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Chris Bang, On Behalf of Himself and All Others Similarly Situated v. Acura Pharmaceuticals

January 11, 2011

CHRIS BANG, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
ACURA PHARMACEUTICALS, INC., ANDREW D. REDDICK, PETER A. CLEMENS, RON J. SPIVEY AND ROBERT JONES, DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiffs Chris Bang ("Bang") and the Acura Investors Group ("Investors Group") each move to appoint counsel and lead plaintiff in a securities class action against Acura Pharmaceuticals ("Acura"). For the following reasons, the Court denies Bang's Motion to Appoint Counsel and Lead Plaintiff and grants the Investors Group's Motion to Appoint Counsel and Lead Plaintiff. The Investors Group's Motion to Consolidate is not properly before the Court at this time and as such will not be addressed.

BACKGROUND

On September 10, 2010, Bang filed a securities class action in this District on behalf of purchasers of common stock of Acura between February 21, 2006 and April 22, 2010 ("Class Period") alleging violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §§ 78j(b) and 78t(a) ("PSLRA"), and SEC's Rule 10b-5. Specifically, the Complaint charges that Acura made knowingly false and misleading statements to investors regarding the effectiveness and pending FDA approval of its drug Acurox. When the FDA announced on April 22, 2010 that Acurox was not effective enough to warrant approval and that Acura had disregarded specific instructions from the FDA regarding clinical trials, Acura's share price dropped 42.5% (and another 39% in after-market trading). The same day, the FDA voted 19-1 against approving Acurox.

Bang published notice of the pendency of the class action on September 10, 2010 in GlobeNewswire, a widely circulated national business publication, notifying potential class members that they had sixty days to seek appointment as lead plaintiff.

Both Bang and the Investors Group timely moved to appoint counsel and lead plaintiff. Bang claims he suffered the largest individual loss of any investor-$87,881-and that he was the first and only class member to file an action seeking recovery on behalf of a class of defrauded Acura investors.*fn1 The Investors Group comprises three individual investors who lost money on their Acura stock suffering a total loss of $93,503.91. Individually, the three Investors Group members suffered losses of $25,081, $31,081, and $37,341. Two of the three Investors Group members had a relationship that predated the instant lawsuit.

After the parties fully briefed the issue, the Court heard oral argument on December 20, 2010.

STANDARD OF REVIEW

Under prior law, lead plaintiffs in securities class actions were selected by a "race to the courthouse" method where the first plaintiff to file suit was usually appointed as lead plaintiff. See In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002). The PSLRA eliminated this method and instead sets forth a procedure for the selection of a lead plaintiff to oversee securities class actions which focuses on who the best representative would be for the class. 15 U.S.C. § 78u-4(a)(3). The "plaintiff or plaintiffs" that file the initial action must first publish a notice to the class within twenty days informing potential class members of their right to file a motion for appointment as lead counsel. Id. § 78u-4(a)(3)(A)(i). Within sixty days of that publication any member of the proposed class may apply to be appointed lead plaintiff. Id. § 78u-4(a)(3)(A)(i)(II). The court then appoints as lead plaintiff the person or group of persons that the court determines to be most capable of adequately representing the interests of the class members. Id. § 78u-4(a)(3)(B)(i).

The PSLRA creates a rebuttable presumption that the most adequate plaintiff is the person or group of persons that: (1) either has filed the complaint or made a motion in response to a notice;

(2) has the largest financial interest in the relief sought by the class; and (3) otherwise satisfies the requirements of Rule 23. Id. § 78u-4(a)(3)(B)(iii).*fn2 This presumption may be rebutted if there is proof that the presumptively most adequate lead plaintiff either will not fairly and adequately protect the class' interests or is subject to some unique defense that renders the lead plaintiff incapable of adequately representing the class. Id. § 78u-4(a)(3)(B)(iii)(II).

DISCUSSION

I. Lead Plaintiff

Here, Bang and the Investors Group each seek to be lead plaintiff. Both Bang and the Investors Group agree that Bang's publication of notice in GlobeNewswire satisfied the publication requirement and that each party timely moved to be appointed lead plaintiff in response to that notice. See 15 U.S.C. ยง 78u-4(a)(B)(iii)(aa). Bang and the Investors Group disagree over which plaintiff has ...


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