Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02005/USCOURTS-casd-3_13-cv-02005-4/pdf.json

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

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

BRAD MAUSS, individually and on

behalf of all other persons similarly

situated,

 Plaintiff,

CASE NO. 13cv2005 JM (JLB)

ORDER GRANTING MOTION FOR

CLASS CERTIFICATION;

APPOINTING CLASS

REPRESENTATIVES; AND

APPOINTING CLASS COUNSEL 

v.

NUVASIVE, INC.; ALEXIS V.

LUKIANOV; KEVIN C. O’BOYLE;

and MICHAEL J. LAMBERT, 

Defendants.

 

Pursuant to Fed.R.Civ.P. 23(a), 23(b)(3), and 23(g), Lead Plaintiff Brad Mauss

and Plaintiff Daniel Popov move for class certification and appointment of class 

representatives and class counsel. Defendants NuVasive, Inc. (“NuVasive”), Alexis

V. Lukianov, Kevin C. O’Boyle, and Michael J. Lambert (collectively “Defendants”)

oppose the motion on the ground that named Plaintiffs and their counsel are inadequate

to represent the class. Having carefully considered the matters presented, the court

record, and the arguments of counsel, the court grantsthe motion for class certification,

appoints Brad Mauss and Daniel Popov as class representatives, and appoints

Pomerantz LLP (“Pomerantz”) and Glancy Prongay & Murray LLP (“GPM”) as class

counsel. 

/ / /

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BACKGROUND

On August 28, 2013, Plaintiff commenced this putative securities-fraud class

action on behalf of those individuals who purchased NuVasive securities between

October 22, 2008, and July 30, 2013. After filing the Sixth Amended Complaint

(“6AC”) on October 26, 2016, four rounds of Rule 12(b)(6) motions, and several

miscellaneous motions, Plaintiffs, on October 28, 2016, 38 months after

commencement of the action, filed their motion for class certification and appointment

of class representatives and class counsel. Defendants’ opposition to the motion for

class certification focuses on the ability of the class representatives and class counsel

to satisfy the adequacy requirement of Fed.R.Civ.P. 23(a)(4).

As the merits are not directly at issue in the present motion, the court briefly

reviews the nature of this action. NuVasive designs, develops, and markets products

for the surgical treatment of spine disorders. NuVasive’s products include Maximum

Access Surgery (“MAS”) and Fusion products. On July 30, 2013, NuVasive disclosed

in its Form 10-Q for its second quarter in 2013 that it had “received a federal

administrative subpoena from the Office of the Inspector General of the U.S.

Department of Health and Human Services (OIG) in connection with an investigation

into possible false or otherwise improper claims submitted to Medicare and Medicaid. 

The subpoena seeks discovery of documentsfor the period January 2007 through April

2013.” After releasing this news, NuVasive securities declined $3.28 per share or over

12%, to close at $22.84 per share on July 31, 2013.

Throughout the applicable class period, the complaint alleges Defendants made

false and/or misleading statements, as well as failed to disclose material adverse facts

about NuVasive's business, operations, and prospects. Specifically, Defendants

allegedly made false and/or misleading statements and/or failed to disclose that

NuVasive improperly submitted false claims to Medicare and Medicaid in alleged

violation of federal and state laws and regulations, made illegal “kickbacks” to doctors,

and engaged in off-label promotion of NuVasive products and services. The alleged

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fraudulent kickback and off-label marketing scheme prompted an investigation by the

Office of the Inspector General of the U.S. Department of Health and Human Services. 

Ultimately, NuVasive paid about $13.5 million in fines and penalties. 

The 6AC alleges Plaintiff and other class members have suffered significant

losses and damages. Based on these general allegations and more specific allegations

provided in the 6AC, the complaint asserts two causes of action: (1) Violations of

Section 10(b) and Rule 10b-5 promulgated thereunder against all Defendants; and (2)

Violations of Section 20(a) of the Securities Exchange Act against the individual

Defendants. 

DISCUSSION

For a class to be certified, Plaintiffs must satisfy the prerequisites of Rule 23(a),

and one requirement of Rule 23(b). Under Rule 23(a), the class must satisfy four

prerequisites:

(1) numerosity of [parties], (2) common questions of law or

fact predominate, (3) the named [party's] claims and defenses

are typical, and (4) the named [party] can adequately protect

the interests of the class.

Hanon v. Dataproducts, 976 F.2d 497, 508 (9th Cir. 1992); Briseno v. ConAgra Foods

Inc., 844 F3d. 1121, 1131 (9th Cir. 2017) (“the class representatives bear the burden

of demonstrating compliance with Rule 23"). Under Rule 23(b)(3), class certification

is appropriate where “questions of law or fact common to the class 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). 

Defendants do not dispute Plaintiffs’ showing on the elements of numerosity,

commonality, typicality, or the predominance of common factual and legal issues. The

only class action requirement challenged by Defendants is Rule 23(a)(4), adequacy of

Plaintiffs and their counsel to represent the class. 

The general test for adequacy involves an analysis of the adequacy of counsel

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and the class representative’s willingness to “prosecute the action vigorously.” In re

Mego Fin’l Corp. Secur. Litig., 213 F.3d 454, 462 (9th Cir. 2000). “The proper

resolution of this issue requires that two questions be addressed: (a) do the named

plaintiffs and their counsel have any conflicts of interest with other class members and

(b) will the named plaintiffs and their counsel prosecute the action vigorously on behalf

of the class?” Id. In reliance upon district court cases from around the country,

Defendants contend “that where a plaintiffis unfamiliar with the alleged claims orfacts

of the case, the plaintiff cannot adequately represent a class.” (Oppo. at p.9:24-25). 

While some circuits require the class representative to have sufficient knowledge about

the class claims to provide meaningful guidance to counsel, see Maywalt v., Parker &

Parsley Petroleum Co., 67 F.3d 1072, 1077-78 (2nd Cir. 1995), in the Ninth Circuit, as

long asthe class representative understands his duties and isrepresented by competent

counsel, the class representative and class counsel are considered competent for

purposes of Rule 23(a)(4). Local Joint Executive Bd. Of Culinary/Beverage Trust

Fund v. Las Vegas Sands, 244 F.3d 1152, 1162 (9th Cir. 2011); Rutter Group,

California Practice Guide: Federal Civil Procedure Before Trial, ¶10:343 (2010).

Finally, in the case of federal securities actions, the Private Securities Litigation

Reform Act of 1995 (“PSLRA”), 15 U.S.C. §78u-4 et seq., sets forth requirements that

the lead plaintiff “be capable of adequately representing the interests of class

members.” 15 U.S.C. §78u-4(a)(B). On an issue of first impression, the Fifth Circuit

has stated, in reference to the PSLRA, “that securities class actions be managed by

active, able class representatives who are informed and can demonstrate they are

directing the litigation. In this way, the PSLRA raises the standard adequacy threshold

[of Rule 23(a)].” Berger v. Compaq Computer Corp., 257 F.3d 475 (5th Cir. 2001). 

It is unclear whether the Ninth Circuit will follow the Fifth Circuit’s interpretation of

the PSLRA as raising the bar for those who seek to serve as class representatives. This

is particularly true where the legislative history of the PSLRA indicates that “[t]he

provisions of the bill relating to the appointment of a lead plaintiff are not intended to

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affect current law with regard to challenges to the adequacy of the class representative

or typicality of the claims among the class.” H.R. Conf. Rep. No. 104–67, at 34–35

(1995). Accordingly, the court declinesto impose a higher burden on Plaintiffs beyond

that required by Rule 23(a).

Adequacy of Class Counsel 

Plaintiffs and the class are represented by Pomerantz and GPM. The firm

resumes submitted by counsel demonstrate their adequacy to represent the class. As

set forth in those firmresumes, both firms have extensive experience in the prosecution

of federal securities class actions. (Carino Decl. Exhs. 2, 3). Both firms are

knowledgeable about federalsecurities laws and have successfully prosecuted hundreds

of class actions. 

Defendants do not raise any specific objection to the competency of Pomerantz

and GPM to prosecute this action and to act as class counsel. Rather, Nuvasive

contends that counsel have, in essence, treated the class representatives as superfluous

stand-ins by not keeping them adequately informed about the status of the case (failed

to provide the class representatives with copies of all the amended complaints, orders

and other papers issued by the court, or to keep the class representatives adequately

informed). (Oppo. at pp.12:23-13:14). The record reveals that Plaintiff Mausstestified

that he maintained regular communication with counsel throughout this case, received

documents and updates from counsel, and spoke with counsel about 20 times in 36

months. (Mauss TR 101:17-24; 147:3-13; 157-157). While Plaintiff Popov did not

maintain continuous contact with counsel like Plaintiff Mauss, since resuming a more

active role, Plaintiff Popov has regularly communicated with counsel. Based upon the

totality of the record, the court finds Pomerantz and GPM adequate to represent the

class.

In sum, the court appoints Pomerantz and GPM as class counsel.

Adequacy of Brad Mauss and Daniel Popov to Serve as Class Representatives

The identical declarations of Brad Mauss and Daniel Popov, prepared by

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counsel, establish their competency to serve as class representatives. The declarations

establish that they both read the initial complaint and, at least, the 6AC. They both

declare their awareness that the federalsecurities claims arise under §§10(b) and 20(a)

of the Securities Exchange Act of 1934 and are based upon the alleged materially false

and “misleading statements and omissions of material fact concerning, among other

things, NuVasive’s fraudulent sales and marketing practices and compliance with

healthcare fraud and abuse.” (Popov Decl. ¶4; Mauss Decl. ¶4). Both declarations

establish that they “have a fiduciary responsibility to the absent class members to

oversee the litigation and ensure that counsel for plaintiffs prosecute the case

vigorously and in the interest of all class members equally.” (Popov Decl. ¶13; Mauss

Decl. ¶13). The declarations also establish that they will vigorously prosecute this

action.

In contrast to the competency demonstrated by Mauss and Popov in their

declarations, Defendants rely upon their deposition testimony in seeking to establish

that the proposed class representatives lack sufficient familiaritywith the case such that

they are inadequate class representatives. 

In large part, NuVasive contendsthat Popov and Mauss have little understanding

of the case, are overly reliant on counsel to prosecute the action, and are not informed

of the status of the case. NuVasive cites deposition testimony to the effect that Popov

and Mauss relied upon counsel to conduct an investigation, failed to show familiarity

with the allegations supporting the federal securities claims, failed to maintain regular

contact with counsel, and are not sufficiently informed or involved in directing the

litigation. The court concludes that the lack of familiarity with certain legal and factual

issues demonstrated by Plaintiffs in their depositions is insufficient to disqualify them

from serving as class representatives.

At the outset the court highlights that federal securities litigation is, by its very

nature, attorney-driven litigation. The complexity of the prototypical securities case

involves an analysis of allegedly materially misleading statements or omissions made

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by the company based upon an analysis of SEC filings, wire and press releases,

analysts’ reports and advisories about the company, and other information. See 6AC

at p.1. Such an analysis is beyond the capabilities of most individuals and, in such

cases, counsel play a critical role in investigating and prosecuting violations of the

federal securities laws. See In re Emulex Corp., 210 F.R.D. 717, 721 (C.D. Cal 2002)

(“Plaintiffs’ reliance on counsel to file documents and to investigate and litigate the

case does not show a failure to supervise or an abdication of their duties as class

representatives.”).

Here, Popov and Mauss are adequate class representatives because (1) they are

represented by competent counsel in Pomerantz and GPM who will vigorously

prosecute this action; (2) there are no identified conflicts between Plaintiffs, counsel, 1

or the class; (3) they have demonstrated a general familiarity with the allegations in the

case; and (4) they have accepted the responsibilities to serve as class representatives

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(they have provided responsive documents to counsel, cooperated with counsel,

appeared for deposition, kept themselves generally informed about material

developmentsin the case, and represent that they will adequately represent the interests

of the class). 

/ / /

/ / /

/ / /

/ / /

 From a practical perspective, at the conclusion of all but the largest of 1

federal securities class actions, counsel are almost always the single largest

recipient of funds from any recovery. Counsel are thus incentivized to vigorously

prosecute the action.

 This general familiarity does not require Plaintiffs to understand SEC filings

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such as Form 10-Ks and Form 10-Qs or to recite the elements of a federal securities

claim. Similarly, the representatives are not disqualified from serving as class

representatives because of testimony showing a lack of knowledge concerning the

physical location of the situs of the action, the judge assigned to the case, the

specific alleged misstatements made in the 6AC, or the specific nature of the claims

asserted against the individual defendants.

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In sum, the court grants the motion for class certification, appoints Brad Mauss

and David Popov as class representatives, and appoints Pomerantz and GPM as class

counsel.

IT IS SO ORDERED.

DATED: March 22, 2017

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All parties

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