Rihn v. Acadia Pharmaceuticals Inc. et al, No. 3:2015cv00575 - Document 91 (S.D. Cal. 2018)
Court Description: ORDER Granting Plaintiff's 75 Motion for Final Approval of Class Action Settlement and Granting 76 Motion for Attorneys' Fees and Expenses. The Court grants attorney's fees in the amount of $731,250, expenses in the amount of $74,546.01, and an incentive award of $2,500. Signed by Judge Barry Ted Moskowitz on 1/22/2018. (mxn)
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 Case No.: 15-cv-00575 BTM-DHB JEFF RIHN, individually and on behalf of all others similarly situated, Plaintiff, 14 15 v. 16 ACADIA PHARMACEUTICALS INC., ULI HACKSELL AND STEPHEN R. DAVIS, 17 18 ORDER GRANTING PLAINTIFFS’ MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND MOTION FOR ATTORNEYS’ FEES AND EXPENSES ECF NOS. 75, 76 Defendants. 19 20 Plaintiffs have filed a Motion for Final Approval of the Class Action Settlement 21 (ECF No. 75) and a Motion for Attorneys’ Fees and Expenses (ECF No. 76). On 22 January 8, 2018, the Court held a hearing on the motions. For the reasons 23 discussed below, Plaintiffs’ motions are GRANTED. 24 I. PROCEDURAL BACKGROUND 25 On November 16, 2015, Lead Plaintiffs, Paul and Sharyn Levine, filed a 26 Consolidated Class Action Complaint (“CCAC”) against Defendants Acadia 27 Pharmaceuticals Inc. (“Acadia”), Uli Hacksell, and Stephen R. Davis. (ECF No. 28 1 15-cv-00575 BTM-DHB 1 43). The CCAC asserted claims for violations of (1) section 10(b) of the Securities 2 Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 and (2) section 20(a) of the 3 Securities Exchange Act. Id. The claims were premised on allegations that 4 Defendants knowingly and recklessly made materially false and misleading 5 statements regarding the timing and status of Acadia’s New Drug Application 6 (“NDA”) for its lead product candidate, Nuplazid (pimavanserin). Id. These false 7 and misleading statements allegedly artificially inflated stock prices of Acadia 8 between November 10, 2014 and March 11, 2015 (the “Class Period”). Id. 9 On September 19, 2016, the Court denied Defendants’ motion to dismiss the 10 CCAC. (ECF No. 56). On November 4, 2016, the Court granted a joint motion to 11 stay the action pending private mediation. (ECF No. 63). The parties filed a joint 12 motion for settlement on March 13, 2017 (ECF No. 67) and the Court issued a 13 preliminary order approving the settlement on June 9, 2017 (ECF No. 71). 14 15 16 17 II. DISCUSSION A. Motion for Final Approval 1. Class Certification Plaintiffs seek final certification of the Settlement Class, defined as: lead 18 Plaintiffs as well as all Persons who purchased or otherwise acquired the publicly 19 traded common stock and/or call options of ACADIA in the United States on the 20 NASDAQ Global Select Market during the Class Period and who allege to have 21 been damaged thereby. 22 Excluded from the Class are Defendants and members of their immediate 23 families; any firm, trust, partnership, corporation, officer, director, or other 24 individual or entity in which a Defendant has a controlling interest or which is 25 related to or affiliated with any of the Defendants, and the legal representatives, 26 heirs, successors-in-interest or assigns of such excluded Persons; and the Judge 27 and Magistrate Judge to whom the Action is assigned, and any member of those 28 2 15-cv-00575 BTM-DHB 1 Judges’ staff or immediate families.1 Also excluded from the Class is any 2 Person who properly excluded himself, herself, or itself by filing a valid and timely 3 request for exclusion in accordance with the requirements set forth in the 4 Settlement Notice. The Class Period is defined as the period from November 10, 5 2014, through and including March 11, 2015, both dates inclusive. 6 To certify a settlement class, the requirements of Rule 23 must generally 7 be satisfied. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). 8 However, the Court need not inquire whether the case, if tried, would present 9 management problems. Amchem Prods., Inc. v. Windsor, 521 U.S. 1, 613 10 (1997). 11 Rule 23(a) sets forth four prerequisites for class certification: (1) 12 numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. 13 The Court finds that all four of these requirements have been satisfied. The numerosity requirement is satisfied if “the class is so numerous that 14 15 joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). The proposed 16 class is numerous, consisting of 27,830 Class Members. 17 There are common questions of fact and law concerning whether 18 Defendants made materially false and misleading statements regarding the 19 status and timing of Acadia’s NDA for Nuplazid (pimavanserin). Plaintiffs’ claims 20 are typical because they allege that they purchased publicly traded securities of 21 Acadia during the Class Period and were damaged because Defendants 22 artificially inflated the price of Acadia securities through their dissemination of 23 false and misleading statements about the NDA. 24 25 26 27 28 1 Under 28 U.S.C. § 455(b)(5)(iii), any judge of the United States shall disqualify himself if he or his spouse, or a person within the third degree of relationship to either of them, or the spouse of such a person is known by the judge to have an interest that could be substantially affected by the outcome of the proceeding. The Court amends the Settlement Class definition to exclude such individuals as well. 3 15-cv-00575 BTM-DHB 1 It appears that Plaintiffs and their counsel will fairly and adequately protect 2 the interests of the class. They have vigorously prosecuted the case thus far and 3 it does not appear that there are any conflicts of interest. 4 In addition to satisfying the requirements of Rule 23(a), a proposed class 5 must qualify for certification under one of the categories in Rule 23(b). Plaintiffs 6 seek certification under Rule 23(b)(3). Certification is proper under Rule 23(b)(3) 7 if “the court finds that the questions of law or fact common to class members 8 predominate over any questions affecting only individual members, and that a 9 class action is superior to other available methods for fairly and efficiently 10 11 adjudicating the controversy.” The predominance inquiry "tests whether proposed classes are sufficiently 12 cohesive to warrant adjudication by representation" and "focuses on the 13 relationship between the common and individual issues." Hanlon, 150 F.3d at 14 1022 (internal quotation marks and citation omitted). "When common questions 15 represent a significant aspect of the case and they can be resolved for all 16 members of the class in a single adjudication, there is a clear justification for 17 handling the dispute on a representative rather than on an individual basis." 7AA 18 Wright & Miller, Federal Practice and Procedure § 1778 (3d ed. 2011). When 19 one or more of the central issues in the action are common to the class and can 20 be deemed to predominate, certification may be proper under Rule 23(b)(3) even 21 though other important matters, such as damages or affirmative defenses, will 22 have to be tried separately. Id. 23 Common issues predominate in this litigation. The central inquiry in this 24 case is whether Defendants violated the Securities Exchange Act by 25 disseminating materially false and misleading information regarding the status 26 and timing of Acadia’s NDA for Nuplazid (pimavanserin), leading to artificially 27 inflated prices of Acadia’s publicly traded securities. 28 In addition, class treatment is the appropriate vehicle to resolve this 4 15-cv-00575 BTM-DHB 1 controversy. Pursuant to Rule 23(b)(3), the Court should consider four non- 2 exclusive factors when considering whether class action is a superior method of 3 adjudication, including: (1) the class members' interest in individual litigation, (2) 4 other pending litigation, (3) the desirability of concentrating the litigation in one 5 forum, and (4) difficulties with the management of the class action. 6 Here, the damages for each class member would be small. Therefore, 7 class members would have little motivation to pursue individual cases. 8 Furthermore, due to the common issues in this case, it is desirable to litigate the 9 claims in one forum to ensure consistency of rulings and findings. The parties 10 are unaware of any competing litigation, and the Court need not be concerned 11 regarding any difficulties with management of the class action due to this 12 settlement. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In sum, the Court finds that the requirements of Rule 23(a) have been satisfied and certifies the Settlement Class under Rule 23(b)(3). 2. Fairness, Reasonableness, and Adequacy of the Settlement a. Terms of the Settlement The settlement provides for a gross payment of $2,925,000. The settlement amount will be paid into escrow and, after paying attorneys’ fees and expenses approved by the Court, and other costs of settlement, the net settlement amount will be distributed among the class members with recognized losses who timely submit valid Proof of Claim and Release Forms. b. Legal Standard Before approving a class action settlement, the court must determine whether the proposed settlement is fair, reasonable, and adequate. Fed. R. Civ. P. 23(e)(2). In reaching this determination, courts consider a number of factors, including: (1) the strength of the plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status 5 15-cv-00575 BTM-DHB 1 throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery 2 completed and the stage of the proceedings; (6) the experience and views of 3 counsel; (7) the presence of a governmental participant; and (8) the reaction of the 4 class members to the proposed settlement. Churchill Vill., L.L.C. v. Gen. Elec., 361 5 F.3d 566, 575 (9th Cir.2004). 6 When a settlement agreement is negotiated prior to formal class certification, 7 the court must also scrutinize the settlement for evidence of collusion or other 8 conflicts of interest. In re Bluetooth Headset Products Liability Lit., 654 F.3d 935, 9 946-47 (9th Cir. 2011). Signs of collusion include: (1) when counsel receive a 10 disproportionate distribution of the settlement; (2) when the parties negotiate a 11 "clear sailing" arrangement that provides for the payment of attorney’s fees 12 separate and apart from class funds; and (3) when the parties arrange for fees not 13 awarded to revert to defendants rather than to be added to the class fund. Id. at 14 947. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 c. Strength of Plaintiffs’ Case and Risk, Complexity, Expense, and Duration of Litigation Plaintiffs would face substantial risks in continued litigation, which would undoubtedly be time-consuming and costly. Defendants maintain that “they did not make any actionable misstatements or omissions during the Class Period, they did not act with scienter, and Lead Plaintiffs will be unable to prove that their and the Class’s losses arise out of Defendants’ alleged misconduct.” Faruqi Decl. ¶ 43. Specifically, Defendants contend that (i) “all of the statements in the [CCAC] are either protected by the PSLRA safe-harbor or are inactionable corporate optimism,” (ii) “the [CCAC] does not include any particularized facts that the NDA was not on track to be submitted in March 2015,” (iii) “the scienter allegations in the [CCAC] are nothing more than speculation as Lead Plaintiffs cannot show that Defendants had access to information indicating that the NDA was not on track to be submitted by March 2015,” (iv) “Defendants’ lack of stock sales and large 6 15-cv-00575 BTM-DHB 1 personal holdings negate an inference of scienter,” and (v) “Lead Plaintiffs cannot 2 establish loss causation because the stock drop on March 12, 2015 was due to the 3 realization that the Company would not be acquired, not due to the Second Delay.” 4 Id. 5 Further, “Lead Plaintiffs would have faced a great deal of difficulty in 6 obtaining the necessary documents and depositions” as “the events alleged in the 7 [CCAC] took place as long as four and a half years ago, and the company is under 8 new management.” Id. ¶ 45. “[T]he relevant documents may have been misplaced, 9 former employees may be difficult to locate, and the memories of the parties 10 involved in the actions alleged in the [CCAC] may have faded.” Id. “The complexity 11 of the allegations would have required the retention of additional FDA experts, 12 serving third party document subpoenas, and countless depositions.” Id. 13 d. Amount Offered in Settlement 14 The settlement amount of $2,925,000 “represents approximately 15% of the 15 damages recoverable by Class Members in the Action.” Faruqi Decl. ¶ 80. 16 Accordingly, the benefit provided to the class members is substantial. See In re 17 Cendant Corp. Litig., 264 F.3d 201, 241 (3d Cir. 2001) (noting that recoveries for 18 class action securities litigation typically range from 1.6% to 14% of claimed 19 damages). 20 When the balance remaining in the net settlement fund is de minimus, the 21 remaining balance will be distributed to the Investor Protect Trust. The cy pres 22 doctrine allows a court to distribute unclaimed or non-distributable portions of a 23 class action settlement fund to indirectly benefit the entire class. Six Mexican 24 Workers v. Ariz.Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990). When 25 employing the cy pres doctrine, unclaimed funds should be put to their next best 26 use, e.g., for “the aggregate, indirect, prospective benefit of the class.” Nachshin 27 v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir. 2011). 28 The Ninth Circuit has held that cy pres distribution must be “guided by (1) 7 15-cv-00575 BTM-DHB 1 the objectives of the underlying statute(s); and (2) the interests of the silent class 2 members.” Six Mexican Workers, 904 F.2d at 1307. A cy pres distribution is an 3 abuse of discretion if there is “no reasonable certainty” that any class member 4 would benefit from it. Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012). 5 The Investor Protection Trust is a nonprofit organization with the primary 6 mission to provide independent objective information needed by consumers to 7 make informed investment decisions. The Court finds the designated cy pres 8 recipient appropriate. 9 e. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Stage of Proceedings and Experience and Views of Counsel Lead Counsel, on behalf of Lead Plaintiffs, conducted “an extensive investigation into the facts alleged in the Action, including reviewing FDA documents, press releases, SEC filings, conference call transcripts, and analyst reports.” Faruqi Decl. ¶ 38. Prior to settlement, the Court had denied Defendants’ motion to dismiss but had not yet ruled on Defendants’ motion for reconsideration of the order denying the motion to dismiss. On December 6, 2016, the parties met with a “highly respected and experienced securities litigation mediator, for an arm’s-length mediation session.” Id. ¶ 40. “In advance of the mediation session, both sides submitted and exchanged lengthy mediation briefs outlining their respective analyses of the claims and defenses, and several exhibits.” Id. During the session itself, “the parties extensively debated the strengths and weaknesses of Lead Plaintiffs’ claims and the defenses available to Defendants.” Id. The parties are in a position to accurately assess the strengths and weakness of their respective positions. In addition, Lead Counsel, a law firm with substantial experience litigating securities class action lawsuits, is of the opinion that the settlement is fair, reasonable, and adequate. Id. ¶ 56. 28 8 15-cv-00575 BTM-DHB 1 f. Reaction of the Class Members 2 The reaction of Class Members has been positive. No objections have been 3 filed and there has only been one request for exclusion. Cavallo Decl. ¶¶ 11, 12. 4 In addition, no objections were filed after notification to appropriate federal and 5 state officials pursuant to 28 U.S.C. § 1715(b). No objectors appeared at the final 6 approval hearing. 7 g. Lack of Collusion 8 Because this settlement was reached prior to class certification, the Court 9 examines the Settlement for evidence of collusion. Bluetooth, 654 F.3d at 946-47. 10 There is no indication of collusion. Lead Counsel seeks a fee award totaling 25% 11 of the Settlement Fund. This percentage of recovery is typical and does not 12 represent a disproportionate distribution of the settlement to counsel. Six Mexican 13 Workers, 904 F.2d at 1311. 14 Additionally, there is no “clear sailing” provision here, as the attorneys’ fees 15 are to be paid only out of the Settlement Fund, and at a rate approved by the Court. 16 Moreover, the parties engaged in extensive settlement negotiations and 17 participated in mediation sessions with Robert Meyer, Esq. The history of the case 18 as well as the substantial benefit provided to the Class by the Settlement indicate 19 there has been no collusion. 20 h. Notice to the Class 21 Rule 23(c)(2)(B) provides that the Court must direct to class members “the 22 best notice that is practicable under the circumstances, including individual notice 23 to all members who can be identified through reasonable effort.” It appears that 24 the best notice practicable has been given. 25 Here, Kurtzman Carson Consultants LLC (“KCC”), pursuant to the 26 Preliminary Approval Order, mailed the Settlement Notice to 27,830 potential Class 27 Members beginning on June 30, 2017. Faruqi Decl. ¶ 60. The Settlement Notice 28 and the Proof of Claim form were also made available on 9 15-cv-00575 BTM-DHB 1 www.AcadiaSecuritiesSettlement.com, which has been visited 7,463 times as of 2 August 23, 2017. Id. ¶ 62. The Publication Notice was published in Investor’s 3 Business Daily and posted by PR Newswire on July 10, 2017. Id. ¶ 60. Additionally, 4 KCC set up a toll-free telephone helpline to accommodate potential Class 5 Members who had questions regarding the Settlement. Id. ¶ 61. The help line 6 received 90 calls as of August 23, 2017. Id. 7 The Settlement Notice included: (i) the case caption, (ii) a description of the 8 claims, (iii) a description of the Settlement Class, (iv) the names of Lead Counsel, 9 (v) the amount of attorneys’ fees and expenses that will be requested, (vi) the Final 10 Fairness Hearing date, (vii) the Class Members’ opportunity to appear at the Final 11 Fairness Hearing, (viii) the deadline for filing objections to and exclusions from the 12 Settlement, (ix) the consequences of exclusion, (x) the consequences of remaining 13 a Class Member, (xi) the manner in which to obtain more information, and (xii) 14 directions on how to access the case docket. See Cavallo Decl. Ex. A. i. 15 Final Approval 16 For the reasons discussed above, the Court finds that the Settlement is fair, 17 reasonable, and adequate. Therefore, the Court grants final approval of the 18 Settlement. 19 20 21 22 23 24 25 26 27 28 10 15-cv-00575 BTM-DHB 1 B. 2 3 4 Motion for Attorneys’ Fees and Expenses 1. Attorneys’ Fees Plaintiffs seek attorneys’ fees in the amount of $731,250 – 25% of the anticipated $2,925,000 Settlement Fund. 5 The Ninth Circuit has established 25% of a common fund as a benchmark 6 award for attorney’s fees. Six Mexican Workers, 904 F.2d at 1311. The court may 7 depart from this benchmark percentage if special circumstances indicate that the 8 percentage recovery would be either too small or too large. Id. The court’s 9 selection of the benchmark or any other rate must be supported by findings that 10 take into account all of the circumstances of the case. Vizcaino v. Microsoft Corp., 11 290 F.3d 1043, 1047 (9th Cir. 2002). Such factors include, but are not limited to: 12 (1) the results achieved; (2) the risk involved in the litigation; (3) incidental or 13 nonmonetary benefits conferred by the litigation; and (4) financial burden of the 14 case on counsel. Id. at 1049-50. 15 The Court finds that 25% of the Settlement Fund is an appropriate award in 16 this case. This conclusion is based on the quality of representation by counsel, 17 the excellent results achieved for the class, and the real risks of continued 18 litigation. There does not appear to be a basis for departing from the benchmark 19 percentage. 20 Application of the “lodestar method” may provide a useful “cross-check” as 21 to the reasonableness of a given percentage award. Vizcaino, 290 F.3d at 1050. 22 Courts commonly use a rough calculation of the lodestar as a cross-check. 23 Hopkins v. Stryker Sales Corp., 2013 WL 496358, at *4 (N.D. Cal. Feb. 6 2013). 24 Here, a rough calculation of the lodestar comes to $709,630. Mem. of P. & 25 A. in Support of Attorneys’ Fees Mot. at 13. Based on the lodestar, the multiplier 26 is 1.03. Courts have “routinely enhanced the lodestar to reflect the risk of non- 27 payment in common fund cases.” Vizcaino v. Microsoft Corp., 142 F. Supp. 2d 28 1299, 1305 (W.D. Wash. 2001). “To restrict Class Counsel to the hourly rates they 11 15-cv-00575 BTM-DHB 1 customarily charge for non-contingent work – where payment is assured – would 2 deprive them of any financial incentive to accept contingent-fee cases which may 3 produce nothing. Courts have therefore held that counsel are entitled to a multiplier 4 for risk.” Id. 5 Multipliers of 1 to 4 are commonly found to be appropriate in common fund 6 cases. Vizcaino, 290 F.3d at 1051 n. 6. Accordingly, the 1.03 multiplier is within 7 the range or reasonableness. Therefore, the lodestar cross-check supports the 8 reasonableness of the requested fees of $731,250. 9 2. Expenses 10 Lead Counsel seeks $75,534.64 in costs. These costs were for expert and 11 investigator fees, mediation fees, filing fees, electronic research, photocopying, 12 postage, meals, travel, and lodging. See Supp. Decl. Faruqi in Support of 13 Attorneys’ Fee Mot. These are the types of expenses routinely charged to paying 14 clients. See In re Omnivision Tech., 559 F. Supp. 2d 1036, 1048 (N.D. Cal. 2008) 15 (explaining that class counsel “may recover their reasonable expenses that would 16 typically be billed to paying clients in non-contingency matters”). 17 However, the Court does not consider the $988.63 in Lexis Nexis research 18 fees to be a qualified expense. Fees for the subscription service would have been 19 incurred regardless of whether research was done for this case and therefore 20 should be properly considered as part of the firm’s overhead. 21 22 Therefore, the Court grants Lead Counsel’s request for reimbursement of expenses in the amount of $74,546.01. 23 24 25 3. Incentive Fee Award Plaintiffs seek an incentive award of $2,500.00 for Lead Plaintiff, Sharyn Levine. 26 The Court may, in its discretion, award incentive or service awards to named 27 plaintiffs to “compensate class representatives for work done on behalf of the 28 class, to make up for financial or reputational risk undertaken in bringing the action, 12 15-cv-00575 BTM-DHB 1 and, sometimes, to recognize their willingness to act as a private attorney general.” 2 Rodriguez v. West Publishing Corp., 563 F.3d 948, 958-59 (9th Cir. 2009). District 3 courts must carefully scrutinize incentive awards to ensure that they do not 4 undermine the adequacy of the class representatives. Radcliffe v. Experian 5 Information Solutions, Inc., 715 F.3d 1157, 1165 (9th Cir. 2013). 6 Lead Counsel states that over the past two and a half years, Plaintiff has (i) 7 engaged in numerous communications with Lead Counsel, (ii) participated in the 8 litigation and provided input into the prosecution of the case, (iii) reviewed 9 documents filed in this Action, including the CCAC and motion to dismiss briefing, 10 (iv) stayed fully informed of the status of the case, and (v) consulted with counsel 11 and provided input on the mediation and settlement negotiations. Faruqi Decl. ¶ 12 97. In light of the work Plaintiff has done on behalf of the class, the requested 13 incentive award is reasonable and is approved. 14 III. CONCLUSION 15 For the reasons set forth above, Plaintiffs’ Motion for Final Approval of the 16 Class Action Settlement is GRANTED. Plaintiffs’ Motion for Attorneys’ Fees and 17 Expenses is also GRANTED. The Court grants attorney’s fees in the amount of 18 $731,250, expenses in the amount of $74,546.01, and an incentive award of 19 $2,500. 20 21 IT IS SO ORDERED. 22 23 24 Dated: January 22, 2018 25 26 27 28 13 15-cv-00575 BTM-DHB
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