Micholle v. Ophthotech Corporation

Background

This federal securities action was brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The plaintiffs are Frank Micholle, individually and on behalf of others similarly situated, and the Sheet Metal Workers’ Pension Plan of Southern California, Arizona and Nevada. The defendants are Ophthotech Corporation, David R. Guyer, and Samir Patel.

The court had previously denied the defendants’ motion to dismiss. A prior unopposed motion to certify a class remained pending when the lead plaintiff filed the motion addressed in this opinion. That motion sought preliminary approval of a class-action settlement, certification of a settlement class, and approval of notice to the class.

Preliminary Approval of the Settlement

The court explained that preliminary approval requires an initial evaluation of whether a proposed settlement appears fair, reasonable, and adequate, and whether there is probable cause to submit it to class members. The court found that the proposed agreement appeared to result from extensive, good-faith negotiations mediated by Judge Layn Philips (Ret.). Lead counsel had investigated the case by reviewing more than 2.8 million pages of documents and consulting an industry expert.

The proposed settlement provided for $29 million in cash, plus interest earned in an escrow account. The agreement stated that lead counsel would seek attorneys’ fees of no more than 30% of the settlement amount and litigation expenses of no more than $500,000. The court found no obvious deficiencies, concluded that the settlement amount appeared reasonable at the preliminary stage, and found that the plan of allocation would treat class members roughly equally because all plaintiffs, including the lead plaintiff, would be subject to the same distribution formula. The court therefore preliminarily approved the settlement agreement.

Conditional Settlement-Class Certification

For settlement purposes only, the court provisionally certified a class consisting of people who purchased or acquired Ophthotech common stock between March 2, 2015, and December 12, 2016, inclusive. The class excluded the defendants; their immediate family members; people who were Ophthotech officers or directors during the class period; entities in which a defendant had or had a controlling interest; Ophthotech’s corporate parent or affiliates; the legal representatives, heirs, successors-in-interest, or assigns of excluded people; and anyone who timely and validly requested exclusion.

The court found that the proposed class met the requirements of Federal Rule of Civil Procedure 23. It found numerosity because the class was likely to include thousands of people, based on the tens of millions of shares outstanding and traded during the relevant period. It found commonality because class members shared questions concerning alleged securities-law violations, alleged misrepresentations or omissions about clinical trials for Fovista, the defendants’ state of mind, causation, artificial inflation of Ophthotech’s stock price, and damages.

The court found typicality because the proposed class members’ claims arose from the same alleged conduct and involved the same alleged harm. It found adequate representation because class counsel had substantial securities-litigation experience and there was no indication that counsel was unqualified or unable to conduct the case; the plaintiffs and class representatives also had the same incentives to pursue the alleged injuries. The court further found that common issues predominated and that a class action was the superior and more efficient method of resolving the dispute.

The court approved the stipulation appointing the lead plaintiff as class representative and Robbins Geller Rudman & Dowd LLP as class counsel. It also appointed Gilardi & Co. LLC as claims administrator.

Notice to the Class

The court approved the proposed notice plan. The plan called for mailing the notice and proof-of-claim and release materials to settlement-class members who could be identified through reasonable effort. It also called for publication of a summary notice in the national edition of The Wall Street Journal and once through a national newswire service.

The court concluded that this plan was the best notice practicable under the circumstances, satisfied due-process requirements, and addressed the required information under Rule 23, including the nature of the action, the class definition, the claims, the right to appear through an attorney, the process for requesting exclusion, and the effect of a class judgment.

Disposition

The court granted the plaintiffs’ unopposed motion for preliminary approval of the settlement, settlement-class certification, and approval of notice. Because the proposed settlement schedule was outdated, the parties were ordered to file an updated proposed order by March 25, 2022. The court denied the earlier unopposed class-certification motion without prejudice to refiling if the court later denied final approval of the settlement. The clerk was directed to close the open motions on the docket.