Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_13-cv-01920/USCOURTS-cand-5_13-cv-01920-15/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

IN RE INTUITIVE SURGICAL 

SECURITIES LITIGATION. Case No. 5:13-cv-01920-EJD 

ORDER CERTIFYING PLAINTIFF

CLASS

Re: Dkt. No. 123

Lead Plaintiff Employees’ Retirement System of the State of Hawaii (“Hawaii ERS”), 

together with named Plaintiff Greater Pennsylvania Carpenters’ Pension Fund (“Greater Penn”) 

(collectively, “Plaintiffs”), bring this putative securities class action against Intuitive Surgical, Inc. 

(“Intuitive”), Lonnie M. Smith (“Smith”), Gary S. Guthart (“Guthart”), and Marshall L. Mohr

(“Mohr”) (collectively, “Defendants”), alleging violations of Sections 10(b), 20(a) and 20A of the 

Securities Exchange Act of 1934 and U.S. Securities and Exchange Commission (“SEC”) Rule 

10b-5 promulgated thereunder. Pls’ Second. Am. Class Action Compl. (“SACC”), Dkt. No. 184-

9.

1

 Plaintiffs bring this action individually and on behalf of all other persons and entities that

purchased or acquired Intuitive’s common stock during the proposed class period of February 6, 

2012 and July 18, 2013, inclusive. 

Presently before the court is Plaintiffs’ Motion for Class Certification pursuant to Federal 

 1 The court has determined that it is appropriate to Grant Plaintiffs’ Motion for Leave to Amend 

the Complaint (Dkt. No. 185). A written Order to this effect is forthcoming. As a result, Plaintiff’s 

Second Amended Class Action Complaint (Dkt. No. 184-9) is now the operative pleading in this 

action and the court will therefore rely on it accordingly for the purposes of this Order.

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Rule of Civil Procedure 23 (Dkt. No. 123, “Mot.”). After careful consideration of the parties’ 

papers, the evidence submitted in this case, the argument of counsel presented at the hearing, and 

for the reasons explained below, the court hereby GRANTS Plaintiffs’ Motion for Class 

Certification in accordance with the findings and analysis set forth in this Order. 

I. BACKGROUND

The factual and procedural background of this case is by now well-known and was

discussed at length in this court’s Order Granting in Part and Denying in Part Defendants’ Motion 

to Dismiss (“Order on MTD”). See Dkt. No. 83. Accordingly, the court will briefly summarize 

the general background in this case, highlighting the facts and allegations most relevant to the 

issue of class certification. 

Intuitive is a biomedical corporation that designs, manufactures, and sells da Vinci 

Surgical Systems (“da Vinci”), a robotic surgical system that uses computer technology to allow 

surgeons to remotely operate through a small tube inside the patient. SACC ¶¶ 30, 40-41. The da 

Vinci is Intuitive’s sole product and source of revenue. Id. ¶¶ 30, 41. Because da Vinci is the 

only robotic surgical system in the United States approved by the Food and Drug Administration 

(“FDA”) for soft tissue procedures, Intuitive enjoyed rapid growth, and by December 31, 2012, 

there were 2,585 da Vinci systems installed in 2,025 hospitals worldwide. Id. ¶¶ 39-40. Intuitive 

common stock is publicly traded on the NASDAQ under the ticker symbol “ISRG.” Id. ¶ 30.

Hawaii ERS is a public pension plan governed by an eight-member board of trustees and 

made up of retirees, beneficiaries, inactive vested members, and active public employees working 

for the state and counties of Hawaii. Id. ¶ 26. Hawaii ERS purchased a total of 26,048 shares of 

Intuitive common stock during the class period, and sold a total of 12,268 shares. Id. Greater 

Penn is a “trustee-administered, multi-employer, defined benefit pension plan for carpenters in 

Pennsylvania.” Id. ¶ 28. Greater Penn purchased a total of 2,893 shares, and sold 21 shares of 

Intuitive common stock during the class period. Id.

One of da Vinci’s most commonly used tools is the “Hot Shears Monopolar Curved 

Scissors (“monopolar scissors”), which can cauterize tissue through the application of electricity 

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via an electrode. Id. ¶ 43-44, 47. To ensure that the electricity is only channeled through that 

electrode, the metal parts of the scissors are covered with insulating rubber sleeves (“tip covers”). 

Id. ¶ 45. Plaintiffs allege that the tip covers were prone to tiny cracks or slits that prevented them 

from properly insulating the metal instruments, thus allowing electricity to escape into the 

patient’s body, damaging tissue and internal organs. Id. ¶¶ 45-48. 

According to Plaintiffs, Intuitive became aware of this defect through medical device 

reports (“MDRs”).2 Plaintiffs allege that Intuitive received thousands of MDRs regarding da 

Vinci’s safety issues, and systematically concealed and underreported the complaints to the FDA. 

See id. ¶¶ 85-111. Plaintiff alleges that, instead of reporting the MDRs to the FDA, Intuitive 

issued a “secret recall” where, beginning in October 2011, Intuitive sent letters modifying or 

correcting the instructions for proper use of the monopolar scissors in order to avoid damaging the 

tip covers. Id. at ¶¶ 60-64. Intuitive did not report or otherwise inform the FDA that it had sent 

these letters, which the FDA later determined to be a violation of 21 C.F.R. § 806.10. Id. ¶ 63. On 

July 16, 2013, Intuitive received a Warning Letter issued by the FDA, citing Intuitive’s failure to 

adequately report the recalls and adverse events, which Intuitive publicly released on July 19, 

2013. Id. ¶¶ 137-150.

Plaintiffs filed this action alleging that Defendants made numerous materially false and 

misleading statements and omissions regarding the safety of the da Vinci system and Intuitive’s 

compliance with FDA regulations. See Pls.’ First Am. Compl., Dkt. No. 48. The alleged 

misrepresentations fell into roughly four categories: (1) statements regarding the general safety 

and efficacy of da Vinci surgery; (2) statements regarding Intuitive finances; (3) warning

statements regarding the risks Intuitive may face from product-liability lawsuits, product defects, 

and product recalls; and (4) statements regarding the FDA regulations the company faces. See

 2 Pursuant to FDA regulations, if an adverse event (death or serious injury) occurs at a hospital, 

and the hospital has information that reasonably suggests a medical device may have caused or 

contributed to that event, the hospital must report that information to the manufacturer through an 

MDR. See id. ¶¶ 81-85; see also 21 U.S.C. §360i(b)(1)(B); 21 C.F.R. §§ 803.30, 803.50. And if 

the MDR suggests that the device may have contributed to a serious injury or death, then the 

manufacturer must report the MDR to the FDA.Id.; see also 21 C.F.R. § 803.50(a). 

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Order on MTD at 5-7, 11. The court dismissed Plaintiffs allegations as to the second, third, and 

fourth categories of statements. Id.

Plaintiffs contend that the “truth” about Defendants fraudulent misrepresentations and 

omissions was revealed in a series of five corrective disclosures: (1) a Bloomberg article published 

on February 28, 2013; (2) another Bloomberg article published on March 5, 2013; (3) Intuitive’s 

first quarter financial results released on April 18, 2013; (4) a pre-announcement of Intuitive’s

second quarter financial results released on July 8, 2013, and (5) Intuitive’s actual second quarter 

financial results plus the FDA’s Warning Letter, released on July 18, 2013. Mot. at 4-5; SACC ¶¶ 

216-220. Plaintiffs allege that each of these “corrective disclosures” cumulatively resulted in a

dramatic decline the price of Intuitive common stock. Mot. at 5; SACC ¶ 180. Plaintiffs now seek 

to certify a class of investors who purchased Intuitive common stock between February 6, 2012 

and July 18, 2013 and suffered damages as a result. Mot. at 2.

II. LEGAL STANDARD 

Rule 23 of the Federal Rules of Civil Procedure governs class certification. A party 

seeking class certification bears the burden of affirmatively demonstrating that they have satisfied

each of the four requirements of Rule 23(a) and at least one of the requirements of Rule 23(b). 

Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011); Zinser v. Accufix Research Inst., Inc., 

253 F.3d 1180, 1186 (9th Cir. 2001), opinion amended on denial of reh’g, 273 F.3d 1266 (9th Cir. 

2001). Rule 23(a) provides that a class may only be certified if “(1) the class is so numerous that 

joinder of all members is impracticable; (2) there are questions of law or fact common to the class; 

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the 

class; and (4) the representative parties will fairly and adequately protect the interests of the class.” 

Fed. R. Civ. P. 23(a). In other words, the class must satisfy the requirements of numerosity, 

commonality, typicality, and adequacy to maintain a class action. Mazza v. Am. Honda Motor 

Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012). 

In addition, a party seeking class certification must also “satisfy through evidentiary proof” 

at least one of the three requirements of Rule 23(b). Comcast Corp. v. Behrend, 133 S. Ct. 1426, 

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1432 (2013); Dukes, 564 U.S. at 350. Where a plaintiff seeks certification under Rule 23(b)(3)’s 

predominance approach, the plaintiff must establish “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). 

A trial court has broad discretion in making the decision to grant or deny a motion for class 

certification. Bateman v. American Multi-Cinema, Inc., 623 F.3d 708, 712 (9th Cir. 2010). In 

making this determination, the court’s analysis “must be ‘rigorous’ and may ‘entail some overlap 

with the merits of the plaintiff’s underlying claim.’” Amgen Inc. v. Conn. Ret. Plans and Trust 

Funds, 133 S. Ct. 1184, 1194 (2013) (quoting Dukes, 564 U.S. at 349); see also Mazza, 666 F.3d 

at 588. However, “Rule 23 grants courts no license to engage in free-ranging merits inquiries at 

the certification stage.” Amgen, 133 S. Ct. at 1194–95; Ellis v. Costco Wholesale Corp., 657 F.3d 

970, 983 (9th Cir. 2011). Thus, “[m]erits questions may be considered to the extent - but only to 

the extent - that they are relevant to determining whether the Rule 23 prerequisites for class 

certification are satisfied.” Amgen, 133 S. Ct. at 1195. The court must resolve factual disputes as 

“necessary to determine whether there was a common pattern and practice that could affect the 

class as a whole.” Id. (emphasis in original). “When resolving such factual disputes in the context 

of a motion for class certification, district courts must consider ‘the persuasiveness of the evidence 

presented.”’ Hatamian v. Advanced Micro Devices, Inc., 2016 WL 1042502, at *3 (N.D. Cal. 

Mar. 16, 2016) (quoting Ellis, 657 F.3d at 982). Where a court concludes as a result of its analysis

that the moving party has met its burden of proof, then the court may certify the class. Zinser, 253 

F.3d at 1186.

III. DISCUSSION 

Plaintiffs move to certify a class consisting of “all persons or entities who purchased or 

acquired the publicly traded common stock of Intuitive Surgical, Inc. during the period from 

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February 6, 2012 through July 18, 2013 inclusive, and who were damaged thereby.”3 SACC at 1 

and ¶ 248. Plaintiffs contend that the proposed class complies with Rule 23(a) and 23(b)(3). 

Defendants oppose class certification on the grounds that Plaintiffs have failed to satisfy the 

requirements of Rule 23(a)(3), (a)(4) and (b)(3). See Defs.’ Opp. to Mot. for Class Cert. (“Opp.”) 

at 1-2, Dkt. No. 135. 

A. Rule 23(a) Requirements 

i. Numerosity 

Under Rule 23(a)(1), the first requirement for class certification is that the proposed class 

must be “so numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). 

While satisfaction of the numerosity requirement generally does not turn on an exact number, 

“where the number of class members exceeds forty, and particularly where class members number 

in excess of one hundred, the numerosity requirement will generally be found to be met.” Int’l 

Molders’ & Allied Workers’ Local Union No. 164 v. Nelson, 102 F.R.D. 457, 461 (N.D. Cal. 

1983); Noll v. eBay, Inc., 309 F.R.D. 593, 602 (N.D. Cal. 2015). “Additionally, it is not necessary 

to state the exact number of class members when the plaintiff’s allegations ‘plainly suffice’ to 

meet the numerosity requirement.” In re Cooper Cos. Inc. Sec. Litig., 254 F.R.D. 628, 634 (C.D. 

Cal. 2009). District courts have consistently found a proposed class to be sufficiently numerous in 

securities fraud cases where “several million shares of stock were purchased during the class 

period.” Id. (quoting In re Unioil Sec. Litig., 107 F.R.D. 615, 618 (C.D. Cal. 1985)). 

Here, Plaintiffs meet the requirements for numerosity. While the exact number of 

proposed class members is presently unknown, Plaintiffs submit evidence indicating that more 

than 1,000 persons and/or entities purchased or acquired Intuitive common stock between

 3 Excluded from the Class are (i) all Defendants; (ii) members of the immediate families of 

individual defendants Guthart, Mohr, and Smith; (iii) any subsidiaries and affiliates of Defendants; 

(iv) any person who is or was an officer or director of Intuitive or any of Intuitive’s subsidiaries of 

affiliates; (v) Defendants’ directors’ and officers’ liability insurance carriers, and any affiliates or 

subsidiaries thereof; (vi) Intuitive’s employee retirement and benefit plan(s); and (vii) the legal 

representatives, heirs, successors and assigns of any such excluded person or entity. ACC ¶ 256. 

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February 6, 2012 and July 18, 2013. See Mot. for Cert. at 7; Declaration of Jonathan Gardner 

(“Gardner Decl.”), Ex. 1 (RFA Responses) at 5. The record further indicates that “Intuitive had 

between 39 million and 40 million shares outstanding throughout the Class Period. Gardner Decl.

Ex. 1 at 22. Defendants do not challenge Plaintiffs’ compliance with Rule 23(a)(1). See Opp. at 5 

n. 2. Accordingly, the court finds that Plaintiffs have successfully met the requirements for

numerosity. See Cooper, 254 F.R.D. at 634 (highlighting that the defendant had more than 36 

million shares of stock outstanding during the class period and explaining that the court “certainly 

may infer that, when a corporation has millions of shares trading on a national exchange, more 

than 40 individuals purchased stock over the course of more than a year.”).

ii. Commonality 

The second requirement under Rule 23(a), known as “commonality,” requires that class 

members’ claims contain “questions of law and fact common to the class.” Fed. R. Civ. P. 

23(a)(2); Staton v. Boeing Co., 327 F.3d 938, 953 (9th Cir. 2003). As the Ninth Circuit explained 

in Hanlon v. Chrysler Corp.,

Rule 23(a)(2) has been construed permissively. All questions of fact 

and law need not be common to satisfy the rule. The existence of 

shared legal issues with divergent factual predicates is sufficient, as 

is a common core of salient facts coupled with disparate legal 

remedies within the class.

150 F.3d 1011, 1019 (9th Cir. 1998). In other words, a few factual variations among the class will 

generally not defeat commonality, so long as the class claims still arise from foundation of shared 

pertinent legal or factual issues. See Staton, 327 F.3d at 953. Such issues must be of sufficient 

importance “to convince a court that a class action is the most efficient way of determining the 

rights of the parties.” Cooper, 254 F.R.D. at 634 (citing Martin v. Dahlberg, Inc., 156 F.R.D. 207, 

214 (N.D. Cal. 1994) (“the core purposes of a class suit will only be advanced if the common 

issues of law or fact are issues central to the case.”)). In securities fraud cases, commonality is 

often satisfied as a result of the inherent nature of such cases. That is, courts have “easily” found 

commonality “where class members all bought or sold the same stock in reliance on the same 

disclosures made by the same parties.” In re VeriSign, Inc. Sec. Litig., 2005 WL 7877645, at *5 

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(N.D. Cal. Jan. 13, 2005); see also Blackie v. Barrack, 524 F.2d 891, 902 (9th Cir. 1975)

(“Confronted with a class of purchasers allegedly defrauded over a period of time by similar 

misrepresentations, courts have taken the common sense approach that the class is united by a 

common interest in determining whether a defendant’s course of conduct is in its broad outlines 

actionable, which is not defeated by slight differences in class members’ positions...”). 

Similarly to other securities fraud class actions, here, Plaintiffs contend that all class 

members were “harmed as a result of a common course of conduct arising from material 

misrepresentations and omissions Defendants made to the investing public.” Mot. for Cert. at 9. 

Plaintiffs identify the common questions of law and fact as: (1) whether Defendants violated the 

Securities Exchange Act; (2) whether Defendants omitted and/or misrepresented material facts; (3) 

whether Defendants knowingly or recklessly disregarded that their statements and omissions were 

false and misleading; (4) whether the price of Intuitive’s stock was artificially inflated as a result 

of Defendants’ misrepresentations and/or omissions; and (5) whether and to what extent disclosure 

of the truth regarding Defendants’ omissions and/or misrepresentations of material facts caused 

class members to suffer economic loss and damages. Id.

Such inquiries raise questions common to all purported class members. Moreover, 

Defendants do not dispute that Plaintiffs satisfy Rule 23(a)(2) here. See Opp. at 5 n. 2. 

Accordingly, the court finds that Plaintiffs have satisfied the commonality requirement. 

iii. Typicality

The third requirement under Rule 23(a), “typicality,” provides that the claims or defenses 

of the class representatives must be “typical of the claims or defenses of the class.” Fed. R. Civ. 

P. 23(a)(3). Typicality must be assessed in light of the circumstances presented by each case. 

Blackie, 524 F.2d at 910. The purpose of the typicality requirement is to “assure that the interest 

of the named representative aligns with the interests of the class.” Hanon v. Dataproducts Corp.,

976 F.2d 497, 508 (9th Cir.1992). 

The Ninth Circuit instructs that the test for typicality “is whether other members have the 

same or similar injury, whether the action is based on conduct which is not unique to the named 

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plaintiffs, and whether other class members have been injured by the same conduct.” Ellis, 657 

F.3d at 984 (quoting Hanon, 976 F.2dat 508) see also Hanlon, 150 F.3d at 1020 (explaining that a 

representative’s claims or defenses may be considered “typical” of the class where “they are 

reasonably co-extensive with those of absent class members; they need not be substantially 

identical.”); accord Hevesi v. Citigroup, Inc., 366 F.3d 70, 82 (2d Cir. 2004) (“a class 

representative can establish the requisite typicality under Rule 23 if the defendants committed the 

same wrongful acts in the same manner against all members of the class.” (internal quotations 

omitted)). However, “class certification is inappropriate where a putative class representative is 

subject to unique defenses which threaten to become the focus of the litigation.” In re Montage 

Technlogy Grp. Ltd. Sec. Litig., 2016 WL 1598666, at *4 (N.D. Cal. 2016) (citing Hanon, 976 

F.2d at 508); In re Countrywide Fin. Corp. Sec. Litig., 273 F.R.D. 586, 598 (C.D. Cal. 2009)

(explaining that “typicality is defeated where ‘there is a danger that absent class members will 

suffer [because] their representative is preoccupied with defenses unique to it.’”). 

Here, Defendants contend that Plaintiffs - through their investment managers - were privy 

to different statements and information than other stockholders, and are therefore not typical of the 

proposed class. Opp. at 5-6. Specifically, Defendants assert that certain investment managers

working on behalf of Plaintiffs regularly met with Intuitive executives, including “in person once a 

year at the investment managers’ offices, and by phone once a quarter at Intuitive’s headquarters 

following earnings calls.” Id. Based on these interactions, Defendants challenge typicality on two 

related grounds. First, Defendants argue that the merits of Plaintiffs’ claims are distinct from the 

claims of the proposed class because their investment advisors “heard and relied upon statements 

different than those alleged to have defrauded the market.” Id. at 5. And second, because of these

investment advisors’ special relationship with Intuitive, Defendants contend Plaintiffs are subject 

to defenses that are unique from other class members. Id. at 5-6. Defendants particularly

highlight instances where these advisors acknowledged, downplayed, or dismissed concerns 

regarding da Vinci’s purported safety issues, and maintain that in light of this, “the litigation going 

forward will focus not on whether the class relied on the alleged misstatements and omissions, but 

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rather on whether these particular Plaintiffs in fact relied on them.” Id.

Defendants’ argument is insufficient to defeat typicality. The fact that certain of Plaintiffs’

investment managers met with Intuitive on occasion does not, without more, render Hawaii ERS 

or Greater Penn atypical of the proposed class. Importantly, there is no evidence that non-public 

information was shared during the in-person meetings or phone conversations referenced by 

Defendants. As the district court explained in Beach v. Healthways, Inc., 

Mere communication with corporate insiders will not render a class 

representative atypical for class certification purposes absent the 

exchange of non-public information. Courts have consistently 

certified classes where there was no evidence that the named 

plaintiff received non-public information from a corporate officer.

In general, the cases hold that if the plaintiff has received 

information from company insiders that confirms, reflects, repeats, 

or even digests publicly available market information, that plaintiff 

is an appropriate class representative. 

2010 WL 1408791, at *4 (M.D. Tenn. Apr. 2, 2010) (citing In re DVI, Inc. Sec. Litig., 249 F.R.D. 

196, 202-03 (E.D. Pa. 2008) (internal citations omitted). 

Moreover, where, as here, the plaintiffs advance a “fraud on the market” theory of liability, 

the question of whether investment managers specifically relied on Defendants’ alleged

misrepresentations is unlikely to significantly shift the focus of the case given that “an investor’s 

reliance on any public material misrepresentations ... may be presumed for purposes of a Rule 

10b-5 action.” Basic Inc. v. Levinson, 485 U.S. 224, 247 (1988); see In re Diamond Foods, Inc., 

Sec. Litig., 295 F.R.D. 240, 252 (N.D. Cal. 2013) (explaining that while “[m]ost investors think 

they are a little smarter than average and see opportunities others have missed...they all rely on 

publicly available data (with the exception, of course, of investors trading on insider 

information).”); see also Darquea v. Jarden Corp., 2008 WL 622811 (S.D.N.Y. 2008) (explaining 

that even where the lead plaintiffs’ investment advisors testified that the alleged misstatements at 

issue were not crucial to their decision to recommend the stock purchase, “there is no reason to 

believe that the defense will draw any extraordinary attention or divert the trial from the main 

issues”). Indeed, courts have “routinely rejected” the argument that different investment strategies 

among plaintiffs necessarily subject them to unique defenses such that they become atypical of the 

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class. See Diamond Foods, 295 F.R.D. at 252 (quoting In re WorldCom Inc. Sec. Litig., 219 

F.R.D. 267, 281-82 (S.D.N.Y. 2003). 

Thus, while special circumstances may be relevant to assessing typicality, the record here 

does not suggest Plaintiffs possessed material non-public information or otherwise operated under

materially distinct factual circumstances from other class members. See Hanon, 976 F.2d at 508-

09. To the contrary, Plaintiffs’ claims are generally “founded on the same alleged facts and legal 

theories as the claims of other Class members – i.e., the alleged artificial inflation and consequent 

market correction of the price of Intuitive’s stock caused by Defendants’ fraudulent public 

statements and omissions – and the injury Plaintiffs suffered is alleged to be the same as the injury 

suffered by the proposed Class as a whole.” Mot. at 10. Accordingly, the court finds that 

Plaintiffs are sufficiently typical of the proposed class. 

iv. Adequacy

Finally, the fourth requirement under Rule 23(a), “adequacy,” provides that class 

representatives must be capable of fairly and adequately protecting the interests of absent class 

members. Fed. R. Civ. P. 23(a)(4). The adequacy condition requires the court to evaluate issues

on which the named plaintiffs and members of the proposed class might disagree. The two 

primary issues for the court to consider when evaluating the adequacy of representation are (1) 

whether the class representative(s) and counsel have any conflicts of interest with other class 

members; and (2) whether the named representative(s) and counsel will prosecute the action 

vigorously on behalf of the class. Staton, 327 F.3d at 954; Hanlon, 150 F.3d at 1020; see also In 

re Montage Technlogy, 2016 WL 1598666, at *5. Plaintiffs contend that they are adequate class 

representatives because their “interests are not antagonistic to those of other Class members” and 

because they are represented by qualified, experienced counsel that is “fully capable of 

prosecuting this action vigorously on behalf of the Class.” Mot. at 11-12. 

Defendants challenge Plaintiffs’ adequacy as representatives of the putative class on two 

grounds. First, Defendants argue that there is a “real danger” that Plaintiffs will become 

preoccupied and distracted from representing the interests of other class members as a result of the 

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unique defenses they may face, as discussed with respect to typicality. Opp. at 7-8. And second, 

Defendants contend that Plaintiffs lack sufficient knowledge of the case to serve as 

representatives, stating that Plaintiffs are “completely uninformed and unconcerned with both the 

prosecution of this litigation and its underlying allegations.” Id. at 8-9. 

With respect to the unique defenses issue, the court finds that there is no evidence to 

suggest that Plaintiffs or their counsel have conflicts of interest that would prevent them from 

adequately representing other class members. Defendants’ identify two statements from certain of 

Plaintiffs’ investment advisors in which the advisors expressed some skepticism or disagreement 

with respect to the allegations of fraud against Intuitive.

4

 See Opp. at 8. However, based on the 

court’s review of the record, these limited statements indicating possible differences of opinion 

between Plaintiffs and two of their investment advisors does not suggest that Plaintiffs have a 

conflict of interest with, or otherwise could not adequately represent the interests of, the unnamed 

class members. 

As to the argument that Plaintiffs’ lacked adequate knowledge, the court finds Defendants’ 

allegations to be overstated and without merit. “The threshold of knowledge required to qualify a 

class representative is low; a party must be familiar with the basic elements of her claim [] and 

will be deemed inadequate only if she is ‘startlingly unfamiliar’ with the case.” Moeller v. Taco 

Bell Corp., 220 F.R.D. 604, 611 (N.D. Cal. 2004), amended on other grounds, 2012 WL 3070863 

(N.D. Cal. 2012); see also Hodges v. Akeena Solar, Inc., 274 F.R.D. 259, 267 (N.D. Cal. 2011). 

To establish adequacy, class representatives generally need only to be “familiar with the basis for 

the suit and their responsibilities as lead plaintiffs” such that they can uphold their obligations to 

other class members. In re Conseco Life Ins. Co. LifeTrend Ins. Sales & Mktg. Litig., 270 F.R.D. 

 4 First, Defendants point to the deposition testimony of Greater Penn’s corporate representative, James Klein, wherein he agreed that Brown Advisory - an investment manager for Greater Penn - may have disagreed with Greater Penn’s view of the fraud claims. Depo. of James Klein (“Klein 

Depo.”) at 249:24-250:3, Dkt. No 139-10 Second, Defendants reference statements from Sands 

Capital - an investment manager for Hawaii ERS - downplaying the safety criticisms of the da 

Vinci. See Decl. of Philip Tassin (“Tassin Decl.”), Ex. 39, Dkt. No. 134-20. 

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521, 531 (N.D. Cal. 2010). However, while this is a “modest” requirement, class certification 

many nevertheless be denied “where the class representatives have so little knowledge of and 

involvement in the class action that they would be unable or unwilling to protect the interests of 

the class against the possibly competing interests of the attorneys.” In re Monster Worldwide, Inc. 

Sec. Litig., 251 F.R.D. 132, 135 (S.D.N.Y. 2008). 

Defendants here argue that Greater Penn and Hawaii ERS demonstrated inadequate 

knowledge of the case to serve as class representatives and are “nothing more than the willing

pawn[s] of counsel.” Opp. at 8-11. In support of this position, Defendants highlight select 

answers from the deposition of Greater Penn’s representative Jim Klein in an effort to show Mr. 

Klein’s lack of knowledge or involvement as to certain aspects of the case. Id. at 10-11; see Depo. 

of James R. Klein (“Klein Depo.”) at 126:2-127:3, 157:21-159:1, 259:2-4; 263:18-267:22, 269:12-

20, Dkt. No. 139-10. Similarly with respect to Hawaii ERS, Defendants reference portions of the

deposition testimony from Hawaii ERS witnesses Wesley Machida,5 Vijoy Chattergy,

6 and Brian 

Aburano,

7 in which the witnesses were unable to answer certain questions about Hawaii ERS 

and/or the case. See id.

Defendants compare this testimony to Monster Worldwide, wherein the district court 

found the class representative to be inadequate where the corporate designee for the plaintiff-entity

did not know (1) the name of the stocks at issue; (2) the name of the defendants in the case; (3) 

whether plaintiff ever owned any of the stock at issue; (4) whether an amended complaint had 

been filed; (5) whether he had ever seen a complaint in the action; and (6) whether defendant had 

moved to dismiss. 251 F.R.D. at 135. Defendants then focus in on Mr. Machida and Mr. 

 5 Mr. Machida was formerly employed as the Executive Director of Hawaii ERS and presently 

serves on its board of trustees. Depo. of Wesley Machida (“Machida Depo.) at 61:23-612:6; 

70:13-16, Dkt. No 139-12. Mr. Machida now works as the State Director of Finance. Id. at 

61:23-24.

6 Mr. Chattergy is the chief investment officer for Hawaii ERS. Depo. of Vijoy Chattergy

(“Chattergy Depo.”) at 9:22-10:1, Dkt. No 139-14. 

7 Mr. Aburano is a deputy attorney general assigned to Hawaii ERS to advise and represent it, and 

serves as its corporate designee for purposes of this litigation. Depo. of Brian Aburano (“Aburano 

Depo.”) at 50:3-16; 148:17-19, Dkt. No. 139-8.

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Chattergy’s lack of knowledge as to such factors. See Opp. at 8-10; Machida Depo. at 116:15-19; 

118:20-22, 120:22-124:24, 136:5-24, 145:19-146:13; Chattergy Depo. at 98:10-15, 111:18-112:5, 

194:3-195:24, 198:25-199:24. However, these cherry-picked excerpts highlighted by Defendants 

are largely irrelevant, if not misleading, to the present inquiry. While it is true that Mr. Machida 

and Mr. Chattergy demonstrate arguably insufficient knowledge to serve as the class 

representative, neither individual was selected as Hawaii ERS’ “corporate designee” - or 30(b)(6)

witness - for the purposes of this action.

8

 Rather, it is Mr. Aburano who Hawaii ERS identified as

its corporate designee for the purposes of this litigation. See Aburano Depo. at 8:3-4, 10:19-21.

In contrast to individual witnesses, corporate designees are responsible for the information 

related to the plaintiff-entity on a broader scale. “It is not expected that the designee have personal 

knowledge as to all relevant facts; however, the designee must become educated and gain the 

requested knowledge to the extent reasonably available.” Louisiana Pac. Corp. v. Money Mkt. 1 

Institutional Inv. Dealer, 285 F.R.D. 481, 486 (N.D. Cal. 2012) (recognizing that a Rule 30(b)(6) 

deposition represents the entity’s knowledge and not that of the individual deponent). The witness 

should be capable of providing “complete, knowledgeable and binding answers on behalf of the 

corporation” about the topics noticed for deposition. Marker v. Union Fidelity Life Ins., 125 

F.R.D. 121, 126 (M.D.N.C. 1989). Thus, the entity has a duty to educate its designees about 

matters beyond his or her personal knowledge. 

In support of Mr. Aburano and Mr. Klein’s adequacy as class representatives, Plaintiffs 

identify specific deposition testimony wherein both Mr. Aburano and Mr. Klein correctly provide 

information that the court in Monster Worldwide identified relevant to its determination of 

 8 As Plaintiffs point out, during the class period, “Mr. Machida did not sit on the HIERS board or 

have a vote in board decisions and was not responsible for keeping up with the day to day of 

litigation. Mr. Machida was not designated as a 30(b)(6) witness and so there was no obligation 

that he be prepared to testify on behalf of [Hawaii ERS] as to all information reasonably available 

to the organization.” Reply at 5. Similarly, “[w]hile Mr. Chattergy testified extensively as to the 

structure of the [Hawaii ERS] and its investment philosophy and policies, he was not 

knowledgeable about this litigation because he is not involved in its prosecution or supervision.” 

Id.

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adequacy. See 251 F.R.D. at 135. The Monster factors and Plaintiffs’ corresponding deposition 

excerpts are summarized as follows:

Factor Hawaii ERS Greater Penn

1 Whether designee 

knew the name of the 

stock at issue

“Intuitive stock.” Ex. 1, 

Aburano Depo. 35:24.

Discussing Fund’s purchases of 

“Intuitive stock.” Ex. 2, Klein Depo. 

147:22-24.

2 Whether designee 

knew the name of 

defendant(s)

“Gary Guthart . . . Marshall 

Mohr, Lonnie Smith.” 

Aburano Depo. 183:3-5.

Marshall Mohr...I think he was 

CFO...Gary Guthart...I believe he 

was CEO...And Lonnie Smith. I 

think former CEO and board of 

directors.” Klein Depo. 260:10-19.

3 Whether designee 

knew if plaintiff(s) 

ever owned the stock 

at issue

Correctly identified “ERS’s 

transactions in Intuitive 

Surgical securities during the 

class period.” Aburano Dep. 

158:24-25.

Q: “Do you know which of the 15 

equity managers held Intuitive 

Surgical shares in

2012 and 2013 for Greater Penn?” 

A: “Yes...Brown Advisory.” Klein 

Depo. 124:4-11

4 Whether designee 

knew if an amended 

complaint was filed “I reviewed drafts of the 

amended complaint.” 

Aburano Depo. 60:12-15.

Q: “Is there now some doubt in your 

mind that you [reviewed the 

amended complaint]?”

5 Whether designee had A: “No.” Klein Depo. 272:9-11.

ever seen a complaint 

in the action

6 Whether designee 

knew if defendant(s) 

had ever moved to 

dismiss

Q: “Did you read the motion 

to dismiss papers?”

A: “I did at one point.” 

Q: “Did you read the motion 

to dismiss order?” 

A:“I... read the order partially 

granting and partially denying 

the motion to dismiss.”

Q: “Did you read the motion 

for reconsideration of that 

order?” 

A: “I did read it.” 

Aburano Depo. 201:7-16.

“I’ve looked at a lot of documents, 

court filings.” Klein Depo. 264:21-

22. 

“[The Order on Defendants’ motion 

to dismiss] might be one of the 

documents I’ve read through.” Klein 

Depo. 264:14-17.

“I believe I’ve seen [defendants’ 

motion for reconsideration].” Klein 

Depo. 274:17-21.

Based on the foregoing, Mr. Aburano and Mr. Klein demonstrated a sufficient level of 

knowledge about this case to satisfy the court that they are capable of protecting the interests of 

the class in this litigation. Accordingly, the court concludes that Plaintiffs have met their burden 

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to show that are adequate class representatives under Rule 23(a)(4). 

B. Rule 23(b)(3) – The Predominance Requirement 

Having satisfied the Rule 23(a) requirements, the court now turns to Rule 23(b). Where, as 

here, a plaintiff seeks certification under Rule 23(b)(3), the plaintiff must establish “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). Plaintiffs contend the 

predominance requirement of Rule 23(b)(3) is satisfied here because Intuitive’s alleged 

misconduct “affected all class members in the same manner,” and therefore common question of 

law and fact prevail over questions affecting only individual class members. Mot. at 12; see Fed. 

R. Civ. P. 23(b)(3). Plaintiffs further contend the use of class action is superior in securities cases 

because it ensures “the just, speedy, and efficient determination of the class member’s claims.”9 

Mot. at 24. 

“Considering whether questions of law or fact common to class members predominate 

begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v. 

Halliburton Co., 563 U.S. 804, 809 (2011) (“Halliburton I”). Here, Plaintiffs bring claims 

pursuant to Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated 

thereunder.10 To establish liability and recover damages under Section 10(b) and 10b–5, Plaintiffs 

must prove “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a 

connection between the misrepresentation or omission and the purchase or sale of a security; (4) 

reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.”

Amgen, 133 S. Ct. at 1191-92; Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 

 9 Defendants do not challenge Plaintiffs’ claim that superiority is satisfied in this case. See Opp. 

at 12-13.

10 Plaintiffs also assert claims against the individually named defendants in this case for violations 

of sections 20(a) and 20A Securities Exchange Act of 1934 (15 U.S.C. § 78t, t-1). However, 

Defendants do not appear to advance any additional argument as to predominance that is specific 

to these claims, nor does the court find that there is any reason to address them independently at 

this time. 

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1061 (9th Cir. 2008). However, the Supreme Court has ruled that loss causation and materiality 

need not be proven at the certification stage. See Halliburton I, 563 U.S. at 813 (it is not required 

to “show loss causation as a condition of obtaining class certification”); see also Amgen, 133 S. 

Ct. at 1197 (securities fraud plaintiffs need not prove materiality at the class certification stage, 

because “the question of materiality is common to the class, and [ ] a failure of proof on that issue 

would not result in questions affecting only individual members.”). Defendants challenge 

Plaintiffs’ ability to satisfy predominance as to reliance and damages. See Opp. at 12-13. 

i. Presumption of Reliance

Courts have long recognized that without a classwide presumption of reliance in securities 

fraud cases, Rule 23(b) (3)’s predominance requirement “would often be an insuperable barrier to 

class certification, since each of the individual investors would have to prove reliance on the 

alleged misrepresentation.” Dukes, 131 S.Ct. at 2552 n. 6; see also Halliburton, 563 U.S. at 810 

(explaining that “requiring proof of individualized reliance from each member of the proposed 

plaintiff class effectively would prevent such plaintiffs from proceeding with a class action, since 

individual issues would overwhelm the common ones.”) (citing Basic, 485 U.S. at 242). 

Accordingly, the Supreme Court has identified two avenues through which plaintiffs may invoke a 

rebuttable presumption of reliance: the “fraud-on-the-market” presumption, as outlined in Basic 

Inc. v. Levinson, and the Affiliated Ute presumption, as set forth in Affiliated Ute Citizens v. 

United States, 406 U.S. 128, 153-154 (1972). Plaintiffs contend they are entitled to a presumption 

of reliance under both theories.11 

Basic’s “fraud on the market” theory provides a rebuttable presumption that because “the 

market price of shares traded on well-developed markets reflects all publicly available 

information,” including any misrepresentations, “all traders who purchase stock in an efficient 

market are presumed to have relied on the accuracy of a company’s public statements.” Basic, 

 11 Because the court finds that Plaintiffs are entitled to a presumption of reliance under Basic such 

that the class may be certified, it is unnecessary for the court to reach the question of whether 

Plaintiffs are similarly entitled to such a presumption under Affiliated Ute. 

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485 U.S. at 246-7; Dukes, 131 S.Ct. at 2552 n. 6; see also Halliburton Co. v. Erica P. John Fund, 

Inc., 134 S. Ct. 2398, 2404 (2014) (“Halliburton II”) (reaffirming Basic’s presumption of 

reliance). To invoke this presumption at the class certification stage, plaintiff must show: (1) the 

alleged misrepresentations were publicly known, (2) Intuitive’s stock traded in an efficient market, 

and (3) “the relevant transaction took place between the time the misrepresentations were made 

and the time the truth was revealed.” Halliburton I, 131 S. Ct. at 2185 (quoting Basic, 485 U.S. at 

248, n. 27). However, the presumption may be rebutted where a defendant offers evidence that 

“severs the link between the alleged misrepresentation and either the price received (or paid) by 

the plaintiff, or his decision to trade at a fair market price.” Basic, 485 U.S. at 248; see

Halliburton II, 134 S. Ct. at 2415-16. 

Plaintiffs have made a preliminary showing that they are entitled to the fraud-on-themarket presumption here.12 Defendants do not challenge Plaintiffs’ initial satisfaction of the 

elements required to invoke the presumption, but rather contend that the presumption is rebutted 

because individual questions of knowledge predominate and because “the alleged 

misrepresentations and omissions had no impact on the stock price.” Opp. at 17. 

a. Individualized Questions of Knowledge 

First, Defendants assert that individualized questions of knowledge will predominate over 

common questions because the allegedly “omitted” information at issue here was publicly

available during the class period. Opp. at 13. That is, Defendants contend that “a substantial 

number of class members had actual knowledge of the allegedly omitted information, making 

reliance impossible to prove classwide.” Opp. at 13. Specifically, Defendants identify four means 

through which they argue class members could have accessed the information Plaintiffs allege was 

 12 Specifically, Plaintiffs allege that Intuitive “artificially inflated or maintained its stock price 

through public misrepresentations and omissions, that the stock is commonly traded on the 

NASDAQ, and that class members bought Intuitive common stock during the class period and 

suffered losses when the truth was disclosed.” Mot. at 17. Plaintiffs also offer further analysis of 

market efficiency pursuant to the five factors set forth in Cammer v. Bloom, 711 F. Supp. 1264 

(D.N.J. 1989), as well as four of the additional factors used by some courts in the Ninth Circuit. See Mot. at 18-22; Binder v. Gillespie, 184 F.3d 1059, 1065 (9th Cir. 1999) (quoting Cammer, 711 F. Supp. at 1286-87). 

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fraudulently concealed: (1) the October 2011 Letters; (2) the Medical Device Reports; (3) the 

Product Liability Lawsuits; and (4) a January 2012 Patent Application. Defendants maintain that 

this theory is distinct from a “truth-on-the-market” defense, which they acknowledge is improper 

to consider at the class certification stage. See Amgen, 133 S. Ct. at 1194-95. Defendants explain 

that a truth-on-the-market defense precludes any investor from recovering on the grounds that all 

investors necessarily knew of the allegedly omitted information, while Defendants here argue 

“only that some class members - not necessarily all class members - likely knew the truth and that 

consequently the court cannot presume that the whole class was ignorant of, and relied upon, the 

alleged omission.” Opp. at 14, n. 6. 

1. The October 2011 “Customer Letters” or “Secret Recall Letters”

In October 2011, Defendants sent over 2,000 letters to various purchasers of da Vinci -

namely, hospitals - providing clarifications and additional instruction on how to use the da Vinci 

tip covers safely. See Opp. at 14; SACC ¶¶ 60-64. Plaintiffs characterize the Letters as “secret 

recalls,” accusing Defendants of trying to indirectly correct for the safety issues without having to 

suffer the fallout of taking responsibility directly. See SACC ¶¶ 60-64. In any event, these letters 

arguably alluded to or implicated some of the safety concerns at issue in this lawsuit. As a result, 

Defendants argue that some members of the class were made aware of da Vinci’s safety problems

via the Letters, thus resulting in individualized questions of knowledge. Opp. at 14. However, the 

court agrees with Plaintiffs that there is a significant difference between sending an instructional 

letter to certain entities regarding a product, and publicly disclosing critical safety issues posed by 

the product. See Reply at 11.

2. The Medical Device Reports (MDRs)

Next, Defendants claim that MDRs are publicly available in the FDA’s database, and thus 

the allegedly unreported or misclassified reports were actually uploaded and accessible to the 

public long before the March 2013 press release announcing the changes to Defendants’ MDR 

reporting procedures. Accordingly, Defendants argue that “anyone in the proposed class could 

have known about the increase in MDRs.” Opp. at 15. 

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Defendants’ argument overlooks the substance of Plaintiffs’ allegations on this particular 

issue. Plaintiffs assert that “thousands of MDRs were improperly kept secret by Defendants 

failing to report them at all, and even those that were filed [in the FDA’s] database were 

misclassified as ‘other’ instead of ‘serious injury,’ thereby misleading the market as to da Vinci’s 

safety. Reply at 11-12; SACC ¶¶ 7, 86, 96. Accordingly, the fact that some MDRs were publicly 

available is not inconsistent with Plaintiffs allegations that other MDRs were not, nor is it 

evidence that class members had knowledge of the information Plaintiffs actually allege was 

concealed. 

3. The Products Liability Lawsuits 

Defendants argue that the nature and number of product liability lawsuits against Intuitive 

was no secret, and therefore class members would have been aware of the safety issues Defendants 

purportedly concealed. However, this argument again excludes critical pieces of Plaintiffs’ 

allegations regarding the extent of Defendants’ omissions. Specifically, Plaintiffs accuse 

Defendants of having entered into “secret tolling agreements” with individuals who suffered 

injuries as a result of the da Vinci. SACC ¶¶ 6, 79-80; Reply at 12-13. Plaintiffs allege that 

Intuitive is currently engaged in litigation regarding insurance coverage for over a thousand claims 

made before and during the class period, where the insurers claim they had not been informed of 

the agreements, and had they been so informed, they would not have issued the policy. Id. 

Accordingly, the court agrees with Plaintiffs that these lawsuits, while public, are not an accurate

or complete source of the relevant information pertaining to da Vinci’s safety that Plaintiffs claim 

was omitted. 

4. The Patent Application 

Finally, Defendants claim that information regarding the defective tip cover was publically 

available and known to some class members because Defendants filed a patent application for a 

redesigned tip cover on January 12, 2012 – before the proposed class period. This argument lacks 

merit. First, as Plaintiffs point out, patent updates are routine, and the mere fact that Defendants 

filed an application for a redesigned tip cover does not actually communicate relevant safety 

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information regarding the product to the public. See Reply at 12. And second, it is highly 

unlikely that a patent’s technical language would be construed publicly as a “revelation” of the 

safety concerns at issue or a disclosure regarding the product’s defective design. See id.

* * *

In sum, while Defendants may be correct that certain individuals or entities had access to 

pieces of information Plaintiffs allege was fraudulently concealed, the court is not convinced that 

individual questions as to these highly specific and limited sources of information will 

predominate over the larger questions of reliance that remain common to the class. For this 

reason, and for the reasons explained above, Defendants fail to rebut the presumption of reliance.

b. Price Impact

Defendants’ second argument seeks to rebut Plaintiffs’ presumption of reliance on the 

grounds that the misrepresentations and corrective disclosures had no impact on Intuitive’s stock 

price. Opp. at 17-18. In Halliburton II, the Court explained that price impact is at the core of 

Basic’s fundamental premise that a misrepresentation or omission will be reflected by the market 

price at the time the statement is made. Halliburton II, 134 S. Ct. at 2416. For that reason, if a 

defendant can demonstrate that a misrepresentation or a corrective disclosure did not actually 

impact the price of the stock in an efficient market, the “basis for finding that the fraud had been 

transmitted through market price would be gone” and the suit should not proceed as a class action.

Id.; Basic, 485 U.S. at 248. Accordingly, Halliburton II confirmed that a defendant may attempt 

to rebut the Basic presumption at the class certification stage with evidence showing a lack of 

price impact. 

Based on the ruling from Halliburton II, on remand, the district court for the Northern 

District of Texas conducted an extensive assessment of the evidence of price impact submitted by 

both parties. See Erica P. John Fund, Inc. v. Halliburton Co., 309 F.R.D. 251, 263 (N.D. Tex. 

2015) (“Halliburton Tex.”). The evidence submitted by the respective parties primarily consisted 

of reports from competing experts, both of whom had “developed a market model and performed 

an event study to determine whether there was statistically significant price movement on the dates 

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of the alleged misrepresentations and corrective disclosures.” Id. After a detailed evaluation of 

the merits of each expert’s methodology and conclusions, the district court concluded that 

Halliburton’s expert had demonstrated lack of price impact on all but one of the corrective 

disclosure dates. Id. at 270, 271 272, 274, 276, 280. The court therefore granted class 

certification, but only as to the single corrective disclosure date where Halliburton had failed to 

rebut price impact. See id. at 280.

As was presented to the district court in Halliburton Tex, the parties to the instant action 

have offered competing evidence from their respective experts on the issue of price impact. Thus, 

this court is now similarly tasked with evaluating whether Defendants have rebutted the 

presumption of reliance under a price impact theory as to each of the corrective disclosures alleged 

here. In considering this evidence, the court evaluates not only the admissibility but also the 

persuasiveness of the expert reports. See Ellis, 657 F.3d at 982; In re Rail Freight Fuel Surcharge 

Antitrust Litig., 725 F.3d 244, 255 (D.C.Cir. 2013). 

As a preliminary matter, the court finds that Defendants bear both the burden of production 

and the burden of persuasion on the issue of price impact. See Halliburton Tex., 209 F.R.D. at 

260. That is, where Plaintiffs have satisfied the requirements entitling them to the initial 

presumption of reliance, in order to rebut this presumption Defendants must convince the court 

that their evidence is more probative of price impact than the evidence offered by Plaintiffs. See

id. In conducting this analysis, the court will focus on changes in the stock price with respect to 

the corrective disclosure dates, as opposed to the misrepresentations alleged, because this method 

more accurately captures the impact, if any, of a material misrepresentation or omission.

13 While 

 13 As explained by the district court on remand from Halliburton II, 

Fraud on the market securities litigation typically focuses on a price change at the time of a 

corrective disclosure. If a particular disclosure causes the stock price to decline at the time 

of disclosure, then the misrepresentation must have made the price higher than it would 

have otherwise been without the misrepresentation. Measuring price change at the time of 

the corrective disclosure, rather than at the time of the corresponding misrepresentation, 

allows for the fact that many alleged misrepresentations conceal a truth. Thus, the 

misrepresentation will not have changed the share price at the time it was made. 

Halliburton Tex., 309 F.R.D. at 262.

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Defendants also challenge the seven dates Plaintiffs allege affirmative misrepresentations took 

place on the grounds that there was “no positive price impact,” this argument is unpersuasive. See

Opp. at 17. The lack of a statistically significant price increase following an alleged 

misrepresentation does not indicate lack of price impact. See Hatamian, 2016 WL 1042502, at *7 

(“Price impact in securities fraud cases is not measured solely by price increase on the date of a 

misstatement; it can be quantified by decline in price when the truth is revealed.”); Halliburton II, 

134, S. Ct. at 2414. 

With that, the court now turns to the five corrective disclosure dates alleged by Plaintiffs 

here: February 28, 2013; March 5, 2013; April 18-19, 2013; July 8, 2013; and July 18, 2013. “To 

show that a corrective disclosure had a negative impact on a company’s share price, courts 

generally require a party’s expert to testify based on an event study that meets the 95% confidence 

standard, which means ‘one can reject with 95% confidence the null hypothesis that the corrective 

disclosure had no impact on price.’” 14 Halliburton Tex., 309 F.R.D. at 262 (citing Merrit B. Fox, 

Halliburton II: It All Depends on What Defendants Need to Show to Establish No Price Impact, 70 

Bus. Law 437, 442 n. 17 (2014–15)). Both parties have submitted expert reports as evidence in 

support of their arguments for and against price impact. Plaintiffs’ expert, Professor Chad 

Coffman, concludes that statistically significant negative price changes occurred on each of the 

five corrective disclosure dates. Reply at 13-14, Dkt. No. 139-3; Expert Rebuttal Report of Chad 

Coffman, CFA (“Coffman Rebuttal”) ¶ 6, Dkt. No 141-13. Conversely, Defendants’ expert Dr. 

Kenneth M. Lehn concludes that there were no statistically significant price decreases on the first 

three dates (February 28, March 5, and April 19), and the statistically significant decreases on the 

last two dates (July 8 and July 18) are irrelevant and should not be considered by the court. Opp. 

at 18-19; Expert Report of Kenneth M. Lehn (“Lehn Report”) ¶¶ 43-65, Dkt. No. 135-39. Each 

disclosure will be addressed briefly below. 

 

14 An event study is a regression analysis that seeks to show how the market price of a company’s 

stock tends to respond to pertinent publicly reported events. Halliburton II, 134 S. Ct. at 2415. 

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1. February 28, 2013 – Bloomberg’s “Safety Probe” Article

On February 28, 2013, Bloomberg News reported that a U.S. regulator (later identified as 

the FDA in subsequent articles) had initiated a “safety probe” of the da Vinci surgical system. 

SACC ¶ 10, 113, 216; Lehn Report at ¶ 9; Coffman Rebuttal ¶¶ 31-32. The article was published 

approximately five minutes before the stock market closed. SACC ¶ 10, 113, 216. Within those 

five minutes, Intuitive’s stock price dropped by approximately 11 percent, with the stock value 

declining from about $573 to about $510 per share. Id. at 10.

Because the article was released only five minutes before the market closed on February 

28, 2013, Defendants’ expert used a two-day window to conduct his event study, “consisting of 

both February 28, 2013 and March 1, 2013.” Lehn Report ¶ 44. Lehn’s event study did not find a 

statistically significant change in stock price. Id. 

The court finds that it was inappropriate to use a two-day window to calculate price impact 

here. “An efficient market is said to digest or impound news into the stock price in a matter of 

minutes.” Halliburton Tex., 309 F.R.D. at 269. Absent unusual circumstances, it is likely that the 

market would have therefore quickly incorporated the information contained in the Bloomberg

article into Inuitive’s stock price. See id.; Coffman Rebuttal ¶¶ 35-38. There is also no dispute 

that in the minutes following the release of the article, stock prices dropped by roughly 11 percent. 

Lehn reaches a different conclusion only when the event window is expanded to two full days. 

See Lehn Report ¶ 44. Moreover, as Coffman points out, “[e]ven if one accepts Dr. Lehn’s 

position that the partial rebound on March 1, 2013 should be considered, a proper ‘event window’ 

to analyze this event should run from just before the release of the news at 3:55pm on February 

28, 2013, through market close on the next trading day, March 1, 2013,” rather than incorporating 

“almost a full day before the event occurs.” Coffman Rebuttal ¶¶ 36-37. The court agrees with 

Coffman. 

Based on the foregoing, the court finds that the substantial decline in Intuitive’s stock price 

and Coffman’s event study establish price impact as to the February 28, 2013 disclosure, and

Defendants have not met their burden to show otherwise. To the extent that Defendants advance 

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an additional argument in a footnote that the information revealed by the disclosure was unrelated 

to any alleged misrepresentation, this argument is neither convincing nor adequately supported. 

See Opp. at 19 n.10. Accordingly, Plaintiffs are entitled to a presumption of reliance with respect 

to the February 28 corrective disclosure. 

2. March 5, 2013 – Bloomberg’s “Robosurgery Death Reports” Article

On March 5, 2013, another Bloomberg article entitled “Robosurgery Suits Detail Injuries 

as Death Reports Rise” was published, writing that “incident reports sent to U.S. regulators linked 

the da Vinci to at least 70 deaths since 2009.” SACC ¶ 217. The parties disagree about exactly 

when the article was released, with Plaintiffs asserting that it was published in the early morning 

of March 5, 2013, while Defendants contend the news broke after the market closed that day. 

Compare Coffman Rebuttal ¶ 55, Dkt. No. 141-13, with Lehn Report ¶ 10, Dkt. No. 135-39. 

Based on Lehn’s conclusion that the article was published after market close, he contends it is 

“appropriate to conduct an event study of Intuitive’s stock price on March 6, 2013” as opposed to 

March 5. Lehn Report ¶¶ 52 n.90, 53. 

While the record supports the contention that a version of the article was indeed released 

after the market closed, Plaintiffs offer compelling evidence to suggest that an earlier version of 

the article was released the morning of March 5, 2013. Plaintiffs cite an analyst’s report released 

prior to the market open on March 5, 2013 that can be construed as referencing or alluding to the 

Bloomberg article and the information it reported. Coffman Rebuttal ¶ 58 n. 73 (citing “ISRG 

Volatility is Potential Boon to Buyers. The Chance of da Vinci Having Safety Issues is Remote,” 

Janney Capital Markets, Mar. 5, 2013, Ex. 23, Dkt. No. 135-27). The analyst report stated: “ISRG 

shares could be under pressure this morning for the second straight day as business journal articles 

continue to harp on potential safety concerns on da Vinci.” Id. Plaintiffs also submit a purported 

copy of the earlier version of the article as Appendix B to the Coffman Rebuttal (Dkt. No. 141-13 

at 62-67). Defendants do not offer any such evidence on this issue. 

Based on this record, the court finds that March 5, 2013 is the more appropriate date on 

which to perform the regression analysis. Because Lehn does not discuss his event study for the 

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date of March 5 in his Report, Defendants fail to rebut price impact for this corrective disclosure. 

3. April 18-April 19, 2013 – First Quarter 2013 Financial Results 

On April 18, 2013, Intuitive reported its first quarter financial results for 2013 after the 

market closed. SACC ¶ 218. Plaintiffs allege that “Intuitive reported procedure growth of 18%, 

below consensus expectations of 21%, and guided total 2013 procedure growth to the lower end of 

its range.” Id. “Intuitive’s common stock fell by $8.62, approximately 3%, from a closing price 

of $493.37 on April 18, 2013 to a closing price of $484.75 on April 19.” Id. ¶ 218(c). 

The court finds a lack of price impact in connection with the release of Intuitive’s financial 

results between April 18th and April 19th 2013. First, neither Lehn nor Coffman found a 

statistically significant price impact at the 95% confidence level for this date. Coffman Rebuttal ¶ 

6(iii)(a). Rather, Coffman’s analysis resulted in a price impact at a 90% confidence level. Id.; 

Reply at 14. Although Plaintiffs argue that price impact at a 90% confidence level is a statistically 

significant, the district court in Halliburton Tex adopted 95% confidence level as the threshold 

requirement and this court finds no reason to deviate here. See 309 F.R.D. at 270. 

Second, there is a lack of clarity regarding the source of information and the regression 

analysis conducted as to this disclosure. In addition to disclosing quarterly financial information, 

Plaintiffs also allege that Intuitive’s Senior Vice President Marshall L. Mohr made a false or 

misleading statement on April 18, 2013. SACC ¶ 32. As Lehn points out, Coffman “does not 

provide a reliable methodology for distinguishing the effect of the alleged corrective disclosure 

from the effect of the alleged misrepresentation on April 18, 2013.” Lehn Report ¶ 27(d). It is

also not entirely clear from the parties’ papers whether Coffman and Lehn used April 18th, April 

19th, or a two-day window including both days for their respective event studies regarding this 

disclosure. Compare Opp. at 19, Dkt. No. 135, with Reply at 14, Dkt. No. 139-3. 

Finally, even if the court accepted the 90% confidence level, the court is not convinced the

quarterly financial results were a corrective disclosure at all. As discussed below in connection 

with the release of Intuitive’s second quarter financial results, financial statements are not 

corrective of misrepresentations related to safety, and the court dismissed all other categories of 

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affirmative misstatements Plaintiffs previously plead. See Order on MTD, 15-16, Dkt. No. 83. 

While Defendants only raise this argument in connection with July’s financial disclosures, the 

court finds it equally applicable here. Accordingly, Plaintiffs’ presumption of reliance for April 

18-April 19, 2013 is rebutted. 

4. July 8 Press Release & July 18 Second Quarter Financial Results

On July 8, 2013, Intuitive issued a press release “pre-announcing” its second quarter 

financial results, which Plaintiffs characterize as “dismal” and falling “well below expectations.” 

SACC ¶¶ 130, 219. On July 18, 2013, after market-close, Intuitive then officially released its “2Q 

2013” financial results, which were “consistent with its July 8, 2013 pre-announcement”

prognosis. Id. ¶ 220. Both experts found statistically significant declines in Intuitive’s stock price 

on July 8, 2013 and July 18, 2013. See Coffman Rebuttal ¶¶ 74-78, 84-95; Lehn Report ¶¶ 66-74. 

While Defendants concede that there was a decline in stock price, they argue that the July 

financial statements should not be considered “corrective disclosures” because this kind of 

financial information is unrelated to allegations of da Vinci’s safety problems. Plaintiffs argue 

that the July 8 press release and the July 18 financial report disclosed “new” information related to 

Intuitive’s financial situation, which makes the statements corrective. SACC ¶¶ 130, 219. 

Plaintiffs are mistaken. As Defendants point out, the court dismissed allegations that were based 

on Intuitive’s financial statements because such statements were “literally true,” and therefore 

unlikely to “mislead a reasonable investor as to the future state of Intuitive’s market success.” 

Order on MTD at 15-16; Opp. at 19. Consequently, this action contains no alleged

misrepresentations related to Intuitive’s financial condition that a remedial disclosure could

correct. Based on the foregoing, Defendants have successfully rebutted the presumption as to the 

release of financial information on July 8, 2013 and July 18, 2013. 

5. July 18, 2013 –FDA Warning Letter

However, also on July 18, 2013, Intuitive publically released a Warning Letter it had 

received two days earlier from the FDA. Id. ¶ 220. As discussed above, both experts found a 

statistically significant decline in Intuitive’s stock price in connection with this disclosure. See

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Coffman Rebuttal ¶¶ 84-95; Lehn Report ¶¶ 66-74. 

Intuitive was given the Warning Letter following an “onsite audit” conducted by the FDA

to monitor issues it had previously identified in a Form 483. See SACC ¶ 220; Coffman Rebuttal 

¶¶ 84-89. The Form 483 had been provided to Intuitive on June 25, 2013. Id. Defendants’

argument that “the Warning Letter revealed nothing new to the market that was not disclosed 

previously in the Form 483” is unpersuasive. As Coffman explains, “Form 483 is used to 

document a problem that is still being investigated and not necessarily part of a company’s 

permanent record, whereas a warning letter is an indication that the company reply to the Form 

483 has been insufficient to explain or solve the issues in question.” Coffman Rebuttal ¶ 87. 

According to Coffman, the FDA only issues a warning “after Form 483 is issued and the inspector 

completes the Establishment Inspection Report and an FDA official...reviews the Form 483 and 

believes that a serious violation may exist.” Id. As a result, issuance of a Warning Letter strongly 

suggests that it is the FDA’s position that the corrective actions undertaken by the receiver have 

not been adequate. See Mulligan v. Impax Labs., Inc., 36 F. Supp. 3d 942, 948 (N.D. Cal. 2014). 

The existence and implications of the Warning Letter absolutely constitutes “new” 

information. Moreover, the information is also directly relevant to alleged misrepresentations 

regarding safety. Accordingly, the court concludes that there is compelling evidence of price 

impact in connection with the July 18, 2013 disclosure of the FDA Warning Letter. Based on this 

finding, the court also rejects Defendants’ argument that if any class is certified, the class period 

must end no later than June 25, 2013. Opp. at 23. The class period shall extend through July 18, 

2013, as proposed.

ii. Damages Methodology 

In a final attempt to undermine Plaintiffs’ satisfaction of the predominance requirement, 

Defendants, relying on Comcast, argue that Plaintiffs fail to present a classwide method for 

computing damages, and thus inquiries as to class members’ individual damages assessments will 

predominate in contravention Rule 23(b)(3). Opp. at 21. 

While the court agrees that Comcast supports the general notion that damages questions 

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should be considered when weighing issues of predominance, Defendants’ reading of Comcast is 

too broad. The Ninth Circuit has construed Comcast as requiring only that plaintiffs “be able to 

show that their damages stemmed from the defendant’s actions that created the legal liability.” 

Levya v. Medline Industries, Inc., 716 F.3d 510, 514 (9th Cir. 2013) (citing Comcast, 133 S.Ct. at 

1435); accord Roach v. T.L. Cannon Corp., 778 F.3d 401, 407 (2d Cir. 2015) (“the Court did not 

hold that proponents of class certification must rely upon a classwide damages model to 

demonstrate predominance”); In re Deepwater Horizon, 739 F.3d 790, 817 (5th Cir. 2014) (calling 

the defendants’ suggestion that class certification should be denied based on a failure to show 

classwide damages “a significant distortion of Comcast” that had already been rejected by several 

circuits). Courts in this district have similarly declined to adopt such an overly broad

interpretation of Comcast. See, e.g., Hatamian, 2016 WL 1042502, at *8; Diamond Foods, 295 

F.R.D. at 251.

Plaintiffs state that they will use the “out-of-pocket” methodology, which is the standard 

approach used for calculating damages in Section 10(b) securities cases. Coffman Rebuttal ¶¶ 96-

109. Coffman explains that the “out-of-pocket” method

measures damages as the artificial inflation per share at the time of 

purchase less the artificial inflation at the time of sale (or, if the 

share is not sold before full revelation of the fraud, the artificial 

inflation at the time of purchase, subject to the PSLRA’s “90-day 

lookback” provision, a formulaic limit on damages that also can be 

applied class wide

Id. ¶ 96. This method is widely considered “an accepted method for the evaluation of materiality 

damages to a class of stockholders in a defendant corporation.” Diamond Foods, 295 F.R.D. at 

251; see id. 

Based on ample legal precedent, as well as Coffman’s report explaining the methodology 

Plaintiffs represent that they will use to calculate classwide damages, the court finds that Plaintiffs 

have identified a satisfactory methodology for calculating damages here. Plaintiffs demonstrate 

that damages are capable of being “feasibly and efficiently calculated” on a classwide basis “once 

the common liability questions are adjudicated.” See Levya, 716 F.3d at 514; Hatamian, 2016 

WL 1042502, at *9. 

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IV. CONCLUSION

Based on the foregoing, the court finds, concludes, and orders as follows:

1. Plaintiffs’ Motion for Class Certification is GRANTED. 

2. Pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(3), this action is 

found to be appropriate for class certification. The class is defined as follows: 

All persons or entities who purchased or acquired the publicly 

traded common stock of Intuitive Surgical, Inc. during the period 

from February 6, 2012 through July 18, 2013, inclusive, and who 

were damaged thereby. Excluded from the Class are (i) all 

Defendants; (ii) members of the immediate families of individual 

defendants Guthart, Mohr, and Smith; (iii) any subsidiaries and 

affiliates of Defendants; (iv) any person who is or was an officer or 

director of Intuitive or any of Intuitive’s subsidiaries of affiliates; (v) 

Defendants’ directors’ and officers’ liability insurance carriers, and 

any affiliates or subsidiaries thereof; (vi) Intuitive’s employee 

retirement and benefit plan(s); and (vii) the legal representatives, 

heirs, successors and assigns of any such excluded person or entity.

SACC ¶ 248. 

3. Lead plaintiffs Employees’ Retirement System of the State of Hawaii and Greater 

Pennsylvania Carpenters’ Pension Fund are hereby appointed as Class Representatives. 

4. The law firm of Labaton Sucharow LLP shall be appointed Class Counsel.

IT IS SO ORDERED.

Dated: December 22, 2016

______________________________________

EDWARD J. DAVILA

United States District Judge

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