It’s not uncommon for winners and losers to spin the results of a jury verdict, but rarely will two sides offer flatly contradictory takes on what went down.
And yet behold two press releases—one from defense counsel Latham & Watkins, and one from plaintiffs counsel Robbins Geller Rudman & Dowd—both issued in the wake of a verdict on Monday by a federal jury in Orange County, California.
What is this, soccer for 7-year-olds, where everyone gets a trophy? How can both sides unequivocally claim that they won?
To be clear, each firm in my opinion has a top-notch public relations arm. It’s not that the people writing the press releases got it wrong.
Rather, declaring victory in this case has more to do with what you want to emphasize: the moral high ground or cold, hard cash.
Based solely on the docket entry, the outcome looks like a definite win for Robbins Geller. “Verdict reached. Jury FINDS: in favor of plaintiff(s). Polling waived.”
The 200-lawyer firm sued Puma Biotech in U.S. District Court for the Central District of California in 2015 on behalf of lead plaintiff the Norfolk Pension Fund.
They alleged that the company and its executives made four false or misleading statements about the results of a clinical trial for Puma’s breast cancer drug neratinib, which treats a particularly aggressive subset of the disease, HER2-positive breast cancer. According to the plaintiffs, these misstatements caused two significant drops in Puma stock.
“This was a case about integrity,” said Robbins Geller partner Jason Forge, who litigated the case along with partners Patrick Coughlin, Tor Gronborg, Trig Smith and Susannah Conn and associates Marco Janoski, Debashish Bakshi, Ting Liu and Grace Cho.
Securities fraud class actions almost never go to trial. Since the passage of the Private Securities Litigation Reform Act of 1995, only 15 cases have been tried to verdict, according to Robbins Geller.
The Latham team sees an even smaller universe, noting that only two matters of equivalent size have been decided by juries—Vivendi SA and Household International.
Robbins Geller was counsel in Household, scoring the all-time largest securities class recovery following a trial: $1.575 billion.
According to defense counsel from Latham, the Robbins Geller team had similar hopes for Puma, claiming $1.1 billion in investor losses before trial.
Given Puma’s market cap of about $1 billion, “This was literally a bet-the-company case,” said Latham partner Andrew Clubok, who led the defense trial team along with partner Michele Johnson. The Latham team also included partners Colleen Smith and Sarah Tomkowiak and associates Kristin Murphy, Meryn Grant, Amanda Betsch, Jordan Cook, Clayton LaForge, Wes Horton, Allie O’Hara, Andrew Dane and Remy Lamons.
Clubok said they stressed four key themes: The drug was safe and effective, Puma told the truth, Puma executives had no motive to commit fraud, and the stock drops were caused by other factors.
The result? A mixed bag.
After a two-week trial before U.S. District Judge Andrew Guilford and four days of deliberations, the jury found that the defendants knowingly made false or misleading statements regarding the disease-free survival rates of people who took neratinib. However, the jurors found that the three other statements at issue were not misleading.
The jurors also found the misleading statement “played a substantial part” in causing Puma’s stock to drop on one of the two alleged occasions.
The Robbins Geller team claims vindication. “We’re very thankful and grateful the jury saw this for what it was: Securities fraud,” Forge said.
But here’s the thing. The jurors awarded $4.50 in damages per share. According to Latham, that’s a mere 4.77 percent of the damages that were claimed.
Moreover, it’s not an automatic payout. Absent class members must submit claims and prove they’re entitled to a recovery. And in other mega-securities class actions, Latham said only 20 to 40 percent of investors did so.
Forge disputes those figures, adding that most of Puma’s shares are held by institutional investors. Nowadays, he said such investors can easily submit their claims electronically and are likely to respond in greater numbers.
Nor will everyone automatically get $4.50 a share. For example, lead plaintiff Norfolk Pension Fund claimed it lost $1.35 million as a result of the fraud. At $4.50 a share, that works out to $64,000, according to Latham. But during the class period the pension fund also made $65,000 on other Puma stock transactions, which could potentially be offset against the losses, Latham said. Which may mean the fund’s damages are zero.
Still, Robbins Geller in its press release says class members could wind up being awarded “up to $100 million.”
Latham predicts it will be far less—$9 million to $18 million. “Minuscule,” is how the firm described the anticipated damages in its press release.
Conventional wisdom holds that certified securities class actions that survive a motion to dismiss typically settle for 10 to 20 percent of the claimed losses. If so, the plaintiffs might have walked away before trial with a nine-figure check from Puma.
But Forge doesn’t see it that way.
That Puma and its CEO “would declare a finding that they committed securities fraud a victory may be more damning than the finding itself,” he said. “Everybody talks about corporate culture. What more do you need to know?… That cheating people is OK if it doesn’t cost us much?”
Clubok responded, “What the company and its CEO are relieved about is that they can get back to the work they’re doing developing a treatment for the worst kind of breast cancer,” he said. “We think the jury got even the small award wrong, but the important thing is that the life-saving medicine the company is developing will still get to patients.”
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