Turnofsky v. electroCore, Inc., 2020 U.S. Dist. LEXIS 72313

The lead class plaintiff, especially in securities litigation context, should have a larger financial interest in the litigation and meet the requirements imposed under Fed. R. Civ. P. 23.

This securities class action lawsuit was filed under the Private Securities Litigation Reform Act (PSLRA) and alleged violations of the Securities Act of 1933 and the Securities Act of 1934, among others. The court determined the proper appointment of lead plaintiff, Carole Tibbs, for the securities class in this PSLRA class action lawsuit.

The District Court held that under the PSLRA, there is a two-step process for appointing a lead plaintiff in federal securities class actions. First, the court identified the presumptive lead plaintiff, and second, the court determined whether any member of the putative class has rebutted the presumption. In re Cendant Corp. Litig., 264 F.3d 201, 262 (3d Cir. 2001).

In deciding the designation of lead plaintiff, the court held that when considering a motion to appoint a lead plaintiff, satisfaction of Rule 23 is "confined to determining whether the movant has made a prima facie showing of typicality and adequacy." In re Cendant, 264 F.3d at 263. With regard to the typicality prong of Rule 23, the potential lead plaintiff with the largest financial loss has a greater stake in the outcome of the litigation.

The District Court’s recent holding in Turnofsky is important in the context of class action securities litigation under the PSLRA. Here, the plaintiff, Carole Tibbs, satisfied the typicality prong of Rule 23. Tibbs had a larger financial interest than the other potential lead plaintiffs in this litigation based on her securities holdings in electroCore stock. Additionally, Tibbs satisfied the adequacy prong of Rule 23 because she acquired an interest in electroCore securities during the applicable class period and alleged that she suffered damages due to misleading statements claimed by electroCore regarding its business and clinical data surrounding its lead migraine drug, gammaCore. Based on her larger financial interest in this class action lawsuit and based on her status as shareholder, the court held that she was the proper lead plaintiff in this PSLRA class action lawsuit.


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