Quarford v. Dermtech, Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] Case No.: 23-cv-1885-DMS-JLB 11 MIKA BAGHERI, individually and on behalf of all others similarly situated, 12 ORDER GRANTING MOVANT Plaintiff, ROBERT WEINER’S MOTION TO [13] v. APPOINT LEAD PLAINTIFF, 14 APPROVE LEAD COUNSEL, AND DERMTECH, INC.; JOHN DOBAK; and CONSOLIDATE CASES; DENYING 15 KEVIN SUN, COMPETING MOTIONS; AND 16 Defendants. VACATING HEARING [17] 18 Case No.: 23-cv-2221-DMS-JLB ELENA C. QUARFORD, individually 19 and on behalf of all others similarly situated [20] Plaintiff, [21] v. [22] DERMTECH, INC.; JOHN DOBAK; and 23 KEVIN SUN, 24 Defendants. [25] 26 Pending before the Court is the matter of appointing lead plaintiff in this putative 27 securities fraud class action brought on behalf of all purchasers of DermTech, Inc. 28 (“DermTech” or the “Company”) securities between March 8, 2021, and November 3, 1 2022, inclusive. On December 15, 2023, movants Robert Weiner (“Weiner,” ECF No. 10), 2 Sameer and Sunaina Khanna (“the Khannas,” ECF No. 11), the Ramras Accounts 3 (“Ramras,” ECF No. 12), and Sandra Nolan (“Nolan,” ECF No. 13) filed motions to be 4 appointed lead plaintiff pursuant to 15 U.S.C. § 78u-4(a)(3). Movant Weiner alleges the 5 largest financial interest, measured by his “last-in-first-out” (“LIFO”) loss, in connection 6 with his purchases of Dermtech securities during the class period: $95,118.67. The 7 Khannas and Nolan have since filed notices of non-opposition to competing motions, (ECF 8 Nos. 15, 17), and Ramras has filed a notice of withdrawal. (ECF No. 19). Defendants also 9 filed a notice of non-opposition. (ECF No. 16.) Weiner’s motion therefore proceeds 10 unopposed. For the reasons set forth below, the Court appoints Weiner as lead plaintiff, 11 approves Weiner’s choice of Glancy Prongay & Murray LLP as lead counsel, and grants 12 Weiner’s request to consolidate related cases. 13 I. DISCUSSION 14 A. Appointment of Lead Plaintiff 15 The Court appoints Weiner as lead plaintiff; having alleged the largest loss, Weiner 16 is the presumptive lead plaintiff and no other class member has attempted to rebut the 17 presumption. Under the Private Securities Litigation Reform Act (“PSLRA”), a district 18 court appoints lead plaintiffs through a “three-step process.” Mersho v. U.S. Dist. Ct, 6 19 F.4th 891 , 898 (9th Cir. 2021). The first step requires publication of the action so that 20 purported class members can move for lead plaintiff appointment. Id. at 899 (citing 15 21 U.S.C. § 78u-4(a)(3)(A)(i)(I)–(II)). The second step involves identifying the “most 22 adequate” plaintiff: the movant with the largest alleged loss becomes the presumptive lead 23 plaintiff if they can make “a prima facie showing of adequacy and typicality.” Id. The 24 third step allows for other members of the purported class to rebut that presumption. Id. 25 Here, the first step of publication has been satisfied. No later than 20 days after 26 filing a class action securities complaint, a private plaintiff must publish “in a widely 27 circulated national business-oriented publication or wire service, a notice advising 28 members of the purported plaintiff class . . . of the pendency of the action, the claims 1 asserted therein, and the purported class period . . . .” 15 U.S.C. § 78u-4(a)(3)(A)(i)(I). 2 Plaintiff Mika Bagheri (“Bagheri”) filed this action on October 16, 2023. (ECF No. 1.) 3 One the same day, Glancy Prongay & Murray LLP, counsel for Bagheri, published a notice 4 of the action in Business Wire, a widely circulated national business-oriented wire service. 5 (See ECF No. 10-4, Ex. A to Decl. of Robert V. Prongay.) 6 Weiner is the presumptively most adequate plaintiff at step two. At step two, the 7 movant with the largest financial interest who “otherwise satisfies the requirements of Rule 8 23 of the Federal Rules of Civil Procedure” is presumptively “the most adequate plaintiff.” 9 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). “[T]he district court must identify which movant has 10 the largest alleged losses and then determine whether that movant has made a prima facie 11 showing of adequacy and typicality.” Mersho, 6 F.4th at 899; see Fed. R. Civ. P. 23(a).1 12 Weiner has alleged the largest loss among the four movants: he has alleged a loss of 13 $95,118.67.2 14 Adequacy is determined by asking two questions: “(1) do the named plaintiffs and 15 their counsel have any conflicts of interest with other class members and (2) will the named 16 plaintiffs and their counsel prosecute the action vigorously on behalf of the class?” In re 17 Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 566 (9th Cir. 2019) (quoting Hanlon v. 18 Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998)). Weiner argues that his 19 “financial interest demonstrates that he has sufficient incentive to ensure vigorous 20 advocacy, and ‘no evidence exists to suggest that [Weiner is] antagonistic to other members 21 of the class . . . .’” (Weiner’s Mem. of Law at 7–8, ECF No. 10-1, quoting Yousefi v. 22 Lockheed Martin Corp., 70 F. Supp. 2d 1061, 1071 (C.D. Cal. 1999), alteration in original.) [24] 25 1 “One or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions 26 of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the 27 interests of the class.” Fed. R. Civ. P. 23(a). 2 In comparison, the Khannas alleged a loss of $57,059.38; Ramras alleged a loss of $12,311.67; and [28] 1 This is a prima facie showing of adequacy. See Zhu v. UCBH Holdings, Inc., 682 F. Supp. 2 2d 1049, 1053 (N.D. Cal. 2010) (adequacy inquiry at appointment of lead plaintiff stage 3 “is not as searching as” the inquiry at class certification). 4 Typicality is satisfied where “the claims or defenses of the representative parties are 5 typical of the claims or defenses of the class.” Hanlon, 150 F.3d 1011 at 1020 (citing Fed. 6 R. Civ. P. 23(a)(3)). Weiner argues that his “interests and claims are typical of the interests 7 and claims of the class” because like all class members, he “purchased DermTech securities 8 during the Class Period,” “suffered losses as a result” of those purchases, alleges that 9 Defendants violated federal securities laws by “disseminating materially misleading 10 statements concerning DermTech’s operations and financial prospects,” and alleges that 11 his losses arose “from the artificial inflation of DermTech securities” caused by 12 Defendants’ “misrepresentations and omissions.” (Weiner’s Mem. of Law at 7.) Because 13 Weiner’s claims “arise from the same events and legal theory as the claims of the other 14 purported class members,” Weiner has made a prima facie showing of typicality. Salzman 15 v. ImmunityBio, Inc., No. 23-CV-01216-GPC-WVG, 2023 WL 6305798 , at *1 (S.D. Cal. 16 Sept. 27, 2023). 17 No party has rebutted the presumption that Weiner is the most adequate plaintiff. At 18 step three, “[t]he presumption may be rebutted ‘only upon proof by a member of the 19 purported plaintiff class that the presumptively most adequate plaintiff . . . will not fairly 20 and adequately protect the interests of the class; or [ ] is subject to unique defenses that 21 render such plaintiff incapable of adequately representing the class.’” Mersho, 6 F.4th at 22 899 (quoting 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa)–(bb)) (alteration in original). 23 Accordingly, because Weiner is the presumptive lead plaintiff and no other class member 24 rebuts that presumption, the Court APPOINTS Weiner as lead plaintiff. 25 B. Appointment of Lead Counsel 26 Once the court has designated a lead plaintiff, that plaintiff “shall, subject to the 27 approval of the court, select and retain counsel to represent the class.” 15 U.S.C. § 78u28 4(a)(3)(B)(v). “If the lead plaintiff has made a reasonable choice of counsel, the district 1 court should generally defer to that choice.” ImmunityBio, 2023 WL 6305798 , at * 2 (citing 2 Cohen v. U.S. Dist. Ct., 586 F.3d 703 , 712 (9th Cir. 2009)). Weiner has selected and 3 retained Glancy Prongay & Murray LLP. (Weiner’s Mem. of Law at 8.) In light of the 4 firm’s lengthy and substantial experience in securities class action litigation, (see GPM 5 Firm Resume, Ex. D to Decl. of Robert V. Prongay, ECF No. 10-7), the Court APPROVES 6 Weiner’s choice of Glancy Prongay & Murray LLP as lead counsel. 7 C. Consolidation of Cases 8 On October 16, 2023, Plaintiff Bagheri filed the initial class action complaint against 9 DermTech alleging violations of the Securities Exchange Act of 1934 (“Exchange Act”). 10 See Bagheri v. DermTech, Inc., No. 23-cv-1885-DMS-JLB (filed Oct. 16, 2023) (“Bagheri 11 Action”). On December 5, 2023, Plaintiff Elena C. Quarford filed a similar class action 12 complaint against DermTech alleging similar violations of the Exchange Act stemming 13 from the same set of events. See Quarford v. DermTech, Inc., No. 23-cv-2221-DMS-JLB 14 (filed Dec. 5, 2023) (“Quarford Action”). The Quarford Action was initially assigned to 15 the Honorable James E. Simmons, but on December 18, 2023, it was reassigned to the 16 undersigned district judge as a related case pursuant to this District’s low number rule. See 17 S.D. Cal. Civ. L.R. 40.1. Movant Weiner now moves to consolidate the Bagheri and 18 Quarford Actions. (Weiner’s Mem. of Law at 3–4.) 19 The Court finds that the Bagheri and Quarford Actions are essentially identical. “If 20 actions before the court involve a common question of law or fact, the court may . . . 21 consolidate the actions.” Fed. R. Civ. P. 42(a). In determining whether consolidation is 22 appropriate, a district court “weighs the saving of time and effort consolidation would 23 produce against any inconvenience, delay, or expense that it would cause.” Huene v. 24 United States, 743 F.2d 703, 704 (9th Cir. 1984). “[C]onsolidation provides that the two 25 cases proceed under a single case number.” Cleveland v. Ludwig Inst. for Cancer Rsch. 26 Ltd., No. 19-cv-2141-JM-JLB, 2021 WL 2780234 (S.D. Cal. July 2, 2021). The Bagheri 27 and Quarford Actions involve the same defendants, overlapping proposed classes, most of 28 the same factual allegations, and nearly identical claims under federal securities laws. 1 Given the similar factual and legal issues, consolidation of the two cases would promote 2 judicial economy. Neither Defendants nor the other movants have indicated opposition to 3 ||consolidation. Accordingly, the Court GRANTS Weiner’s motion for consolidation. 4 Il. CONCLUSION AND ORDER 5 For the foregoing reasons, the Court GRANTS Movant Weiner’s motion (ECF No. 6 || 10); DENIES the competing motions of Movants The Khannas (ECF No. 11), Ramras 7 || (ECF No. 12), and Nolan (ECF No. 13); and ORDERS as follows: 8 1. The Bagheri Action (No. 23-cv-1885-DMS-JLB) and the Quarford Action (No. 239 cv-2221-DMS-JLB) are CONSOLIDATED. (The “Consolidated Action.’’) 10 2. A Master File is created for the Consolidated Action under Case No. 23-cv-18851] DMS-JLB. All filings shall be made under Case No. 23-cv-1885-DMS-JLB. Each 12 subsequent case filed in or transferred to this District concerning the same subject 13 matter shall be consolidated into the Master File. 14 3. Every pleading in the Consolidated Action shall bear the caption: [15] 16 |! IN RE DERMTECH, INC. SECURITIES | ©@#8¢ No.: 23-cv-1885-DMS-JLB 17 || LITIGATION [19] 20 4. Movant Robert Weiner is APPOINTED as lead plaintiff. 21 5. Movant Robert Weiner’s selection of Glancy Prongay & Murray LLP is 22 APPROVED as lead counsel for the class. 23 6. The hearing currently scheduled for February 2, 2024, is VACATED. 24 IT IS SO ORDERED. [25] 26 || Dated: January 17, 2024 ) j ” Lh f 27 Hon. Dana M. Sabraw. Chief Judge 28 United States District Court