Rosi v. Aclaris Therapeutics, Inc.

Background

Lead plaintiff Robert Fulcher moved for final approval of a class-action settlement involving claims under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The complaint alleged that Aclaris Therapeutics, Inc. and certain current or former officers made false or misleading statements, primarily about the company’s first FDA-approved product, ESKATA. The surviving allegations concerned August and November 2018 statements promoting Aclaris’s direct-to-consumer advertising campaign without disclosing that the FDA had previously told the company it believed the campaign was misleading and would try to stop it. The court had rejected the remainder of the claims at the earlier pleading stage.

The proposed settlement required Aclaris or its insurers to pay $2.65 million into a settlement fund. After payment of approved attorneys’ fees, expenses, administration costs, and any service award, the remaining money would be distributed to class members based on recognized losses. Class members who did not opt out would be bound by a broad release of claims relating to the purchase, acquisition, sale, or ownership of Aclaris securities during the settlement period. The settlement administrator sent thousands of notice packages; the opinion states that no objections were received and that there was one opt-out.

Settlement-Class Certification

The court confirmed its earlier certification of a settlement class under Federal Rule of Civil Procedure 23. The class consisted of persons or entities that purchased or otherwise acquired Aclaris securities between May 8, 2018, and August 12, 2019, inclusive. The court found that the class satisfied Rule 23(a)’s requirements, including numerosity, common questions, typical claims, and adequate representation. It also found that common questions predominated and that a class action was the superior method for resolving the matter under Rule 23(b)(3).

Settlement Approval

Under Rule 23(e), a class settlement may be approved only if it is fair, reasonable, and adequate. The court found that the class representatives and counsel adequately represented the class, the settlement was negotiated at arm’s length after mediation, and the proposed method of distributing the net fund was effective and equitable. The court also considered the expense, delay, and risks of continued litigation, including issues concerning proof of false statements, materiality, scienter, loss causation, damages, class certification, trial, and appeal.

The court gave significant weight to the class’s reaction: 9,211 notice packages were sent, no objections were submitted, and only one person or entity opted out. The court found that the $2.65 million settlement represented a favorable result in light of the risks, although it had no information about whether the defendants could withstand a larger judgment. The court concluded that the settlement was fair, reasonable, and adequate and approved it.

Attorneys’ Fees and Expenses

Lead counsel requested $833,333.33, or 33.3 percent of the settlement fund, plus $55,255.76 in expenses. The court reviewed the request under factors including the time and labor expended, the complexity and risks of the litigation, the quality of representation, the requested fee compared with the recovery, public-policy considerations, and the reaction of the class. Counsel reported 506 attorney hours and three paralegal hours and claimed a lodestar of $361,550.50, meaning the value of counsel’s time calculated using hourly rates.

The court found that counsel had performed extensive work and achieved a favorable result, but concluded that some attorney hours were unnecessary or could reasonably have been performed by paralegals. It reduced the lodestar value by one-third, to $241,033.67. The court also found that 33.3 percent was toward the high end of reasonable fees and that 30 percent was more appropriate. It therefore awarded $795,000 in attorneys’ fees, equal to 30 percent of the settlement fund, and $53,665.65 in costs and expenses. The court approved expenses for computer research, expert fees, investigator fees, and mediator fees, while reducing or rejecting other claimed expenses.

Service Award

Fulcher requested a $10,000 service award. The court explained that the Private Securities Litigation Reform Act limits additional payments to a class representative but permits reimbursement for reasonable costs and expenses directly related to representing the class. Fulcher estimated that he spent 75 hours on the case, but he did not provide documentary records, evidence of expenses, or evidence of lost wages or commissions. He did not attend hearings or mediation, participate in discovery, or provide documents or answers to interrogatories.

The court found that Fulcher had done more than merely lend his name to the lawsuit and was entitled to a nominal award for staying in contact with counsel and participating in discussions. It concluded, however, that most of the claimed work was not compensable from the class fund and that a larger award would be unfair to the class. The court granted a $1,000 service award.

Disposition

Judge Lewis J. Liman approved the $2.65 million settlement with modifications. The court awarded $795,000 in attorneys’ fees, $53,665.65 in costs and expenses, and a $1,000 service award to Fulcher. The clerk was directed to close the two listed case matters, including member case 19-cv-8284, and to close the case.