Melucci v. Corcept Therapeutics Incorporated

Background

This proposed securities class action names Corcept Therapeutics Incorporated, its President and Chief Executive Officer Joseph K. Belanoff, and its Chief Financial Officer Charles Robb as defendants. The proposed class consists of people and entities that purchased or otherwise acquired Corcept securities between August 2, 2017, and February 5, 2019.

The complaint alleges that Corcept’s positive statements about its business, operations, and prospects were materially misleading or lacked a reasonable basis because the company allegedly paid doctors to promote Korlym, promoted Korlym for unapproved uses, used a related party as its sole specialty pharmacy, inflated revenue and sales through allegedly illicit practices involving a related party, and engaged in conduct likely to lead to regulatory scrutiny. The opinion does not decide the truth of those allegations.

After notice of the action was publicized, five motions sought appointment as lead plaintiff and approval of lead counsel. Robert Baffa later withdrew his motion, as did Bucks County Employees Retirement Fund (BCERF). The remaining competing motions were filed by the Ferraro Group, BCERF, Nicholas Melucci, and Nova Scotia Health Employees Pension Plan (NSHEPP). After the court rejected a proposed agreement for the Ferraro Group and NSHEPP to serve as co-lead plaintiffs, BCERF filed a response purporting to renew its motion.

Legal standard

The Private Securities Litigation Reform Act governs selection of a lead plaintiff in a private securities class action. The court first identifies the proposed plaintiff with the largest financial interest in the requested relief. It then determines whether that plaintiff satisfies the class-representation requirements of Federal Rule of Civil Procedure 23(a), particularly typicality and adequacy. Other proposed class members may rebut the resulting presumption by showing that the presumptive lead plaintiff cannot fairly and adequately represent the class or is subject to unique defenses.

The lead plaintiff selects class counsel, subject to court approval. The court stated that it generally should defer to a reasonable choice of counsel.

Analysis

The court used approximate economic losses to compare the proposed lead plaintiffs’ financial interests. It applied four factors: shares purchased during the class period, net shares purchased, net funds spent, and approximate losses. The court rejected NSHEPP’s proposal to give controlling weight to net shares purchased, explaining that this approach is less useful when alleged disclosures occur gradually and affect the stock price multiple times.

The court’s table showed the following approximate losses:

- Ferraro Group: $1,828,049.77 - NSHEPP: $135,244.00 - BCERF: $93,366.54 - Melucci: $3,478.91

The court found that three of the four factors strongly favored the Ferraro Group, while net shares purchased favored NSHEPP. Considering all four factors together, the court determined that the Ferraro Group had the largest financial interest.

The court also found that the Ferraro Group satisfied Rule 23(a)’s typicality and adequacy requirements for purposes of lead-plaintiff appointment. Its claims appeared typical because it, like the other proposed class members, purchased Corcept securities during the class period at allegedly inflated prices and suffered alleged losses. The court found no indication of conflicts with other class members, no evidence of unique defenses, and a sufficient showing of adequacy.

The court concluded that no other proposed class member rebutted the presumption favoring the Ferraro Group. It rejected NSHEPP’s arguments concerning uncertainty about the Ferraro Family Foundation’s assets, leadership structure, voting procedures, and litigation experience. It also rejected BCERF’s argument, which appeared to rely on the previously rejected co-lead-plaintiff stipulation.

The court approved the Ferraro Group’s selection of Levi & Korsinsky, LLP as lead counsel after reviewing the firm’s resume and finding the choice reasonable.

Disposition

The court appointed the Ferraro Group as lead plaintiff and approved its selection of Levi & Korsinsky, LLP as lead counsel. It granted the Ferraro Group’s motion, ECF No. 17, and denied BCERF’s motion, ECF No. 24, renewed as ECF No. 58; Melucci’s motion, ECF No. 29; and NSHEPP’s motion, ECF No. 32.

The court also ordered that no law firm other than Levi & Korsinsky may work on the action for the proposed class without prior court approval. Any request to approve additional plaintiffs’ counsel must identify the counsel and background, describe the proposed tasks, and explain why Levi & Korsinsky cannot perform them. Anyone seeking fees in the case, including staff, consultants, and experts, must keep contemporaneous billing records, meaning records made no later than seven days after the work. Adam C. McCall must review and approve attorneys’ fees and costs each month and remove duplicative or unreasonable charges.