Pardi v. Tricida, Inc.

Background

Lead Plaintiff Jeffrey M. Fiore moved under Federal Rule of Civil Procedure 23 to certify a securities class action, appoint himself as class representative, and appoint Block & Leviton LLP as class counsel. The case asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5.

The case concerns Tricida’s drug veverimer and statements made by Defendant Klaerner during a May 7, 2020 earnings call. The court had previously ruled that two alleged misstatements could support claims against Klaerner: one discussed only some of the Food and Drug Administration’s review concerns, and another attributed cancellation of an advisory committee meeting in part to COVID-19-related logistical challenges. The case proceeds against Klaerner.

Fiore proposed a class consisting of all persons or entities that purchased or otherwise acquired Tricida common stock from May 8, 2020, through February 25, 2021, inclusive, subject to exclusions for the defendants and specified related persons and entities.

Class-certification requirements

Rule 23(a) requires numerosity, commonality, typicality, and adequacy. Rule 23(b)(3) additionally requires that common questions predominate over individual questions and that a class action be superior to other methods of resolving the dispute.

The court found numerosity because Tricida stock traded at an average weekly volume of 4.55 million shares and 198 institutions held shares accounting for the vast majority of the public float. It found commonality because the proposed class members shared questions about whether Klaerner made materially false or misleading statements or omissions, acted with the required state of mind, and caused investor losses.

The court rejected Klaerner’s arguments that Fiore was atypical because he purchased stock after a July 15, 2020 disclosure and because of his testimony about his knowledge of the challenged statements and publicly available information. The court found Fiore’s allegations and testimony sufficient for typicality. It also found adequacy satisfied because Fiore and lead counsel asserted that they had no conflicts with other class members and had worked diligently, and Klaerner did not dispute those points.

Predominance and reliance

The main dispute under Rule 23(b)(3) was whether reliance could be shown on a class-wide basis. The court applied the fraud-on-the-market presumption, under which investors who buy stock in an efficient market may be presumed to have relied on a public, material misstatement reflected in the stock price. The court found that the requirements for invoking that presumption were undisputed or did not need to be proven at the certification stage.

The court then considered whether Klaerner had rebutted the presumption by showing that the alleged misstatements had no effect on Tricida’s stock price. Klaerner argued that the class period should end on July 16, 2020, after an alleged corrective disclosure, and that later disclosures did not reveal new information about the FDA’s May 1, 2020 meeting.

The court concluded that the July 15, 2020 disclosure was not fully corrective because it stated that the FDA had identified deficiencies but did not specify them. The August 6, 2020 disclosure identified concerns about the magnitude and durability of the treatment effect and the applicability of trial data to the U.S. population, but did not disclose that most trial sites were in Eastern Europe or that the treatment effect was strongly influenced by a single site. The August 24 and October 29 disclosures likewise discussed new regulatory developments and FDA opinions rather than revealing the specific facts allegedly omitted from the May 7 statements.

The court found that the February 25, 2021 disclosure was the first to reveal the full set of alleged omitted facts, including concerns about a single site, the location of most trial sites in Eastern Europe, and the applicability of the results to U.S. patients. The stock price fell 30.57% in response, from $7.36 per share to $5.11 per share, and both parties’ experts found the decline statistically significant. The court rejected the argument that this decline merely reflected previously disclosed regulatory risks.

Ruling

The court held that Klaerner failed to sever the alleged misstatements from the February 25, 2021 price impact and therefore failed to rebut the fraud-on-the-market presumption. Because the presumption applied, individual class members would not need to show that they personally knew about or relied on the alleged misstatements. The court found that the predominance requirement was satisfied.

Judge Haywood S. Gilliam, Jr. GRANTED the motion for class certification. The court certified the class defined as all persons or entities that purchased or otherwise acquired Tricida common stock from May 8, 2020, through February 25, 2021, inclusive, with the exclusions stated in the order. The court also ORDERED that Jeffrey M. Fiore serve as class representative and that Block & Leviton LLP serve as class counsel. It further SET a telephonic case-management conference for October 22, 2024, and directed the parties to meet and confer and submit a joint case-management statement by October 15, 2024.