Posts tagged "Litigation"

In re Rewalk Robotics Ltd. Stockholder Litigation (Lawyers Weekly No. 09-063-17)

(adsbygoogle = window.adsbygoogle || []).push({});

COMMONWEALTH OF MASSACHUSETTS

 

SUFFOLK, ss.                                                                       SUPERIOR COURT

                                                                                                CIV. NO. 16-3336- BLS 2

                                                                                                (Consol. with 16-3670-BLS 2)

 

 

IN RE REWALK ROBOTICS LTD.

STOCKHOLDER LITIGATION

 

 

 MEMORANDUM OF DECISION AND ORDER

ON DEFENDANTS’ RENEWED REQUEST TO STAY  

 

This is a putative class action brought pursuant to Sections 11, 12 and 15 of the Securities Act of 1933.  The lead case was filed October 31, 2016 and the second on November 30, 2106, with the two actions consolidated in January 2017.  In April this year, the defendants moved to stay this case because of pending parallel federal multi-district litigation proceedings.  This Court (Salinger, J.) denied that request because nothing had taken place of note in the federal litigation and because this case was filed first. read more

Read more...

Posted by Massachusetts Legal Resources - January 9, 2018 at 2:20 am

Categories: News   Tags: , , , , , , ,

In re OvaScience Inc. Stockholder Litigation (Lawyers Weekly No. 09-050-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
NO. 2015-3087-BLS2
(Consol. with 16-0645)
IN RE OVASCIENCE INC.
STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER ON
PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
This is a putative class action arising under Sections 11, 12, and 15 of the Securities Act of 1933. Plaintiffs Westmoreland County Employee Retirement System, Phillip Hofmann, Carlos Rivas, and Cesar Castellanos are investors who purchased stock in the defendant OvaScience, Inc. (OvaScience). They allege that a Registration Statement and Prospectus issued in connection with a secondary offering of OvaScience stock on January 8, 2015 contained false statements and material omissions of fact concerning an experimental fertility treatment that OvaScience was in the process of developing. The case is now before the Court on the plaintiffs’ Motion for Class Certification pursuant to Mass R. Civ. P. 23. The plaintiffs seek to certify a nationwide class that consists of all persons who purchased OvaScience stock “pursuant and/or traceable to” the January 8 2015 secondary offering.1 Alternatively, they seek statewide class certification consisting of the Massachusetts-based purchasers. This Court concludes that the plaintiffs’ Motion must be DENIED.
1 Excluded from the proposed class are each of the defendants, past and current officers and directors of OvaScience, J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, and Leerink Partners LLC, their affiliates or sponsors, the members of their families, and any entity which any defendant has or had a controlling interest, and the legal representatives, heirs, successors, or assigns of any such excluded party.
2
Certification of this class requires this Court to exercise personal jurisdiction over absent class members who are not residents of Massachusetts. Whether that can be done consistent with due process was first addressed by the Supreme Court in Phillips Petroleum Co v. Stutts, 472 U.S. 797 (1985) (Stutts). The Court reasoned that, “[b]ecause a state places fewer burdens upon an absent class plaintiff than it does upon an absent defendant in a nonclass suit, the Due Process Clause need not and does not afford the former as much protection from state-court jurisdiction as it does the latter.” 472 U.S. at 811. The Court went on to hold that the forum state may exercise jurisdiction over the absent class member even in the absence of minimum contacts so long as it provides certain basic due process protections. Id. At a minimum, that means that the absent plaintiff must have the opportunity to remove himself from the class. Because the case before it was brought in a state (Kansas) that permitted absent class members to opt out, the Supreme Court held that the state court could properly assert personal jurisdiction over nonresident class members.
Massachusetts, of course, does not permit individual parties to remove themselves or opt out of a class action. See Mass.R.Civ. P. 23. Interpreting and applying Stutts, the Supreme Judicial Court in Moelis v. Berkshire Life Ins. Co., 451 Mass. 483 (2008) held that a Massachusetts state court judge may therefore certify a national class only if absent class members satisfy the “traditional minimum contacts test” first articulated in International Shoe Co.v. Washington, 326 U.S. 310, 319-320 (1945). That test requires that the nonresident plaintiff must have engaged in “some act by which the nonresident purposefully availed himself of the privilege of conducting activities in Massachusetts, thus invoking the benefits and protections of its laws.” Moelis, 451 Mass. at 488, citing Good Hope Industries, Inc. Ryder Scott, Co., 378 Mass. 1, 7 (1979). In Moelis, the SJC upheld the lower court’s refusal to certify
3
a nationwide class because the absent class members did not have sufficient contacts with Massachusetts to satisfy constitutional requirements.
The absent class members in Moelis had all purchased life insurance policies from the defendant Berkshire Life Insurance Company (Berkshire) based on a “disappearing premium” concept. Plaintiffs alleged that Berkshire had marketed the policies based on false representations that dividends paid on the policies would eventually cover the policyholder’s obligation to pay premiums after a set number of years, when in fact the premium obligation continued for much longer. In concluding that these contacts were insufficient to permit the assertion of personal jurisdiction, the SJC noted that the only contact that the nonresident class members had with this state was the purchase, through agents in their own states, of an insurance policy from Berkshire, a Massachusetts company, and their mailing of annual premium payments to Berkshire. 451 Mass. at 488. This was simply not enough to warrant the assetion of personal jurisdiction over them. Given the similarities between Moelis and the instant case, this Court is compelled to reach the same conclusion here.
In arguing that this Court may assert personal jurisdiction over the nonresident class members, plaintiffs rely on Kramersmeier v. R.G. Dickinson & Co., 440 N.W.2d 873, 877 (Iowa 1989). That class was a putative class action brought by individuals who had purchased tax-free bonds in a municipal bond offering from Iowa agents of the defendants. The bondholders received periodic payments of principal and interest from funds generated in Iowa, and relied on a prospectus that was prepared by an Iowa underwriter and an Iowa limited partnership for the sole purpose of selling bonds to develop Iowa real estate for the benefit of an Iowa city. The Iowa Supreme Court concluded that these contacts with the state were sufficient to meet the minimum contacts test as articulated in Stutts. The instant case is quite different.
4
Indeed, the nonresidents in this action have even less connection to Massachusetts than those in Moelis. Their only contact with this state is that they own stock in a Massachusetts company, but “stock ownership in or affiliation with a corporation, without more is not a sufficient minimum contact.” Cent. States Se. and Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000); see also cases cited in Defendants’ Memorandum in Opposition to Plaintiffs Motion for Class Certification, page 4, fn. 3. Unlike Moelis, there is no evidence that they mailed any payment to Ovascience in Massachusetts. The vast majority of these stockholders purchased their shares from defendants J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, both of which are based in New York.2 The current situs of the shares is Delaware, where OvaScience is incorporated. Neither the nature of the stock itself nor any benefits accruing from stock ownership are so uniquely tied to or affected by a policy of the Commonwealth that a nonresident class member would expect this dispute to be adjudicated in Massachusetts. In short, to include nonresidents in the class would run afoul of the Due Process clause.
Plaintiffs point to several Massachusetts cases in which trial courts approved settlements between defendants and “nationwide” classes of plaintiffs. There is nothing to indicate those courts adjudicated the issue (much less considered it) before approving the settlements, however. In any event, the settlement context is not analogous. Before a settlement is approved, all class members are notified and have an opportunity to object to it – itself a due process protection. Here, absent class members are not notified before the court determines whether to certify the class and (absent a settlement), they will be bound by the result, without any chance to be heard, much less to opt out.
2 The third underwriter defendant, Leerink Partners LLC, is a Boston based company but it only sold 10 shares during the secondary offering.
5
If nonresidents are not included in any class, then there are simply not enough Massachusetts members of the putative class to permit this case to proceed as a class action. The defendants have submitted undisputed evidence that a statewide class would consist of only 13 known members – eleven individual purchasers, plus Wellington Management Company (Wellington) and Fidelity Management Trust Company (Fidelity), both of which made multiple purchases during the January 2015 secondary offering.3 Courts have routinely denied class certification in cases involving twenty or fewer plaintiffs. The plaintiffs argue that the class is far larger because Wellington and Fidelity hold their stock “in street name” on behalf of tens of thousands of beneficial owners (the actual investors who would form the class). But this Court has no evidence of that. “’The party instituting the action need not show the exact number of potential members in order to satisfy’ the numerosity prerequisite, but she ‘does bear the burden of showing impracticability and mere speculation as to the number of parties involved is not sufficient to satisfy Rule 23(a)(1).’” Swack v. Credit Suisse First Bos., 230 F.R.D. 250, 258 (D. Mass. 2005), quoting 7A Wright, Miller & Kane, Federal Practice and Procedure § 1762 (2004). Plaintiffs here has failed to satisfy that burden.
________________________
Janet L. Sanders
Justice of the Superior Court
3 This number could further be reduced if this Court allows the defendants’ motion for summary judgment as to four of the named plaintiffs. That motion is currently under advisement. read more

Read more...

Posted by Massachusetts Legal Resources - December 7, 2017 at 2:22 pm

Categories: News   Tags: , , , , , ,

In re OvaScience Inc. Stockholder Litigation (Lawyers Weekly No. 09-051-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
NO. 2015-3087-BLS2
(Consol. with 16-0645)
IN RE OVASCIENCE INC.
STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANTS’ MOTION FOR SUMMARY JUDGEMENT
This is a putative class action alleging violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 ( the Securities Act). Plaintiffs Westmoreland County Employee Retirement System (Westmoreland), Phillip Hofmann, Carlos Rivas, and Cesar Castellanos are investors who purchased stock in the defendant OvaScience, Inc. (OvaScience).1 They allege that a Prospectus and Prospectus Supplement issued in connection with a secondary offering of OvaScience stock contained false statements and material omissions of fact concerning an experimental fertility treatment that OvaScience was in the process of developing. In addition to suing OvaScience, plaintiffs have also named as defendants certain of the company’s officers and directors as well as the three investment banks who served as the underwriters. The defendants now move for summary judgment against Castellanos, Hofmann, and Rivas (the Individual Plaintiffs). This Court concludes that the Motion must be ALLOWED.
1 Heather Carlson was also a plaintiff in the action. However, on August 1, 2017, the parties filed a joint stipulation voluntarily dismissing her from the action without prejudice. Judgment was entered on the docket pursuant to Mass. R. Civ. P. 58(a) on August 3, 2017.
2
BACKGROUND
On January 8, 2015, OvaScience conducted a secondary public stock offering in which it sold 2,645,000 shares at $ 50 per share (the January 8 Offering). J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, and Leerink Partners LLC served as the Underwriters. The offering closed on January 13, 2015, at which point there were over 27 million OvaScience shares outstanding.
At various points in 2015, the Individual Plaintiffs made purchases of OvaScience stock through online brokers E*Trade and Capital One Investing. On January 8, 2015, Castellano purchased 350 shares at $ 50.488. He made four more purchases between January 12 and February 3, 2015 for a price per share that ranged from $ 40.0899 up to $ 48.1799. Rivas made seven purchases between March 2015 and August 2015 for a price per share ranging from $ 24.32 to $ 41.49. Hoffman made three purchases between February and April 2015 for a price per share that ranged from $ 31.83 to $ 42.107485.
In October 2015, plaintiffs Hofmann and Rivas filed a lawsuit against the defendants; Castellanos filed a separate complaint based on the same allegations five months later, and the two actions were consolidated. In August 2016, Westmoreland intervened as plaintiff in the consolidated actions. After this Court denied a motion to dismiss, discovery proceeded on a bifurcated basis. Phase I of the discovery was limited to “class certification and standing issues” and was to be complete by May 19, 2017. See Scheduling Order dated January 20, 2017. That deadline was extended to June 19, 2017. This motion followed.
DISCUSSION
Sections 11 and 12(a) (2) of the Securities Act impose liability for untrue statements of material fact or omissions of material fact in a registration statement or prospectus. Section 15
3
of the Securities Act imposes secondary liability upon persons who control those liable under Sections 11 and 12. See Pyramid Holdings, Inc. v. Inverness Med. Innovations, Inc., 638 F. Supp. 2d 120, 124 (D. Mass. 2009); Cooperman v. Individual, Inc., 171 F.3d 43, 52 (1st Cir. 1999). In order to have standing to bring a claim under Section 11, plaintiffs must have purchased shares in the offering in question or, if the shares were purchased in an aftermarket, be able to trace their shares to the offering at issue. In re Century Aluminum Co. Sec. Litig, 729 F. 3d 1104, 1106 (9th Cir. 2013). For claims asserted under Section 12(a) (2), plaintiffs have standing only if they purchased the stock directly from a “seller”— a person that owned the security and passed title or successfully solicited the purchase of the security, motivated at least in part by a desire to serve its own financial interests or those of the securities owner. See Pinter v. Dahl, 486 U.S. 622 (1988); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48-50 (2d Cir. 1991). It is plaintiffs’ burden to show that the circumstances of their purchases provide them with the requisite standing. See In re Puda Coal Sec. Inc. Litig. (Puda Coal), 2013 WL 5493007, at *6, *9 (S.D.N.Y. Oct. 1, 2013).
Defendants first raised the issue of standing in a motion to dismiss pursuant to Rule 12(b) (6), Mass.R.Civ.P. Concluding that, at the very least, the plaintiff Westmoreland had standing, this Court denied the motion and allowed the case to proceed through discovery. Phase I of discovery was to allow plaintiffs the opportunity to compile evidence relating to the standing issue. The deadline for that discovery has now passed. Based on the summary judgment record, this Court concludes that the Individual Plaintiffs have no reasonable expectation of proving that they have standing to sue under either Section 11 or Section 12 of the Securities Act. Because their Section 15 claim is derivative of the Section 11 and Section 12 claims, that too must be dismissed.
4
As to their Section 12 claim, it is undisputed that the Individual Plaintiffs purchased their shares from two online brokers and thus did not purchase any shares either directly from any of the defendants or as a result of their solicitations. As to their Section 11 claim, the Individual Plaintiffs have failed to demonstrate either that they purchased their stocks directly in the January 8 Offering or that their stocks are traceable to someone who bought shares in the Offering. Purchases by three of the four Individual Plaintiffs were made after the January 8 Offering for a price per share that is considerably less than the offering price. As to plaintiff Castellanos, he purchased a block of shares on the date of the offering at $ 50.4888 per share, which was just over the offering price of $ 50. However, given that several million shares were already outstanding at the time of the Offering, such evidence merely indicates that the stock might be connected to the Offering. That is simply too speculative to support a Section 11 claim. See Puda Coal, 2013 WL 5493007, at *7 (observing that plaintiff cannot rely solely on the similarity of date and share price to demonstrate traceability); In re Quarterdeck Office Sys., Inc. Sec. Litig., 1993 U.S. Dist. LEXIS 19806, at *8 (C.D. Cal. Sept. 30, 1993), quoting Abbey v. Computer Memories, Inc., 634 F. Supp. 870, 874 (N.D. Cal. 1986) (“Courts have uniformly interpreted § 11 as requiring more than a showing that a plaintiff’s stock ‘might’ have come from the relevant offering.”). In arguing that this similarity in price and date is sufficient, plaintiffs rely on In re Everyware Global, Inc. Sec. Litig., 175 F.Supp.3d 837 (S.D. Ohio 2016), but that was a decision on a motion to dismiss, not summary judgment. Indeed, in concluding that the complaint stated a claim, the court in Everyware specifically noted that, with a chance to proceed past the pleading stage, plaintiffs would seek to prove traceability through third party subpoenas as well as discovery from the underwriter defendants. Plaintiffs in the instant case have made no such effort.
5
The Individual Plaintiffs contend that the motion is premature because traceability is a “merits issue” not properly the subject of Phase I discovery. This Court disagrees. Defendants clearly flagged the issue of standing in their motion to dismiss and then successfully obtained a scheduling order that bifurcated discovery so as to focus first on that question of standing. With the deadline for that discovery now passed, the issue is ripe for decision. Moreover, the Individual Plaintiffs have not invoked Mass.R.Civ.P. 56(f), nor have they met its requirements. That rule requires the party seeking to obtain its benefits to explain why he or she is currently unable to adduce the facts essential to an opposition and to provide a plausible basis for believing that the sought-after facts can be assembled within a reasonable time. Plaintiffs have done neither here.
For these reasons and for other reasons articulated in the defendants’ memoranda, the claims asserted by the Individual Plaintiffs in these two consolidated actions are hereby DISMISSED. The sole remaining plaintiff is Westmoreland. This matter is scheduled for a Rule 16 Conference on January ___ 2018 at 2:00 p.m.
________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 21, 2017 read more

Read more...

Posted by Massachusetts Legal Resources - December 7, 2017 at 10:47 am

Categories: News   Tags: , , , , , ,

In re ReWalk Robotics Ltd. Stockholder Litigation (Lawyers Weekly No. 12-048-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03336-BLS2
1684CV03670-BLS2
____________________
IN RE REWALK ROBOTICS LITD. STOCKHOLDER LITIGATION
____________________
MEMORANDUM AND ORDER DENYING DEFENDANTS’ MOTION TO STAY PENDING PARALLEL FEDERAL PROCEEDINGS
The named plaintiffs in these putative class actions claim that ReWalk Robotics Ltd. and thirteen other defendants are liable under §§ 11, 12(a)(2), and 15 of the federal Securities Act because ReWalk purportedly made false statements in a registration statement and prospectus concerning a public offering of securities. The first of these actions was filed on October 31, 2016. The second was filed on November 30, 2016. They were consolidated on January 9, 2017.
A similar lawsuit making similar Securities Act claims against the same Defendants was filed in the United States District Court for the District of Massachusetts on January 31, 2017. That lawsuit was docketed as Deng v. ReWalk Robotics et al., no. 1:17-cv-10179-FDS, and is pending before Judge Saylor.
Defendants have moved to stay these state court proceedings pending dispositive resolution of this federal lawsuit.1 A trial judge has broad discretion to grant or deny a stay of proceedings pending resolution of the same or similar claims in another forum. Travenol Laboratories, Inc. v. Zotal, Ltd., 394 Mass. 95, 97 (1985). The Court concludes, in the exercise of its discretion, that there is no good reason to stay these actions. It will therefore DENY Defendants’ motion.
1 When Defendants filed their motion to stay, they represented that a second federal class action asserting similar claims had been filed against them in the United States District Court for the Northern District of California, and that Defendants have moved to have the two federal actions consolidated in the District of Massachusetts as a single multidistrict litigation proceeding. In their reply memorandum, however, Defendants report that the California action was voluntarily dismissed on March 23, 2017. As a result, there are currently only two sets of actions asserting similar Securities Act claims against ReWalk and the other Defendants: these two actions in Massachusetts Superior Court and the Deng case filed several months later in federal court in the District of Massachusetts.
– 2 –
Although Defendants argue that it would be inefficient for these cases and the pending federal action to proceed at the same time, they do not muster any convincing explanation as to why they seek a stay of these actions in Massachusetts court rather than asking the federal judge to stay the later-filed federal action.
The first of these consolidated actions was filed in the Massachusetts Superior Court three months before the pending federal action was filed. Furthermore, the additional factual allegations asserted in the consolidated complaint in these actions suggest that the state court plaintiffs have made more progress in investigating the factual basis for their claims. There is no evidence that the plaintiffs in the federal action have done anything of substance to move their case forward. As a result, and in the absence of any other reason to defer to the federal court, the fact that these actions were filed first weighs heavily against staying these actions. See, e.g., C.D.S., Inc. v. Zetler, 198 F.Supp.3d 323, 332 (S.D.N.Y. 2016). Defendants argue that the federal action should be treated as if it were the first-filed case because those plaintiffs originally asserted the same claims against the same Defendants in an action filed in California state court on September 20, 2016, a month before the first action was filed in Massachusetts. But the California action was dismissed because the California state courts lacked personal jurisdiction over the Defendants. If a judgment had been entered in the California action it would have violated the constitutional requirements of due process and thus been a “nullity.”2 Since the California action was a nullity, it can hardly count as being the first filed action.
The fact that Plaintiffs in these actions are asserted claims under the federal Securities Act has no bearing on whether this action should be stayed until the later-filed federal action is resolved. State and federal courts have concurrent subject
2 “[A] judgment rendered in the absence of personal jurisdiction is a nullity.” Vazquez-Robles v. CommoLoCo, Inc., 757 F.3d 1, 4 (1st Cir. 2014); accord World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291-292 (1980) (judgment entered by state court with no personal jurisdiction over defendant violates Fourteenth Amendment due process clause and therefore is void); Lamarche v. Lussier, 65 Mass. App. Ct. 887, 889 (2006) (“A judgment is void if the court from which it issues lacked jurisdiction over the defendant.”); see also Securities and Exchange Comm’n v. Ross, 504 F.3d 1130 (9th Cir. 2007) (vacating disgorgement order entered in Securities Act case because district court lacked personal jurisdiction over defendant).
– 3 –
matter jurisdiction over Securities Act claims. See Fortunato v. Akebia Therapeutics, Inc., 1584CV02665-BLS2, slip op. at 2-16, 2017 WL 716356, *1-*9 (Mass. Sup. Ct. Feb. 21, 2017) (Salinger, J.). As a result, Plaintiffs in these actions are entitled to choose to proceed in State court.
Plaintiffs’ choice of forum should not be disregarded merely because they are asserting federal claims. “State courts are adequate forums for the vindication of federal rights;” this is “a foundational principle of our federal system.” Burt v. Titlow, 134 S. Ct. 10, 15 (2013). The Supreme Court has “consistently held that state courts have inherent authority, and are thus presumptively competent, to adjudicate claims arising under the laws of the United States.” Id., quoting Tafflin v. Levitt, 493 U.S. 455, 458 (1990). Defendants’ arguments to the contrary are without merit.
Defendants have not suggested that they would be unfairly prejudiced by having to litigate in Massachusetts and thus have not moved to dismiss under the doctrine of forum non conveniens. To the contrary, Defendants’s preferred forum is in Massachusetts, albeit in federal rather than state court.
In sum, Defendants have not shown there is any good reason to stay these actions.
ORDER
Defendants’ motion to stay these consolidated case pending resolution of a parallel civil action in federal court is DENIED.
April 3, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Read more...

Posted by Massachusetts Legal Resources - April 27, 2017 at 4:32 pm

Categories: News   Tags: , , , , , , ,

In re Ovascience, Inc. Stockholder Litigation (Lawyers Weekly No. 12-177-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIV. NO. 15-03087 BLS 2
(Consol. With 16-0645)
IN RE OVASCIENCE, INC. STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANTS’ MOTION TO DISMISS
This is a putative class action brought pursuant to Sections 11, 12 and 15 of the Securities Act of 1933. Plaintiffs are investors who purchased stock in the defendant Ovascience, Inc. (Ovascience or the Company). They allege that a Registration Statement issued in connection with a secondary offering of Ovascience stock on January 8, 2015 (the January 8 Offering), contained false statements and material omissions of fact concerning an experimental fertility treatment (AUGMENT) that Ovascience was in the process of developing. In addition to suing Ovascience, plaintiffs have also named as defendants certain of the Company’s officers and directors (collectively, the Ovascience defendants) as well as three investment banks, J.P. Morgan, Credit Suisse and Leerink Partners, which were the underwriters in the January 8 Offering (the Underwriters). The case is now before the Court on the defendants’ Motion to Dismiss pursuant to Rule 12(b) (6), Mass.R.Civ.P. After careful review of the parties’ submissions, the Court concludes that the Motion should be DENIED. This memorandum sets forth a brief explanation of the reasons for that decision.
The defendants makes two argument in support of their motion. First, they contend that the Complaint fails to allege sufficient facts, under the standard set forth in Iannachino v. Ford Motor Co., 451 U.S. Mass. 623 (2008), that the Registration Statement contained material
2
misrepresentations.1 This Court disagrees. The Complaint sets forth detailed allegations that the Registration Statement contained misleading statements or failed to include material facts regarding: 1) the science behind AUGMENT; 2) the success rate; 3) the reason why the Company undertook its studies outside of the United States; and 4) the profitability of the Company. Plaintiffs allege that, as a result of the falsely optimistic picture the Registration Statement painted regarding AUGMENT’s prospects as a fertility treatment, stocks prices for Ovascience briefly shot up (with certain of the individual defendants profiting from that rise), then sharply declined when the facts regarding AUGMENT emerged just a few months later – facts that were known at the time the Registration Statement issued. This more than satisfies the requirement that the Complaint set forth facts “plausibly suggesting (not merely consistent with) an entitlement to relief…” Iannacchino, supra, quoting Bell Atl. Corp. v. Twombly, 550 Mass. 544, 555 (2007).
The second argument concerns the issue of standing. The claims are brought pursuant to Section 11, 12 and 15 of the Securities Act. In order to have standing to bring a claim under Section 11, a plaintiff must have purchased shares either in the offering in question or, if the shares were purchased in an aftermarket, they must be “traceable” to the offering at issue. Where a company has made more than one stock offering, it may be quite difficult for a plaintiff to meet Section 11’s standing requirement. Standing is even more difficult to demonstrate if the claim is asserted under Section 12, which imposes liability only on a “seller” as defined by the statute. A “seller” includes a non-owner (like an underwriter) if the defendant solicited the purchase, motivated at least in part by its own financial interest. See Pinter v Dahl, 486 U.S. 622
1 There have been three iterations of the complaint since this case began. This Court looks to the most recent one, entitled “Class Action Complaint for Intervention for Violation of the Securities Act of 1933, filed November 4, 2016.
3
(1988). However, the plaintiff must show a direct connection between the purchase and the offering in question. Language that the shares were purchased “pursuant and/or traceable to” the offering documents is not enough. Plumbers Union Local No. 12 v. Nomura Asset Acceptance Corp., 632 F.3d 762 (1st Cir.) 2011) (affirming dismissal of Section 12 claim for lack of standing); See also ARIAD Pharmaceuticals, Inc. Securities Litigation, No. 15-1491, 2016 U.S. App. LEXIS 21235, ___F.3d___ (Nov. 28, 2016) (affirming dismissal of Section 11 claim where plaintiff alleged only that shares were traceable to the offering).
In the instant case, the Complaint alleges that all plaintiffs purchased stock “pursuant and/or traceable to” the January 8 Offering. Relying on Nomura and ARIAD, defendants argue this is insufficient to give the plaintiffs standing to bring this case. Ovascience points out that, at the time of the Offering, there were over 24 million shares of Ovascience outstanding; it argues that, because the Registration Statement related to a secondary offering, some greater level of specificity is required. See In re Century Aluminum Securities Litigation, 729 F.3d 1105, 1107 (9th Cir. 2013) (if it is only “possible” that the plaintiff purchased the stock in the offering, that is not enough to confer standing under Section 12).
If the Complaint alleged only that plaintiffs’ shares were traceable to the January 8 Offering, the defendants would be correct. But as to plaintiff Westmoreland, it alleges more, stating that Westmoreland purchased its stock on the day of the January 8 Offering and at the Offering price. This Court concludes that these additional facts are sufficient to permit a reasonable inference that Westmoreland purchased its stock directly in the Offering, so as to have standing under both Section 11 and section 12. 2 With at least one named plaintiff
2 The Complaint also asserts a claim against the individual defendants under Section 15, which imposes secondary liability on “control persons.” Given this Court’s ruling on the Section 11 and Section 12 claim, the Section 15 claim also survives.
4
(Westmoreland) having satisfied standing requirements, dismissal of this class action is not warranted under Rule 12(b) 6).
____________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 22, 2016 read more

Read more...

Posted by Massachusetts Legal Resources - December 30, 2016 at 10:06 pm

Categories: News   Tags: , , , , , ,