Pardi v. Tricida

Background

The case concerned allegations under Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5. Lead Plaintiff alleged that Tricida and Gerritt Klaerner misled investors about the likelihood that the Food and Drug Administration would approve veverimer, Tricida’s investigational drug candidate for slowing the progression of chronic kidney disease. The Food and Drug Administration ultimately denied Tricida’s application and its later appeal, and Lead Plaintiff alleged that Tricida’s stock price fell after related announcements.

The Court appointed Jeffrey M. Fiore as Lead Plaintiff and Block & Leviton LLP as Lead Counsel. In September 2024, the Court certified a class of people and entities that purchased or otherwise acquired Tricida common stock from May 8, 2020, through February 25, 2021. Tricida filed for Chapter 11 bankruptcy in January 2023, and the Court granted Lead Plaintiff’s request to dismiss Tricida without prejudice. Klaerner was therefore the only remaining defendant.

After mediation and substantial discovery, the parties entered into a settlement agreement fully executed in March 2025. The Court had preliminarily approved the settlement in May 2025 and held a final fairness hearing on October 16, 2025.

Settlement Terms and Notice

Klaerner agreed to make a non-reversionary payment of $14,250,000. The settlement fund also included taxes, settlement-administration expenses, court-approved attorneys’ fees and costs, any additional award to Lead Plaintiff, and payments to class members. Payments would be calculated under a Plan of Allocation based on factors including when and how much stock a class member acquired, whether and when it was sold, the sale proceeds, and the stock’s artificial inflation. The parties estimated that class members would receive approximately $0.40 per share, with authorized claimants having a recognized loss greater than zero receiving at least $10. The estimated average recovery was approximately $2,000 per claimant, although the 200 largest claimants represented approximately 90% of the total recognized loss at that point.

After a reasonable period, any remaining settlement balance would be redistributed among authorized claimants if feasible. Any balance too small to distribute would be donated to the Bluhm Legal Clinic Center for Litigation and Investor Protection at Northwestern University Pritzker School of Law, a process known as a cy pres distribution.

Class members agreed to release claims related to the allegations and events in the case and their purchase, acquisition, holding, sale, or disposition of Tricida securities during the class period. The release included unknown claims and a waiver of rights under California Civil Code section 1542 and similar laws. Class members also agreed to waive claims arising from any failure of the notice process concerning Klaerner and Tricida.

Kroll Settlement Administration LLC mailed notices to identifiable shareholders, emailed more than 500 nominee account holders, posted documents on a settlement website, published a summary notice on PR Newswire, and operated a telephone helpline. As of October 7, 2025, Kroll and Broadridge Financial Services had distributed or sent thousands of notifications. Kroll had received approximately 11,859 timely claims and 85 late claims. No class members had objected to the settlement or requested exclusion.

Final Settlement Approval

The Court reviewed whether the settlement class continued to satisfy Federal Rule of Civil Procedure 23, which governs class actions. Because the settlement class was identical to the previously certified class and no relevant facts had changed, the Court incorporated its earlier class-certification analysis.

Under Rule 23(e), a class settlement may be approved only after a hearing and a finding that it is fair, reasonable, and adequate. The Court considered the adequacy of notice, possible signs of collusion, the strength of the claims, litigation risks, the settlement amount, the extent of discovery, the stage of the case, and the class members’ reactions.

The Court found that the notice plan provided the best practicable notice under the circumstances. It also found the settlement fair, adequate, and reasonable. The Court considered the complexity of the securities case, the disputed issues concerning Food and Drug Administration approval, the risks involving liability, loss causation, and damages, the possibility of expert disputes at trial, the completed discovery, and the risks created by Tricida’s bankruptcy. The Court also considered that Klaerner’s directors-and-officers insurance was limited and was being reduced by defense costs, and that recovery from Klaerner’s personal assets was uncertain.

The Court found that the $14.25 million settlement was within the reasonable range given the litigation risks and costs. Lead Plaintiff’s damages expert had estimated potential maximum damages of approximately $215 million, while the parties stated that damages could be as low as $44 million under another theory. The Court found the settlement consistent with comparable securities class-action settlements. The Court also found that the proposed cy pres recipient had a sufficient connection to the class and the purposes of the securities laws.

The Court therefore granted Lead Plaintiff’s motion for final approval of the class action settlement.

Attorneys’ Fees and Costs

Class Counsel requested 27.5% of the settlement fund, or $3,918,750, in attorneys’ fees, plus $337,645.15 in litigation costs. The Court noted that 25% is a common benchmark for percentage-based awards from a common fund, but found that an increase was justified by the results achieved, the case’s complexity, the risks of litigation, the extensive discovery and investigation, the successful class certification, the contingency risk, and counsel’s handling of Tricida’s bankruptcy.

As a cross-check, the Court reviewed the lodestar, which estimates fees by multiplying reasonable hours by reasonable hourly rates. Class Counsel reported 3,106.3 hours and a lodestar of $2,494,599; bankruptcy counsel reported 219.7 hours and $227,275 in fees. The requested fee represented a 1.41 multiplier of Class Counsel’s anticipated lodestar. The Court found the requested fee reasonable and granted the motion for attorneys’ fees and costs, awarding $3,918,750 in attorneys’ fees and $337,645.15 in costs, for a total of $4,256,395.15.

Lead Plaintiff’s Costs and Expenses

Lead Plaintiff requested $1,700 for costs and expenses related to representing the class, or alternatively $680 for time spent preparing for and attending a deposition. The Court explained that the Private Securities Litigation Reform Act prohibits incentive payments to named plaintiffs beyond their proportional recovery, but allows reasonable costs and expenses directly related to class representation, including lost wages.

The Court found that Lead Plaintiff provided meaningful evidence of time spent responding to discovery, evaluating the settlement, and preparing for and attending the deposition. Lead Plaintiff estimated spending at least 20 hours, or about 2.5 workdays, and used paid time off for the deposition. The Court accepted the calculation based on Lead Plaintiff’s stated annual salary and granted Lead Plaintiff’s motion for costs and expenses, awarding $1,700.

Further Directions

The Court directed the parties and settlement administrator to implement the Final Order and settlement agreement. It directed the parties to file a stipulated final judgment within seven days. Class Counsel must file a Post-Distribution Accounting after the settlement checks become stale or all funds have been distributed. The Court will withhold 10% of the attorneys’ fees until that accounting is filed and directed Class Counsel to request release of the remaining amount at that time.