Goldenberg v. NeoGenomics, Inc.

Background

Daniel Goldenberg brought a securities lawsuit under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act. He alleges that NeoGenomics, Inc. and former and current officers made materially false or misleading statements about the company’s cancer tests, operating structure, and compliance program. According to the allegations described in the opinion, later company disclosures were followed by declines in NeoGenomics’s stock price.

Goldenberg and Edilbert Caballes each moved to be appointed lead plaintiff and asked the court to approve their selected lead counsel. Goldenberg purchased 18,435 shares, spent $322,891 in net expenditures, and claimed an approximate loss of $174,591. Caballes purchased 1,500 shares, spent $65,750, and claimed an approximate loss of $52,870.

Lead Plaintiff Standard

The Act generally creates a presumption that the class member with the largest financial interest should be appointed lead plaintiff if that person timely seeks appointment and satisfies the requirements of typicality and adequacy under Rule 23 of the Federal Rules of Civil Procedure. Typicality asks whether the proposed lead plaintiff’s claims arise from the same conduct and injuries as the other class members’ claims. Adequacy concerns whether the plaintiff and counsel can fairly and effectively represent the class without conflicts.

Court’s Analysis

The court found that Goldenberg timely filed his motion and properly submitted the required sworn certification. It also found that he had the largest financial interest under the factors used by courts in the district, including shares purchased, net shares purchased, net funds spent, and approximate losses.

The court further found that Goldenberg made the required preliminary showing of typicality and adequacy. His claims arose from his purchase of NeoGenomics securities during the alleged class period, the alleged inflation of the shares’ value by misleading statements, and resulting losses. The court found that Goldenberg had selected experienced securities counsel, had a sufficient financial interest to support vigorous advocacy, and had no apparent conflict with the class.

Caballes argued that Goldenberg was subject to a unique defense because he bought all of his shares after NeoGenomics’s first disclosure concerning an internal investigation. The court rejected that argument at this stage. It concluded that the first disclosure could have been only a partial disclosure and that the materials cited by Caballes did not necessarily reveal all of the alleged misrepresentations. The court also noted that post-disclosure purchases are not automatically a bar to lead-plaintiff appointment.

Caballes separately relied on Goldenberg’s alleged criminal history. The opinion states that Goldenberg reported one misdemeanor shoplifting conviction from more than 25 years earlier and explained that a later bad-check charge had been dismissed. The court concluded that the old misdemeanor and the other allegations did not show that Goldenberg was inadequate to represent the class.

Lead Counsel and Disposition

The court approved Goldenberg’s selection of Gibbs Law Group LLP as lead counsel because the firm’s materials showed extensive securities-litigation experience and the ability to conduct the litigation. Judge Jennifer H. Rearden granted Goldenberg’s motion for appointment as lead plaintiff and approval of his selection of lead counsel. She denied Caballes’s competing motion for appointment as lead plaintiff. The opinion does not state that the court decided the underlying securities claims or certified the proposed class.