Knight v. CytomX Therapeutics, Inc.

Background

Kevin Knight filed a putative securities class action against CytomX Therapeutics, Inc., Sean A. McCarthy, Carlos Campoy, and Debanjan Ray. Knight alleged that, during the stated class period from May 17, 2018, through May 13, 2020, the defendants made misrepresentations or omissions about issues concerning the efficacy and safety of CytomX’s products in clinical trials. Knight alleged that CytomX’s stock price fell $5.21 per share, or 36.08 percent, when information about the products became public. He brought claims under the Securities Exchange Act of 1934 on behalf of people who purchased or otherwise acquired CytomX securities during the class period.

The Private Securities Litigation Reform Act (PSLRA) requires public notice of the action and a process for selecting a lead plaintiff in covered securities class actions. Notice was published on the date the complaint was filed and gave potential class members 60 days to seek appointment as lead plaintiff. Michael Margiotta filed his motion on July 20, 2020, one day before the deadline. Knight initially filed his own motion but later notified the court that he did not oppose Margiotta’s motion because Margiotta had the largest financial interest in the case. Knight’s motion was terminated as moot.

Lead Plaintiff Analysis

The court determined that Margiotta’s stated loss was approximately $4,087. Because his motion was unopposed, the court treated him as the prospective plaintiff with the largest financial interest.

At this stage, the court considered whether Margiotta made an initial showing of two requirements under Federal Rule of Civil Procedure 23(a): typicality and adequacy. Typicality asks whether the proposed lead plaintiff’s injury and claims are similar to those of other class members. The court found that Margiotta, like the other proposed class members, purchased CytomX stock during the class period when the stock was allegedly artificially inflated and allegedly suffered losses when the information became public.

Adequacy asks whether the proposed lead plaintiff and counsel have conflicts with other class members and whether they will pursue the case for the class. The court found no indication of conflicts and concluded that Margiotta and his counsel appeared likely to pursue the case diligently. The court also found that no class member had shown that Margiotta could not fairly and adequately protect the class or had unique defenses preventing him from representing it.

Lead Counsel and Disposition

The PSLRA permits the lead plaintiff to select class counsel, subject to court approval. No party objected to Margiotta’s selection of The Rosen Law Firm, P.A. The court reviewed the firm’s résumé and found that Margiotta had made a reasonable choice.

The court GRANTED Margiotta’s Motion for Appointment as Lead Plaintiff and Approval of Selection of Counsel. It APPOINTED Margiotta as lead plaintiff and APPROVED his selection of Rosen Law as lead counsel.