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Kimbro v. Clovis Oncology, Inc.

United States District Court, D. Colorado

February 18, 2016

SONNY P. MEDINA, Plaintiff,


RAYMOND P MOORE, United States District Judge.

Pending before the Court are various motions for consolidation and for appointment of lead plaintiff and lead counsel filed by: (1) Vikram B. Kothari, Barbara Fayeulle-Frey, and Suzanne J. Real (collectively, “the Clovis Investor Group”) (ECF Nos. 10-13); (2) the Laborers’ District Council and Contractors’ Pension Fund of Ohio and the Employees’ Retirement System of the City of St. Petersburg, Florida (collectively, “the Pension Fund Group”) (ECF No. 14); (3) Nail Koymen, Karl Showrai, and Thomas Jankowski (collectively, “the KSJ Group”) (ECF No. 15); (4) John Brian Moran (“Moran”) (ECF No. 16); (5) Todd Rinaldi and Myo Thant (collectively, “the RT Group”) (ECF No. 17); and (6) M.Arkin (1999) LTD and Arkin Communications LTD (collectively, “the Arkin Group, ” and along with the Clovis Investor Group, the Pension Fund Group, the KSJ Group, Moran, and the RT Group, “the Moving Parties”) (ECF No. 18).

The Moving Parties seek consolidation of this case with two other cases brought in this District: (1) Steven Kimbro v. Clovis Oncology, Inc., Patrick J. Mahaffy, Erle T. Mast, 15-cv-02547-RBJ (“the Kimbro Action”); and (2) Ralph P. Rocco v. Clovis Oncology, Inc., Patrick J. Mahaffy, Erle T. Mast, 15-cv-02697-CBS (“the Rocco Action”). Because the instant case is the lowest numbered case, this Court is the one to decide the pending motions for consolidation. D.C. Colo. L.Civ.R. 42.1.

I. Procedural Background

On November 19, 2015, plaintiff Sonny P. Medina (“Medina”) filed a Class Action Complaint (“the initial complaint”) against defendants Clovis Oncology, Inc. (“Clovis”) and Patrick J. Mahaffy (“Mahaffy”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) & 78t(a), and Rule 10b-5 promulgated by the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5 (“Rule 10b-5”).

The initial complaint alleges the following. Since May 19, 2014, Clovis and certain of its current and former officers and directors materially misrepresented the nature and significance of data collected from clinical trials for a lung cancer treatment drug known as CO-1686 or “rociletnib.” (ECF No. 1 at ¶ 2.) On November 16, 2015, Clovis issued a press release disclosing that the U.S. Food and Drug Administration had requested additional clinical data regarding rociletnib because Clovis had submitted a New Drug Application and Breakthrough Therapy designation for rociletnib that contained immature data sets. (Id. at ¶ 3.) As a result of this press release, the trading price of Clovis’ common stock dropped from $99.43 per share on November 13, 2015 to $30.24 per share on November 16, 2015-a loss of approximately $2.17 billion in market capitalization. (Id. at ¶ 4.)

Pursuant to the Private Securities Litigation Reform Act (“the PSLRA”), the filing of the initial complaint triggered Medina’s responsibility to have published a notice advising members of the purported plaintiff class of the pendency of this action, the claims asserted, the purported class period, and that, not later than 60 days after the publishing of the notice, any member may move to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(A). Medina’s attorneys caused a notice to be published on November 20, 2015 (ECF Nos. 15-2, 16-4, 17-4), and, subsequently, the Moving Parties each filed the motions described supra on January 19, 2016.

Since that time, the landscape has altered. Beginning on January 22, 2016, all of the Moving Parties, but for the Arkin Group, have expressed their belief that they are not the group with the largest financial interest in the relief sought in this case, and, if the Court finds a competing movant to be a typical and adequate member of the purported class, their non-opposition to that movant being appointed lead plaintiff. (See ECF No. 25 (the KSJ Group), ECF No. 29 (the Clovis Investor Group), ECF No. 31 (the RT Group), ECF No. 34 (the Pension Fund Group), ECF No. 36 (Moran)). The Arkin Group has meanwhile filed a Memorandum of Law in support of their motion for consolidation, and appointment of lead plaintiff and lead counsel. (ECF No. 38.)

II. Discussion

A. Consolidation

Pursuant to Fed.R.Civ.P. 42(a) (“Rule 42(a)”), actions which involve “a common question of law or fact” may be consolidated. Whether to consolidate is vested in the broad discretion of the district court. Shump v. Balka, 574 F.2d 1341, 1344 (10th Cir. 1978).

Here, all of the Moving Parties have moved for consolidation of this case. (See ECF Nos. 11, 14-18.) Moreover, defendants Clovis and Mahaffy have not opposed consolidation. Rather, in the Kimbro Action, Clovis and Mahaffy filed a Notice of Related Case in which they informed that a related case had been filed in the U.S. District Court for the Northern District of California, captioned as Moran v. Clovis Oncology, Inc., Patrick J. Mahaffy, Erle T. Mast, 15-cv-05323-RS (“the Moran Action”). (Case No. 15-cv-02547-RBJ, ECF No. 16 at 2.) Clovis and Mahaffy asserted that the Moran Action should be consolidated with the related cases filed in this District, and attached a pleading from the Moran Action. (See id., ECF No. 16-1.) Based on the Court’s review of that pleading, it appears clear that Clovis and Mahaffy do not oppose, and likely support, consolidation in this District. (See ECF No. 16-1 at 3.)

In addition to the parties’ apparent unanimity in consolidating the cases in this District, the Court also finds that they involve common questions of law and fact, and thus, should be consolidated under Rule 42(a). Specifically, all of the cases are based on the same alleged facts that Clovis and its officers and directors made false or misleading statements with respect to rociletnib, and the false or misleading nature of these statements came to public light on November 16, 2015, causing a significant drop in the value of Clovis’ common stock. Next, the named-defendants in all but one respect are the same. In this case, Medina only named Clovis and Mahaffy as defendants, while in the other two cases a third defendant, Erle T. Mast (“Mast”), was also named. This does not affect the Court’s analysis, as Mahaffy and Mast are both alleged to be officers of Clovis and liable for the same reasons. Finally, the complaints all seek relief pursuant to the same securities laws and/or regulations, notably, Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5.

With this in mind, the Court GRANTS the motions for consolidation. As a result, pursuant to D.C. Colo. L.Civ.R. 42.1, the Kimbro Action (Case No. 15-cv-02547-RBJ) and the Rocco Action (Case No. 15-cv-02697-CBS) shall be consolidated with the instant case, and the cases will be collectively assigned to this Court. There is one final issue. As mentioned supra, there is a fourth case that may be related to the ones filed in this District: the Moran Action. That case was filed in the Northern District of California. Based on the Court’s review of that case’s docket, it appears that the Arkin Group have filed a motion to transfer the Moran Action to this District (“the transfer motion”). (Case No. 3:15-cv-05323-RS (N.D. Cal.), ECF No. 27.) The transfer motion is pending resolution in the district court, with a motion hearing set for March 10, 2016. (See id.) As a result, for the avoidance of doubt, the Court’s ...

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