securities, commodities, or other assets at a fixed price within
a specified time.” Option, BLACK’S LAW DICTIONARY (11th ed. 2019). A call option refers to
the right to buy securities, whereas a put option refers to the right to sell securities. Id.
Common stock, or common share, by contrast, is defined as “[a] class of stock entitling the
holder . . . to receive dividends . . . and to share in assets upon liquidation.” Stock, BLACK’S
LAW DICTIONARY (11th ed. 2019).
3

7

$73,420.00, which was entirely based on common-stock purchases. See (Dkt. #8-4).
Childs suffered the third largest loss of the four lead-plaintiff movants, summing
$51,593.45. (Dkt. #11 at 6). And Retirement System incurred losses of $31,704.00,
also entirely based on common-stock purchases. See (Dkt. #13-4). Massar therefore
suffered the largest financial loss from Reata’s share-price decline during the relevant
class period. Thus, under Section 78u–4(a)(3)(B)(iii)(I)(bb), Massar enjoys a
presumption that he is the lead plaintiff, so long as he satisfies the relevant Rule 23
requirements.
C. Typicality and Adequacy Under Rule 23
The PSLRA also requires that a presumptive lead plaintiff, in addition to
having incurred the greatest financial loss, must “otherwise satisfy the requirements
of Rule 23 of the Federal Rules of Civil Procedure.” 15 U.S.C. § 78u–
4(a)(3)(B)(iii)(I)(cc). However, in this Rule 23 evaluation, “only the typicality and
adequacy prongs . . . are relevant.” Marcus v. J.C. Penney Co., No. 6:13-CV-736, 2014
WL 11394911, at *5 (E.D. Tex. Feb. 28, 2014) (citation omitted); Okla. L. Enf't Ret.
Sys. v. Adeptus Health Inc., No. 4:17-CV-00449, 2017 WL 3780164, at *4 (E.D. Tex.
Aug. 31, 2017). Thus, to satisfy the Rule 23 requirements under the PSLRA, a lead
plaintiff must have claims or defenses that are “typical of the claims or defenses of
the class,” and the lead plaintiff must “fairly and adequately protect the interests of
the class.” FED. R. CIV. P. 23(a).
Notably, for purposes of Rule 23 analysis under the PSLRA, the Court “need
not raise its inquiry to the level required in ruling on a motion for class certification.”

8

Hohenstein v. Behringer Harvard REIT I, Inc., No. 3:12-CV-3772, 2012 WL 6625382,
at *2 (N.D. Tex. Dec. 20, 2012). Rather, it is sufficient that a lead-plaintiff movant
make only a prima facie showing that he or she satisfies the typicality and adequacy
requirements of Rule 23. Singh v. 21 Vianet Grp., Inc., No. 2:14-CV-894, 2015 WL
5604385, at *1 (E.D. Tex. Sept. 21, 2015).
To be “typical” of the class, the potential lead plaintiff’s claim must have “the
same essential characteristics as those of the other class members.” Marcus, 2014 WL
11394911, at *5 (citation omitted), such that “the incentives of the plaintiffs are
aligned with those of the class.” Hohenstein, 2012 WL 6625382, at *3 (quoting Beck v.
Maximus, Inc., 457 F.3d 291, 295–96 (3d Cir. 2006)). Further, a lead-plaintiff movant
is adequate when he or she is “prepared to prosecute the action vigorously,” Stein v.
Match Grp., Inc., No. 3:16-CV-549, 2016 WL 3194334, at *5 (N.D. Tex. June 9, 2016)
(citation omitted), and when no conflicts exist between the named plaintiffs’ interests
and the class members’ interests. James v. City of Dallas., 254 F.3d 551, 571 (5th Cir.
2001) (quoting Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 625–26 (5th Cir.
1999)).
Finally, where a potential lead plaintiff has satisfied the PSLRA requirements
to become the presumptive lead plaintiff, this presumption may be rebutted upon
proof that the presumptive lead plaintiff is subject to unique defenses or would not
adequately and fairly represent the class’s interest. 15 U.S.C. § 78u–4(a)(3)(B)(iii)(II).

9

i. Whether Massar Satisfies Rule 23’s Typicality and Adequacy
Requirements
The Fifth Circuit has not addressed whether movants who invest primarily or
wholly in options can qualify as lead plaintiffs representing a class that consists
largely of common stockholders.4 However, other courts have held that movants who
invest only in options are atypical of a class comprising common shareholders. See,
e.g., Andrada v. Atherogenics, Inc., No. 05 Civ. 00061, 2005 WL 912359, at *5
(S.D.N.Y. Apr. 19, 2005); Margolis v. Caterpillar, Inc., 815 F.Supp. 1150, 1156 (C.D.
Ill. 1991); In re Stitch Fix, Inc. Sec. Litig., 393 F.Supp.3d 833, 836 (N.D. Cal. 2019);
Applestein v. Medivation, Inc., No. C 10-00998, 2010 WL 3749406, at *4 (N.D. Cal.
Sept. 20, 2010). But see, e.g., In re Scientific–Atlanta, Inc. Sec. Litig., 571 F.Supp.2d
1315, 1330–31 (N.D. Ga. 2007) (finding an options trader suitable to lead a class in a
securities class action); In re Donnkenny Inc., Sec. Litig., 171 F.R.D. 156, 156
(S.D.N.Y.

1997) (holding

that

an

options

trader

who

purchased

both

options and common stock was an adequate lead plaintiff). And, particularly relevant
here, some courts have held that lead-plaintiff movants are atypical of or inadequate
to represent a class largely consisting of common shareholders when a substantial
portion of their losses are based on options. See, e.g., Cook v. Allergn PLC, No. 18 Civ.

The information before the Court indicates that the average Reata investor acquired
common stock rather than options during the Class Period. This conclusion is supported first
by the fact that all lead-plaintiff movants other than Massar purchased exclusively common
stock. See (Dkt. #7, #11, #13). Moreover, Massar’s substantial options trading during the
Class Period further indicates that Reata securities purchasers during the Class Period
predominantly traded in common stock. For example, Massar purchased ninety-nine percent
of the available 02/19/21 C200 option contracts during the Class Period, see (Dkt. #14-5 at 3);
(Dkt. #21-2 at 2), eighty-one percent of the 11/20/20 C160 option contracts, and seventy-eight
percent of the 11/20/20 C160 option contracts, see (Dkt. #14-5 at 3); (Dkt. #21-2 at 10–11).
4

10

12089, 2019 WL 1510894, at *2 (S.D.N.Y. Mar. 21, 2019); Di Scala v. ProShares Ultra
Bloomberg Crude Oil, No. 20 CIV. 5865, 2020 WL 7698321, at *4 (S.D.N.Y. Dec. 28,
2020).
In Cook, for instance, the court held that a lead-plaintiff movant was atypical
of the class where approximately sixty percent of the movant’s losses came from
options trading. Cook, 2019 WL 1510894, at *2. The Cook court reasoned that
appointing the options investor as lead plaintiff very likely “would introduce factual
issues irrelevant to stockholder class members, like strike price, duration, maturity,
volatility, and interest rates, and . . . could subject the class to unique defenses,
causing unnecessary conflict.” Id. (quoting In re Elan Corp. Sec. Litig., No. 08 Civ.
08761, 2009 WL 1321167, at *2 (S.D.N.Y. May 11, 2009)).
Similarly, in Di Scala, the lead-plaintiff movant with the highest financial
interest was an options investor who lost about $18.2 million due to the defendant’s
declining share price, and the movant with the next largest financial interest lost
about $2.4 million. Di Scala, 2020 WL 7698321, at *2. Despite the roughly sixteenmillion-dollar difference in financial interests between the two movants, the Di Scala
court held that the movant with the highest financial interest was atypical of the
class where eighty-two percent of his losses were based on options trading. Id. at *4.
Like in Cook, the Di Scala court reasoned that the options investor was potentially
not “motivated by the same market incentives as class members who traded shares
on the open market,” and thus, his appointment as lead plaintiff raised the concern
that issues unique to the options investor would “threaten to become the focus of the

11

litigation” at the class-certification stage and otherwise. Id. (citation omitted); accord
Applestein, 2010 WL 3749406, at *4 (holding that the lead-plaintiff movant’s options
trading had the potential to distract from the lawsuit’s central issue: whether the
defendant committed fraud on the market).
Here, it is undisputed that Massar has the highest financial interest of the
lead-plaintiff movants—with financial losses of $1,164,107.00 stemming from Reata’s
falling share price. However, like in Cook and Di Scala, the fact that Massar’s losses
during the Class Period were based solely on option contracts renders Massar atypical
of the putative class. And while Massar did trade in both common stock and options
during the Class Period, his losses arose exclusively from his options; in fact, Massar
profited from his common-stock investments. See (Dkt. #14-3). This material gain in
common stocks makes Massar’s trading practices during the Class Period
functionally the same as an investor who traded only in options and materially
different from the putative class consisting largely of common stockholders.5
In rebuttal, Massar points out that some courts have appointed options
investors as lead plaintiffs in securities class actions. (Dkt. #24 at 4–5) (citing Hall v.
Medicis Pharm. Corp., No. CV08-1821, 2009 WL 648626, at *5 (D. Ariz. Mar. 11,
2009); Medina v. Clovis Oncology, Inc., No. 15-CV-2546, 2016 WL 660133, at *4 (D.

The Court also acknowledges that Massar may be subject to at least one additional
unique defense. Specifically, Francis alleges that Massar also engaged in short selling during
the Class Period. (Dkt. #18 at 3–4). Massar maintains that his Reata investment strategy did
not include short sales. (Dkt. #24 at 7). However, because the Court concludes that Massar
is atypical and/or subject to unique defenses based on his options trading, the Court need not
address the short-selling question.
5

12

Colo. Feb. 18, 2016); Goldstein v. Puda Coal, Inc., 827 F.Supp.2d 348, 355 (S.D.N.Y.
2011)). However, each of these cases is inapposite here.6
In Hall, the court appointed an options investor as lead plaintiff in a securities
class action. 2009 WL 648626, at *5. However, the Hall court acknowledged a
“divergence of authority on the subject” and noted that, had some evidence specific to
the options investor been presented suggesting that “the nature of his options, the
history of their purchase and sale, or some other factor made him inadequate to
represent the class, then the Court might have occasion to disqualify [the lead
plaintiff].” Id. at *4. For Massar, another factor has been presented that calls into
question his typicality and adequacy: Massar made a material profit from his
common-stock investments. Because one hundred percent of Massar’s Reata-driven
losses stemmed from option contracts, even under the standard applied in Hall,
Massar is not qualified to act as lead plaintiff.
Similarly, the options investors deemed typical for purposes of appointing a
lead plaintiff in Goldstein can be distinguished from Massar. In Goldstein, the court
appointed an investor as lead plaintiff who had traded in and suffered financial loss
from both options and common stock of the defendant company. Goldstein,
827 F.Supp.2d at 355. Here, as explained above, Massar incurred financial loss only

Below, the Court distinguishes Hall and Goldstein. However, the Court does not
distinguish Medina because it is unclear whether the lead plaintiff in that case traded in and
suffered loss from both options and common stock. Medina, 2016 WL 660133, at *4. The
decision only mentions that Arkin Group, the prevailing lead-plaintiff movant, suffered losses
of nearly $13.4 million and “may have held securities that other members of the class did not,
such as options.” Id. at *3. While it is possible that Arkin Group held common stock and
suffered financial loss from holding that common stock, the case does not make that clear.
6

13

from his option contracts and in fact profited from his Reata common-stock
investments during the Class Period. For the foregoing reasons, the Court concludes
that Massar is atypical of the class and does not qualify to serve as lead plaintiff.
Massar also cautions the Court against “redefin[ing] the putative Class to
consist only of investors in Reata common stock.” (Dkt. #24 at 6). However, the Court’s
denial of Massar’s lead-plaintiff motion does not have the effect of restricting the
putative class to investors holding exclusively common shares of Reata. Rather, the
sole task of the Court presently is to “appoint as lead plaintiff the member or members
of the purported plaintiff class that the court determines to be most capable of
adequately representing the interests of class members.” 15 U.S.C. § 78u–
4(a)(3)(B)(i). Just because Massar, as an options investor, is disqualified from being
the “most adequate” lead plaintiff does not mean that any Reata investors holding
options are excluded from the class.
Finally, even if the Court were to conclude that Massar satisfies typicality,
thus making him the presumptive lead plaintiff, that presumption would be rebutted
because Massar’s trading practices subject him to “unique defenses” concerning
damages. Gelt Trading v. Co-Diagnostics, Inc., No. 2:20-CV-00368, 2021 WL 913934,
at *5 (D. Utah Mar. 10, 2021); Bricklayers of W. Pa. Pension Plan v. Hecla Mining
Co., No. 2:12-CV-00042, 2012 WL 2872787, at *4 (D. Idaho July 12, 2012). In this
regard, the Gelt Trading case is instructive. In Gelt Trading, the court held that a
lead-plaintiff movant who invested in options rather than common stock was subject
to unique defenses regarding damages because “comparing damage calculations for

14

purchasers of stock and purchasers of options is like ‘comparing apples to oranges.’”
Gelt Trading, 2021 WL 913934, at *5 (quoting Hecla Mining Co., 2012 WL 2872787,
at *4). The Gelt Trading court reasoned that “the price and value of a single share of
common stock is very different from the price and value of a single call option”
because “[t]he options’ valuable lives are limited, their value is conditional, and there
is a large disparity between their price and their potential value.” Id. (quoting Hecla
Mining Co., 2012 WL 2872787, at *4). The Court agrees with this reasoning, which
applies to Massar. Even if Massar’s holding and trading Reata options and shares
were typical of the class, Massar is potentially subject to unique defenses concerning
damages that likewise render Massar ineligible to serve as lead plaintiff.
Because Massar’s trading practices are atypical of the class and, in any event,
subject him to unique defenses, he is not the “most adequate plaintiff,” and the Court
denies his motion for appointment as lead plaintiff, (Dkt. #14).
ii. Whether Francis Satisfies Rule 23’s Adequacy and Typicality
Requirements
The Court next considers whether Francis, having the second largest financial
interest of the lead-plaintiff movants, satisfies the adequacy and typicality
requirements of Rule 23, thus making him the presumptive lead plaintiff. Retirement
System argues that Francis did not “provide[] the Court with anything more than
bare bones information” and therefore did not make the requisite prima facie showing
of adequacy or typicality. (Dkt. #21 at 12). In his initial motion for appointment as
lead plaintiff, Francis stated that he “lives in New York[,] has been investing for over
[twenty-five] years . . . has a college degree[,] and works in real estate and general
15

contracting.” (Dkt. #8 at 5). Francis’s submission of his required PSLRA certification,
(Dkt. #8-3), in addition to Francis’s aforementioned educational and professional
background in investment and business transactions, represents all the background
information that Francis provided. While Francis did not provide a wide breadth of
information about himself, the Court is not persuaded by Retirement System’s
argument that Francis failed to present enough to show that he is typical and
adequate.
Regarding Francis’s typicality, the relevant inquiry is “whether the class
representative’s claims have the same essential characteristics of those of the
putative class” and “arise from a similar course of conduct and share the same legal
theory.” James, 254 F.3d at 571. Francis’s claims are clearly typical of the class’s.
Francis, like other members of the class, alleges that Reata violated the Securities
Exchange Act by making false or misleading statements regarding Reata’s business,
and Francis purchased Reata common stock at allegedly artificially inflated prices.
(Dkt. #8 at 5). In sum, the nature of Francis’s financial interest in and claims against
Reata suggests that the incentives of Francis “are aligned with those of the class.”
Hohenstein, 2012 WL 6625382, at *3 (quoting Beck, 457 F.3d at 295–96).
Francis likewise satisfies the adequacy requirement of Rule 23. The adequacy
requirement is fulfilled when the lead-plaintiff movant makes a “showing [of] zeal
and competence of the representative’s counsel, and a willingness and ability of the
representative to take an active role in and control the litigation and to protect the
interests of absentees.” Giovagnoli, 2017 WL 11220692, at *4 (citing Berger v.

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Compaq Computer Corp., 257 F.3d 475, 479 (5th Cir. 2001)). As evident from
Francis’s motion, he has retained competent and experienced counsel who are
prepared to litigate this action efficiently and aggressively. (Dkt. #8 at 6); (Dkt. #85). Francis has also expressed a “strong desire to prosecute these actions on behalf of
the class,” (Dkt. #8 at 5), and has attached a PSLRA certification revealing his
willingness to serve as class representative, (Dkt. #8-3). Francis also contends that
there is no known conflict between his claims and those asserted on behalf of the
class. (Dkt. #18 at 7). In light of the foregoing, Francis has satisfied the typicality and
adequacy requirements of Rule 23 and is the presumptive lead plaintiff.
This presumption that Francis is the “most adequate plaintiff” may only be
rebutted by proof that he is subject to unique defenses or will not adequately and
fairly represent the class. 15 U.S.C. § 78u–4(a)(3)(B)(iii)(II). Retirement System and
the other lead-plaintiff movants have failed to provide such proof, and the Court is
unaware of any such proof in the record.
Retirement System bases its argument as to Francis’s inadequacy on the
amount of background information that Francis provided. (Dkt. #21 at 7). Courts
have occasionally cited a dearth of information provided by and about a lead-plaintiff
movant as the basis for denying the movant’s motion. See, e.g., In re Boeing Co.
Aircraft Sec. Litig., No. 19 CV 2394, 2019 WL 6052399, at *5 (N.D. Ill. Nov. 15, 2019);
Camp v. Qualcomm Inc., No. 18-CV-1208, 2019 WL 277360, at *3 (S.D. Cal. Jan. 22,
2019); Perez v. HEXO Corp., No. 19 CIV. 10965, 2020 WL 905753, at *3 (S.D.N.Y.
Feb. 25, 2020). However, courts regularly reject the notion that detailed background

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information is required by a lead-plaintiff movant to show that he or she is adequate
and typical. See Kasilingam v. Tilray, Inc., No. 1:20-CV-03459, 2020 WL 4530357, at
*3 (S.D.N.Y. Aug. 6, 2020); Borteanu v. Nikola Corp., No. CV-20-01797,
2020 WL 7392795, at *6 (D. Ariz. Dec. 15, 2020).
In Boeing, a family collectively moving for lead-plaintiff appointment offered
only their PSLRA certification and place of residence in support of their candidacy.
2019 WL 6052399, at *5. The court admonished the movants for failing to provide
information regarding their “level of financial sophistication . . . the general source of
their wealth . . . [or] general information about their backgrounds, education,
employment, or investment experience” and held that a “movant must supply some
information about its ability to perform the role of lead plaintiff” in order to satisfy
the Rule 23 requirements. Id. Similarly, in Camp, the court declined to appoint a
lead-plaintiff movant for failing to “include any basic details about himself, including
where he lives or who he is specifically in his motion.” 2019 WL 277360, at *3
(emphasis added). And in Perez, the court opted not to appoint a lead-plaintiff movant
who did not provide any information about himself, e.g., “investment history,
educational background, etc.” 2020 WL 905753, at *3. While the movant in Perez
supplied personal details after the opposing movants highlighted his prior nondisclosure of background information, the court was concerned, based on the movant’s
initial failure to disclose such information, about whether he, as lead-plaintiff, would
“meaningfully oversee and control the prosecution of this consolidated class action.”
Id.

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Here, unlike the prospective lead plaintiffs in Boeing, Camp, and Perez,
Francis did provide basic background information about himself. Specifically, in his
lead-plaintiff motion, Francis states his place of residence, provides that he has
twenty-five years of investing experience, advises that he is college-educated, and
enumerates the industries in which he works. (Dkt. #8 at 5). Francis also explains
why his claims are typical of the class, describes his financial stakes in the matter,
and cites a “strong desire” to litigate this action and represent the class. (Dkt. #8 at
5). The Court therefore concludes that Boeing and similar cases are distinguishable
and that Francis has provided sufficient background information for the Court to
make an informed lead-plaintiff determination. See also Kasilingam, 2020 WL
4530357, at *3; Borteanu, 2020 WL 7392795, at *6.
Retirement System also argues that, as an institutional investor, it should be
afforded a preference to be appointed lead plaintiff. (Dkt. #21 at 9). Retirement
System is correct that the PSLRA has been construed to afford a preference for
securities fraud litigation to be directed by institutional investors. See, e.g., In re
Veeco Instruments Inc., Sec. Litig., 233 F.R.D. 330, 332–33 (S.D.N.Y. 2005) (“[T]he
PSLRA was passed, at least in part, to increase the likelihood that institutional
investors would serve as lead plaintiffs in [securities fraud litigation].”). However, a
core goal of the PSLRA is to have any potential plaintiff class represented by “a
member with a substantial financial interest in the recovery as incentive, monitor
the litigation to prevent its being ‘lawyer-driven.’” Strong v. AthroCare Corp., No. A08-CA-574-SS, 2008 WL 11334942, at *3 (W.D. Tex. Dec. 10, 2008) (quoting In re

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Waste Mgmt., Inc. Sec. Litig., 128 F. Supp. 2d 401, 411–12 (S.D. Tex. 2000)). Those
with a substantial financial interest in a private securities action are often
institutional investors, but this “does not foreclose appointment of a fully competent
individual investor,” and “[i]n fact, to do otherwise would violate the plain language
of the statute, and work to undermine the presumption crafted by Congress.” In re
Alcatel Alsthom Sec. Litig., No. MDL 1263, 1999 WL 33756548, at *5 (E.D. Tex. June
7, 1999). Retirement System’s status as an institutional investor, therefore, does not
render it the presumptive lead plaintiff where Francis, with the largest financial
stake in the suit, has otherwise made a prima facie showing of adequacy and
typicality.
D. Lead Counsel
Once the Court selects a lead plaintiff, that plaintiff can then choose lead
counsel, subject to the Court’s approval. 15 U.S.C. § 78u–4(a)(3)(B)(v). Francis has
retained The Rosen Law Firm, P.A. as lead counsel and Steckler Wayne Cochran,
PLLC as liaison counsel in this matter and has moved for the Court’s approval.
(Dkt. #7). The Court has reviewed the background and experience of each firm and is
satisfied that each could adequately represent the plaintiff class in this action.
(Dkt. #8-5, #8-6). Rosen Law has served as lead counsel in various securities class
actions that have resulted in substantial recoveries for shareholders. (Dkt. #8-5).
Steckler Wayne Cochran has many years of experience handling complex litigation,
including certified class actions. (Dkt. #8-6). The Court therefore approves Francis’s
selection of lead counsel and liaison counsel.

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IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the Motion of Russell Francis,
Sr. for Appointment as Lead Plaintiff and Approval of Lead Plaintiff’s Selection of
Counsel, (Dkt. #7), and DENIES the Motion of Jason Childs for Appointment as Lead
Plaintiff and Approval of His Selection of Counsel, (Dkt. #11), the Motion of
Waterford Township General Employees Retirement System as Lead Plaintiff and

.
Approval of Selection of Counsel, (Dkt. #13), and the Motion of Luke G. Massar for
Appointment as Lead Plaintiff and Approval of Lead Counsel, (Dkt. #14).
The Court further ORDERS that Russell Francis, Sr. is appointed as lead
plaintiff pursuant to the Private Securities Litigation Reform Act of 1995, 15 U.S.C.
§ 78u–4(a)(3)(B); and Francis’s selection of The Rosen Law Firm, P.A. as lead counsel
and Steckler Wayne Cochran, PLLC as liaison counsel are approved, pursuant to 15
U.S.C. § 78u–4(a)(3)(B)(v).
So ORDERED and SIGNED this 15th day of July, 2021.

____________________________________
SEAN D. JORDAN
UNITED STATES DISTRICT JUDGE

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