Tuesday, July 12, 2005

Secondary Offering Class Certified in Celera

Judge Christopher F. Droney (D. Conn.) has certified a 1933 Act class of secondary offering investors suing Celera, the human genome mapping company that once sold for nearly $250 per share back in its heyday of early 2000. But don't worry, you're in luck, because you can have your very own share today for only 12 bucks. But let's get down to brass tacks.

Defendants didn’t contest numerosity or commonality, but fought the class representatives on just about everything else, starting with typicality. Defendants argued "that the claims of the proposed class representatives… are not typical because neither party can set forth successful claims under Section 11 or 12 due to the manner in which they purchased Celera common stock." But the court found this argument "unpersuasive," holding that "there was only one prospectus issued, and it applied equally to all purchases of stock during that secondary offering," and "although the defendants may be able to prove that [the class representatives] purchased some of their shares before the secondary offering, this goes to each party's damages; also, they purchased at least some of their shares after the secondary offering, and therefore their claims are typical of the class."

As for adequate representation, the court rejected Defendants position regarding the class representative’s knowledge, holding that "it is unrealistic to require a class action representative to have an in-depth grasp of the legal theories of recovery behind his or her claim."

Having established the 23(a) criteria, the court moved on to 23(b)(3). You get the picture though, this isn’t going to take long. Defendants raised "a truth [on] the market defense" but Judge Droney rejected this too, saying "this defense -- that this information was available to all purchasers prior to the secondary offering -- will be against the entire class, and not the individual purchasers." The court also held that "questions of whether the information was disseminated and available prior to the secondary offering, and what weight to give to that information, are factual questions that go to the merits of the plaintiffs' claims, and therefore are inappropriate to address at this stage of the proceedings."

The court finished things off by certifying the class, noting that "there is only one principal issue in this case -- whether the defendants made proper disclosures in conjunction with the secondary public offering, the Court finds that a class action is superior to other available methods for the fair and efficient adjudication of this controversy."

You can read the decision at 228 F.R.D. 102.

Nugget: "Given the complexities of a securities litigation case, the interest of individual stockholders in controlling the prosecution of separate actions is low."

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