Christiansen v. Spectrum Pharmaceuticals, Inc.

Background

This proposed securities class action alleges that Spectrum Pharmaceuticals, Inc., Thomas J. Riga, and Francois J. Lebel violated the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5 by making false or misleading statements about a Spectrum drug. The action survived the defendants’ motion to dismiss and proceeded to discovery. The court previously appointed Steven B. Christiansen as lead plaintiff under the Private Securities Litigation Reform Act (PSLRA), and appointed Kaplan Fox & Kilsheimer LLP as lead counsel.

About eight months after discovery began, Christiansen personally emailed an employee of Darrow, an outside investor-relations consulting firm that provided services to Assertio Holdings, Spectrum’s parent company. Christiansen mistakenly believed he was communicating directly with Assertio. His emails discussed settlement matters, requested a call with Assertio, and stated that investors—including the “Columbine Commission”—had working capital tied up in the case. Kaplan Fox told the defendants that Christiansen had promised not to discuss the case with anyone other than his attorneys.

The next day, Kaplan Fox filed a materially similar class action for Nizar Sami Ayoub. Christiansen later sought class certification and referred to Ayoub as an additional plaintiff, even though Ayoub had not been named as a party in this case. After the court ordered the parties in both cases to explain why they should not be consolidated, the defendants moved to disqualify Christiansen as lead plaintiff and to stay the proceedings. Christiansen opposed the motion and submitted a promise not to contact Assertio, Darrow, or Spectrum representatives or discuss the case except through his attorneys, the mediator, or in response to questions during court proceedings. He later sent the court a letter while represented by counsel, discussing theories about the Columbine High School shooting, defending his direct settlement communications, and accusing defense counsel of violating his First Amendment rights.

Why the Court Disqualified Christiansen

The PSLRA requires the court to appoint the class member most capable of adequately representing the class. The court explained that it has a continuing duty to monitor whether the lead plaintiff remains able to protect class members’ interests. In making that assessment, the court may consider conflicts of interest, honesty, and trustworthiness.

The court identified two aspects of Christiansen’s conduct. First, it found that he had disclosed confidential settlement information to a nonparty, potentially risking waiver of attorney-client privilege. The court was not persuaded that the conduct would not happen again because Christiansen later maintained that he had a right to contact management directly. The court therefore lacked confidence that he could be relied upon to protect the confidentiality of settlement communications.

Second, the court found that Christiansen’s communications repeatedly focused on the “Columbine Commission” and his conspiracy theories about the Columbine shooting. The court concluded that these matters were irrelevant to the claims in the case and suggested a conflict between Christiansen’s personal interests and the interests of the proposed class.

Reopening the Lead Plaintiff Process

The PSLRA does not specify the procedure for replacing a lead plaintiff who no longer satisfies the requirements of Federal Rule of Civil Procedure 23. The court considered whether another person who had previously sought appointment could simply be selected. It concluded that no previously timely applicant appeared clearly qualified: two other applicants had reported larger losses but had been found less adequate for different reasons.

The court rejected the proposal to appoint Ayoub automatically. It was unwilling to assume that lead counsel’s preferred substitute was the most adequate plaintiff, particularly because Ayoub had not been consolidated into this case and had not been part of the earlier appointment process. Reopening the process would allow any investor or group of investors who wished to serve as lead plaintiff to apply, and would permit the court to conduct the required analysis rather than accept counsel’s choice without broader review.

The court ordered Kaplan Fox to publish notice of the reopened appointment process in a widely circulated national business publication or wire service by August 25, 2025. Because class members had already received notice that the action was pending, the court shortened the application period from 60 days to 30 days. Putative class members could move for appointment as substitute lead plaintiff by September 24, 2025.

Disposition

The court granted the defendants’ motion and disqualified Christiansen as lead plaintiff. It kept the case stayed except for filings necessary to complete the selection of a new lead plaintiff. The court denied the plaintiff’s request for a status conference without prejudice to renewing the request with an explanation of the issues to be discussed.