Knight v. CytomX Therapeutics, Inc.

[2] 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION [6] 7 KEVIN KNIGHT, Case No. 20-cv-03432-BLF 8 Plaintiff, ORDER GRANTING PLAINTIFF 9 v. MICHAEL MARGIOTTA'S MOTION FOR APPOINTMENT AS LEAD 10 CYTOMX THERAPEUTICS, INC., et al., PLAINTIFF AND APPROVAL OF SELECTION OF COUNSEL 11 Defendants. [Re: ECF 22] [13] 14 Before the Court is Plaintiff Michael Margiotta’s (“Mr. Margiotta”) unopposed Motion for 15 Appointment as Lead Plaintiff and Approval of Selection of Counsel (“Motion”). See Mot., ECF 16 22. Pursuant to Civil Local Rule 7-1(b), the Court determined this motion was suitable for 17 decision without oral argument on October 23, 2020, and vacated the hearing on Mr. Margiotta’s 18 Motion scheduled for November 5, 2020. See Order, ECF 32. For the reasons stated herein, the 19 Court GRANTS Plaintiff’s Motion. [20] 21 I. BACKGROUND 22 On May 21, 2020, Plaintiff Kevin Knight (“Mr. Knight”) filed this putative securities class 23 action lawsuit against Defendants CytomX Therapeutics, Inc. (“CytomX”), Sean A. McCarthy, 24 Carlos Campoy, and Debanjan Ray (collectively, “Defendants”). See Compl., ECF 1. CytomX 25 operates as an oncology-focused biopharmaceutical company in the U.S. and develops a novel 26 class of investigational antibody therapeutics for the treatment of cancer. Id. ¶ 2. Mr. Knight 27 alleges that, from May 17, 2018 to May 13, 2020 (the “Class Period”), Defendants issued 1 issues with its products’ efficacy and safety in clinical trials. See id. ¶¶ 1, 5–8. When CytomX 2 made abstracts for its clinical presentations available, Mr. Knights avers that “CytomX’s stock 3 price fell $5.21 per share, or 36.08%.” Id. ¶¶ 6–7. Mr. Knight alleges that, as a result of these 4 misrepresentations and the “precipitous decline” in the market value of CytomX’s securities, 5 “Plaintiff and other Class members have suffered significant losses and damages.” Id. ¶ 8. As a 6 result, Mr. Knight filed the instant lawsuit for violations of the Securities Exchange Act of 1934 7 on behalf of all persons who purchased or otherwise acquired CytomX’s securities during the 8 Class Period. Id. ¶ 1. 9 On the same day the complaint was filed, May 21, 2020, a Private Securities Litigation 10 Reform Act (“PSLRA”) early notice was issued advising potential class members of the claims 11 alleged in the action and the 60-day deadline for class members to move to be appointed as lead 12 plaintiff. See Mot. 3; see also Ex. 1 to Decl. of Laurence M. Rosen (“Rosen Decl.”), Notice, ECF 13 24-1. On July 20, 2020, Mr. Margiotta filed this Motion seeking appointment as lead plaintiff and 14 approval of The Rosen Law Firm, P.A. (“Rosen Law”) as lead counsel for the class. See Mot. 4. 15 On the same day, Mr. Knight also filed a motion to appoint himself as lead plaintiff and 16 Pomerantz LLP as lead counsel. See Mot. of Kevin Knight 1, ECF 27. However, on August 3, 17 2020, Mr. Knight filed a notice of non-opposition to Mr. Margiotta’s Motion that basis that Mr. 18 Margiotta possesses the “largest financial interest” in this matter within the meaning of the 19 PSLRA. See Notice of Non-Opposition, ECF 31. Mr. Knight’s motion was terminated as moot on 20 October 23, 2020. See Order. Mr. Margiotta’s Motion is thereby unopposed. [21] 22 II. LEGAL STANDARD 23 A. Lead Plaintiff 24 The Private Securities Litigation Reform Act of 1995 (“PSLRA”) governs the procedure 25 for selection of lead plaintiff in all private class actions under the Securities Exchange Act of 26 1934. 15 U.S.C. § 78u-4(a)(3). Pursuant to the PSLRA, the court shall appoint as lead plaintiff 27 “the member or members of the purported plaintiff class that the court determines to be most 1 adequate plaintiff.” Id. at § 78u-4(a)(3)(B)(i). 2 The PSLRA “provides a simple three-step process for identifying the lead plaintiff.” In re 3 Cavanaugh, 306 F.3d 726 , 729 (9th Cir. 2002). First, the pendency of the action, the claims made, 4 and the purported class period must be publicized in a “widely circulated national business5 oriented publication or wire service.” Id.; see also 15 U.S.C. § 78u-4(a)(3)(A)(i)(I). This notice 6 must be published within 20 days of the filing of the complaint. Id. It must also alert members of 7 the purported class that they have 60 days to move for appointment as lead plaintiff. 15 U.S.C. 8 § 78u-4(a)(3)(A)(i)(II). 9 Second, the court must identify the presumptive lead plaintiff. To do so, the court “must 10 compare the financial stakes of the various plaintiffs and determine which one has the most to gain 11 from the lawsuit.” Cavanaugh, 306 F.3d at 730. The court must then determine whether that 12 individual, “based on the information he has provided in his pleadings and declarations,” satisfies 13 the requirements of Rule 23(a), “in particular those of ‘typicality’ and ‘adequacy.’” Id. If the 14 plaintiff with the largest financial interest satisfies these requirements, he becomes the 15 “presumptively most adequate plaintiff.” Id.; see also 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). 16 Finally, the other plaintiffs must have “an opportunity to rebut the presumptive lead 17 plaintiff's showing that [he] satisfies Rule 23' s typicality and adequacy requirements.” 18 Cavanaugh, 306 F.3d at 730. Unless a member of the purported plaintiff class provides proof that 19 the presumptive plaintiff “(aa) will not fairly and adequately protect the interests of the class; or 20 (bb) is subject to unique defenses that render such plaintiff incapable of adequately representing 21 the class,” the court must appoint the presumptively most adequate plaintiff as lead plaintiff. 15 22 U.S.C. § 78u-4(a)(3)(B)(iii)(II); see also Cavanaugh, 306 F.3d at 732. 23 B. Lead Counsel 24 Under the PLSRA, the lead plaintiff has the right, subject to court approval, to “select and 25 retain counsel to represent the class.” 15 U.S.C. § 78u–4(a)(3)(B)(v). “[T]he district court should 26 not reject a lead plaintiff’s proposed counsel merely because it would have chosen differently.” 27 Cohen v. U.S. Dist. Court, 586 F.3d 703 , 711 (9th Cir. 2009) (citation omitted). “[I]f the lead 1 choice.” Id. at 712 (citations omitted). [2] 3 III. DISCUSSION 4 A. Procedural Requirements 5 Pursuant to the PSLRA, Pomerantz LLP published a notice of the pending action on May 6 21, 2020, the same date that Mr. Knight filed the complaint in this case. See 15 U.S.C. § 78u7 4(a)(3)(A)(i); see also Notice. The notice announced the pendency of this action, listed the claims, 8 specified the class period, and advised putative class members that they had 60 days from the date 9 of the notice to file a motion to seek appointment as lead plaintiff in the lawsuit. Id. Thus, the 10 notice complied with the PSLRA’s requirements. See 15 U.S.C. § 78u–4(a)(3)(A). 11 As noted above, Mr. Margiotta then filed this Motion on July 20, 2020, one day before the 12 last day of the 60-day deadline. See Mot. Mr. Margiotta has therefore met the statutory notice 13 requirements. 14 B. Financial Interest 15 The Court must next determine whether Mr. Margiotta qualifies as the most adequate 16 plaintiff. To make this determination, the Court must first consider Mr. Margiotta’s financial 17 interest in the relief sought. See Cavanaugh, 306 F.3d at 730. Mr. Margiotta has submitted a “loss 18 chart” setting forth calculations of his alleged losses, totally approximately $4,087.00. Ex. 3 to 19 Rosen Decl., Loss Chart, ECF 24-3; see also Mot. 6. Because Mr. Margiotta’s Motion is 20 unopposed, Mr. Margiotta is necessarily the prospective lead plaintiff with the greatest financial 21 interest in the litigation. See Notice of Non-Opposition; Order; see also City of Dearborn Heights 22 Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc., No. 12-CV-06039-LHK, 2013 WL 2368059 , 23 at *3 (N.D. Cal. May 29, 2013) (“Without access to financial information from other parties, the 24 Court is constrained to conclude that the [proposed plaintiff's] alleged loss best qualifies it to serve 25 as lead plaintiff.” (quoting Bassin v. Decode Genetics, Inc., 230 F.R.D. 313, 316 (S.D.N.Y. 26 2005)). 27 C. Rule 23 Requirements 1 financial stake in this litigation, the Court must next consider whether Mr. Margiotta satisfies the 2 typicality and adequacy requirements of Rule 23(a). Federal Rule of Civil Procedure 23(a) sets 3 forth four requirements for class certification: (1) numerosity, (2) commonality, (3) typicality, and 4 (4) adequacy. Fed. R. Civ. P. 23(a). At the appointment of lead plaintiff stage, courts need only 5 consider typicality and adequacy, as the failure to satisfy numerosity or commonality would 6 preclude certifying a class action at all. Cavanaugh, 306 F.3d at 730 n.5. “When the court makes 7 [this] initial determination, it must rely on the presumptive lead plaintiff's complaint and sworn 8 certification; there is no adversary process to test the substance of those claims.” Id. at 730. As 9 such, Mr. Margiotta need only make a prima facie showing that he satisfies the Rule 23 10 requirements of typicality and adequacy. See id. at 731. 11 In determining whether typicality is satisfied, a Court inquires “whether other members 12 have the same or similar injury, whether the action is based on conduct which is not unique to the 13 named plaintiffs, and whether other class members have been injured by the same course of 14 conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citation omitted), 15 superseded by statute on other grounds, Berger v. Ludwick, No. C-97-0728-CAL, 2000 WL 16 1262646 (N.D. Cal. Aug. 17, 2000). In this case, like all other members of the purported class, Mr. 17 Margiotta purchased CytomX stocks during the Class Period, when CytomX’s stock prices were 18 allegedly artificially inflated by Defendants’ misrepresentations and/or omissions, and Mr. 19 Margiotta allegedly suffered damages when those misrepresentations and/or omissions came to 20 light. See Mot. 7. Mr. Margiotta’s claims thus appear to be typical, if not identical, to the claims of 21 other members of the putative class. 22 The test for adequacy asks whether the lead plaintiff and his counsel “have any conflicts of 23 interest with other class members” and whether the lead plaintiff and his counsel will “prosecute 24 the action vigorously on behalf of the class.” Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 25 2003). Here, there is no indication of conflicts between Mr. Margiotta and other class members 26 and Mr. Margiotta’s diligence in seeking appointment as lead plaintiff suggests that he and his 27 counsel will prosecute this action vigorously. 1 required at this stage, and the Court finds that Mr. Margiotta qualifies as the presumptively most 2 adequate plaintiff under the PSLRA. 3 D. Opportunity to Rebut 4 Other plaintiffs have been afforded an opportunity to rebut Mr. Margiotta’s showing that 5 || he as the presumptive lead plaintiff satisfies Rule 23’s typicality and adequacy requirements, as 6 || evidenced by Mr. Knight’s opposition. See Mot. of Kevin Knight. However, Mr. Margiotta’s 7 Motion is now unopposed and no member of the purported plaintiff class has provided proof that 8 Mr. Margiotta “will not fairly and adequately protect the interests of the class” or that Mr. 9 || Margiotta “is subject to unique defenses that render [him] incapable of adequately representing the 10 class.” 15 U.S.C. § 78u-4(a)(3)(B) UD; see also Notice of Non-Opposition. Accordingly, the 11 Court APPOINTS Mr. Margiotta to serve as lead plaintiff. 12 E. Lead Counsel 5 13 No parties have objected to Mr. Margiotta’ selection of Rosen Law as counsel. See Notice 14 || of Non-Opposition; Order. The Court has reviewed the firm’s resume, Ex. 4 to Rosen Decl., Firm 3 15 Resume, ECF 24-4, and is satisfied that Mr. Margiotta has made a reasonable choice of counsel. a 16 || See also Mot. 8. Accordingly, the Court APPROVES Mr. Margiotta’s selection of Rosen Law as 3 17 lead counsel. [18] 19 IV. CONCLUSION 20 For the foregoing reasons, Mr. Margiotta’s Motion for Appointment as Lead Plaintiff and 21 Approval of Selection of Counsel is GRANTED. [22] 23 || Dated: November 18, 2020 kom Lh han én) [24] BETH LABSON FREEMAN 25 United States District Judge