United States District Court, D. Maryland
CITY OF CAPE CORAL MUNICIPAL FIREFIGHTERS' RETIREMENT PLAN, ET AL., Plaintiffs,
EMERGENT BIOSOLUTIONS, INC., HQ, ET AL., Defendants.
W. TITUS UNITED STATES DISTRICT JUDGE
case involves alleged violations of federal securities laws
by Defendant Emergent Biosolutions, Inc., HQ
(“Emergent”) and a number of Emergent executives,
including Defendants Fuad El-Hibri, Daniel J. Abdun-Nabi
(“Abdun-Nabi”), Robert G. Kramer, and Adam R.
Havey (“Individual Defendants”) (collectively,
“Defendants”). Emergent is a specialty
biopharmaceutical company and sole provider of the only U.S.
Food and Drug Administration-licensed anthrax vaccine,
BioThrax. Am. Compl. ¶¶ 34-35, ECF No. 23. The
primary purchaser of BioThrax has been the United States
Government via the Center for Disease Control and Prevention
(“CDC”). Id. ¶ 35. In July 2010,
the U.S. Biomedical Advanced Research and Development
Authority awarded a six-year contract to Emergent to expand
its BioThrax manufacturing capabilities at a new facility,
Building 55. Id. ¶ 44.
2011, Emergent obtained a five-year BioThrax procurement
contract from the CDC for Emergent to supply up to 44.75
million doses of BioThrax for the Strategic National
Stockpile (“SNS”). Id. ¶ 41. This
contract was set to expire on September 30, 2016.
Id. In August 2015, Defendants began discussions
with the CDC about the renewal of the BioThrax contract.
Id. ¶ 46.
allege that beginning on January 11, 2016, Defendants made
material misrepresentations and omissions that made investors
believe that the Government intended to purchase
Emergent's newly increased production capacity.
Id. ¶¶ 54-57. On May 5, 2016, in a press
release filed with the U.S. Securities and Exchange
Commission, Emergent confirmed that the Government would
award it a renewed BioThrax contract and described the new
contract as requiring “significantly increased
deliveries in order to satisfy the U.S. government's
stated requirements for a licensed anthrax vaccine in the
Strategic National Stockpile” as well as making other
related statements. Id. ¶¶ 55, 91. On a
company conference call with investors on that same day,
Abdun-Nabi, President and C.E.O. of Emergent, called the
anticipated follow-on contract “one big, beautiful
package.” Id. ¶ 93.
May 5, 2016 to June 1, 2016, the price of Emergent's
Common Stock, which is traded on the New York Stock Exchange
(“NYSE”), increased nearly fifteen percent, from
$37.85 per share on May 5, 2016 to $43.49 per share on June
1, 2016. Id. ¶¶ 6, 15. On June 22, 2016,
Emergent disclosed that the Government sought “the
continued procurement of 29.4 million doses of
BioThrax” over a five-year period, which was less than
the expiring contract that called for 44.75 million.
Id. ¶ 118. The same day, the price of Emergent
Common Stock “declined by approximately $8 per share,
falling from its close of $39.32 per share on June 21, 2016
to a close of $31.33 per share on June 22, 2016 . . . on
unusually high trading volume of more than 9.5 million shares
traded, or 21 times the average daily trading volume over the
preceding ten trading days.” Id. ¶ 119.
19, 2016, Plaintiff William Sponn (“Sponn”),
individually and on behalf of all others similarly situated,
initiated this lawsuit against Defendants, alleging
violations of federal securities laws. Compl., ECF No. 1. On
October 26, 2016, the Court granted Plaintiffs' Motion
for Appointment as Lead Plaintiff and Approval of Selection
of Lead Counsel (ECF No. 16), appointing Plaintiffs City of
Cape Coral Municipal Firefighters' Retirement Plan
(“Cape Coral Fire”) and City of Sunrise Police
Officers' Retirement Plan (“Sunrise Police”)
as Lead Plaintiffs and Robbins Geller Rudman & Dowd LLP
(“Robbins Geller”) as Lead Counsel pursuant to
the Private Securities Litigation Reform Act (PSLRA) of 1995,
15 U.S.C. § 78u-4 (2012). ECF No. 22. On December 27,
2016, Lead Plaintiffs filed an Amended Complaint, asserting
claims under Section 10(b) of the Securities Exchange Act of
1934 (“Exchange Act”) and Rule 10b-5 promulgated
thereunder against all Defendants and claims under Section
20(a) of the Exchange Act against the Individual Defendants.
ECF No. 23. On February 27, 2017, Defendants filed a Motion
to Dismiss Plaintiffs' Amended Complaint (“Motion
to Dismiss”). ECF No. 36. After a hearing, the Court
denied the Motion to Dismiss by order on July 7, 2017. ECF
prevailed on the Motion to Dismiss, Lead Plaintiffs returned
with a Motion for Class Certification and Appointment of
Class Representatives and Class Counsel, filed on November
29, 2017. ECF No. 60. On December 20, 2017, Lead Plaintiffs
filed an Amended Motion for Class Certification and
Appointment of Class Representatives and Class Counsel
(“Amended Motion for Class Certification”),
seeking to appoint Geoffrey L. Flagstad
(“Flagstad”) instead of Sponn, in addition to
Lead Plaintiffs, as Class Representative.ECF No. 68.
Defendants oppose class certification and ask the Court to
strike the opinions in the Report on Market Efficiency of
Lead Plaintiffs' expert. Defs.' Mot. to Exclude
Expert Op., ECF No. 81. Having conducted a hearing on the
pending motions, the Court will, for the reasons discussed
below, certify the proposed Class based on a shortened Class
The Proposed Class
their Amended Motion, Lead Plaintiffs seek certification of a
plaintiff class, pursuant to Federal Rule of Civil Procedure
23, consisting of:
All persons or entities who, between January 11, 2016 and
June 21, 2016 (the “Class Period”), purchased or
otherwise acquired Emergent BioSolutions Inc. publicly traded
common stock listed on the New York Stock Exchange
(“NYSE”), Inc. and who were damaged thereby.
69 at 2 (footnotes omitted). They seek to appoint themselves
and Flagstad as Class Representatives. ECF No. 69 at 8. Cape
Coral Fire and Sunrise Police are benefit pension plans that
acquired 7, 900 and 7, 800 shares, respectively, of Emergent
Common Stock during the proposed Class Period, but before May
5, 2016. Id. at 9. Flagstad is an individual who
acquired 165 shares of Emergent Common Stock during the
proposed Class Period, after May 5, 2016. Id.
Lead Plaintiffs seek to appoint Robbins Geller, a law firm
specializing in complex civil litigation cases and the
current Lead Counsel, as Class Counsel. Id. at 1.
Legal Standard Under Rule 23
maintain a class action, a party moving for class
certification bears the burden of demonstrating that the
proposed class meets the two-step inquiry outlined in Federal
Rule of Civil Procedure 23. See Gunnells v. Healthplan
Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). First,
the movant must show that the proposed class meets the four
prerequisites set forth in Rule 23(a):
(1) Numerosity: “the class is so numerous that
joinder of all members is impracticable”;
(2) Commonality: “there are questions of law
or fact common to the class”;
(3) Typicality: “the claims or defenses of the
representative parties are typical of the claims or defenses
of the class”; and
(4) Adequacy: “the representative parties will
fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a)(1)-(4); Gunnells, 348 F.3d at
423. Second, the court must determine if the proposed class
meets one of the three requirements set forth in Rule 23(b).
Gunnells, 348 F.3d at 423. Here, Lead Plaintiffs
seek to proceed under Rule 23(b)(3), which requires that
“the questions of law or fact common to class members
predominate over any questions affecting only individual
members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the
controversy.” Fed.R.Civ.P. 23(b)(3); Gunnells,
348 F.3d at 423; see ECF No. 69 at 18. District
courts have wide discretion in deciding whether to certify a
class and should liberally construe Rule 23.
Gunnells, 348 F.3d at 424.
The Proposed Class Meets the Rule 23 Standard
The Class Period
preliminary matter, the parties dispute the appropriate
timeframe of the Class Period, assuming the Class is
certified. Lead Plaintiffs propose that the Class Period
should be from January 11, 2016, the date Lead Plaintiffs
claim the alleged material misstatements about the follow-on
contract began, through June 21, 2016, the day before the
alleged “corrective” disclosure. ECF No. 69 at 2.
Defendants argue that the Class Period should only begin on
May 5, 2016, the date they assert the first actionable
statement under the PSLRA was made, to June 21, 2016.
Defs.' Opp'n to Lead Pls.' Am. Mot. for Class
Certification 16, ECF No. 78.
the Court has not made any final determinations
regarding the materiality and actionability of any of the
specifically alleged misstatements, it does recognize, as it
did at the July 6, 2017 hearing on Defendants' Motion to
Dismiss, that the May 5, 2016 statement by Abdun-Nabi calling
the anticipated follow-on contract “one big, beautiful
package, ” at this stage in the litigation “is
where this case goes from puffery to fraud.” Mots.
Hr'g Tr. 97:20-21, ECF No. 79-3. Because the Court is
required at the class certification stage to limit the
proposed Class based on the alleged misrepresentations found
to be actionable, the Court will at this time certify the
proposed Class based on the shortened Class Period of May 5,
2016 to June 21, 2016 (“shortened Class Period”).
See Malone v. Microdyne Corp., 26 F.3d 471, 480 (4th
Cir. 1994) (remanding case to district court to narrow and
recertify the plaintiff class consistent with actionable
of the Class for the shortened Class Period necessarily
results in the Court finding that Lead Plaintiffs cannot be
appointed Class Representatives at this time because they do
not meet the adequacy requirement under Rule 23(a)(4).
Accordingly, only Flagstad is eligible to be appointed Class
Representative. It does not result, however, in any impact on
Lead Plaintiffs' ability to continue to serve and fulfill
their duties as Lead Plaintiffs. Lead Plaintiffs may remain
in the case and retain their obligations under the PSLRA and
Rule 23 even when they are not appointed class
representatives. See, e.g., Lumen v.
Anderson, No. 08-0514-CV-W-HFS, 2011 WL 3794144, at *2
(W.D. Mo. Aug. 24, 2011); In re Oxford Health Plans Sec.
Litig., 191 F.R.D. 369, 378-79 (S.D.N.Y 2000). Moreover,
certification based on the shortened Class Period does not
mean that the parties cannot at a later date move this Court
to expand the Class Period to include statements made between
January 11, 2016 and May 5, 2016, should they later be found
to be actionable based on information obtained in discovery.
This Court “remains free to modify [a certification
order] in the light of subsequent developments in the
litigation.” Gen. Tel. Co. of the Sw. v.
Falcon, 457 U.S. 147, 160 (1982); see Fed. R.
Civ. P. 23(c)(1)(C) (“An order that grants or denies
class certification may be altered or amended before final
The Proposed Class Satisfies Rule 23(a)
proposed Class, based on the shortened Class Period, meets
all four Rule 23(a) prerequisites. The first three
prerequisites are easily met in this case and are undisputed
by Defendants. For the sake of brevity, the Court will
dispense with an in depth analysis and will find ...